Saul Centers(BFS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements, management's discussion, market risk disclosures, and controls for the period Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended June 30, 2025, showing decreased net income and EPS due to increased expenses Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate investments, net | $2,047,907 | $2,024,305 | | Total assets | $2,139,684 | $2,126,404 | | Total liabilities | $1,651,410 | $1,625,280 | | Total equity | $488,274 | $501,124 | Consolidated Statements of Operations Highlights (Unaudited) | (In thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $70,834 | $66,943 | $142,690 | $133,635 | | Net income | $14,181 | $19,490 | $27,029 | $37,753 | | Net income available to common stockholders | $7,921 | $11,649 | $14,922 | $22,481 | | Basic and diluted EPS | $0.33 | $0.48 | $0.62 | $0.93 | Consolidated Statements of Cash Flows Highlights (Unaudited) | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,978 | $65,959 | | Net cash used in investing activities | $(54,568) | $(90,194) | | Net cash provided by (used in) financing activities | $(7,406) | $22,691 | | Net decrease in cash and cash equivalents | $(4,996) | $(1,544) | Notes to Consolidated Financial Statements These notes detail the company's REIT operations, significant construction projects, and the replacement of its credit facility - The company operates as a REIT, focusing on community and neighborhood shopping centers and mixed-use properties, primarily in the Washington, DC/Baltimore metropolitan area, with 50 shopping centers and eight mixed-use properties as of June 30, 2025[23][24][25] Construction in Progress Breakdown | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Hampden House | $245,947 | $217,537 | | Twinbrook Quarter - Other | $84,612 | $84,662 | | Twinbrook Quarter Phase I - Retail/Residential | $2,542 | $9,664 | | Other | $23,410 | $14,330 | | Total | $356,511 | $326,193 | - On July 30, 2025, the company replaced its $525.0 million credit facility with a new $600.0 million senior unsecured credit facility, comprising a $460.0 million revolving line and a $140.0 million term loan[51][105] - The company's operations are aggregated into two reportable business segments: Shopping Centers and Mixed-Use Properties, with performance evaluated based on property net operating income (NOI)[95][96] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, results, liquidity, and capital resources, noting net income decline due to Twinbrook Quarter Phase I Critical Accounting Policies This section outlines key accounting policies requiring significant management judgment, particularly for real estate valuation and accounts receivable collectability - Real estate investment properties are stated at historic cost less depreciation and are evaluated for impairment if an event or change in circumstance indicates a potential impairment in value[119][120] - The assessment of accounts receivable and the allowance for doubtful accounts requires significant management judgment, based on an analysis of outstanding balances, historical bad debt levels, and current economic trends[121] Results of Operations This section details the decrease in net income for Q2 and H1 2025, primarily due to the adverse impact of Twinbrook Quarter Phase I operations - For the three months ended June 30, 2025, net income decreased to $14.2 million from $19.5 million in the prior year, primarily due to a $5.4 million adverse impact from the initial operations of Twinbrook Quarter Phase I[123] - For the six months ended June 30, 2025, net income decreased to $27.0 million from $37.8 million in the prior year, primarily due to an $11.6 million adverse impact from the initial operations of Twinbrook Quarter Phase I[131] Change in Total Expenses (Q2 2025 vs Q2 2024) | (In thousands) | Q2 2025 | Q2 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total expenses | $56,773 | $47,634 | $9,139 | 19.2% | Change in Total Expenses (H1 2025 vs H1 2024) | (In thousands) | H1 2025 | H1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total expenses | $115,781 | $96,063 | $19,718 | 20.5% | Same property revenue and same property net operating income This section presents non-GAAP same-property NOI, which decreased by 4.3% for Q2 2025 and 2.4% for H1 2025, mainly due to lower lease termination fees Same Property Net Operating Income (NOI) Comparison | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total same property NOI | $48,063 | $50,216 | $96,084 | $98,481 | | YoY Change | (4.3%) | | (2.4%) | | - The decrease in same property NOI for both the three and six-month periods was primarily due to lower lease termination fees in the Shopping Center segment[151][152] Liquidity and Capital Resources This section details the company's liquidity, capital strategy, and financing, including major development project funding and a new $600 million credit facility - The company is actively developing two major projects: Twinbrook Quarter Phase I and Hampden House, with remaining investments (excluding capitalized interest) not expected to exceed $10.9 million and $18.1 million, respectively[160][161] - Subsequent to the quarter end, on July 30, 2025, the company replaced its credit facility with a new $600.0 million senior unsecured credit facility, enhancing its liquidity[171] Funds From Operations (FFO) Reconciliation | (In thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $14,181 | $19,490 | $27,029 | $37,753 | | FFO | $28,159 | $31,310 | $55,530 | $61,602 | | FFO available to common stockholders | $25,360 | $28,511 | $49,933 | $56,005 | | Basic and diluted FFO per share | $0.73 | $0.83 | $1.44 | $1.63 | - The commercial portfolio was 94.0% leased as of June 30, 2025, a decrease from 95.8% as of June 30, 2024, with a same-property leasing rate of 93.9%[184] Quantitative and Qualitative Disclosures About Market Risk This section identifies interest rate fluctuations and inflation as primary market risks, with $201.0 million in unhedged variable-rate debt - The company is exposed to interest rate risk on its $201.0 million of unhedged variable-rate debt, where a 1% change would result in a $2.0 million change in annual interest expense[200] - Inflation poses a risk by potentially increasing unreimbursed operating costs and adversely impacting consumer demand at retail centers, which could affect tenants' ability to pay rent[201] Controls and Procedures Management concluded that disclosure controls were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The company's management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[203] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[204] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits Legal Proceedings The company reports no material legal proceedings - The company reports that there are no material legal proceedings[206] Risk Factors The company states there are no material updates to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - There are no material updates to the risk factors presented in the company's 2024 Annual Report on Form 10-K[206] Unregistered Sales of Equity Securities and Use of Proceeds The company reports the sale of 6,110 shares of common stock and 179,700 limited partnership units to its Chairman through the Dividend Reinvestment Plan - B. Francis Saul II, the Company's Chairman and CEO, and affiliated entities acquired 6,110 shares of common stock and 179,700 limited partnership units through the company's Dividend Reinvestment Plan[207] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications, a schedule of portfolio properties, and financial statements - The report includes certifications from the CEO and CFO, a schedule of portfolio properties, and financial statements formatted in Inline XBRL as exhibits[211]