#USA #Bethesda #REIT #Saul Centers #Twinbrook Quarter

Saul Centers, Inc. Reports Second Quarter 2025 Earnings

Saul Centers, Inc. (NYSE: BFS), a prominent equity real estate investment trust (REIT), announced its earnings for the quarter ending June 30, 2025, showcasing some significant swings in its financial landscape. The company's total revenue saw an increase, reaching $70.8 million, up from $66.9 million for the same quarter in 2024, reflecting a sense of growth in a competitive real estate market.

However, this positive development came with challenges. Net income for the same period dipped to $14.2 million, a notable decrease from $19.5 million recorded in the previous year. This decline was largely attributed to the initial operating expenses tied to the Twinbrook Quarter Phase I project, which started its leasing activities recently.

In a promising update for Twinbrook Quarter, Wegmans began operations on June 25, 2025. As of August 4, 2025, out of 452 residential units, 86.1% or 389 units are already leased. This high occupancy rate signals a positive reception from potential tenants, despite the backdrop of reduced net income.

The current financial results indicate that expenses for interest, real estate taxes, depreciation, and other costs associated with the residential and most retail aspects of the property have now begun impacting financials. Consequently, there was a $5.4 million adverse impact on the net income from the previous year, with a reduction of $3.5 million in capitalized interest due to the operational shifts at Twinbrook Quarter Phase I.

Additionally, net income available to common shareholders declined to $7.9 million or $0.33 per share, compared to $11.6 million or $0.48 per share in Q2 2024. This change represents a drop of $2.9 million, largely driven by reduced revenues and higher operational costs due to the ongoing developments.

When breaking down the performance further, the company's same property revenue fell by $1.5 million, or 2.2%, while same property net operating income decreased by 4.3%, equating to a drop of $2.2 million. This decline in revenue was primarily due to lower lease termination fees which fell by $2.0 million, albeit partially compensated by $0.3 million in increased expense recoveries.

For shopping centers within its property portfolio, total same property net operating income amounted to $35.3 million, reflecting a decrease of $2.1 million driven again by the reduction in lease termination fees.

Funds from operations (FFO) available for common shareholders also saw a reduction, listing at $25.4 million or $0.73 per share during the second quarter, down from $28.5 million or $0.83 per share a year earlier. The adverse effects from Twinbrook's initial operations accounted for an impact of $3.2 million in this figure.

Despite these challenges, the leasing landscape remains strong. The commercial portfolio's leasing rate stood at 94.0%, down slightly from 95.8% a year ago, but not without successes in other areas. The residential portfolio saw an impressive 99.0% leasing rate, only marginally lower than the 99.4% from the previous year.

Looking at the broader horizon, the total revenue for the first half of 2025 landed at $142.7 million, a hike from $133.6 million year-over-year. However, the net income still lagged at $27.0 million, a decrease from $37.8 million in the previous year. This continued dip in profitability is linked directly to the costs associated with the operational phase of Twinbrook Quarter Phase I, negatively impacting the bottom line by $11.6 million in the first six months.

As a self-managed and self-administered REIT based in Bethesda, Maryland, Saul Centers operates a diversified portfolio that includes 62 properties across the Metropolitan Washington, D.C./Baltimore area. Notably, over 85% of its property net operating income is derived from this region, underpinning its strategic focus on community-focused retail and mixed-use properties.

Saul Centers continues to navigate through challenges with a focus on enhanced revenues from its operational adjustments while simultaneously managing costs associated with its ongoing developments. Stakeholders will undoubtedly keep a keen eye on the outcomes of Twinbrook Quarter Phase I as its leasing business expands, which is integral to Saul Centers' overall financial health and sustainability moving forward.