Saul Centers, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine months ended September 30,
(Dollars in thousands)	2020		2019
Cash flows from operating activities:
Net income	$	38,640	$	49,155
Adjustments to reconcile net income to net cash provided by operating activities:



Depreciation and amortization of deferred leasing costs	37,593		35,185
Amortization of deferred debt costs	1,163		1,130
Compensation costs of stock grants and options	1,141		1,501
Credit losses on operating lease receivables	4,162		986
Increase in accounts receivable and accrued income	(17,552)		(2,317)
Additions to deferred leasing costs	(7,383)		(1,380)
Increase in prepaid expenses	(3,024)		(4,182)
(Increase) decrease in other assets	738		(2,049)
Increase in accounts payable, accrued expenses and other liabilities	3,871		5,696
Decrease in deferred income	(2,579)		(1,627)
Net cash provided by operating activities	56,770		82,098
Cash flows from investing activities:

Additions to real estate investments	(13,665)		(13,398)
Additions to development and redevelopment projects	(34,698)		(91,657)



Net cash used in investing activities	(48,363)		(105,055)
Cash flows from financing activities:
Proceeds from notes payable	52,100		22,100
Repayments on notes payable	(37,431)		(55,992)

Proceeds from revolving credit facility	90,000		47,000
Repayments on revolving credit facility	(53,000)		(94,000)
Proceeds from construction loan	32,928		71,807
Additions to deferred debt costs	(1,196)		(432)
Proceeds from the issuance of:
Common stock	5,440		19,096
Partnership units	1,114		2,454

Series E preferred stock	0		106,269



Distributions to:
Series C preferred stockholders	0		(5,415)
Series D preferred stockholders	(3,444)		(3,444)
Series E preferred stockholders	(4,950)		0
Common stockholders	(37,012)		(36,326)
Noncontrolling interests	(12,556)		(12,469)
Net cash provided by financing activities	31,993		60,648
Net increase (decrease) in cash and cash equivalents	40,400		37,691
Cash and cash equivalents, beginning of period	13,905		14,578
Cash and cash equivalents, end of period	$	54,305	$	52,269
Supplemental disclosure of cash flow information:
Cash paid for interest	$	32,951	$	31,266
Increase (decrease) in accrued real estate investments and development costs	$	(11,196)	$	1,507

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
(Dollars in thousands) 2020 2019
Cash flows from operating activities:
Net income $ 16,829
$ 17,077
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of deferred leasing costs 11,281
11,643
Amortization of deferred debt costs 373
384
Compensation costs of stock grants and options 427
419
Credit losses on operating lease receivables 130
238
Decrease in accounts receivable and accrued income 2,187
2,035
Additions to deferred leasing costs (4,764 ) (554 )
Decrease in prepaid expenses 1,752
1,111
Increase in other assets (304 ) (2,500 )
Increase in accounts payable, accrued expenses and other liabilities 2,759
5,158
Decrease in deferred income (4,620 ) (3,370 )
Net cash provided by operating activities 26,050
31,641
Cash flows from investing activities:
Acquisitions of real estate investments —
(24 )
Additions to real estate investments (8,516 ) (2,874 )
Additions to development and redevelopment projects (13,072 ) (20,525 )
Net cash used in investing activities (21,588 ) (23,423 )
Cash flows from financing activities:
Proceeds from notes payable —
22,100
Repayments on notes payable (23,352 ) (29,030 )
Proceeds from revolving credit facility 40,000
19,000
Repayments on revolving credit facility (3,000 ) (26,000 )
Proceeds from construction loan 13,862
15,217
Additions to deferred debt costs (33 ) (397 )
Proceeds from the issuance of:
Common stock 4,610
6,171
Partnership units 734
705
Distributions to:
Series C preferred stockholders —
(1,805 )
Series D preferred stockholders (1,148 ) (1,148 )
Series E preferred stockholders (1,650 ) —
Common stockholders (12,275 ) (12,005 )
Noncontrolling interests (4,180 ) (4,148 )
Net cash provided by (used in) financing activities 13,568
(11,340 )
Net increase (decrease) in cash and cash equivalents 18,030
(3,122 )
Cash and cash equivalents, beginning of period 13,905
14,578
Cash and cash equivalents, end of period $ 31,935
$ 11,456
Supplemental disclosure of cash flow information:
Cash paid for interest $ 9,319
$ 10,647
Increase (decrease) in accrued real estate investments and development costs $ (2,836 ) $ 10,048

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)


1.	~~Organization, Basis of Presentation~~

1. Organization, Basis of Presentation

Saul Centers, Inc. (“Saul Centers”) was incorporated under the Maryland General Corporation Law on June 10, 1993, and operates as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). The Company is required to annually distribute at least 90% of its REIT taxable income (excluding net capital gains) to its stockholders and meet certain organizational and other requirements. Saul Centers has made and intends to continue to make regular quarterly distributions to its stockholders. Saul Centers, together with its wholly-owned subsidiaries and the limited partnerships of which Saul Centers or one of its subsidiaries is the sole general partner, are referred to collectively as the “Company.” B. Francis Saul II serves as Chairman of the Board of Directors, Chief Executive Officer and President of Saul Centers.

The Company, which conducts all of its activities through its subsidiaries, Saul Holdings Limited Partnership, a Maryland limited partnership (the “Operating Partnership”) and two subsidiary limited partnerships (the “Subsidiary Partnerships,” and, collectively with the Operating Partnership, the “Partnerships”), engages in the ownership, operation, management, leasing, acquisition, renovation, expansion, development and financing of community and neighborhood shopping centers and mixed-use properties, primarily in the Washington, DC/Baltimore metropolitan area.

As of ~~March 31,~~September 30, 2020, the Company’s properties (the “Current Portfolio Properties”) consisted of 50 shopping center properties (the “Shopping Centers”), 67 mixed-use properties, which are comprised of office, retail and multi-family residential uses (the “Mixed-Use Properties”) and 43 (non-operating) development properties.

Because the properties are located primarily in the Washington, DC/Baltimore metropolitan area, the Company is subject to a concentration of credit risk related to these properties. A majority of the Shopping Centers are anchored by one or more major tenants. As of ~~March 31,~~September 30, 2020, 33 of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. Giant Food, a tenant at 11 Shopping Centers, individually accounted for ~~4.9%~~5.4% of the Company's total revenue for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. No other tenant individually accounted for 2.5% or more of the Company’s total revenue, excluding lease termination fees, for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

The accompanying consolidated financial statements of the Company include the accounts of Saul Centers and its subsidiaries, including the Operating Partnership and Subsidiary Partnerships, which are majority owned by Saul Centers. Substantially all assets and liabilities of the Company as of ~~March 31,~~September 30, 2020 and December 31, 2019, are comprised of the assets and liabilities of the Operating Partnership. The debt arrangements which are subject to recourse are described in Note 5. All significant intercompany balances and transactions have been eliminated in consolidation.

The Operating Partnership is a variable interest entity ("VIE") because the limited partners do not have substantive kick-out or participating rights. The Company is the primary beneficiary of the Operating Partnership because it has the power to direct its activities and the rights to absorb 74.6% of its net income. Because the Operating Partnership is consolidated into the financial statements of the Company, classification of it as a VIE has no impact on the consolidated financial statements of the Company.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for the fair presentation of the financial position and results of operations of the Company for the interim periods have been included. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2019, which are included in its Annual Report on Form 10-K. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to those instructions. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.


2.	~~Summary of Significant Accounting Policies~~

2. Summary of Significant Accounting Policies

Our significant accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 have not changed significantly in amount or composition.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

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~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The most

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

significant estimates and assumptions relate to collectability of operating lease receivables and impairment of real estate properties. Actual results could differ from those estimates.

Accounts Receivable, Accrued Income and Allowance for Doubtful Accounts

Accounts receivable primarily represent amounts currently due from tenants in accordance with the terms of their respective leases. ~~Lease related receivables~~Individual leases are ~~reduced~~assessed for ~~credit losses. Such losses are recognized as a reduction~~collectability and upon the determination that the collection of ~~rental revenue in the consolidated statements of operations.~~

~~In addition to~~ rents ~~due currently,~~is not probable, accrued rent and accounts receivable ~~includes approximately~~ ~~$42.4 million~~are charged off, which is reflected as an adjustment to rental revenue. Revenue from leases where collection is not probable is recorded on a cash basis until collectability is determined to be probable. Further, we assess whether operating lease receivables, at the portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical bad debt levels and ~~$42.1 million, at~~ ~~March 31,~~current economic trends.

At September 30, 2020 and December 31, 2019,~~, respectively, net of allowance for doubtful~~ accounts ~~totaling~~ ~~$36,900~~ ~~and~~ ~~$30,000, respectively, representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of their respective leases.~~receivable was comprised of:


(In thousands)	September 30, 2020		December 31, 2019
Rents currently due	$	14,553	$	7,235
Deferred rents	6,783		474
Straight-line rent	44,266		42,088
Other receivables	5,018		2,967
Allowance for doubtful accounts	(4,919)		(453)

Total	$	65,701	$	52,311

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) 2016-02, ‘‘Leases’’ (“ASU 2016-02”). ASU 2016-02 ~~amends~~amended the ~~existing~~ accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 isbecame effective for annual periods beginning after December 15, 2018, interim periods within those years, and ~~requires~~required a modified retrospective transition approach for all leases existing at the date of initial application, with an option to use certain practical expedients for those existing leases. Upon adoption of ASU 2016-02 effective January 1, 2019, we elected the practical expedient for all leases with respect to lease identification, lease classification, and initial direct costs. We made a policy election not to separate lease and nonlease components and have accounted for each lease component and the related nonlease components together as a single component. There ~~have been~~were no significant changes to our lessor accounting for operating leases as a result of ASU 2016-02.

We lease Shopping Centers and Mixed-Use Properties to lessees in exchange for monthly payments that cover rent, and, where applicable, reimbursement for property taxes, insurance, and certain property operating expenses. Our leases ~~were~~have been determined to be operating leases and generally range in term from one to 15 years.

Some of our leases have termination options and/or extension options. Termination options allow the lessee and/or lessor to terminate the lease prior to the end of the lease term, provided certain conditions are met. Termination options generally require advance notification from the lessee and/or lessor and payment of a termination fee. Termination fees are recognized as revenue over the modified lease term. Extension options are subject to terms and conditions stated in the lease.

On January 1, 2019, a right of use asset and corresponding lease liability related to our headquarters lease were recorded in other assets and other liabilities, respectively. The lease expires on February 28, 2022, with 1 option to renew for an additional five years. The right of use asset and corresponding lease liability totaled ~~$1.4~~$1.1 million and ~~$1.5~~$1.1 million, respectively, at ~~March 31,~~September 30, 2020.

Due to the business disruptions and challenges severely affecting the global economy caused by the novel strain of coronavirus (“COVID-19”) pandemic, many lessees have requested rent relief, including rent deferrals and other lease concessions. The lease modification guidance in ASU 2016-02 does not contemplate the rapid execution of concessions for multiple tenants in response to sudden liquidity constraints of lessees. In April 2020, the FASB staff issued a question and answer document that ~~allows~~provided guidance allowing the Company to elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company has elected to apply such relief, which, in the case of rent deferrals, results in the accrual of rent due from tenants and defers the payment of that rent to a future date, and will monitor the collectability of rent receivables.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses" ("ASU 2016-13"). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of information to support credit loss estimates. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those years. The adoption of ASU 2016-13 effective January 1, 2020, did not have a material impact on our consolidated financial statements and related disclosures because the vast majority of the Company's receivables relate to operating leases which are accounted for under ASC 842, ~~"Leases".~~

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~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

"Leases."

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the presentation used for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.


3.	~~Real Estate~~

3. Real Estate

Construction In Progress

Construction in progress includes land, preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance. During the nine months ended September 30, 2020, assets totaling $284.7 million were placed in service in conjunction with the substantial completion of The Waycroft and Ashbrook Marketplace. Construction in progress as of ~~March 31,~~September 30, 2020 and December 31, 2019, is composed of the following:

(in thousands) March 31, 2020 December 31, 2019
The Waycroft $ 267,563
$ 255,443
7316 Wisconsin Avenue 46,946
44,638
Ashbrook Marketplace 19,796
19,128
Other 11,575
16,435
Total $ 345,880
$ 335,644


(In thousands)	September 30, 2020		December 31, 2019
The Waycroft	$	8,567	$	255,443
7316 Wisconsin Avenue	49,629		44,638
Ashbrook Marketplace	3,727		19,128
Other	12,553		16,435
Total	$	74,476	335,644

Deferred Leasing Costs

Deferred leasing costs consist of commissions paid to third-party and internal leasing agents, internal costs such as payroll-related fringe benefits ~~which~~that are direct and incremental to successful commercial leases, amounts attributed to in-place leases associated with acquired properties and lease inducement costs. Effective with the adoption of ASU 2016-02 on January 1, 2019, all costs incurred prior to the execution of a lease are charged to expense and not capitalized. Unamortized deferred leasing costs are charged to expense if the applicable lease is terminated prior to expiration of the initial lease term. Deferred leasing costs are amortized over the term of the lease or remaining term of acquired leases. Collectively, deferred leasing costs totaled $27.5 million and $24.1 million, net of accumulated amortization of ~~$42.5~~$43.8 million and $41.6 million, as of ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Amortization expense, included in depreciation and amortization of deferred leasing costs in the Consolidated Statements of Operations, totaled ~~$1.3~~$4.0 million and ~~$1.6~~$4.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

Real Estate Investment Properties

Depreciation is calculated using the straight-line method and estimated useful lives of generally between 35 and 50 years for base buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements that extend the useful lives. Leasehold improvement expenditures are capitalized when certain criteria are met, including when the Company supervises construction and will own the improvements. Tenant improvements are amortized, over the shorter of the lives of the related leases or the useful life of the improvements, using the straight-line method. Depreciation expense in the Consolidated Statements of Operations totaled ~~$10.0~~$33.6 million and ~~$10.0~~$30.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively. Repairs and maintenance expense totaled ~~$2.8~~$8.0 million and ~~$3.7~~$9.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively, and is included in property operating expenses in the Consolidated Statements of Operations.


4.	~~Noncontrolling Interests - Holders of Convertible Limited Partnership Units in the Operating Partnership~~

As of September 30, 2020, we have not identified any impairment triggering events, including the impact of COVID-19 and corresponding tenant requests for rent relief. Therefore, under applicable GAAP guidance, 0 impairment charges were recorded.

~~March 31,~~

4. Noncontrolling Interests - Holders of Convertible Limited Partnership Units in the Operating Partnership

As of September 30, 2020,, the B. F. Saul Company and certain other affiliated entities, each of which is controlled by B. Francis Saul II and his family members (collectively, the “Saul Organization”) holds a 25.4% limited partnership interest in the Operating Partnership represented by approximately 7.9 million convertible limited partnership units. These units are convertible into shares of Saul Centers’ common stock, at the option of the unit holder, on a ~~one-for-one~~one-for-one basis provided that, in accordance with the ~~Company's~~Company’s Articles of Incorporation, the rights may not be exercised at any time that the Saul Organization beneficially owns or will own after the exercise, directly or indirectly, in the aggregate more than 39.9% of the value of the outstanding common stock and preferred stock of Saul Centers (the “Equity Securities”). As of ~~March 31,~~September 30, 2020,, approximately ~~700,000~~3.0 million units ~~were convertible~~could be converted into shares of Saul Centers common stock.

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~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The impact of the Saul Organization’s approximately 25.4% limited partnership interest in the Operating Partnership is reflected as Noncontrolling Interests in the accompanying consolidated financial statements. Fully converted partnership units and diluted weighted average common stock outstanding for the three months ended ~~March 31,~~September 30, 2020 and 2019, were approximately 31.3 million and 31.0 million, respectively, and for the nine months ended September 30, 2020 and 2019,, were approximately 31.2 million and ~~30.7~~30.8 million,, respectively.


5.	~~Notes Payable, Revolving Credit Facility, Interest and Amortization of Deferred Debt Costs~~

5. Notes Payable, Revolving Credit Facility, Interest and Amortization of Deferred Debt Costs

The principal amount of the Company’s outstanding debt totaled approximately ~~$1.1~~$1.2 billion at ~~March 31,~~September 30, 2020,, of which approximately ~~$928.9~~$986.0 million was fixed-rate debt and approximately $199.5 million was variable rate debt outstanding under the credit facility. The carrying value of the properties collateralizing the notes payable totaled approximately ~~$1.1~~$1.2 billion as of ~~March 31, 2020~~.September 30, 2020.

At ~~March 31,~~September 30, 2020, the Company had a $400.0 million credit facility comprised of a $325.0 million revolving facility and a $75.0 million term loan. As of ~~March 31,~~September 30, 2020, the applicable spread for borrowings ~~is 135~~was 140 basis points under the revolving credit facility and ~~130~~135 basis points under the term loan. ~~Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the credit facility.~~ Letters of credit may be issued under the revolving credit facility. As of ~~March 31,~~September 30, 2020, based on the value of the Company’s unencumbered properties, approximately $200.3 million was available under the revolving credit facility, $124.5 million was outstanding and approximately $185,000 was committed for letters of credit.

On February 10, 2020, the Company repaid in full the remaining principal balance of $9.2 million of the mortgage loan secured by Boca Valley Plaza, which was scheduled to mature on May 10, 2020.

On March 3, 2020, the Company repaid in full the remaining principal balance of $7.1 million of the mortgage loan secured by Palm Springs Center, which was scheduled to mature on June 1, 2020.

In March and April, 2020, the Company borrowed $71.0 million under its revolving credit facility to provide additional liquidity and flexibility as the effects of the COVID-19 pandemic continue to evolve.

On July 14, 2020, the Company closed on a 15-year, non-recourse $22.1 million mortgage loan secured by Ashbrook Marketplace. The loan matures in 2035, bears interest at a fixed rate of 3.80%, requires monthly principal and interest payments of $114,226 based on a 25-year amortization schedule and requires a final payment of $11.5 million at maturity. The proceeds from the loan were used to pay down the revolving credit facility.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

On July 24, 2020, the Company closed on a 15-year, non-recourse $30.0 million mortgage loan secured by Kentlands Place and Kentlands Square I. The loan matures in 2035, bears interest at a fixed rate of 3.43%, requires monthly principal and interest payments of $149,064 based on a 25-year amortization schedule and requires a final payment of $15.3 million at maturity. The proceeds from the loan were used to pay down the revolving credit facility.

Saul Centers ~~is a guarantor~~and certain consolidated subsidiaries of ~~the credit facility, of which~~ the Operating Partnership ishave guaranteed the ~~borrower.~~payment obligations of the Operating Partnership under the credit facility. The Operating

Partnership is the guarantor of (a) a portion of the Park Van Ness mortgage (approximately $6.7 million of the ~~$67.7~~$66.8 million outstanding balance at ~~March 31,~~September 30, 2020, which guarantee will be reduced to (i) $3.3 million on October 1, 2020 and (ii) 0 on October 1, 2021), (b) a portion of the Broadlands mortgage (approximately ~~$3.9~~$3.8 million of the ~~$31.0~~$30.7 million outstanding balance at ~~March 31,~~September 30, 2020), ~~and~~ (c) a portion of the Avenel Business Park mortgage (approximately $6.3 million of the ~~$26.0~~$25.5 million outstanding balance at ~~March 31,~~September 30, 2020), (d) a portion of The Waycroft mortgage (approximately $23.6 million of the $143.1 million outstanding balance at September 30, 2020), (e) the Ashbrook Marketplace mortgage (totaling $22.1 million at September 30, 2020), and (f) the mortgage secured by Kentlands Place, Kentlands Square I and Kentlands pad (totaling $29.9 million at September 30, 2020). All other notes payable are non-recourse. The guarantee on the Kentlands Square II mortgage loan was released on February 5, 2020.

At December 31, 2019, the principal amount of the Company’s outstanding debt totaled approximately ~~$1.1~~$1.1 billion,, of which ~~$938.4~~$938.4 million was fixed rate debt and ~~$162.5~~$162.5 million was variable rate debt, including $87.5 million outstanding under an unsecured revolving credit facility. The carrying value of the properties collateralizing the notes payable totaled approximately ~~$1.1~~$1.1 billion as of December 31, 2019.

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~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

At ~~March 31,~~September 30, 2020,, the scheduled maturities of debt, including scheduled principal amortization, for years ending December 31, were as follows:


(In thousands)	Balloon Payments			Scheduled Principal Amortization		Total
October 1 through December 31, 2020	$	0		$	7,453	$	7,453
2021	11,012			30,323		41,335
2022	161,002		(a)	30,984		191,986
2023	84,225			31,447		115,672
2024	66,164			30,815		96,979
2025	20,363			27,823		48,186
Thereafter	566,375			117,532		683,907
Principal amount	$	909,141		$	276,377	1,185,518
Unamortized deferred debt costs						9,735
Net						$	1,175,783

(In thousands)
Balloon
Payments

Scheduled
Principal
Amortization
Total
April 1 through December 31, 2020 $ —
$ 21,134
$ 21,134
2021 11,012
29,025
40,037
2022 161,002
(a) 29,645
190,647
2023 84,225
30,065
114,290
2024 66,653
28,703
95,356
2025 20,363
26,291
46,654
Thereafter 520,796
99,518
620,314
Principal amount $ 864,051
$ 264,381
1,128,432
Unamortized deferred debt costs 9,356
Net $ 1,119,076

(a) Includes $124.5 million outstanding under the revolving credit facility.

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the ~~term loan~~credit facility. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaled ~~$9.4~~$9.7 million and $9.7 million, net of accumulated amortization of ~~$7.5~~$8.3 million and $7.5 million, at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively, and are reflected as a reduction of the related debt in the Consolidated Balance Sheets.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

Interest expense, net and amortization of deferred debt costs for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019,, were as follows:

Three Months Ended March 31,
(In thousands) 2020 2019
Interest incurred $ 13,019
$ 12,881
Amortization of deferred debt costs 373
384
Capitalized interest (3,768 ) (2,146 )
Interest expense 9,624
11,119
Less: Interest income 30
52
Interest expense, net and amortization of deferred debt costs $ 9,594
$ 11,067


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Interest incurred	$	12,933	$	13,103	$	38,788	$	38,972
Amortization of deferred debt costs	402		370		1,163		1,130
Capitalized interest	(909)		(3,088)		(5,813)		(7,756)
Interest expense	12,426		10,385		34,138		32,346
Less: Interest income	28		60		127		161
Interest expense, net and amortization of deferred debt costs	$	12,398	$	10,325	$	34,011	$	32,185


6.	~~Equity~~

6. Equity

The consolidated statements of operations for the ~~three~~nine months ended ~~March 31,~~ September 30, 2020 and 2019,, reflect noncontrolling interests of ~~$3.6~~$7.7 million and ~~$3.6~~$10.3 million, respectively, representing income attributable to the Saul Organization for each period.

At ~~March 31,~~September 30, 2020, the Company had outstanding 3.0 million depositary shares, each representing 1/100th of a share of 6.125% Series D Cumulative Redeemable Preferred Stock (the "Series D Stock"). The depositary shares may be redeemed at the Company’s option, in whole or in part, on or after January 23, 2023, at the $25.00 liquidation preference, plus accrued but unpaid dividends to but not including the redemption date. The depositary shares pay an annual dividend of $1.53125 per share, equivalent to 6.125% of the $25.00 liquidation preference. The Series D Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

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~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

At ~~March 31,~~September 30, 2020, the Company had outstanding 4.4 million depositary shares, each representing 1/100th of a share of 6.000% Series E Cumulative Redeemable Preferred Stock (the “Series E Stock”). The depositary shares may be redeemed at the Company’s option, in whole or in part, on or after September 17, 2024, at the $25.00 liquidation preference, plus accrued but unpaid dividends to but not including the redemption date. The depositary shares pay an annual dividend of $1.50 per share, equivalent to 6.000% of the $25.00 liquidation preference. The Series E Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

Per Share Data

Per share data for net income (basic and diluted) is computed using weighted average shares of common stock. Convertible limited partnership units and employee stock options are the Company’s potentially dilutive securities. For all periods presented, the convertible limited partnership units are non-dilutive. The following table sets forth, for the indicated periods, weighted averages of the number of common shares outstanding, basic and dilutive, the effect of dilutive options and the number of options which are not dilutive because the average price of the Company's common stock was less than the exercise prices. The treasury stock method was used to measure the effect of the dilution.

Three months ended March 31,
(In thousands) 2020 2019
Weighted average common stock outstanding-Basic 23,295
22,820
Effect of dilutive options 4
43
Weighted average common stock outstanding-Diluted 23,299
22,863
Non-dilutive options 1,224
438
Years non-dilutive options were issued 2014 through 2019 2016 and 2017

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)


	Three months ended September 30,		Nine months ended September 30,
(In thousands)	2020	2019	2020	2019
Weighted average common stock outstanding-Basic	23,353	23,081	23,329	22,947
Effect of dilutive options	0	40	1	46
Weighted average common stock outstanding-Diluted	23,353	23,121	23,330	22,993
Non-dilutive options	1,516	698	1,418	612
Years non-dilutive options were issued	2011 through 2020	2016, 2017 and 2019	2014 through 2020	2016, 2017 and 2019

7. Related Party Transactions


7.	~~Related Party Transactions~~

The Chairman, Chief Executive Officer and President, the Executive Vice President-Real Estate, the Executive Vice President-Chief Legal and Administrative Officer and the Senior Vice President-Chief Accounting Officer of the Company are also officers of various members of the Saul Organization and their management time is shared with the Saul Organization. Their annual compensation is fixed by the Compensation Committee of the Board of Directors, with the exception of the Senior Vice President-Chief Accounting Officer whose share of annual compensation allocated to the Company is determined by the shared services agreement (described below).

The Company participates in a multiemployer 401K plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. Company contributions, which are included in general and administrative expense or property operating expenses in the Consolidated Statements of Operations, at the discretionary amount of up to 6 percent of the employee’s cash compensation, subject to certain limits, were ~~$120,700~~$255,200 and ~~$96,500~~$264,300 for the ~~three~~nine months ended~~March 31,~~ September 30, 2020 and 2019,, respectively. All amounts contributed by employees and the Company are fully vested.

The Company also participates in a multiemployer nonqualified deferred compensation plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. According to the plan, which can be modified or discontinued at any time, participating employees defer 2% of their compensation in excess of a specified amount. For the ~~three~~nine months ended~~March 31,~~ September 30, 2020 and 2019,, the Company credited to employee accounts ~~$49,500~~$164,800 and ~~$56,500~~,$186,300, respectively, which is the sum of accrued earnings and up to three times the amount deferred by employees and is included in general and administrative expense. All amounts contributed by employees and credited by the Company are fully vested. The cumulative unfunded liability under this plan was ~~$3.2~~$2.8 million and $3.1 million, at ~~March 31,~~September 30, 2020 and December 31, 2019,, respectively, and is included in accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

The Company has entered into a shared services agreement (the “Agreement”) with the Saul Organization that provides for the sharing of certain personnel and ancillary functions such as computer hardware, software, and support services and certain direct and indirect administrative personnel. The method for determining the cost of the shared services is provided for

~~-14-~~

~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

in the Agreement and is based upon head count, estimates of usage or estimates of time incurred, as applicable. The terms of the Agreement and the payments made thereunder are deemed reasonable by management and are reviewed annually by the Audit Committee of the Board of Directors, which consists entirely of independent directors. Billings by the Saul Organization for the Company’s share of these ancillary costs and expenses for the ~~three~~nine months ended~~March 31,~~ September 30, 2020 and 2019,, which included rental expense for the Company’s headquarters lease, totaled approximately ~~$2.2~~$6.0 million and ~~$2.2~~$6.4 million,, net, respectively. The amounts are generally expensed as incurred and are primarily reported as general and administrative expenses in the Consolidated Statements of Operations. As of ~~March 31,~~September 30, 2020 and December 31, 2019,, accounts payable, accrued expenses and other liabilities included approximately ~~$801,700~~$659,000 and ~~$918,700~~,$918,700, respectively, representing amounts due to the Saul Organization for the Company’s share of these ancillary costs and expenses.

The Company has entered into a shared third-party predevelopment cost agreement (the “Predevelopment Agreement”) with the B. F. Saul Real Estate Investment Trust (the “Trust”). The Predevelopment Agreement relates to the sharing of third-party predevelopment costs incurred in connection with the planning of the future redevelopment of certain adjacent real estate assets in the Twinbrook area of Rockville, Maryland. The costs will be shared on a pro rata basis based on the acreage owned by each entity and neither party is obligated to advance funds to the other.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

case with the improvements located thereon, located at the Twinbrook Metro Station in Rockville, Maryland (the “Contributed Property”). In exchange for the Contributed Property, the Company will issue to the Trust 1,416,071 limited partnership units at an agreed upon value of $56.00 per unit, representing an aggregate value of $79.3 million for the Contributed Property. Deed to the Contributed Property and the units were placed in escrow until certain conditions of the Contribution Agreement are satisfied.

In August 2016, the Company entered into an agreement to acquire from the Trust approximately 13.7 acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Ashburn, Virginia. The transaction closed on May 9, 2018, and the Company issued 176,680 limited partnership units to the Trust. The Company constructed a shopping center, Ashbrook Marketplace, and ~~in the second quarter of 2021~~ may be obligated to issue additional limited partnership units to the ~~Trust.~~Trust in the second quarter of 2021. As of September 30, 2020, the Company estimates this obligation to range in value from $3.2 million to $3.5 million, based on projected net operating income of Ashbrook Marketplace for the 12 months ending May 31, 2021.

The Company subleases its corporate headquarters space from a member of the Saul Organization. The lease commenced in March 2002, expires in 2022, and provides for base rent increases of 3% per year, with payment of a pro-rata share of operating expenses over a base year amount. The Agreement requires each party to pay an allocation of total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company’s rent expense for its headquarters location was ~~$202,300~~$609,200 and ~~$193,900~~$593,500 for the ~~three~~nine months ended~~March 31,~~ September 30, 2020 and 2019,, respectively, and is included in general and administrative expense.

On November 5, 2019, the Company entered into an agreement (the "Contribution Agreement") to acquire from the Trust, approximately 6.8 acres of land and its leasehold interest in approximately 1.3 acres of contiguous land, together in each case with the improvements located thereon, located at the Twinbrook Metro Station in Rockville, Maryland (the “Contributed Property”). In exchange for the Contributed Property, the Company will issue to the Saul Trust 1,416,071 limited partnership units in the Operating Partnership (“OP Units”) at an agreed upon value of $56.00 per OP Unit, representing an aggregate value of $79.3 million for the Contributed Property. Deed to the Contributed Property and the OP Units have been placed in escrow until certain conditions of the Contribution Agreement are satisfied.

The B. F. Saul Insurance Agency, Inc., a subsidiary of the B. F. Saul Company and a member of the Saul Organization, is a general insurance agency that receives commissions and fees in connection with the Company’s insurance program. Such commissions and fees amounted to ~~$105,200~~$320,300 and ~~$73,400~~$284,900 for the ~~three~~nine months ended~~March 31,~~ September 30, 2020 and 2019, respectively.

~~2019, respectively.~~

8. Stock-based Employee Compensation, Stock Option Plans, and Deferred Compensation Plan for Directors


8.	~~Stock-based Employee Compensation, Stock Option Plans, and Deferred Compensation Plan for Directors~~

In 2004, the Company established a stock incentive plan (the "Plan"), as amended. Under the Plan, options ~~were~~are granted at an exercise price not less than the market value of the common stock on the date of grant and expire ten years from the date of grant. Officer options vest ratably over four years following the grant and are charged to expense using the straight-line method over the vesting period. Director options vest immediately and are charged to expense as of the date of grant.

The Company uses the fair value method to value and account for employee stock options. The fair value of options granted is determined at the time of ~~each award~~the grant using the Black-Scholes model, a widely used method for valuing stock-based employee compensation, and the following assumptions: (1) Expected Volatility determined using the most recent trading history of the Company’s common stock (month-end closing prices) corresponding to the average expected term of the options; (2) Average Expected Term of the options is based on prior exercise history, scheduled vesting and the expiration date; (3) Expected Dividend Yield determined by management after considering the Company’s current and historic dividend yield, ~~rates,~~ the Company’s yield in relation to other retail REITs and the Company’s market yield at the grant date; and (4) a Risk-free Interest Rate based upon the market yields of US Treasury obligations with maturities corresponding to the average expected term of the options at the grant date. The Company amortizes the value of options granted ratably over the vesting period and includes the amounts as compensation expense in general and administrative expenses.

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~~Table of Contents~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Pursuant to the Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of the Company’s directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. Annually, directors are given the ability to make an election to defer all or part of their fees and have the option to have their fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If a director elects to have their fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company’s common stock on the first trading day of the following quarter to determine the number of shares to be credited to the director. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, ~~2,191~~7,969 shares were credited to director's deferred fee accounts and ~~6,837~~7,354 shares were issued. As of ~~March 31,~~September 30, 2020, the director's deferred fee accounts comprise ~~109,762~~115,023 shares.

Effective April 24, 2020, the Company granted 238,000 options to its directors and certain officers. The following table summarizes the assumptions used in the valuation of the 2020 and 2019 option grants. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, stock option expense totaling ~~$0.4 million~~$969,200 was included in general and administrative expense in the Consolidated Statements of Operations. As of ~~March 31,~~September 30, 2020, the estimated future expense related to unvested stock options was ~~$2.3~~$1.9 million.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)


	Directors						Officers
Grant date	May 3, 2019			April 24, 2020			May 3, 2019			April 24, 2020
Exercise price	$	55.71		$	50.00		$	55.71		$	50.00
Volatility	0.236			0.258			0.206			0.240
Expected life (years)	5.0			5.0			7.0			7.0
Assumed yield	3.75		%	3.80		%	3.80		%	3.85		%
Risk-free rate	2.33		%	0.36		%	2.43		%	0.51		%

The table below summarizes the option activity for the ~~three~~nine months ended~~March 31, 2020~~: September 30, 2020:

Number of
Shares

Weighted
Average
Exercise Price
per share

Aggregate
Intrinsic Value
Outstanding at January 1 1,309,614
$ 53.38
$ 2,528,463
Granted —
—
—
Exercised (10,749 ) 49.19
85,268
Expired/Forfeited —
—
—
Outstanding at March 31 1,298,865
53.42
—
Exercisable at March 31 752,865
52.47
—


	Number of Shares	Weighted Average Exercise Price per share		Aggregate Intrinsic Value
Outstanding at January 1	1,309,614	$	53.38	$	2,528,463
Granted	238,000	50.00		0
Exercised	(10,749)	49.19		85,268
Expired/Forfeited	(21,250)	53.96		0
Outstanding at September 30	1,515,615	52.87		0
Exercisable at September 30	978,240	53.03		0

The intrinsic value measures the price difference between the options’ exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. The intrinsic value for shares exercised during the period was calculated by using the closing share price on the date of exercise. At ~~March 31,~~September 30, 2020, the final trading day of the ~~first~~third quarter, the closing share price of $~~32.74~~$26.58 was lower than the exercise price of ~~the 1,298,865~~all outstanding ~~options granted in 2010 through 2019.~~options. The weighted average remaining contractual life of the Company’s outstanding and exercisable options is ~~6.7~~5.2 years and ~~5.7~~5.5 years, respectively.

The Compensation Committee has also approved an annual award of 200 shares of the Company’s common stock as additional compensation to each director serving on the Board of Directors as of the date of the annual meeting of stockholders. The issuance of these shares may not be deferred.

9. Fair Value of Financial Instruments


9.	~~Fair Value of Financial Instruments~~

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value. The aggregate fair value of the notes payable with fixed-rate payment terms was determined using Level 3 data in a discounted cash flow approach, which is based upon management’s estimate of borrowing rates and loan terms currently available to the Company for fixed-rate financing and, assuming long-term market interest rates of approximately ~~3.80%~~3.25% and 3.55%, would be approximately ~~$924.4~~$1.0 billion and $957.4 million, ~~and~~ ~~$957.4 million~~, respectively, compared to the principal balance of ~~$928.9~~$986.0 million and ~~$938.4~~$938.4 million at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. A change in any of the significant inputs may lead to a change in the Company’s fair value measurement of its debt.

10. Commitments and Contingencies


~~10.~~	~~Commitments and Contingencies~~

Neither the Company nor the current portfolio properties are subject to any material litigation, nor, to management’s knowledge, is any material litigation currently threatened against the Company, other than routine litigation and administrative proceedings arising in the ordinary course of business. Management believes that these items, individually or in the aggregate, will not have a material adverse impact on the Company or the current portfolio properties.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

11. Business Segments


~~11.~~	~~Business Segments~~

The Company has 2 reportable business segments: Shopping Centers and Mixed-Use Properties. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). The Company evaluates performance based upon income and cash flows from real estate of the combined properties in each segment. All of our properties within each segment generate similar types of revenues and expenses related to tenant rent, reimbursements and operating expenses. Although services are provided to a range of tenants, the types of services provided to them are similar within each segment. The properties in each portfolio have similar economic characteristics and the nature of the products and services provided to our tenants and the method to distribute such services are consistent throughout the portfolio. Certain reclassifications have been made to prior year information to conform to the 2020 presentation.


(In thousands)	Shopping Centers		Mixed-Use Properties		Corporate and Other		Consolidated Totals
Three months ended September 30, 2020
Real estate rental operations:
Revenue	$	40,336	$	16,424	$	0	$	56,760
Expenses	(8,755)		(6,184)		0		(14,939)
Income from real estate	31,581		10,240		0		41,821

Interest expense, net and amortization of deferred debt costs	0		0		(12,398)		(12,398)
Depreciation and amortization of deferred leasing costs	(8,169)		(5,544)		0		(13,713)
General and administrative	0		0		(4,107)		(4,107)






Net income (loss)	$	23,412	$	4,696	$	(16,505)	$	11,603
Capital investment	$	2,733	$	6,703	$	0	$	9,436
Total assets	$	982,381	$	643,395	$	55,598	$	1,681,374


Three months ended September 30, 2019
Real estate rental operations:
Revenue	$	41,313	$	15,739	$	0	$	57,052
Expenses	(8,974)		(5,665)		0		(14,639)
Income from real estate	32,339		10,074		0		42,413

Interest expense, net and amortization of deferred debt costs	0		0		(10,325)		(10,325)
Depreciation and amortization of deferred leasing costs	(7,260)		(4,758)		0		(12,018)
General and administrative	0		0		(4,742)		(4,742)








Net income (loss)	$	25,079	$	5,316	$	(15,067)	$	15,328
Capital investment	$	9,166	$	27,290	$	0	$	36,456
Total assets	$	985,244	$	609,560	$	51,960	$	1,646,764

(In thousands)
Shopping
Centers
Mixed-Use
Properties
Corporate
and Other

Consolidated
Totals
Three months ended March 31, 2020
Real estate rental operations:
Revenue $ 41,571
$ 15,372
$ —
$ 56,943
Expenses (8,922 ) (5,267 ) —
(14,189 )
Income from real estate 32,649
10,105
—
42,754
Interest expense, net and amortization of deferred debt costs —
—
(9,594 ) (9,594 )
Depreciation and amortization of deferred leasing costs (7,386 ) (3,895 ) —
(11,281 )
General and administrative —
—
(5,050 ) (5,050 )
Net income (loss) $ 25,263
$ 6,210
$ (14,644 ) $ 16,829
Capital investment $ 4,202
$ 17,386
$ —
$ 21,588
Total assets $ 973,107
$ 640,122
$ 31,611
$ 1,644,840

Three months ended March 31, 2019
Real estate rental operations:
Revenue $ 43,159
$ 16,591
$ —
$ 59,750
Expenses (9,688 ) (5,461 ) —
(15,149 )
Income from real estate 33,471
11,130
—
44,601
Interest expense, net and amortization of deferred debt costs —
—
(11,067 ) (11,067 )
Depreciation and amortization of deferred leasing costs (7,282 ) (4,361 ) —
(11,643 )
General and administrative —
—
(4,814 ) (4,814 )
Net income (loss) $ 26,189
$ 6,769
$ (15,881 ) $ 17,077
Capital investment $ 4,613
$ 18,810
$ —
$ 23,423
Total assets $ 968,674
$ 566,163
$ 10,991
$ 1,545,828

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)




(In thousands)	Shopping Centers		Mixed-Use Properties		Corporate and Other		Consolidated Totals
Nine Months Ended September 30, 2020
Real estate rental operations:
Revenue	$	120,236	$	46,687	$	0	$	166,923
Expenses	(26,041)		(16,848)		0		(42,889)
Income from real estate	94,195		29,839		0		124,034

Interest expense, net and amortization of deferred debt costs	0		0		(34,011)		(34,011)
Depreciation and amortization of deferred leasing costs	(22,812)		(14,781)		0		(37,593)
General and administrative	0		0		(13,790)		(13,790)






Net income (loss)	$	71,383	$	15,058	$	(47,801)	$	38,640
Capital investment	$	11,622	$	36,741	$	0	$	48,363
Total assets	$	982,381	$	643,395	$	55,598	$	1,681,374

Nine Months Ended September 30, 2019
Real estate rental operations:
Revenue	$	126,730	$	48,213	$	0	$	174,943
Expenses	(27,214)		(16,508)		0		(43,722)
Income from real estate	99,516		31,705		0		131,221

Interest expense, net and amortization of deferred debt costs	0		0		(32,185)		(32,185)
Depreciation and amortization of deferred leasing costs	(21,917)		(13,268)		0		(35,185)
General and administrative	0		0		(14,696)		(14,696)








Net income (loss)	$	77,599	$	18,437	$	(46,881)	$	49,155
Capital investment	$	22,746	$	82,309	$	0	$	105,055
Total assets	$	985,244	$	609,560	$	51,960	$	1,646,764

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

12. ~~Subsequent Events~~Impact of COVID-19

~~A novel strain of coronavirus ("COVID-19") was reported to have surfaced in Wuhan, China in December 2019, and has since spread globally, including to every state in the United States.~~ On March 11, 2020, the World Health Organization declared ~~COVID-19~~a novel strain of coronavirus ("COVID-19") a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. As a result, the COVID-19 pandemic is negatively affecting almost every industry directly or indirectly.

The actions taken by federal, state and local governments to mitigate the spread of COVID-19 by ordering closure of nonessential businesses and ordering residents to generally stay at home, and subsequent phased re-openings, have resulted in many of our tenants announcing mandated or temporary closures of their operations and/or requesting adjustments to their lease terms. Experts predict that the COVID-19 pandemic will trigger a period of global economic slowdown or a global recession. COVID-19 could have a material and adverse effect on or cause disruption to our business or financial condition, results from operations, cash flows and the market value and trading price of our securities.

While the Company’s grocery stores, pharmacies, banks and home improvement stores generally remain open, restaurants, if open, are operating at limited capacity, with many offering only delivery and ~~curb side~~curbside pick-up, ~~only,~~ and most health, beauty supply and services, fitness centers, and other non-essential businesses ~~remain closed.~~are in various phases of re-opening depending on location. The Company is generally not charging late fees or delinquent interest on ~~these~~ past due rent payments and, in many cases, rent deferral agreements are being negotiated to allow tenants temporary relief where needed.As of November 3, 2020, payments by tenants of contractual base rent and operating expense and real estate tax recoveries totaled approximately 83% and 91% for the second quarter and third quarter, respectively.

~~On April 1, 2020, the Company borrowed $50.0 million under its revolving credit facility to provide additional liquidity and flexibility as the effects~~The following is a summary of the ~~COVID-19 pandemic continue~~Company's consolidated total collections of the second quarter and third quarter rent billings, including minimum rent, operating expense recoveries, and real estate tax reimbursements as of November 3, 2020:

2020 second quarter

•83% of 2020 second quarter total billings has been paid by our tenants.

▪79% of retail

▪95% of office

▪100% of residential

▪Additionally, rent deferral agreements comprising approximately 11% of 2020 second quarter total billings have been executed (or 67% of the total unpaid balance) including 4% with anchor/national tenants. The executed deferrals typically cover three months of rent and are generally scheduled to ~~evolve.~~be repaid during 2021 and 2022. As a condition to granted rent deferrals, we have sought, and in some cases received, extended lease terms, or waivers of certain adjacent use or common area restrictions. Through October 31, 2020, 3% of second quarter deferred rents have come due. Of the deferred rents that have come due, the majority have been repaid.

2020 third quarter

•91% of 2020 third quarter total billings has been paid by our tenants.

▪89% of retail

▪95% of office

▪100% of residential

▪Additionally, rent deferral agreements comprising approximately 2% of 2020 third quarter total billings have been executed (or 24% of the total unpaid balance) including 1% with anchor/national tenants. The executed deferrals typically cover three months of rent and are generally scheduled to be repaid during 2021 and 2022. As a condition to granted rent deferrals, we have sought, and and in some cases received, extended lease terms, or waivers of certain adjacent use or common area restrictions. Through October 31, 2020, no third quarter deferred rents have come due.

13. Subsequent Events

The Company has reviewed operating activities for the period subsequent to September 30, 2020, and determined there are no subsequent events required to be disclosed.

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~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section should be read in conjunction with the consolidated financial statements of the Company and the accompanying notes in “Item 1. Financial Statements” of this report and the more detailed information contained in the Company’s Form 10-K for the year ended December 31, 2019. Historical results and percentage relationships set forth in Item 1 and this section should not be taken as indicative of future operations of the Company. Capitalized terms used but not otherwise defined in this section have the meanings given to them in Item 1 of this Form 10-Q.

Forward-Looking Statements

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “plans,” “intends,” “estimates,” “anticipates,” “expects,” “believes” or similar expressions in this Form 10-Q. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

•challenging domestic and global credit markets and their effect on discretionary spending;

•the ability of our tenants to pay rent;

•our reliance on shopping center “anchor” tenants and other significant tenants;

•our substantial relationships with members of ~~The~~the Saul Organization;

•risks of financing, such as increases in interest rates, restrictions imposed by our debt, our ability to meet existing financial covenants and our ability to consummate planned and additional financings on acceptable terms;

•our development activities;

•our access to additional capital;

•our ability to successfully complete additional acquisitions, developments or redevelopments, or if they are completed, whether such acquisitions, developments or redevelopments perform as expected;

•risks generally incident to the ownership of real property, including adverse changes in economic conditions, changes in the investment climate for real estate, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and fiscal policies, the relative illiquidity of real estate and environmental risks;

•risks related to our status as a REIT for federal income tax purposes, such as the existence of complex regulations relating to our status as a REIT, the effect of future changes to REIT requirements as a result of new legislation and the adverse consequences of the failure to qualify as a REIT; and

•an epidemic or pandemic (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.

Additional information related to these risks and uncertainties are included in “Risk Factors” (Part I, Item 1A of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2019), “Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Form 10-Q and Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2019), and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” (Part I, Item 2 of this Form 10-Q).

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Impact of COVID-19

~~A novel strain of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China in December 2019, and has since spread globally, including to every state in the United States.~~ On March 11, 2020, the World Health Organization declared ~~COVID-19~~a novel strain of coronavirus ("COVID-19") a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. As a result, the COVID-19 pandemic is negatively affecting almost every industry directly or indirectly.

If the effects of COVID-19 result in continued deterioration of economic and market conditions, or if the Company’s expected holding period for assets changes, subsequent tests for impairment could result in impairment charges in the future. The Company can provide no assurance that material impairment charges with respect to ~~be higher~~the Company’s investment properties will not occur during the ~~quarter ending June~~remainder of 2020 or future periods. As of September 30, 2020, ~~than they were during~~we have not identified any impairment triggering events, including the ~~quarter ended March 31, 2020.~~impact of COVID-19 and corresponding tenant requests for rent relief. Therefore, under applicable GAAP guidance, no impairment charges have been recorded. However, we have yet to see the long-term effects of COVID-19 and the extent to which it may impact our tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in our view or strategy relative to a tenant’s business or industry as a result of COVID-19, or changes in our long-term hold strategies, could be indicative of an impairment triggering event. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether impairment charges are warranted.

While the Company’s grocery ~~stores, pharmacies, banks~~store, pharmacy, bank and home improvement ~~stores~~store tenants generally remain open, restaurants ~~if open,~~ are operating with limited indoor seating, supplemented with delivery and ~~curb side~~curbside pick-up, ~~only,~~ and most health, beauty supply and services, fitness centers, and other non-essential businesses ~~remain closed.~~are re-opening with limited customer capacity depending on location. As of ~~May 5,~~November 3, 2020, ~~approximately 32%~~payments by tenants of ~~the Company’s~~ contractual base rent and operating expense and real estate tax recoveries totaled approximately 83% and 91% for ~~April 2020 remains unpaid~~the second quarter and third quarter, respectively~~, excluding rent subject to executed deferral agreements totaling approximately $355,600 (2%)~~.The Company is generally not charging late fees or delinquent interest on ~~these~~ past due payments and, in many cases, ~~additional~~ rent deferral agreements ~~are being~~have been negotiated to allow tenants temporary relief where needed. The deferral agreements, ~~being negotiated,~~ generally, permit tenants to defer 30 to 90 days of rent, operating expense and real estate tax recovery payments until a later time in their lease term with repayment typically occurring over a 12-month period generally commencing in 2021. We expect that our rent collections will continue to be below our tenants’ contractual rent obligations for so long as governmental orders require non-essential businesses to remain at limited capacity or closed and residents to stay at home. We will continue to accrue rental revenue during the deferral period. However, we anticipate that some tenants eventually will not be able to pay amounts due and we will incur losses against our rent receivables. The extent and timing of the recognition of such losses will depend on future developments, which are highly uncertain and cannot be predicted. ~~April~~Rent collections during the second quarter and third quarter rent relief requests to-date may not be indicative of collections or requests in any future period.

The following is a summary of the Company's executed rent deferral agreements and repayment dates as of November 3, 2020.


(In thousands)	Original Rent Due By Quarter (prior to deferral)		(In thousands)	Repayment Year (after deferral)

2020 First Quarter	$	53	2020	$	328
2020 Second Quarter	5,810		2021	5,259
2020 Third Quarter	1,101		2022	1,116
2020 Fourth Quarter	90		2023	215
Total	$	7,054	2024	101
			2025	18
			Thereafter	17
			Total	$	7,054

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The following is a summary of the Company's consolidated total collections of the second quarter and third quarter, and October rent billings, including minimum rent, operating expense recoveries, and real estate tax reimbursements, as of November 3, 2020:

2020 second quarter

•83% of 2020 second quarter total billings has been paid by our tenants.

▪79% of retail

▪95% of office

▪100% of residential

▪Additionally, rent deferral agreements comprising approximately 11% of 2020 second quarter total billings have been executed (or 67% of the total unpaid balance) including 4% with anchor/national tenants. The executed deferrals typically cover three months of rent and are generally scheduled to be repaid during 2021 and 2022. As a condition to granted rent deferrals, we have sought, and in some cases received, extended lease terms, or waivers of certain adjacent use or common area restrictions. Through October 31, 2020, 3% of second quarter deferred rents have come due. Of the deferred rents that have come due, the majority have been repaid.

2020 third quarter

•91% of 2020 third quarter total billings has been paid by our tenants.

▪89% of retail

▪95% of office

▪100% of residential

▪Additionally, rent deferral agreements comprising approximately 2% of 2020 third quarter total billings have been executed (or 24% of the total unpaid balance) including 1% with anchor/national tenants. The executed deferrals typically cover three months of rent and are generally scheduled to be repaid during 2021 and 2022. As a condition to granted rent deferrals, we have sought, and in some cases received, extended lease terms, or waivers of certain adjacent use or common area restrictions. Through October 31, 2020, no third quarter deferred rents have come due.

October 2020

▪90% of October 2020 total billings has been paid by our tenants.

▪88% of retail

▪92% of office

▪99% of residential

▪Additionally, rent deferral agreements comprising approximately 0.4% of October total billings have been executed (or 3% of the total unpaid balance) none of which are with anchor/national tenants. These deferrals are structured similarly to the second quarter and third quarter deferrals.

Although the Company ~~has~~is and will continue to be actively engaged in rent collection efforts related to uncollected rent, and the Company will continue to work with certain tenants who have requested rent deferrals, the Company can provide no assurance that such efforts or our efforts in future periods will be successful, particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period. The Company strongly encouraged small business tenants to apply for Paycheck Protection Program loans, as available, under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Company has information that many tenants ~~are applying~~applied for these loans and ~~recently, the first~~several tenants have communicated that loan proceeds are being received and ~~a few tenants~~ have subsequently remitted rental payments.

~~On April 1, 2020, the Company borrowed $50.0 million under its revolving credit facility to provide additional liquidity and flexibility as the effects of the COVID-19 pandemic continue to evolve.~~ As of ~~April 30,~~October 31, 2020, the Company had ~~$61.9~~$40.6 million of cash and cash equivalents and borrowing availability of approximately ~~$150.3~~$200.3 million under its unsecured revolving credit facility.

The extent of the effects of COVID-19 on the Company’s business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See Item 1A. Risk Factors. However, we believe the actions we have taken and are continuing to take will help minimize interruptions to operations and will put the Company in the best position to participate in the recovery when the time comes. Management and the Board of Directors will continue to actively monitor the effects of the pandemic, including governmental directives in the jurisdictions in which we operate and the recommendations of public health authorities, and will,

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as needed, take further measures to adapt the Company’s business in the best interests of our stockholders and personnel. The extent to which COVID-19 impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the actions taken to contain the outbreak or mitigate its impact, and the direct and indirect economic effects of the outbreak and containment measures, among others.

The Company was able to transition all but a limited number of essential employees to remote work and does not anticipate any adverse impact on its ability to continue to operate its business. Transitioning to a largely remote workforce has not had any material adverse impact on the Company’s financial reporting systems, internal controls over financial reporting or disclosure controls and procedures. Currently, we have a limited number of employees coming into offices as needed.

We also made temporary changes to lower overhead expenses including salary reductions, which were restored effective October 1, 2020, a corporate hiring freeze, reduction of the company retirement plan match percentage, elimination of business travel and discretionary spending such as professional seminars.

General

The following discussion is based primarily on the consolidated financial statements of the Company as of and for the three and nine months ended ~~March 31, 2020~~.September 30, 2020.

Overview

The Company’s primary strategy is to continue to focus on diversification of its assets through development of transit-centric, residential mixed-use projects in the Washington, D.C. metropolitan area. The Company’s operating strategy also includes improvement of the operating performance and internal growth of its Shopping Centers and ~~will supplement~~supplementing its development of residential mixed-used projects with selective redevelopment and renovations of its core Shopping Centers. ~~Construction~~The residential component of The Waycroft, a project with 491 apartment units and 60,000 square feet of retail space, on North Glebe Road, within two blocks of the Ballston Metro Station, in Arlington, Virginia ~~is substantially complete.~~was placed into service in April 2020. The Company also has a development pipeline of zoned sites, either in its portfolio (some of which are currently shopping center operating properties) or under contract, for development of up to 3,700 apartment units and 975,000 square feet of retail and office space. All such sites are located adjacent to red line Metro stations in Montgomery County, Maryland.

The Company intends to selectively add free-standing pad site buildings within its Shopping Center portfolio, and replace underperforming tenants with tenants that generate strong traffic, generally anchor stores such as supermarkets, drug stores and fitness centers, as evidenced by the March 2020 addition of a 69,000 square foot Giant Food at Seven Corners, ~~and~~ the ~~coming additions~~June 2020 addition of a 36,000 square foot LA Fitness at Broadlands Village and the August 2020 addition of a 54,000 square foot 99 Ranch grocery store at Shops at Fairfax. The Company ~~currently~~ has ~~signed~~seven new pad site tenants, including three at our newly developed Ashbrook Marketplace shopping center, that began paying rent in 2020. Annualized rent from these pad sites totals approximately $1.1 million. Additionally, the Company has executed leases or leases are under negotiation for 12seven more pad sites, ~~within its core portfolio. The pad sites~~tenants of six of which are expected to ~~be completed and operational by late~~begin paying rent in 2021. The annualized rent from these pad sites totals approximately $1.1 million.

In recent years, there has been a limited amount of quality properties for sale and pricing of those properties has escalated. Accordingly, management believes acquisition opportunities for investment in existing and new shopping center and mixed-use properties in the near future is uncertain. Nevertheless, because of the Company’s conservative capital structure, including its cash and capacity under its revolving credit facility, management believes that the Company is positioned to take advantage of additional investment opportunities as attractive properties are identified and market conditions improve. (See “Item 1. Business - Capital Policies”.) It is management’s view that several of the sub-markets in which the Company operates have, or are expected to have in the future, attractive supply/demand characteristics. The Company will continue to evaluate acquisition, development and redevelopment as integral parts of its overall business plan.

Prior to the COVID-19 pandemic, economic conditions within the local Washington, DC metropolitan area had remained relatively stable. Issues facing the Federal government relating to taxation, spending and interest rate policy will likely continue to impact the office, retail and residential real estate markets over the coming years. Because the majority of the Company’s property operating income is produced by our Shopping Centers, we continually monitor the implications of government policy changes, as well as shifts in consumer demand between on-line and in-store shopping, on future shopping center construction and retailer store expansion plans. Based on our observations, we continue to adapt our marketing and merchandising strategies in ~~a way~~ways to maximize our future performance. The Company's commercial leasing percentage, on a ~~comparable~~same property basis, which excludes the impact of properties not in operation for the entirety of the comparable periods, decreased to ~~95.3%~~93.9% at ~~March 31,~~September 30, 2020, from ~~95.7%~~94.8% at ~~March 31,~~September 30, 2019. We expect the volume of lease renewals in 2020, and the rental rates

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at which leases renew, will be negatively impacted by the effects of COVID-19 when comparing executed retail leases to prior year leasing activity.

The Company maintains a ratio of total debt to total asset value of under 50%, which allows the Company to obtain additional secured borrowings if necessary. As of ~~March 31,~~September 30, 2020, amortizing fixed-rate mortgage debt with staggered maturities from 2021 to 2035 represented approximately ~~82.3%~~83.2% of the Company’s notes payable, thus minimizing refinancing risk. The Company’s variable-rate debt consists of $199.5 million outstanding under the credit facility. As of ~~March 31,~~September 30, 2020, the Company has ~~loan~~ availability of approximately $200.3 million under its $325.0 million unsecured revolving credit facility.

Although it is management’s present intention to concentrate future acquisition and development activities on transit-centric, primarily residential mixed-use properties in the Washington, D.C./Baltimore metropolitan area, the Company may, in the future, also acquire other types of real estate in other areas of the country as opportunities present themselves. The Company plans to continue to diversify in terms of property types, locations, size and market, and it does not set any limit on the amount or percentage of assets that may be invested in any one property or any one geographic area.

The following table sets forth average annualized base rent per square foot and average annualized effective rent per square foot for the Company's Commercial properties (all properties except for ~~the~~The Waycroft, Clarendon Center and Park Van Ness apartments). For purposes of this table, annualized effective rent is annualized base rent minus amortized tenant improvements and amortized leasing commissions. The $0.35 per square foot decrease in base rent in the 2020 Period compared to the 2019 Period is primarily attributable to a 100,046 square foot increase in commercial space relating to completed development projects. The space is fully leased, however, rent was not due for the entire period.


	Three months ended March 31,											Nine months ended September 30,
	2020		2019		2018		2017		2016			2020		2019		2018		2017		2016
Base rent	$	19.83	$	20.08	$	20.26	$	18.91	$	18.71	Base rent	$	19.80	$	20.15	$	20.13	$	19.30	$	18.67
Effective rent	$	18.14	$	18.14	$	18.33	$	17.12	$	16.86	Effective rent	$	18.09	$	18.27	$	18.25	$	17.49	$	16.87

Recent Developments

From 2014 through 2016, in separate transactions, the Company purchased four adjacent properties on North Glebe Road in Arlington, Virginia, for an aggregate $54.0 million. The Company ~~has substantially~~ completed construction of The Waycroft, a project with 491 apartment units and 60,000 square feet of retail space on 2.8 acres of land, and apartment occupancy commenced in April 2020. The total cost of the project, including acquisition of land, is expected to be approximately $275.0 million, plus approximately ~~$19.0~~$19.1 million of capitalized interest. A portion of the cost is being financed with a $157.0 million construction-to-permanent loan. Including approximately ~~$18.7~~$19.0 million of capitalized interest and costs of ~~$8.3 million~~$848,700 which are accrued and unpaid, costs incurred through ~~March 31,~~September 30, 2020 total approximately ~~$267.6~~$275.0 million, of which ~~$124.1~~$143.1 million has been financed by the loan. Leases have been executed for a 41,500 square foot Target and 12,600 square feet of retail shop space, resulting in approximately 90% of the planned retail space being leased. Target ~~is scheduled to begin~~began operating in August 2020. An additional 2,400 square feet of retail space became operational during the third quarter of 2020. Applications have been received for 83303 residential leases, totaling approximately ~~17%~~62% of the available units, with 18258 units occupied as of ~~May 5,~~November 3, 2020.

Albertson's/Safeway is currently a tenant at seven of the Company's shopping centers, two locations of which are subleased to other grocers. In February 2017, the Company terminated the lease with Albertson's/Safeway at Broadlands Village. The Company executed a lease with Aldi Food Market for 20,000 square feet of this space, which opened in November 2017, and has executed a lease with LA Fitness for substantially all of the remaining space. LA Fitness ~~has finalized construction and, upon removal of COVID-19 related fitness facility occupancy restrictions, is ready to open~~opened for ~~business.~~business in June 2020.

In the fourth quarter of 2018, the Company substantially completed construction of the shell of a 16,000 square foot small shop expansion at Burtonsville Town Square and construction of interior improvements for the final two tenants ~~are~~is underway. Delivery of the first leased tenant spaces occurred in late 2018, and tenant openings began in the first quarter of 2019. The total development cost was $5.7 million. Leases have been executed for all of the space. In addition, ~~a lease has been executed with~~ Taco Bell ~~which commenced construction in January 2020 of a free-standing building on~~leased a pad site within the ~~property.~~property, constructed a free-standing building, and began operations in August 2020.

In May 2018, the Company acquired from the Saul Trust, in exchange for 176,680 limited partnership units, approximately 13.7 acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Ashburn, Virginia. The Company has substantially completed construction of Ashbrook Marketplace, an approximately 86,000 square foot neighborhood shopping center. A 29,000 square foot Lidl grocery store opened in November 2019, and the shopping center is 100% ~~leased as of February 2020.~~leased. The first small shop opened for business in April 2020, and ~~the remaining~~all tenants, ~~are scheduled to~~except one

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3,231 square foot shop tenant, were open ~~throughout 2020, subject to the removal~~and paying rent as of ~~COVID-19 occupancy restrictions.~~November 3, 2020. All four pad sites have been leased and ~~are in various stages~~three of ~~construction or obtaining permit approvals. In~~ the ~~second quarter~~four were open and paying rent as of ~~2021, the~~November 3, 2020. The Company may be obligated to issue additional limited partnership units to the Saul ~~Trust.~~Trust in the second quarter of 2021. As of September 30, 2020, the Company estimates this obligation to range in value from $3.2 million to $3.5 million, based on projected net operating income of Ashbrook Marketplace for the 12 months ending May 31, 2021.

In September 2018, the Company purchased for $35.5 million, plus $0.7 million of acquisition costs, an office building and the underlying ground located at 7316 Wisconsin Avenue in Bethesda, Maryland. In December 2018, the Company purchased for $4.5 million, including acquisition costs, an interest in an adjacent parcel of land and retail building. The purchase price was funded through the Company's revolving credit facility. The Company has completed development plans for the combined property for the development of up to 366 apartment units and 10,300 square feet of retail space. In July 2019, the Montgomery County Planning Commission unanimously approved the Company's site plan. Design and construction documents are being prepared and a site plan amendment has been submitted incorporating final design parameters. Additional approvals from the Washington Metropolitan Area Transit Authority and the Maryland Transit Administration are in process and are expected to be received by the fourth quarter of 2020. Effective September 1, 2019, the asset was removed from service and transferred to construction in progress. The Company ~~is currently performing~~has completed interior demolition in preparation for future development.

The timing of construction will depend on issuance of final building permits and market conditions.

On November 5, 2019, the Company entered into an agreement (the "Contribution Agreement") to acquire from the ~~Saul~~ Trust, approximately 6.8 acres of land and its leasehold interest in approximately 1.3 acres of contiguous land, together in each case with the improvements located thereon, located at the Twinbrook Metro Station in Rockville, Maryland (the “Contributed Property”). In exchange for the Contributed Property, the Company will issue to the ~~Saul~~ Trust 1,416,071 limited partnership units ~~in the Operating Partnership (“OP Units”)~~ at an agreed upon value of $56.00 per ~~OP Unit,~~unit, representing an aggregate value of $79.3 million for the Contributed Property. Deed to the Contributed Property and the ~~OP Units have been~~units were placed in escrow until certain conditions of the Contribution Agreement are satisfied.

The Company, as contract purchaser, ~~has filed with~~received unanimous approval of the project plan from the City of Rockville ain June 2019 and unanimous approval of the site plan for Phase I of the Twinbrook Quarter development in August 2020. A single petitioner has appealed the approved site plan to the Circuit Court for Montgomery County, Maryland and that appeal is ~~conducting community hearings and awaiting design review committee comments on its plan.~~ongoing. The site plan includes ~~an 80,000~~approval for up to a 92,000 square foot Wegmans grocery store, 29,000 square feet of retail shop space, 460 residential units and ~~237,000~~270,000 square feet of office space. The phasing of these improvements and the timing of construction will depend on removal of contingencies, ~~final~~favorable resolution of the site plan ~~approval,~~appeal, building permit approval and market conditions. The ~~total~~ development potential of this 8.1 acre site, when combined with the Company’s adjacent 10.3 acre site, totals 1,865 residential units, 473,000 square feet of retail space, and 431,000 square feet of office space.

Critical Accounting Policies

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which requires management to make certain estimates and assumptions that affect the reporting of financial position and results of operations. If judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of the financial statements. The Company has identified the following policies that, due to estimates and assumptions inherent in these policies, involve a relatively high degree of judgment and complexity.

Real Estate Investments

Real estate investment properties are stated at historic cost less depreciation. Although the Company intends to own its real estate investment properties over a long term, from time to time it will evaluate its market position, market conditions, and other factors and may elect to sell properties that do not conform to the Company’s investment profile. Management believes that the Company’s real estate assets have generally appreciated in value since their acquisition or development and, accordingly, the aggregate current value exceeds their aggregate net book value and also exceeds the value of the Company’s liabilities as reported in the financial statements. Because the financial statements are prepared in conformity with GAAP, they do not report the current value of the Company’s real estate investment properties.

If there is an event or change in circumstance that indicates a potential impairment in the value of a real estate investment property, the Company prepares an analysis to determine whether the carrying value of the real estate investment property exceeds its estimated fair value. The Company considers both quantitative and qualitative factors including recurring operating losses, significant decreases in occupancy, and significant adverse changes in legal factors and business climate. If impairment indicators are present, the projected cash flows of the property over its remaining useful life, on an undiscounted basis, are

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compared to the carrying value of that property. The Company assesses its undiscounted projected cash flows based upon estimated capitalization rates, historic operating results and market conditions that may affect the property. If the carrying value is greater than the undiscounted projected cash flows, an impairment loss is recognized equivalent to an amount required to adjust the carrying amount to its then estimated fair value. The fair value of any property is sensitive to the actual results of any of the aforementioned estimated factors, either individually or taken as a whole. Should the actual results differ from management’s projections, the valuation could be negatively or positively affected.

Legal Contingencies

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, which are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, the Company believes the final outcome of current matters will not have a material adverse effect on its financial position or the results of operations. Upon determination that a loss is probable to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which its occurrence is considered probable can be difficult to determine.

Results of Operations

Three months ended ~~March 31,~~September 30, 2020 (the "2020 Quarter") compared to the three months ended~~March 31,~~ September 30, 2019 (the "2019 Quarter")

Revenue

~~Revenue~~


	Three months ended September 30,				2019 to 2020 Change
(Dollars in thousands)	2020		2019		Amount		Percent
Base rent	$	48,268	$	46,250	$	2,018	4.4	%
Expense recoveries	8,973		9,159		(186)		(2.0)	%
Percentage rent	60		147		(87)		(59.2)	%
Other property revenue	309		362		(53)		(14.6)	%
Credit losses on operating lease receivables	(1,861)		(431)		(1,430)		331.8	%
Rental revenue	55,749		55,487		262		0.5	%
Other revenue	1,011		1,565		(554)		(35.4)	%
Total revenue	$	56,760	$	57,052	$	(292)	(0.5)	%

Three months ended March 31, 2019 to 2020 Change
(Dollars in thousands) 2020 2019 Amount Percent
Base rent $ 46,348
$ 46,610
$ (262 ) (0.6 )%
Expense recoveries 8,616
9,811
(1,195 ) (12.2 )%
Percentage rent 290
284
6
2.1 %
Other property revenue 291
336
(45 ) (13.4 )%
Credit losses on operating lease receivables (130 ) (238 ) 108
(45.4 )%
Rental revenue 55,415
56,803
(1,388 ) (2.4 )%
Other revenue 1,528
2,947
(1,419 ) (48.2 )%
Total revenue $ 56,943
$ 59,750
$ (2,807 ) (4.7 )%

Base rent includes ~~$356,400~~$1.2 million and ~~$(215,900)~~$(530,300) for the 2020 Quarter and 2019 Quarter, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes ~~$352,900~~$349,300 and ~~$360,100~~,$354,200, for the 2020 Quarter and 2019 Quarter, respectively, to recognize income from the amortization of in-place leases acquired in connection with purchased real estate investment properties.

Total revenue decreased ~~4.7%~~0.5% in the 2020 Quarter compared to the 2019 Quarter, as described below.

Base Rent. The ~~$0.3~~$2.0 million ~~decrease~~increase in base rent in the 2020 Quarter compared to the 2019 Quarter is primarily attributable to ~~(a) a $0.25 per square foot decrease~~the commencement of operations of The Waycroft in ~~commercial base rent ($0.5 million), partially offset by (b) a 45,994 square foot increase~~April 2020 and Ashbrook Marketplace in ~~leased commercial space ($0.2~~November 2019 (collectively, $2.2 million).

Expense Recoveries. Expense recoveries decreased ~~12.2%~~2.0% in the 2020 Quarter compared to the 2019 Quarter primarily due to a decrease in recoverable property operating ~~expenses, largely snow removal.~~expenses.

Credit Losses on Operating Lease Receivables. Credit losses on operating lease receivables for the 2020 Quarter increased $1.4 million from the 2019 Quarter. The increase is primarily due to increased reserves across the portfolio as a result of the impact of COVID-19 on tenant operations.

Other Revenue. Other revenue decreased ~~$1.4~~$0.6 million primarily due to lower parking income ($0.4 million) and lower lease termination ~~fees.~~fees ($0.1 million).

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Expenses


	Three months ended March 31,				2019 to 2020 Change						Three months ended September 30,				2019 to 2020 Change
(Dollars in thousands)	2020		2019		Amount			Percent		(Dollars in thousands)	2020		2019		Amount		Percent
Property operating expenses	$	7,036	$	8,001	$	(965	)	(12.1	)%	Property operating expenses	$	7,416	$	7,525	$	(109)	(1.4)	%

Real estate taxes	7,153		7,148		5			0.1	%	Real estate taxes	7,523		7,114		409		5.7	%
Interest expense, net and amortization of deferred debt costs	9,594		11,067		(1,473		)	(13.3	)%	Interest expense, net and amortization of deferred debt costs	12,398		10,325		2,073		20.1	%
Depreciation and amortization of deferred leasing costs	11,281		11,643		(362		)	(3.1	)%	Depreciation and amortization of deferred leasing costs	13,713		12,018		1,695		14.1	%
General and administrative	5,050		4,814		236			4.9	%	General and administrative	4,107		4,742		(635)		(13.4)	%

Total expenses	$	40,114	$	42,673	$	(2,559	)	(6.0	)%	Total expenses	$	45,157	$	41,724	$	3,433	8.2	%

Total expenses ~~decreased~~ ~~6.0%~~increased 8.2% in the 2020 Quarter compared to the 2019 Quarter, as described below. The Waycroft mixed-use development opened in April 2020 and, concurrent with the opening, interest, real estate taxes and all other costs associated with the residential portion of the property, including depreciation (collectively, $4.2 million), began to be charged to expense, while revenue continues to grow as occupancy increases.

Property Operating Expenses. Property operating expenses decreased ~~12.1%~~1.4% in the 2020 Quarter primarily due to ~~lower snow removal costs ($1.0 million).~~the deferral of non-essential property expenses in response to the impact of COVID-19. The Company continues to complete emergency repairs and handle life and safety issues as needed.

Real Estate Taxes. Real estate taxes increased 5.7% in the 2020 Quarter primarily due to the substantial completion of The Waycroft ($0.3 million) and cessation of capitalization of those taxes.

Interest Expense, net and Amortization of Deferred Debt Costs. Interest expense, ~~decreased 13.3%~~net and amortization of deferred debt costs increased 20.1% in the 2020 Quarter primarily due to ~~(a) higher~~lower capitalized interest as a result of the opening of The Waycroft in April 2020 ($2.4 million), partially offset by an increase in capitalized interest related to 7316 Wisconsin Avenue ($0.4 million).

Depreciation and Amortization of Deferred Leasing Costs. Depreciation and amortization increased 14.1% in the 2020 Quarter primarily due to The Waycroft being placed in service ($1.6 million).

General and Administrative. General and administrative expenses decreased 13.4% in the 2020 Quarter primarily due to reduced overhead expenses including salary reductions, a corporate hiring freeze, elimination of business travel and discretionary spending such as professional seminars.

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Nine months ended September 30, 2020 (the "2020 Period") compared to the nine months ended September 30, 2019 (the "2019 Period")

Revenue


	Nine Months Ended September 30,				2019 to 2020 Change
(Dollars in thousands)	2020		2019		Amount		Percent
Base rent	$	140,120	$	139,735	$	385	0.3	%
Expense recoveries	25,775		27,647		(1,872)		(6.8)	%
Percentage rent	496		760		(264)		(34.7)	%
Other property revenue	938		1,087		(149)		(13.7)	%
Credit losses on operating lease receivables	(4,162)		(987)		(3,175)		321.7	%
Rental revenue	163,167		168,242		(5,075)		(3.0)	%
Other revenue	3,756		6,701		(2,945)		(43.9)	%
Total revenue	$	166,923	$	174,943	$	(8,020)	(4.6)	%

Base rent includes $987,100 and $(742,000) for the 2020 Period and the 2019 Period, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes $1.1 million and $1.1 million for the 2020 Period and the 2019 Period, respectively, to recognize income from the amortization of in-place leases acquired in connection with purchased real estate investment properties.

Total revenue decreased 4.6% in the 2020 Period compared to the 2019 Period, as described below.

Base Rent. The $0.4 million increase in base rent in the 2020 Period compared to 2019 Period is primarily attributable to (a) the commencement of operations of The Waycroft in April 2020 and Ashbrook Marketplace in November 2019 (collectively, $2.7 million), partially offset by (b) ~~higher interest incurred~~the lease expiration and re-leasing of the grocery anchor at Shops at Fairfax, which opened in August 2020 ($0.6 million), (c) 7316 Wisconsin Avenue, which was taken out of service for redevelopment in September 2019 ($0.5 million), (d) lower base rent at 601 Pennsylvania Avenue ($0.5 million) and (e) lower base rent at Clarendon Center ($0.5 million).

Expense Recoveries. Expense recoveries decreased 6.8% in the 2020 Period primarily due to ~~higher outstanding debt balances~~a decrease in recoverable property operating expenses, largely repairs and maintenance and snow removal.

Credit Losses on Operating Lease Receivables. Credit losses on operating lease receivables for the 2020 Period represents 2.49% of the Company’s revenue, an increase from 0.56% for the 2019 Period. The increase is primarily due to increased reserves across the Shopping Center portfolio as a result of the impact of COVID-19 on tenant operations.

Other Revenue. Other revenue decreased $2.9 million primarily due to lower lease termination fees ($~~0.1~~1.9 million) and lower parking income ($1.1 million).

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Expenses


	Nine Months Ended September 30,				2019 to 2020 Change
(Dollars in thousands)	2020		2019		Amount		Percent
Property operating expenses	$	20,862	$	22,641	$	(1,779)	(7.9)	%

Real estate taxes	22,027		21,081		946		4.5	%
Interest expense, net and amortization of deferred debt costs	34,011		32,185		1,826		5.7	%
Depreciation and amortization of deferred leasing costs	37,593		35,185		2,408		6.8	%
General and administrative	13,790		14,696		(906)		(6.2)	%


Total expenses	$	128,283	$	125,788	$	2,495	2.0	%

Total expenses increased 2.0% in the 2020 Period compared to the 2019 Period, as described below. The Waycroft mixed-use development opened in April 2020 and, concurrent with the opening, interest, real estate taxes and all other costs associated with the residential portion of the property, including depreciation, began to be charged to expense (collectively, $9.2 million), while revenue continues to grow as occupancy increases.

Property Operating Expenses. Property operating expenses decreased 7.9% in the 2020 Period primarily due to the deferral of non-essential property expenses in response to the impact of COVID-19. The Company continues to complete emergency repairs and handle life and safety issues as needed.

Real Estate Taxes. Real estate taxes increased 4.5% in the 2020 Period primarily due to the substantial completion of The Waycroft ($0.6 million) and cessation of capitalization of those taxes.

Interest Expense, net and Amortization of Deferred Debt Costs. Interest expense, net and amortization of deferred debt costs increased 5.7% in the 2020 Period primarily due to lower capitalized interest as a result of the opening of The Waycroft in April 2020 ($3.4 million), partially offset by an increase in capitalized interest related to 7316 Wisconsin Avenue ($1.6 million).

Depreciation and Amortization of Deferred Leasing Costs. The increase in depreciation and amortization to $37.6 million in the 2020 Period from $35.2 million in the 2019 Period was primarily due to (a) the commencement of operations of The Waycroft ($3.1 million) and (b) commencement of operations of Ashbrook Marketplace ($0.3 million), partially offset by 7316 Wisconsin Avenue, which was taken out of service for redevelopment in September 2019 ($1.3 million).

General and Administrative. General and administrative expenses decreased 6.2% primarily due to reduced overhead expenses including salary reductions, a corporate hiring freeze, elimination of business travel and discretionary spending such as professional seminars.

Same property revenue and same property operating income

Same property revenue and same property operating income are non-GAAP financial measures of performance and improve the comparability of these measures by excluding the results of properties which were not in operation for the entirety of the comparable reporting periods.

We define same property revenue as total revenue minus the revenue of properties not in operation for the entirety of the comparable reporting periods, and we define same property operating income as net income plus (a) interest expense, net and amortization of deferred debt costs, (b) depreciation and amortization of deferred leasing costs, (c) general and administrative expenses, and (d) change in fair value of derivatives, minus (e) gains on property dispositions and (f) the operating income of properties which were not in operation for the entirety of the comparable periods.

Other REITs may use different methodologies for calculating same property revenue and same property operating income. Accordingly, our same property revenue and same property operating income may not be comparable to those of other REITs.

Same property revenue and same property operating income are used by management to evaluate and compare the operating performance of our properties, and to determine trends in earnings, because these measures are not affected by the cost of our funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of our properties. We believe the exclusion of these items from property revenue and property operating income is useful because the resulting measures capture the actual revenue generated and actual expenses incurred by operating our properties.

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Table of Contents

Same property revenue and same property operating income are measures of the operating performance of our properties but do not measure our performance as a whole. Such measures are therefore not substitutes for total revenue, net income or operating income as computed in accordance with GAAP.

The tables below provide reconciliations of total property revenue and property operating income under GAAP to same property revenue and operating income for the indicated periods. The same property results for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019 include 49 Shopping Centers and six Mixed-Use properties.

Same property revenue


(in thousands)	Three months ended March 31,						(in thousands)	Three months ended September 30,				Nine months ended September 30,
	2020			2019				2020		2019		2020		2019
Total revenue	$	56,943		$	59,750		Total revenue	$	56,760	$	57,052	$	166,923	$	174,943
Less: Acquisitions, dispositions and development properties	(130		)	(889		)	Less: Acquisitions, dispositions and development properties	(2,461)		(72)		(3,161)		(1,155)
Total same property revenue	$	56,813		$	58,861		Total same property revenue	$	54,299	$	56,980	$	163,762	$	173,788

Shopping Centers	$	41,441		$	43,159		Shopping Centers	$	39,727	$	41,313	$	119,226	$	126,730
Mixed-Use properties	15,372			15,702			Mixed-Use properties	14,572		15,667		44,536		47,058
Total same property revenue	$	56,813		$	58,861		Total same property revenue	$	54,299	$	56,980	$	163,762	$	173,788

Total Shopping Center revenue	$	41,571		$	43,159		Total Shopping Center revenue	$	40,336	$	41,313	$	120,236	$	126,730
Less: Shopping Center acquisitions, dispositions and development properties	(130		)	—			Less: Shopping Center acquisitions, dispositions and development properties	(609)		—		(1,010)		—
Total same Shopping Center revenue	$	41,441		$	43,159		Total same Shopping Center revenue	$	39,727	$	41,313	$	119,226	$	126,730

Total Mixed-Use property revenue	$	15,372		$	16,591		Total Mixed-Use property revenue	$	16,424	$	15,739	$	46,687	$	48,213
Less: Mixed-Use acquisitions, dispositions and development properties	—			(889		)	Less: Mixed-Use acquisitions, dispositions and development properties	(1,852)		(72)		(2,151)		(1,155)
Total same Mixed-Use revenue	$	15,372		$	15,702		Total same Mixed-Use revenue	$	14,572	$	15,667	$	44,536	$	47,058

The ~~$2.0~~$2.7 million decrease in same property revenue for the 2020 Quarter compared to the 2019 Quarter, was primarily due to (a) higher credit losses on operating lease receivables and corresponding reserves (collectively, $1.6 million), (b) lower parking income ($0.4 million), (c) lower expense recoveries due to decreased recoverable expenses ($0.3 million), (d) lower lease termination fees ($~~0.7~~0.2 million) ~~and (b) decreased expense recoveries ($1.2 million)~~, (e) lower base rent, primarily due to ~~less snow removal costs~~the lease expiration and re-leasing of the grocery anchor at Shops at Fairfax, which opened in August 2020 ($0.1 million) and (f) lower percentage rent ($0.1 million).

The $10.0 million decrease in same property revenue for the 2020 Period compared to the 2019 Period, was primarily due to (a) higher credit losses on operating lease receivables and corresponding reserves (collectively, $4.3 million), (b) lower expense recoveries due to decreased recoverable expenses ($2.1 million), (c) lower lease termination fees ($1.3 million), (d) lower parking income ($1.0 million), (e) lower base rent, primarily due to the lease expiration and re-leasing of the grocery anchor at Shops at Fairfax, which opened in August 2020 ($0.6 million) and (f) lower percentage rent ($0.3 million).

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Same property operating income


								Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)							(In thousands)	2020		2019		2020		2019

	Three Months Ended March 31,
(In thousands)	2020			2019

Net income	$	16,829		$	17,077		Net income	$	11,603	$	15,328	$	38,640	$	49,155
Add: Interest expense, net and amortization of deferred debt costs	9,594			11,067			Add: Interest expense, net and amortization of deferred debt costs	12,398		10,325		34,011		32,185
Add: Depreciation and amortization of deferred leasing costs	11,281			11,643			Add: Depreciation and amortization of deferred leasing costs	13,713		12,018		37,593		35,185
Add: General and administrative	5,050			4,814			Add: General and administrative	4,107		4,742		13,790		14,696

Property operating income	42,754			44,601			Property operating income	41,821		42,413		124,034		131,221
Less: Acquisitions, dispositions and development properties	(104		)	(628		)
Add (Less): Acquisitions, dispositions and development properties							Add (Less): Acquisitions, dispositions and development properties	(1,159)		97		(901)		(519)
Total same property operating income	$	42,650		$	43,973		Total same property operating income	$	40,662	$	42,510	$	123,133	$	130,702

Shopping Centers	$	32,545		$	33,471		Shopping Centers	$	31,059	$	32,339	$	93,365	$	99,516
Mixed-Use properties	10,105			10,502			Mixed-Use properties	9,603		10,171		29,768		31,186
Total same property operating income	$	42,650		$	43,973		Total same property operating income	$	40,662	$	42,510	$	123,133	$	130,702

Shopping Center operating income	$	32,649		$	33,471		Shopping Center operating income	$	31,581	$	32,339	$	94,195	$	99,516
Less: Shopping Center acquisitions, dispositions and development properties	(104		)	—			Less: Shopping Center acquisitions, dispositions and development properties	(522)		—		(830)		—
Total same Shopping Center operating income	$	32,545		$	33,471		Total same Shopping Center operating income	$	31,059	$	32,339	$	93,365	$	99,516

Mixed-Use property operating income	$	10,105		$	11,130		Mixed-Use property operating income	$	10,240	$	10,074	$	29,839	$	31,705
Less: Mixed-Use acquisitions, dispositions and development properties	—			(628		)
Add (Less): Mixed-Use acquisitions, dispositions and development properties							Add (Less): Mixed-Use acquisitions, dispositions and development properties	(637)		97		(71)		(519)
Total same Mixed-Use property operating income	$	10,105		$	10,502		Total same Mixed-Use property operating income	$	9,603	10,171		$	29,768	$	31,186



Maryland			52-1833074
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)



Title of each class:	Name of exchange on which registered:	Trading symbol:
Common Stock, Par Value $0.01 ~~par value~~Per Share	New York Stock Exchange	BFS
Depositary Shares each representing 1/100th of a share of 6.125% Series D Cumulative Redeemable Preferred Stock, Par Value $0.01 ~~par value~~Per Share	New York Stock Exchange	BFS/PRD
Depositary Shares each representing 1/100th of a share of 6.000% Series E Cumulative Redeemable Preferred Stock, Par Value $0.01 ~~par value~~Per Share	New York Stock Exchange	BFS/PRE


			Page
PART I. FINANCIAL INFORMATION

			~~Page~~
~~PART I. FINANCIAL INFORMATION~~

Item 1. Financial Statements (Unaudited)

(a) Consolidated Balance Sheets as of ~~March 31,~~September 30, 2020 and December 31, 2019			4
(b) Consolidated Statements of Operations for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019			5
(c) Consolidated Statements of Comprehensive Income for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019			6
(d) Consolidated Statements of Equity for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019			7
(e) Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019			811
(f) Notes to Consolidated Financial Statements			912

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(a) Critical Accounting Policies			2329

(b) Results of Operations:
Three months ended ~~March 31,~~September 30, 2020 compared to three months ended ~~March 31,~~September 30, 2019			2430
~~Same Property Revenue~~Nine months ended September 30, 2020 compared to nine months ended September 30, 2019			2532
Same Property Revenue			33
Same Property Operating Income			2535

(c) Liquidity and Capital Resources			2735

Item 3. Quantitative and Qualitative Disclosures About Market Risk			3240

Item 4. Controls and Procedures			3241

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			3442
Item 1A. Risk Factors			3442
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3543
Item 3. Defaults Upon Senior Securities			3543
Item 4. Mine Safety Disclosures			3543
Item 5. Other Information			3543
Item 6. Exhibits			3643
Signatures			3744


(Dollars in thousands, except per share amounts)	March 31, 2020			December 31, 2019			(Dollars in thousands, except per share amounts)	September 30, 2020		December 31, 2019

Assets							Assets
Real estate investments							Real estate investments
Land	$	453,322		$	453,322		Land	$	509,902	$	453,322
Buildings and equipment	1,300,605			1,292,631			Buildings and equipment	1,533,103		1,292,631
Construction in progress	345,880			335,644			Construction in progress	74,476		335,644
	2,099,807			2,081,597				2,117,481		2,081,597
Accumulated depreciation	(572,912		)	(563,474		)	Accumulated depreciation	(595,785)		(563,474)
	1,526,895			1,518,123				1,521,696		1,518,123
Cash and cash equivalents	31,935			13,905			Cash and cash equivalents	54,305		13,905
Accounts receivable and accrued income, net	49,994			52,311			Accounts receivable and accrued income, net	65,701		52,311
Deferred leasing costs, net	27,546			24,083			Deferred leasing costs, net	27,468		24,083
Prepaid expenses, net	3,611			5,363			Prepaid expenses, net	8,387		5,363
Other assets	4,859			4,555			Other assets	3,817		4,555
Total assets	$	1,644,840		$	1,618,340		Total assets	$	1,681,374	$	1,618,340
Liabilities							Liabilities
Notes payable	$	798,343		$	821,503		Notes payable	$	835,613	$	821,503
Term loan facility payable	74,716			74,691			Term loan facility payable	74,766		74,691
Revolving credit facility payable	123,507			86,371			Revolving credit facility payable	123,778		86,371
Construction loan payable	122,510			108,623			Construction loan payable	141,626		108,623
Dividends and distributions payable	19,350			19,291			Dividends and distributions payable	19,373		19,291
Accounts payable, accrued expenses and other liabilities	35,122			35,199			Accounts payable, accrued expenses and other liabilities	27,874		35,199
Deferred income	24,686			29,306			Deferred income	26,727		29,306
Total liabilities	1,198,234			1,174,984			Total liabilities	1,249,757		1,174,984
Equity							Equity
Preferred stock, 1,000,000 shares authorized:							Preferred stock, 1,000,000 shares authorized:

Series D Cumulative Redeemable, 30,000 shares issued and outstanding	75,000			75,000			Series D Cumulative Redeemable, 30,000 shares issued and outstanding	75,000		75,000
Series E Cumulative Redeemable, 44,000 shares issued and outstanding	110,000			110,000			Series E Cumulative Redeemable, 44,000 shares issued and outstanding	110,000		110,000
Common stock, $0.01 par value, 40,000,000 shares authorized, 23,326,963 and 23,231,240 shares issued and outstanding, respectively	233			232
Common stock, $0.01 par value, 40,000,000 shares authorized, 23,358,208 and 23,231,240 shares issued and outstanding, respectively							Common stock, $0.01 par value, 40,000,000 shares authorized, 23,358,208 and 23,231,240 shares issued and outstanding, respectively	234		232
Additional paid-in capital	415,962			410,926			Additional paid-in capital	417,504		410,926
Distributions in excess of accumulated earnings	(223,075		)	(221,177		)	Distributions in excess of accumulated earnings	(235,720)		(221,177)

Total Saul Centers, Inc. equity	378,120			374,981			Total Saul Centers, Inc. equity	367,018		374,981
Noncontrolling interests	68,486			68,375			Noncontrolling interests	64,599		68,375
Total equity	446,606			443,356			Total equity	431,617		443,356
Total liabilities and equity	$	1,644,840		$	1,618,340		Total liabilities and equity	$	1,681,374	$	1,618,340


	Three Months Ended March 31,							Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2020			2019			(Dollars in thousands)	2020		2019		2020		2019
Net income	$	16,829		$	17,077		Net income	$	11,603	$	15,328	$	38,640	$	49,155
Other comprehensive income							Other comprehensive income
Change in unrealized loss on cash flow hedge	—			(46		)	Change in unrealized loss on cash flow hedge	0		55		0		(118)
Total comprehensive income	16,829			17,031			Total comprehensive income	11,603		15,383		38,640		49,037
Comprehensive income attributable to noncontrolling interests	(3,565		)	(3,618		)	Comprehensive income attributable to noncontrolling interests	(2,236)		(3,117)		(7,681)		(10,220)
Total comprehensive income attributable to Saul Centers, Inc.	13,264			13,413			Total comprehensive income attributable to Saul Centers, Inc.	9,367		12,266		30,959		38,817

Preferred stock dividends	(2,798		)	(2,953		)	Preferred stock dividends	(2,798)		(3,210)		(8,394)		(9,116)
Total comprehensive income available to common stockholders	$	10,466		$	10,460		Total comprehensive income available to common stockholders	$	6,569	$	9,056	$	22,565	$	29,701



SAUL CENTERS, INC.
(Exact name of registrant as specified in its charter)


(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive (Loss)		Total Saul Centers, Inc.		Noncontrolling Interests		Total
Balance at January 1, 2020	$	185,000	$	232	$	410,926	$	(221,177)	$	0	$	374,981	$	68,375	$	443,356


Issuance of shares of common stock:
83,978 shares pursuant to dividend reinvestment plan	—		1		4,080		—		—		4,081		—		4,081
11,745 shares due to exercise of stock options and issuance of directors’ deferred stock	—		0		956		—		—		956		—		956
Issuance of 15,101 partnership units pursuant to dividend reinvestment plan	—		—		—		—		—		—		734		734
Net income	—		—		—		13,264		—		13,264		3,565		16,829





Distributions payable preferred stock:

Series D, $38.28 per share	—		—		—		(1,148)		—		(1,148)		—		(1,148)
Series E, $37.50 per share	—		—		—		(1,650)		—		(1,650)		—		(1,650)
Distributions payable common stock ($0.53/share) and distributions payable partnership units ($0.53/unit)	—		—		—		(12,364)		—		(12,364)		(4,188)		(16,552)
Balance, March 31, 2020	185,000		233		415,962		(223,075)		0		378,120		68,486		446,606

Issuance of shares of common stock:
12,627 shares pursuant to dividend reinvestment plan	—		0		407		—		—		407		—		407
3,109 shares due to exercise of stock options and issuance of directors’ deferred stock	—		0		424		—		—		424		—		424

Net income	—		—		—		8,328		—		8,328		1,880		10,208





Distributions payable preferred stock:
Series D, $38.28 per share	—		—		—		(1,148)		—		(1,148)		—		(1,148)
Series E, $37.50 per share	—		—		—		(1,650)		—		(1,650)		—		(1,650)
Distributions payable common stock ($0.53/share) and distributions payable partnership units ($0.53/unit)	—		—		—		(12,373)		—		(12,373)		(4,188)		(16,561)
Balance, June 30, 2020	185,000		233		416,793		(229,918)		0		372,108		66,178		438,286



Balance at January 1, 2019	$	180,000	$	227	$	384,533	$	(208,593	)	$	(255	)	$	355,912		$	69,308		$	425,220
Issuance of shares of common stock:
120,347 shares pursuant to dividend reinvestment plan	—		1		6,170		—			—			6,171			—			6,171
485 shares due to exercise of stock options and issuance of directors’ deferred stock	—		1		419		—			—			420			—			420
Issuance of 13,742 partnership units pursuant to dividend reinvestment plan	—		—		—		—			—			—			705			705
Net income	—		—		—		13,447			—			13,447			3,630			17,077
Change in unrealized loss on cash flow hedge	—		—		—		—			(34		)	(34		)	(12		)	(46		)
Distributions payable preferred stock:
Series C, $42.97 per share	—		—		—		(1,805		)	—			(1,805		)	—			(1,805		)
Series D, $38.28 per share	—		—		—		(1,148		)	—			(1,148		)	—			(1,148		)
Distributions payable common stock ($0.53/share) and distributions payable partnership units ($0.53/unit)	—		—		—		(12,108		)	—			(12,108		)	(4,155		)	(16,263		)
Balance, March 31, 2019	$	180,000	$	229	$	391,122	$	(210,207	)	$	(289	)	$	360,855		$	69,476		$	430,331



(in thousands)	March 31, 2020		December 31, 2019
The Waycroft	$	267,563	$	255,443
7316 Wisconsin Avenue	46,946		44,638
Ashbrook Marketplace	19,796		19,128
Other	11,575		16,435
Total	$	345,880	$	335,644


•	~~limit the amount of debt as a percentage of gross asset value, as defined in the loan agreement, to less than~~ ~~60%~~ ~~(leverage ratio);~~


•	~~limit the amount of debt so that interest coverage will exceed~~ ~~2.0x on a trailing~~ ~~four-quarter~~ ~~basis (interest expense coverage); and~~


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	2020		2019		2020		2019
Net income	$	11,603	$	15,328	$	38,640	$	49,155



Add:

Real estate depreciation and amortization	13,713		12,018		37,593		35,185
FFO	25,316		27,346		76,233		84,340
Subtract:

Preferred stock dividends	(2,798)		(3,210)		(8,394)		(9,116)

FFO available to common stockholders and noncontrolling interests	$	22,518	$	24,136	$	67,839	$	75,224
Weighted average shares:
Diluted weighted average common stock	23,353		23,121		23,330		22,993
Convertible limited partnership units	7,911		7,869		7,903		7,852
Average shares and units used to compute FFO per share	31,264		30,990		31,233		30,845
FFO per share available to common stockholders and noncontrolling interests	$	0.72	$	0.78	$	2.17	$	2.44


	Total Properties		Total Square Footage		Percent Leased
	Shopping Centers	Mixed-Use	Shopping Centers	Mixed-Use	Shopping Centers		Mixed-Use
September 30, 2020	50	7	7,876,842	1,136,937	94.5	%	90.3	%
September 30, 2019	49	6	7,760,730	1,076,837	95.2	%	91.9	%


			Average Base Rent per Square Foot
Three months ended September 30,	Square Feet	Number of Leases	New/Renewed Leases		Expiring Leases
2020	288,059	66	$	24.67	$	25.09
2019	179,919	54	23.76		24.17


	New Leases			First Generation/Development Leases			Renewed Leases				New Leases		Renewed Leases
Number of leases	21			5			43			Number of leases	11		55
Square feet	88,538			15,269			339,154			Square feet	23,338		264,721
Per square foot average annualized:										Per square foot average annualized:
Base rent	$	23.54		$	37.50		$	37.24		Base rent	$	15.41	$	25.49
Tenant improvements	(3.70		)	(10.73		)	(2.48		)	Tenant improvements	(0.51)		(0.10)
Leasing costs	(0.85		)	(1.28		)	(1.08		)	Leasing costs	(0.34)		—
Rent concessions	(0.79		)	(0.06		)	(3.60		)	Rent concessions	(0.57)		(0.28)
Effective rents	$	18.20		$	25.43		$	30.08		Effective rents	$	13.99	$	25.11



FORM			10-Q


Expiring Leases:	Total
Square feet	379,057
Average base rent per square foot	$	24.08
Estimated market base rent per square foot	$	22.87


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~



31.		Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer and Chief Financial Officer (filed herewith).*

32.		Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer (filed herewith).*

99.	(a)	Schedule of Portfolio Properties (filed herewith).

101.		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended ~~March 31,~~September 30, 2020, formatted in Extensible Business Reporting Language (“XBRL”): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of equity and comprehensive income, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements.

104.		Cover Page Interactive Data File (the Cover Page Interactive Data File is embedded within the Inline XBRL document).


		SAUL CENTERS, INC. (Registrant)

Date: November 5, 2020		~~SAUL CENTERS, INC.~~ ~~(Registrant)~~

~~Date: May 6, 2020~~	/s/ B. Francis Saul II
		B. Francis Saul II Chairman, Chief Executive Officer and President

Date: ~~May 6,~~November 5, 2020		/s/ Scott V. Schneider
		Scott V. Schneider Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer)

Date: ~~May 6,~~November 5, 2020		/s/ Joel A. Friedman
		Joel A. Friedman Senior Vice President, Chief Accounting Officer (principal accounting officer)