UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-12254


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


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

7501 Wisconsin Avenue, Bethesda, Maryland 20814

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code (301) 986-6200

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol:	Name of exchange on which registered:	~~Trading symbol:~~
Common Stock, Par Value $0.01 Per Share	BFS	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 Per Share	BFS/PRD	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 Per Share	BFS/PRE	New York Stock Exchange	~~BFS/PRE~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒☐

Accelerated filer

☐☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, par value $0.01 per share outstanding as of October 31, ~~2020: 23.4~~2021: 23.7 million.

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SAUL CENTERS, INC.

Table of Contents


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

(a) Consolidated Balance Sheets as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020			4
(b) Consolidated Statements of Operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			5

(c) Consolidated Statements of ~~Comprehensive Income~~Equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			6
(d) Consolidated Statements of ~~Equity for the three and nine months ended September 30, 2020 and 2019~~			7
~~(e) Consolidated Statements of~~ Cash Flows for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			1110
~~(f)~~(e) Notes to Consolidated Financial Statements			1211

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

(a) Critical Accounting Policies			2928

(b) Results of Operations:
Three months ended September 30, ~~2020~~2021 compared to three months ended September 30, ~~2019~~2020			3029
Nine months ended September 30, ~~2020~~2021 compared to nine months ended September 30, ~~2019~~2020			3230
Same ~~Property Revenue~~property revenue and same property operating income			33
~~Same Property Operating Income~~			3531

(c) Liquidity and Capital Resources			3534

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4038

Item 4. Controls and Procedures			4139

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			4240
Item 1A. Risk Factors			4240
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4341
Item 3. Defaults Upon Senior Securities			4341
Item 4. Mine Safety Disclosures			4341
Item 5. Other Information			4341
Item 6. Exhibits			4341
Signatures			4442

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Dollars in thousands, except per share amounts)	(Dollars in thousands, except per share amounts)	September 30, 2020		December 31, 2019		(Dollars in thousands, except per share amounts)	September 30, 2021		December 31, 2020

Assets	Assets					Assets
Real estate investments	Real estate investments					Real estate investments
Land	Land	$	509,902	$	453,322	Land	$	511,596	$	511,482
Buildings and equipment	Buildings and equipment	1,533,103		1,292,631		Buildings and equipment	1,563,059		1,543,837
Construction in progress	Construction in progress	74,476		335,644		Construction in progress	191,707		69,477
		2,117,481		2,081,597			2,266,362		2,124,796
Accumulated depreciation	Accumulated depreciation	(595,785)		(563,474)		Accumulated depreciation	(639,241)		(607,706)
		1,521,696		1,518,123			1,627,121		1,517,090
Cash and cash equivalents	Cash and cash equivalents	54,305		13,905		Cash and cash equivalents	11,917		26,856
Accounts receivable and accrued income, net	Accounts receivable and accrued income, net	65,701		52,311		Accounts receivable and accrued income, net	61,855		64,917
Deferred leasing costs, net	Deferred leasing costs, net	27,468		24,083		Deferred leasing costs, net	24,638		26,872
Prepaid expenses, net		8,387		5,363

Other assets	Other assets	3,817		4,555		Other assets	13,969		9,837
Total assets	Total assets	$	1,681,374	$	1,618,340	Total assets	$	1,739,500	$	1,645,572
Liabilities	Liabilities					Liabilities
Notes payable	Notes payable	$	835,613	$	821,503	Notes payable	$	794,586	$	827,603
Construction loan payable						Construction loan payable	147,112		144,607
Revolving credit facility payable						Revolving credit facility payable	95,028		103,913
Term loan facility payable	Term loan facility payable	74,766		74,691		Term loan facility payable	99,209		74,791
Revolving credit facility payable		123,778		86,371
Construction loan payable		141,626		108,623
Dividends and distributions payable		19,373		19,291
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	27,874		35,199		Accounts payable, accrued expenses and other liabilities	27,199		24,384
Deferred income	Deferred income	26,727		29,306		Deferred income	26,216		23,293
Dividends and distributions payable						Dividends and distributions payable	20,543		19,448

Total liabilities	Total liabilities	1,249,757		1,174,984		Total liabilities	1,209,893		1,218,039
Equity	Equity					Equity
Preferred stock, 1,000,000 shares authorized:	Preferred stock, 1,000,000 shares authorized:					Preferred stock, 1,000,000 shares authorized:

Series D Cumulative Redeemable, 30,000 shares issued and outstanding	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	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, 23,358,208 and 23,231,240 shares issued and outstanding, respectively		234		232
Common stock, $0.01 par value, 40,000,000 shares authorized, 23,713,961 and 23,476,626 shares issued and outstanding, respectively						Common stock, $0.01 par value, 40,000,000 shares authorized, 23,713,961 and 23,476,626 shares issued and outstanding, respectively	237		235
Additional paid-in capital	Additional paid-in capital	417,504		410,926		Additional paid-in capital	430,537		420,625
Partnership units in escrow						Partnership units in escrow	79,300		—
Distributions in excess of accumulated earnings	Distributions in excess of accumulated earnings	(235,720)		(221,177)		Distributions in excess of accumulated earnings	(252,309)		(241,535)

Total Saul Centers, Inc. equity	Total Saul Centers, Inc. equity	367,018		374,981		Total Saul Centers, Inc. equity	442,765		364,325
Noncontrolling interests	Noncontrolling interests	64,599		68,375		Noncontrolling interests	86,842		63,208
Total equity	Total equity	431,617		443,356		Total equity	529,607		427,533
Total liabilities and equity	Total liabilities and equity	$	1,681,374	$	1,618,340	Total liabilities and equity	$	1,739,500	$	1,645,572

The Notes to Financial Statements are an integral part of these statements.

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


(Dollars in thousands, except per share amounts)	(Dollars in thousands, except per share amounts)	Three Months Ended September 30,				Nine Months Ended September 30,				(Dollars in thousands, except per share amounts)	Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue	Revenue									Revenue
Rental revenue	Rental revenue	$	55,749	$	55,487	$	163,167	$	168,242	Rental revenue	$	59,058	$	55,749	$	175,634	$	163,167
Other	Other	1,011		1,565		3,756		6,701		Other	1,198		1,011		3,351		3,756
Total revenue	Total revenue	56,760		57,052		166,923		174,943		Total revenue	60,256		56,760		178,985		166,923
Expenses	Expenses									Expenses
Property operating expenses	Property operating expenses	7,416		7,525		20,862		22,641		Property operating expenses	8,210		7,416		24,420		20,862
Real estate taxes	Real estate taxes	7,523		7,114		22,027		21,081		Real estate taxes	7,154		7,523		22,121		22,027
Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	12,398		10,325		34,011		32,185		Interest expense, net and amortization of deferred debt costs	10,914		12,398		34,559		34,011
Depreciation and amortization of deferred leasing costs		13,713		12,018		37,593		35,185
Depreciation and amortization of lease costs										Depreciation and amortization of lease costs	12,467		13,713		37,852		37,593
General and administrative	General and administrative	4,107		4,742		13,790		14,696		General and administrative	4,626		4,107		14,234		13,790
Total expenses	Total expenses	45,157		41,724		128,283		125,788		Total expenses	43,371		45,157		133,186		128,283

Net Income	Net Income	11,603		15,328		38,640		49,155		Net Income	16,885		11,603		45,799		38,640
Noncontrolling interests	Noncontrolling interests									Noncontrolling interests
Income attributable to noncontrolling interests	Income attributable to noncontrolling interests	(2,236)		(3,102)		(7,681)		(10,250)		Income attributable to noncontrolling interests	(3,747)		(2,236)		(9,653)		(7,681)
Net income attributable to Saul Centers, Inc.	Net income attributable to Saul Centers, Inc.	9,367		12,226		30,959		38,905		Net income attributable to Saul Centers, Inc.	13,138		9,367		36,146		30,959

Preferred stock dividends	Preferred stock dividends	(2,798)		(3,210)		(8,394)		(9,116)		Preferred stock dividends	(2,798)		(2,798)		(8,395)		(8,394)
Net income available to common stockholders	Net income available to common stockholders	$	6,569	$	9,016	$	22,565	$	29,789	Net income available to common stockholders	$	10,340	$	6,569	$	27,751	$	22,565
Per share net income available to common stockholders	Per share net income available to common stockholders									Per share net income available to common stockholders

Basic and diluted	Basic and diluted	$	0.28	$	0.39	$	0.97	$	1.30	Basic and diluted	$	0.44	$	0.28	$	1.17	$	0.97

The Notes to Financial Statements are an integral part of these statements.

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~EQUITY

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2020 2019 2020 2019
Net income $ 11,603 $ 15,328 $ 38,640 $ 49,155
Other comprehensive income
Change in unrealized loss on cash flow hedge 0 55 0 (118)
Total comprehensive income 11,603 15,383 38,640 49,037
Comprehensive income attributable to noncontrolling interests (2,236) (3,117) (7,681) (10,220)
Total comprehensive income attributable to Saul Centers, Inc. 9,367 12,266 30,959 38,817
Preferred stock dividends (2,798) (3,210) (8,394) (9,116)
Total comprehensive income available to common stockholders $ 6,569 $ 9,056 $ 22,565 $ 29,701

~~The Notes to Financial Statements are an integral part of these statements.~~


(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Partnership Units in Escrow		Distributions in Excess of Accumulated Earnings		Total Saul Centers, Inc.		Noncontrolling Interests		Total
Balance at January 1, 2021	$	185,000	$	235	$	420,625	$	—	$	(241,535)	$	364,325	$	63,208	$	427,533


Issuance of shares of common stock:
96,268 shares pursuant to dividend reinvestment plan	—		1		2,839		—		—		2,840		—		2,840
910 shares due to exercise of stock options and issuance of directors’ deferred stock	—		—		323		—		—		323		—		323
Issuance of 19,493 partnership units pursuant to dividend reinvestment plan	—		—		—		—		—		—		575		575
1,416,071 partnership units placed in escrow pursuant to Twinbrook contribution	—		—		—		79,300		—		79,300		—		79,300
Net income	—		—		—		—		10,262		10,262		2,533		12,795





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)	—		—		—		—		(12,488)		(12,488)		(4,218)		(16,706)
Balance, March 31, 2021	185,000		236		423,787		79,300		(246,559)		441,764		62,098		503,862

Issuance of shares of common stock:
68,206 shares pursuant to dividend reinvestment plan	—		—		2,855		—		—		2,855		—		2,855
6,038 shares due to share grants, exercise of stock options and issuance of directors’ deferred stock	—		—		705		—		—		705		—		705
Issuance of partnership units:	—		—		—		—		—		—		—		—
13,978 units pursuant to the dividend reinvestment plan	—		—		—		—		—		—		585		585
469,740 units pursuant to the contribution of Twinbrook leasehold interest	—		—		—		—		—		—		21,500		21,500
93,674 units pursuant to the contribution of Ashbrook Marketplace	—		—		—		—		—		—		4,320		4,320
Net income	—		—		—		—		12,746		12,746		3,373		16,119





Distributions payable preferred stock:
Series D, $38.28 per share	—		—		—		—		(1,149)		(1,149)		—		(1,149)
Series E, $37.50 per share	—		—		—		—		(1,650)		(1,650)		—		(1,650)
Distributions payable common stock ($0.55/share) and distributions payable partnership units ($0.55/unit)	—		—		—		—		(13,000)		(13,000)		(4,694)		(17,694)
Balance, June 30, 2021	185,000		236		427,347		79,300		(249,612)		442,271		87,182		529,453

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Saul Centers, Inc.

~~CONSOLIDATED STATEMENTS OF EQUITY~~


(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Partnership Units in Escrow		Distributions in Excess of Accumulated Earnings		Total Saul Centers, Inc.		Noncontrolling Interests		Total

Issuance of shares of common stock:
65,171 shares pursuant to dividend reinvestment plan	—		1		2,896		—		—		2,897		—		2,897
743 shares due to exercise of stock options and issuance of directors’ deferred stock	—		—		294		—		—		294		—		294
Issuance of 13,841 partnership units pursuant to dividend reinvestment plan	—		—		—		—		—		—		615		615
Net income	—		—		—		—		13,138		13,138		3,747		16,885





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 ($0.55/share) and distributions payable partnership units ($0.55/unit)	—		—		—		—		(13,037)		(13,037)		(4,702)		(17,739)
Balance, September 30, 2021	$	185,000	$	237	$	430,537	$	79,300	$	(252,309)	$	442,765	$	86,842	$	529,607

~~(Unaudited)~~

(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

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Saul Centers, Inc.

(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
Issuance of shares of common stock:
14,525 shares pursuant to dividend reinvestment plan — 1 421 — — 422 — 422
984 shares due to exercise of stock options and issuance of directors’ deferred stock — 0 290 — — 290 — 290
Issuance of 13,108 partnership units pursuant to dividend reinvestment plan — — — — — — 380 380
Net income — — — 9,367 — 9,367 2,236 11,603
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) — — — (12,371) — (12,371) (4,195) (16,566)
Balance, September 30, 2020 $ 185,000 $ 234 $ 417,504 $ (235,720) $ 0 $ 367,018 $ 64,599 $ 431,617


(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Partnership Units in Escrow		Distributions in Excess of Accumulated Earnings		Total Saul Centers, Inc.		Noncontrolling Interests		Total
Balance at January 1, 2020	$	185,000	$	232	$	410,926	$	—	$	(221,177)	$	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	—		—		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)		378,120		68,486		446,606



Issuance of shares of common stock:
12,627 shares pursuant to dividend reinvestment plan	—		—		407		—		—		407		—		407
3,109 shares due to share grants, exercise of stock options and issuance of directors’ deferred stock	—		—		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)		372,108		66,178		438,286

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Saul Centers, Inc.

(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, 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
Issuance of shares of common stock:
99,804 shares pursuant to dividend reinvestment plan — 1 5,127 — — 5,128 — 5,128
48,772 shares due to exercise of stock options and issuance of directors’ deferred stock — 0 2,798 — — 2,798 — 2,798
Issuance of 20,041 partnership units pursuant to dividend reinvestment plan — — — — — — 1,029 1,029
Net income — — — 13,232 — 13,232 3,518 16,750
Change in unrealized loss on cash flow hedge — — — — (95) (95) (32) (127)
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) — — — (12,181) — (12,181) (4,166) (16,347)
Balance, June 30, 2019 180,000 230 399,047 (212,109) (384) 366,784 69,825 436,609

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~~Saul Centers, Inc.~~

(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
Issuance of 44,000 shares of Series E Cumulative preferred stock 110,000 — (3,731) — — 106,269 — 106,269
Issuance of shares of common stock:
105,753 shares pursuant to dividend reinvestment plan — 1 5,673 — — 5,674 — 5,674
1,645 shares due to exercise of stock options and issuance of directors’ deferred stock — 0 406 — — 406 — 406
Issuance of 13,406 partnership units pursuant to dividend reinvestment plan — — — — — — 720 720
Net income — — — 12,226 — 12,226 3,102 15,328
Change in unrealized loss on cash flow hedge — — — — 41 41 14 55
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)
Series E, $5.83 per share — — — (257) — (257) — (257)
Distributions payable common stock ($0.53/share) and distributions payable partnership units ($0.53/unit) — — — (12,241) — (12,241) (4,173) (16,414)
Balance, September 30, 2019 $ 290,000 $ 231 $ 401,395 $ (215,334) $ (343) $ 475,949 $ 69,488 $ 545,437


(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Partnership Units in Escrow		Distributions in Excess of Accumulated Earnings		Total Saul Centers, Inc.		Noncontrolling Interests		Total


Issuance of shares of common stock:
14,525 shares pursuant to dividend reinvestment plan	—		1		421		—		—		422		—		422
984 shares due to exercise of stock options and issuance of directors’ deferred stock	—		—		290		—		—		290		—		290
Issuance of 13,108 partnership units pursuant to dividend reinvestment plan	—		—		—		—		—		—		380		380
Net income	—		—		—		—		9,367		9,367		2,236		11,603






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)	—		—		—		—		(12,371)		(12,371)		(4,195)		(16,566)
Balance, September 30, 2020	$	185,000	$	234	$	417,504	$	—	$	(235,720)	$	367,018	$	64,599	$	431,617

The Notes to Financial Statements are an integral part of these statements.

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Saul Centers, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS					CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)	(Unaudited)					(Unaudited)
		Nine months ended September 30,					Nine months ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	38,640	$	49,155	Net income	$	45,799	$	38,640
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of deferred leasing costs		37,593		35,185
Depreciation and amortization of lease costs						Depreciation and amortization of lease costs	37,852		37,593
Amortization of deferred debt costs	Amortization of deferred debt costs	1,163		1,130		Amortization of deferred debt costs	1,237		1,163
Compensation costs of stock grants and options		1,141		1,501
Compensation costs of stock and option grants						Compensation costs of stock and option grants	1,197		1,141
Credit losses on operating lease receivables	Credit losses on operating lease receivables	4,162		986		Credit losses on operating lease receivables	802		4,162
Increase in accounts receivable and accrued income		(17,552)		(2,317)
(Increase) decrease in accounts receivable and accrued income						(Increase) decrease in accounts receivable and accrued income	2,260		(17,552)
Additions to deferred leasing costs	Additions to deferred leasing costs	(7,383)		(1,380)		Additions to deferred leasing costs	(1,316)		(7,383)
Increase in prepaid expenses		(3,024)		(4,182)
(Increase) decrease in other assets		738		(2,049)

Increase in other assets						Increase in other assets	(4,124)		(2,286)
Increase in accounts payable, accrued expenses and other liabilities	Increase in accounts payable, accrued expenses and other liabilities	3,871		5,696		Increase in accounts payable, accrued expenses and other liabilities	2,432		3,871
Decrease in deferred income		(2,579)		(1,627)
Increase (decrease) in deferred income						Increase (decrease) in deferred income	2,923		(2,579)
Net cash provided by operating activities	Net cash provided by operating activities	56,770		82,098		Net cash provided by operating activities	89,062		56,770
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Acquisitions of real estate investments (1) (2) (3)						Acquisitions of real estate investments (1) (2) (3)	(9,011)		—
Additions to real estate investments	Additions to real estate investments	(13,665)		(13,398)		Additions to real estate investments	(14,593)		(13,665)
Additions to development and redevelopment projects	Additions to development and redevelopment projects	(34,698)		(91,657)		Additions to development and redevelopment projects	(15,227)		(34,698)

Net cash used in investing activities	Net cash used in investing activities	(48,363)		(105,055)		Net cash used in investing activities	(38,831)		(48,363)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from notes payable	Proceeds from notes payable	52,100		22,100		Proceeds from notes payable	—		52,100
Repayments on notes payable	Repayments on notes payable	(37,431)		(55,992)		Repayments on notes payable	(33,670)		(37,431)

Proceeds from term loan facility						Proceeds from term loan facility	25,000		—
Proceeds from revolving credit facility	Proceeds from revolving credit facility	90,000		47,000		Proceeds from revolving credit facility	36,000		90,000
Repayments on revolving credit facility	Repayments on revolving credit facility	(53,000)		(94,000)		Repayments on revolving credit facility	(42,500)		(53,000)
Proceeds from construction loan	Proceeds from construction loan	32,928		71,807		Proceeds from construction loan	2,430		32,928
Additions to deferred debt costs	Additions to deferred debt costs	(1,196)		(432)		Additions to deferred debt costs	(3,474)		(1,196)
Proceeds from the issuance of:	Proceeds from the issuance of:					Proceeds from the issuance of:
Common stock	Common stock	5,440		19,096		Common stock	8,717		5,440
Partnership units		1,114		2,454
Partnership units (1) (2) (3)						Partnership units (1) (2) (3)	1,775		1,114

Series E preferred stock		0		106,269

Distributions to:	Distributions to:					Distributions to:
Series C preferred stockholders		0		(5,415)

Series D preferred stockholders	Series D preferred stockholders	(3,444)		(3,444)		Series D preferred stockholders	(3,445)		(3,444)
Series E preferred stockholders	Series E preferred stockholders	(4,950)		0		Series E preferred stockholders	(4,950)		(4,950)
Common stockholders	Common stockholders	(37,012)		(36,326)		Common stockholders	(37,926)		(37,012)
Noncontrolling interests	Noncontrolling interests	(12,556)		(12,469)		Noncontrolling interests	(13,127)		(12,556)
Net cash provided by financing activities		31,993		60,648
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(65,170)		31,993
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	40,400		37,691		Net increase (decrease) in cash and cash equivalents	(14,939)		40,400
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	13,905		14,578		Cash and cash equivalents, beginning of period	26,856		13,905
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	54,305	$	52,269	Cash and cash equivalents, end of period	$	11,917	$	54,305
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest	Cash paid for interest	$	32,951	$	31,266	Cash paid for interest	$	33,738	$	32,951
Increase (decrease) in accrued real estate investments and development costs	Increase (decrease) in accrued real estate investments and development costs	$	(11,196)	$	1,507	Increase (decrease) in accrued real estate investments and development costs	$	504	$	(11,196)

(1) The 2021 acquisition of real estate and proceeds from the issuance of partnership units each excludes $79,300 in connection with the contribution of Twinbrook Quarter by the B. F. Saul Real Estate Investment Trust in exchange for limited partnership units that are held in escrow. See Notes 3 and 4 to the Consolidated Financial Statements.

(2) The 2021 acquisition of real estate and proceeds from the issuance of partnership units each excludes $21,500 in connection with the contribution of the Twinbrook Quarter leasehold interest in exchange for limited partnership units. See Notes 3 and 4 to the Consolidated Financial Statements.

(3) The 2021 acquisition of real estate and proceeds from the issuance of partnership units each excludes $4,320 in connection with the issuance of additional limited partnership units to B. F. Saul Real Estate Investment Trust as additional consideration pursuant to the terms of the 2016 contribution agreement, as amended, related to Ashbrook Marketplace. See Note 7 to the Consolidated Financial Statements.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

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 and 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 September 30, ~~2020,~~2021, the Company’s properties (the “Current Portfolio Properties”) consisted of 50 shopping center properties (the “Shopping Centers”), 7 mixed-use properties, which are comprised of office, retail and multi-family residential uses (the “Mixed-Use Properties”) and 34 (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 September 30, ~~2020,~~2021, 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 ~~5.4%~~5.3% of the Company's total revenue for the nine months ended September 30, ~~2020.~~2021. No other tenant individually accounted for 2.5% or more of the Company’s total revenue, excluding lease termination fees, for the nine months ended September 30, ~~2020.~~2021.

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 September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, are comprised of the assets and liabilities of the Operating Partnership. ~~The debt~~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%~~73.4% 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,~~2020, 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.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

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~~2020 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 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~~represents amounts ~~currently~~ due from tenants, whether current or deferred, in accordance with the terms of their respective ~~leases.~~leases and base rent recognized on a straight-line basis. Individual leases are assessed for collectability and upon the determination that the collection of rents is not probable, accrued rent and accounts receivable 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 current economic trends. As of September 30, 2021, $4.6 million of rents previously deferred have come due. Of the amounts that have come due, $4.5 million has been paid.

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, accounts receivable was comprised of:


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	September 30, 2021		December 31, 2020
Rents currently due	Rents currently due	$	14,553	$	7,235	Rents currently due	$	7,576	$	13,321
Deferred rents	Deferred rents	6,783		474		Deferred rents	5,388		8,205
Straight-line rent	Straight-line rent	44,266		42,088		Straight-line rent	46,429		44,863
Other receivables	Other receivables	5,018		2,967		Other receivables	5,974		3,751
Allowance for doubtful accounts	Allowance for doubtful accounts	(4,919)		(453)		Allowance for doubtful accounts	(3,512)		(5,223)

Total	Total	$	65,701	$	52,311	Total	$	61,855	$	64,917

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the presentation used for the nine months ended September 30, 2021.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

~~Recently Issued Accounting Standards~~

3. Real Estate

Construction In ~~February 2016,~~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 ~~Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) 2016-02, ‘‘Leases’’ (“ASU 2016-02”). ASU 2016-02 amended~~commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the ~~accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets~~start of construction such as architectural, engineering, construction management and ~~making targeted changes to lessor accounting. ASU 2016-02 became effective for annual periods beginning after~~carrying costs consisting of interest, real estate taxes and insurance. During the nine months ended September 30, 2021, assets totaling $8.7 million were placed in service in conjunction with the substantial completion of The Waycroft. Construction in progress as of September 30, 2021 and December ~~15, 2018, interim periods within those years, and required a modified retrospective transition approach for all leases existing at~~31, 2020, is composed of 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 were no significant changes to our lessor accounting for operating leases as a result of ASU 2016-02.following:


(In thousands)	September 30, 2021		December 31, 2020
Twinbrook Quarter	$	127,348	$	—
Hampden House	53,619		50,723
The Waycroft	—		8,651
Ashbrook Marketplace	—		153
Other	10,740		9,950
Total	$	191,707	$	69,477

Leases

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 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~~An operating lease right of use asset and corresponding lease liability related to our headquarters lease ~~were recorded~~are reflected 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 ~~$1.1 million~~$321,900 and ~~$1.1 million,~~$334,500, respectively, at September 30, ~~2020.~~2021.

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 Accounting Standards Update 2016-02, "Accounting for Leases"
("ASU ~~2016-02~~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 of the Financial Accounting Standards Board issued a question and answer document that 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."

~~Reclassifications~~

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

~~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 September 30, 2020 and December 31, 2019, is composed of the following:

(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 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~~$24.6 million and ~~$24.1~~$26.9 million, net of accumulated amortization of ~~$43.8~~$47.7 million and ~~$41.6~~$44.5 million, as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Amortization expense, included in depreciation and amortization of ~~deferred leasing costs in the Consolidated Statements of Operations, totaled $4.0 million and $4.5 million for the nine months ended September 30, 2020 and 2019, respectively.~~

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

lease costs in the Consolidated Statements of Operations, totaled $3.6 million and $4.0 million for the nine months ended September 30, 2021 and 2020, respectively.

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 ~~$33.6~~$34.2 million and ~~$30.7~~$33.6 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Repairs and maintenance expense totaled ~~$8.0~~$10.2 million and ~~$9.7~~$8.0 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and is included in property operating expenses in the Consolidated Statements of Operations.

As of September 30, ~~2020,~~2021, 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, 0no impairment charges were recorded.

Acquisitions

On November 5, 2019, the Company entered into an agreement (the “Twinbrook Contribution Agreement”) to acquire from 1592 Rockville Pike LLC ("1592 Rockville Pike"), a wholly-owned subsidiary of the B. F. Saul Real Estate Investment Trust (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”). The Contributed Property is immediately adjacent to approximately 10.3 acres owned by the Company. In exchange for the Contributed Property, the Company will issue to 1592 Rockville Pike 1,416,071 limited partnership units in the Operating Partnership. Title to the Contributed Property and the units were placed in escrow until certain conditions of the Twinbrook Contribution Agreement were satisfied.

The units issued to 1592 Rockville Pike will remain in escrow until the conditions of the Twinbrook Contribution Agreement, as amended, are satisfied. Half of the units held in escrow were released on the October 18, 2021. The remaining units held in escrow are scheduled to be released on October 18, 2023.

On March 5, 2021, the Company entered into an amendment to the Twinbrook Contribution Agreement in which it and 1592 Rockville Pike agreed to release to the Company from escrow the deed and assignment of the leasehold interest of the Contributed Property, as of that date. The Company also reimbursed 1592 Rockville Pike for certain expenses pursuant to the Twinbrook Contribution Agreement totaling $7.4 million. Acquisition costs totaled $1.2 million. The Company recorded a finance lease right-of-use asset of $19.4 million and corresponding lease liability of $19.4 million related to the leasehold interest assumed in the transaction. The incremental borrowing rate used to calculate the lease liability was 5.63%.

On June 29, 2021, the third-party landlord under the ground lease contributed to the Company the fee simple interest in the land underlying the leasehold interest in exchange for 469,740 limited partnership units in the Operating Partnership, representing an aggregate value of $21.5 million. Acquisition costs were paid in cash and totaled $0.7 million. Accordingly, the finance lease right-of-use asset and finance lease liability were extinguished. Amortization expense and interest expense related to the lease totaled $104,000 and $362,800, respectively, for the nine months ended September 30, 2021.

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

As of September 30, ~~2020,~~2021, 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%~~held an aggregate 25.1% limited partnership interest in the Operating Partnership represented by approximately ~~7.9~~8.1 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 basis provided that, in accordance with the 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 September 30, ~~2020,~~2021, approximately ~~3.0~~1.0 million units could be converted into shares of Saul Centers common stock.

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~~The impact~~Table of ~~the Saul Organization’s approximately 25.4%~~Contents

Notes to Consolidated Financial Statements (Unaudited)

As of September 30, 2021, a third party investor holds a 1.5% limited partnership interest in the Operating Partnership represented by 469,740 convertible limited partnership units. At the option of the unit holder, these units are convertible into shares of Saul Centers’ common stock on a one-for-one basis; provided that, in lieu of the delivery of Saul Centers' common stock, Saul Centers may, in its sole discretion, deliver cash in an amount equal to the value of such Saul Centers' common stock.

The impact of the aggregate 26.6% limited partnership interest in the Operating Partnership held by parties other than Saul Centers is reflected as Noncontrolling Interests in the accompanying consolidated financial statements. ~~Fully converted~~Weighted average fully diluted partnership units and ~~diluted weighted average~~ common stock outstanding for the three months ended September 30, 2021 and 2020, ~~and 2019, were~~was approximately ~~31.3~~33.7 million and ~~31.0~~31.3 million, respectively, and for the nine months ended September 30, ~~2020~~2021 and ~~2019, were~~2020, was approximately 32.9 million and 31.2 million, ~~and 30.8~~respectively.

The 0.7 million ~~respectively.~~limited partnership units remaining in escrow after October 18, 2021, in connection with the Twinbrook Contribution Agreement are not eligible to receive distributions from the Operating Partnership until such time as they are released from escrow.

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

The principal amount of the Company’s outstanding debt totaled approximately ~~$1.2~~$1.1 billion at September 30, ~~2020,~~2021, of which approximately ~~$986.0~~$949.5 million was fixed-rate debt and approximately ~~$199.5~~$198.0 million was variable rate debt outstanding under the credit facility. The carrying value of the properties collateralizing the notes payable totaled approximately ~~$1.2~~$1.1 billion as of September 30, ~~2020.~~2021.

~~At September 30, 2020,~~On August 31, 2021, the Company ~~had a $400.0 million~~replaced its credit facility. The new credit facility, ~~comprised~~which can be used for working capital, property acquisitions, development projects or letters of credit, totals $525.0 million (the “New Facility”), of which $425.0 million is a ~~$325.0~~revolving credit facility (the “Revolving Line”) and $100.0 million ~~revolving facility~~is a term loan (the “Term Loan”). The Revolving Line matures on August 29, 2025, which term may be extended by the Company for one additional year, subject to satisfaction of certain conditions. The Term Loan matures on February 26, 2027, and may not be extended. In general, loan availability under the New Facility is primarily determined by operating income from the Company’s existing unencumbered properties. Interest accrues at a ~~$75.0 million term loan.~~rate of LIBOR plus a spread of 135 basis points to 195 basis points under the Revolving Line, and 130 basis points to 190 basis points under the Term Loan, each as determined by certain leverage tests. As of September 30, ~~2020,~~2021, the applicable spread for borrowings ~~was~~is 140 basis points under the ~~revolving credit facility~~Revolving Line and 135 basis points under the ~~term loan.~~Term Loan. Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the New Facility. Letters of credit may be issued under the revolving credit facility. ~~As of~~On September 30, ~~2020,~~2021, based on the value of the Company’s unencumbered properties, approximately ~~$200.3~~$228.2 million was available under the ~~revolving credit facility, $124.5~~Revolving Line, $98.0 million was outstanding and approximately $185,000 was committed for letters of credit.

On ~~February 10, 2020,~~January 5, 2021, the Company repaid in full the remaining principal balance of ~~$9.2~~$6.1 million of the mortgage loan secured by ~~Boca Valley Plaza,~~Jamestown Place, which was scheduled to mature ~~on May 10, 2020.~~in February 2021.

On ~~March 3, 2020,~~June 11, 2021, the Company repaid in full the remaining principal balance of ~~$7.1~~$5.0 million of the mortgage loan secured by ~~Palm Springs Center,~~Hunt Club Corners, 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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~~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.

August 2021.

Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the 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~~$3.3 million of the ~~$66.8~~$65.1 million outstanding balance at September 30, ~~2020,~~2021, which guarantee will be reduced to ~~(i) $3.3 million on October 1, 2020 and (ii) 0~~zero on October 1, 2021), (b) a portion of the Broadlands mortgage (approximately ~~$3.8~~$3.7 million of the ~~$30.7~~$29.9 million outstanding balance at September 30, ~~2020)~~2021), (c) a portion of the Avenel Business Park mortgage (approximately $6.3 million of the ~~$25.5~~$24.4 million outstanding balance at September 30, ~~2020)~~2021), (d) a portion of The Waycroft mortgage (approximately $23.6 million of the ~~$143.1~~$148.5 million outstanding balance at September 30, ~~2020)~~2021), (e) the Ashbrook Marketplace mortgage (totaling ~~$22.1~~$21.5 million at September 30, ~~2020)~~2021), and (f) the mortgage secured by Kentlands Place, Kentlands Square I and Kentlands ~~pad~~Pad (totaling ~~$29.9~~$29.2 million at September 30, ~~2020)~~2021). 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,~~2020, the principal amount of the Company’s outstanding debt totaled approximately ~~$1.1~~$1.2 billion, of which ~~$938.4~~$980.8 million was fixed rate debt and ~~$162.5~~$179.5 million was variable rate debt, including ~~$87.5~~$104.5 million outstanding under an unsecured revolving credit facility. The carrying value of the properties collateralizing the notes payable totaled approximately ~~$1.1~~$1.2 billion as of December 31, ~~2019.~~2020.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

At September 30, ~~2020,~~2021, the scheduled maturities of debt, including scheduled principal amortization, for years ending December 31, were as follows:


(In thousands)	(In thousands)	Balloon Payments			Scheduled Principal Amortization		Total		(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
October 1 through December 31, 2021									October 1 through December 31, 2021	$	—		$	7,679	$	7,679
2022	2022	161,002		(a)	30,984		191,986		2022	36,502			31,016		67,518
2023	2023	84,225			31,447		115,672		2023	9,225			31,479		40,704
2024	2024	66,164			30,815		96,979		2024	66,164			30,876		97,040
2025	2025	20,363			27,823		48,186		2025	118,363		(a)	27,860		146,223
2026									2026	134,088			24,333		158,421
Thereafter	Thereafter	566,375			117,532		683,907		Thereafter	537,673			92,253		629,926
Principal amount	Principal amount	$	909,141		$	276,377	1,185,518		Principal amount	$	902,015		$	245,496	1,147,511
Unamortized deferred debt costs	Unamortized deferred debt costs						9,735		Unamortized deferred debt costs						11,576
Net	Net						$	1,175,783	Net						$	1,135,935

(a) Includes ~~$124.5~~$98.0 million outstanding under the ~~revolving credit facility.~~Revolving Line.

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the 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 ~~$9.7~~$11.6 million and ~~$9.7~~$9.3 million, net of accumulated amortization of ~~$8.3~~$7.2 million and ~~$7.5~~$8.7 million, at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and are reflected as a reduction of the related debt in the Consolidated Balance Sheets.

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

Interest expense, net and amortization of deferred debt costs for the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020		2021		2020
Interest incurred	Interest incurred	$	12,933	$	13,103	$	38,788	$	38,972	Interest incurred	$	12,481	$	12,933	$	38,062	$	38,788
Amortization of deferred debt costs	Amortization of deferred debt costs	402		370		1,163		1,130		Amortization of deferred debt costs	425		402		1,237		1,163
Capitalized interest	Capitalized interest	(909)		(3,088)		(5,813)		(7,756)		Capitalized interest	(1,991)		(909)		(4,734)		(5,813)
Interest expense	Interest expense	12,426		10,385		34,138		32,346		Interest expense	10,915		12,426		34,565		34,138
Less: Interest income	Less: Interest income	28		60		127		161		Less: Interest income	1		28		6		127
Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	$	12,398	$	10,325	$	34,011	$	32,185	Interest expense, net and amortization of deferred debt costs	$	10,914	$	12,398	$	34,559	$	34,011

6. Equity

The consolidated statements of operations for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, reflect noncontrolling interests of ~~$7.7~~$9.7 million and ~~$10.3~~$7.7 million, respectively, representing income attributable to ~~the~~limited partnership units not held by Saul ~~Organization for each period.~~Centers.

At September 30, ~~2020,~~2021, 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 September 30, ~~2020,~~2021, 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.

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


		Three months ended September 30,		Nine months ended September 30,			Three months ended September 30,		Nine months ended September 30,
(In thousands)	(In thousands)	2020	2019	2020	2019	(In thousands)	2021	2020	2021	2020
Weighted average common stock outstanding-Basic	Weighted average common stock outstanding-Basic	23,353	23,081	23,329	22,947	Weighted average common stock outstanding-Basic	23,692	23,353	23,619	23,329
Effect of dilutive options	Effect of dilutive options	0	40	1	46	Effect of dilutive options	4	—	2	1
Weighted average common stock outstanding-Diluted	Weighted average common stock outstanding-Diluted	23,353	23,121	23,330	22,993	Weighted average common stock outstanding-Diluted	23,696	23,353	23,621	23,330
Non-dilutive options	Non-dilutive options	1,516	698	1,418	612	Non-dilutive options	1,350	1,516	1,474	1,418
Years non-dilutive options were issued	Years non-dilutive options were issued	2011 through 2020	2016, 2017 and 2019	2014 through 2020	2016, 2017 and 2019	Years non-dilutive options were issued	2014 through 2020	2011 through 2020	2011 and 2014 through 2020	2014 through 2020

7. Related Party Transactions

The Chairman and Chief Executive Officer, the President and ~~President, the Executive Vice President-Real Estate,~~Chief Operating Officer, the Executive Vice President-Chief Legal and Administrative Officer and the Senior Vice President-Chief Accounting Officer and Treasurer 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 and Treasurer 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~~6% of the employee’s cash compensation, subject to certain limits, were ~~$255,200~~$328,500 and ~~$264,300~~$255,200 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, 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 nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company credited to employee accounts ~~$164,800~~$120,800 and ~~$186,300,~~$164,800, 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 ~~$2.8~~$3.0 million and ~~$3.1~~$2.9 million, at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included in accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

The Company ~~has entered into~~and the Saul Organization are parties to 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 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~~Net billings by the Saul Organization for the Company’s share of these ancillary costs and expenses for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, which included rental expense for the Company’s headquarters lease, totaled approximately ~~$6.0~~$5.9 million and ~~$6.4~~$6.0 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 September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, accounts payable, accrued expenses and other liabilities included approximately ~~$659,000~~$883,900 and ~~$918,700,~~$782,700, 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.

On ~~November~~March 5, ~~2019,~~2021, the Company ~~entered into an agreement (the "Contribution Agreement") to acquire~~acquired from ~~the Trust,~~1592 Rockville Pike, approximately 6.8 acres of land and its leasehold interest in approximately 1.3 acres of contiguous land, together in each

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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 PropertyMaryland. See Notes 3 and ~~the units were placed in escrow until certain conditions of the Contribution Agreement are satisfied.~~4.

In August 2016, the Company entered into an agreement (the "Ashbrook Contribution 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 may be obligated to issue~~Marketplace. On June 30, 2021, the Company issued 93,674 additional limited partnership units as additional consideration to the Trust in accordance with 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.~~Contribution Agreement, as amended.

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 ~~$609,200~~$611,200 and ~~$593,500~~$609,200 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and is included in general and administrative expense.

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 ~~$320,300~~$280,700 and ~~$284,900~~$320,300 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

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 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 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 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, 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.

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

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

quarter to determine the number of shares to be credited to the director. During the nine months ended September 30, ~~2020, 7,969~~2021, 7,429 shares were credited to director's deferred fee accounts and ~~7,354~~7,874 shares were issued. As of September 30, ~~2020,~~2021, the director's deferred fee accounts comprise ~~115,023~~118,183 shares.

Effective ~~April 24, 2020,~~May 7, 2021, the Company granted ~~238,000~~250,500 options to its directors and certain officers. The following table summarizes the assumptions used in the valuation of the ~~2020~~2021 and ~~2019~~2020 option grants. During the nine months ended September 30, ~~2020,~~2021, stock option expense totaling ~~$969,200~~$1.0 million was included in general and administrative expense in the Consolidated Statements of Operations. As of September 30, ~~2020,~~2021, the estimated future expense related to unvested stock options was ~~$1.9~~$2.0 million.

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~~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 %


	Directors						Officers
Grant date	April 24, 2020			May 7, 2021			April 24, 2020			May 7, 2021
Exercise price	$	50.00		$	43.89		$	50.00		$	43.89
Volatility	0.258			0.297			0.240			0.275
Expected life (years)	5.0			5.0			7.0			7.0
Assumed yield	3.80		%	4.96		%	3.85		%	4.97		%
Risk-free rate	0.36		%	0.77		%	0.51		%	1.24		%

The table below summarizes the option activity for the nine months ended September 30, ~~2020:~~2021:


		Number of Shares	Weighted Average Exercise Price per share		Aggregate Intrinsic Value			Number of Shares	Weighted Average Exercise Price per share		Aggregate Intrinsic Value
Outstanding at January 1	Outstanding at January 1	1,309,614	$	53.38	$	2,528,463	Outstanding at January 1	1,502,670	$	52.86	$	—
Granted	Granted	238,000	50.00		0		Granted	250,500	43.89		—
Exercised	Exercised	(10,749)	49.19		85,268		Exercised	(3,000)	41.82		3,450
Expired/Forfeited	Expired/Forfeited	(21,250)	53.96		0		Expired/Forfeited	(87,000)	53.60		—
Outstanding at September 30	Outstanding at September 30	1,515,615	52.87		0		Outstanding at September 30	1,663,170	51.49		171,250
Exercisable at September 30	Exercisable at September 30	978,240	53.03		0		Exercisable at September 30	1,137,295	52.89		133,340

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~~of stock options exercised during the ~~period~~nine months ended September 30, 2021 was calculated by using the ~~closing share~~transaction price on the date of ~~exercise.~~exercise and totaled $3,450. The intrinsic value of stock options exercised during the nine months ended September 30, 2020 totaled $85,268. At September 30, ~~2020,~~2021, the final trading day of the 2021 third quarter, the closing share price of ~~$26.58~~$44.06 was lower than the exercise price of ~~all~~1,397,625 outstanding ~~options.~~options granted in 2013 through 2020. The weighted average remaining contractual life of the Company’s outstanding and exercisable options is ~~5.2~~6.3 years and ~~5.5~~5.3 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

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 ~~3.25%~~3.60% and ~~3.55%~~3.40%, would be approximately ~~$1.0 billion~~$937.3 million and ~~$957.4~~$981.0 million, respectively, compared to the principal balance of ~~$986.0~~$949.5 million and ~~$938.4~~$980.8 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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

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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Notes to Consolidated Financial Statements (Unaudited)

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~~variety 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~~2021 presentation.


(In thousands)	(In thousands)	Shopping Centers		Mixed-Use Properties		Corporate and Other		Consolidated Totals		(In thousands)	Shopping Centers		Mixed-Use Properties		Corporate and Other		Consolidated Totals
Three months ended September 30, 2020
Three months ended September 30, 2021										Three months ended September 30, 2021
Real estate rental operations:	Real estate rental operations:									Real estate rental operations:
Revenue	Revenue	$	40,336	$	16,424	$	0	$	56,760	Revenue	$	42,485	$	17,771	$	—	$	60,256
Expenses	Expenses	(8,755)		(6,184)		0		(14,939)		Expenses	(8,640)		(6,724)		—		(15,364)
Income from real estate	Income from real estate	31,581		10,240		0		41,821		Income from real estate	33,845		11,047		—		44,892

Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	0		0		(12,398)		(12,398)		Interest expense, net and amortization of deferred debt costs	—		—		(10,914)		(10,914)
Depreciation and amortization of deferred leasing costs		(8,169)		(5,544)		0		(13,713)
Depreciation and amortization of lease costs										Depreciation and amortization of lease costs	(7,203)		(5,264)		—		(12,467)
General and administrative	General and administrative	0		0		(4,107)		(4,107)		General and administrative	—		—		(4,626)		(4,626)

Net income (loss)	Net income (loss)	$	23,412	$	4,696	$	(16,505)	$	11,603	Net income (loss)	$	26,642	$	5,783	$	(15,540)	$	16,885
Capital investment	Capital investment	$	2,733	$	6,703	$	0	$	9,436	Capital investment	$	2,629	$	8,722	$	—	$	11,351
Total assets	Total assets	$	982,381	$	643,395	$	55,598	$	1,681,374	Total assets	$	960,247	$	766,761	$	12,492	$	1,739,500

Three months ended September 30, 2019
Three months ended September 30, 2020										Three months ended September 30, 2020
Real estate rental operations:	Real estate rental operations:									Real estate rental operations:
Revenue	Revenue	$	41,313	$	15,739	$	0	$	57,052	Revenue	$	40,336	$	16,424	$	—	$	56,760
Expenses	Expenses	(8,974)		(5,665)		0		(14,639)		Expenses	(8,755)		(6,184)		—		(14,939)
Income from real estate	Income from real estate	32,339		10,074		0		42,413		Income from real estate	31,581		10,240		—		41,821

Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	0		0		(10,325)		(10,325)		Interest expense, net and amortization of deferred debt costs	—		—		(12,398)		(12,398)
Depreciation and amortization of deferred leasing costs		(7,260)		(4,758)		0		(12,018)
Depreciation and amortization of lease costs										Depreciation and amortization of lease costs	(8,169)		(5,544)		—		(13,713)
General and administrative	General and administrative	0		0		(4,742)		(4,742)		General and administrative	—		—		(4,107)		(4,107)

Net income (loss)	Net income (loss)	$	25,079	$	5,316	$	(15,067)	$	15,328	Net income (loss)	$	23,412	$	4,696	$	(16,505)	$	11,603
Capital investment	Capital investment	$	9,166	$	27,290	$	0	$	36,456	Capital investment	$	2,733	$	6,703	$	—	$	9,436
Total assets	Total assets	$	985,244	$	609,560	$	51,960	$	1,646,764	Total assets	$	982,381	$	643,395	$	55,598	$	1,681,374

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Notes to Consolidated Financial Statements (Unaudited)


(In thousands)	(In thousands)	Shopping Centers		Mixed-Use Properties		Corporate and Other		Consolidated Totals		(In thousands)	Shopping Centers		Mixed-Use Properties		Corporate and Other		Consolidated Totals
Nine Months Ended September 30, 2020
Nine Months Ended September 30, 2021										Nine Months Ended September 30, 2021
Real estate rental operations:	Real estate rental operations:									Real estate rental operations:
Revenue	Revenue	$	120,236	$	46,687	$	0	$	166,923	Revenue	$	126,935	$	52,050	$	—	$	178,985
Expenses	Expenses	(26,041)		(16,848)		0		(42,889)		Expenses	(27,087)		(19,454)		—		(46,541)
Income from real estate	Income from real estate	94,195		29,839		0		124,034		Income from real estate	99,848		32,596		—		132,444

Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	0		0		(34,011)		(34,011)		Interest expense, net and amortization of deferred debt costs	—		—		(34,559)		(34,559)
Depreciation and amortization of deferred leasing costs	Depreciation and amortization of deferred leasing costs	(22,812)		(14,781)		0		(37,593)		Depreciation and amortization of deferred leasing costs	(21,639)		(16,213)		—		(37,852)
General and administrative	General and administrative	0		0		(13,790)		(13,790)		General and administrative	—		—		(14,234)		(14,234)

Net income (loss)	Net income (loss)	$	71,383	$	15,058	$	(47,801)	$	38,640	Net income (loss)	$	78,209	$	16,383	$	(48,793)	$	45,799
Capital investment	Capital investment	$	11,622	$	36,741	$	0	$	48,363	Capital investment	$	8,200	$	30,631	$	—	$	38,831
Total assets	Total assets	$	982,381	$	643,395	$	55,598	$	1,681,374	Total assets	$	960,247	$	766,761	$	12,492	$	1,739,500

Nine Months Ended September 30, 2019
Nine Months Ended September 30, 2020										Nine Months Ended September 30, 2020
Real estate rental operations:	Real estate rental operations:									Real estate rental operations:
Revenue	Revenue	$	126,730	$	48,213	$	0	$	174,943	Revenue	$	120,236	$	46,687	$	—	$	166,923
Expenses	Expenses	(27,214)		(16,508)		0		(43,722)		Expenses	(26,041)		(16,848)		—		(42,889)
Income from real estate	Income from real estate	99,516		31,705		0		131,221		Income from real estate	94,195		29,839		—		124,034

Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	0		0		(32,185)		(32,185)		Interest expense, net and amortization of deferred debt costs	—		—		(34,011)		(34,011)
Depreciation and amortization of deferred leasing costs	Depreciation and amortization of deferred leasing costs	(21,917)		(13,268)		0		(35,185)		Depreciation and amortization of deferred leasing costs	(22,812)		(14,781)		—		(37,593)
General and administrative	General and administrative	0		0		(14,696)		(14,696)		General and administrative	—		—		(13,790)		(13,790)

Net income (loss)	Net income (loss)	$	77,599	$	18,437	$	(46,881)	$	49,155	Net income (loss)	$	71,383	$	15,058	$	(47,801)	$	38,640
Capital investment	Capital investment	$	22,746	$	82,309	$	0	$	105,055	Capital investment	$	11,622	$	36,741	$	—	$	48,363
Total assets	Total assets	$	985,244	$	609,560	$	51,960	$	1,646,764	Total assets	$	982,381	$	643,395	$	55,598	$	1,681,374

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Notes to Consolidated Financial Statements (Unaudited)

12. Impact of COVID-19

On March 11, 2020, the World Health Organization declared 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~~While most of our tenants have re-opened their businesses, there remains significant uncertainty around the long-term economic impact of the COVID-19 pandemic, ~~will trigger a period of global economic slowdown or a global recession. COVID-19~~which 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~~store, pharmacy, bank and home improvement ~~stores~~store tenants have generally ~~remain~~remained fully open, many restaurants ~~if open, are operating at~~have operated with reduced hours and/or limited ~~capacity,~~indoor seating, supplemented with ~~many offering only~~ delivery and curbside pick-up, and most health, beauty supply and services, fitness centers, and other non-essential businesses ~~are in various phases of re-opening depending on location.~~have
re-opened, some with limited customer capacity. The Company is generally not charging late fees or delinquent interest on past due rent payments and, in ~~many~~certain cases, rent deferral agreements ~~are being~~have been negotiated to allow tenants temporary relief where needed. As of ~~November 3, 2020, payments by tenants~~September 30, 2021, $4.6 million 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~~.

The following is a summary of the 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 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 quarterrents previously deferred ~~rents~~ have come due. Of the ~~deferred rents~~amounts that have come due, ~~the majority have been repaid.~~

~~2020 third quarter~~

•~~91% of 2020 third quarter total billings~~$4.5 million 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.paid.

13. Subsequent Events

The Company has reviewed operating activities for the period subsequent to September 30, ~~2020,~~2021, 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

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.~~2020. 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 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)~~2020), “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)~~2020), 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

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 the Company’s investment properties will not occur during the remainder of ~~2020~~2021 or future periods. As of September 30, ~~2020,~~2021, 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, 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 store, pharmacy, bank and home improvement store tenants have generally ~~remain~~remained fully open, many restaurants ~~are operating~~have operated with reduced hours and/or limited indoor seating, supplemented with delivery and curbside pick-up, and most health, beauty supply and services, fitness centers, and other non-essential businesses ~~are re-opening~~have
re-opened, some with limited customer ~~capacity depending on location~~capacity. . As of ~~November 3, 2020,~~October 31, 2021, payments by tenants of contractual base rent and operating expense and real estate tax recoveries totaled approximately ~~83% and 91%~~98% for the ~~second quarter and~~ third quarter ~~respectively~~. The Company is generally not charging late fees or delinquent interest on past due payments and, in ~~many~~limited cases, rent deferral agreements have been negotiated to allow tenants temporary relief where needed. The deferral agreements, 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. Management considers reserves established as of September 30, 2021, against such potential losses to be reasonable and adequate. Rent collections during the ~~second~~third 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.~~October 31, 2021, with the exception of amounts due, which are as of September 30, 2021.


(In thousands)
Original Rent Due By Quarter	Original Rent Amount		Repayment Year	Repayment Amount		Amount Due		Amount Collected		Collection Percentage
	(prior to deferral)			(after deferral)						(based on payments currently due)
2020 First Quarter	$	67	2020	$	331	$	331	$	331	100	%
2020 Second Quarter	6,282		2021	5,533		4,301		4,136		96	%
2020 Third Quarter	1,487		2022	2,089
2020 Fourth Quarter	368		2023	628
2021 First Quarter	193		2024	165
2021 Second Quarter	216		2025	38
2021 Third Quarter	206		Thereafter	73
October 2021	38		Total	$	8,857	$	4,632	$	4,467	96	%
Total	$	8,857

(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~~

While we expect collections of ~~the second quarter and third quarter, and October~~ rent billings, including minimum rent, operating expense recoveries and real estate tax reimbursements, to remain below pre-pandemic levels in the near-term, when taking into account the amount of time elapsed since the due date of the payment, we continue to experience sequential improvement in our collection rates. The following table summarizes the Company's consolidated total collections of the first quarter, second quarter, third quarter and October 2021 rent billings as of November ~~3, 2020:~~1, 2021:


	Retail		Office		Residential		Total
2021 First Quarter	99	%	100	%	99	%	99	%
2021 Second Quarter	99	%	100	%	99	%	99	%
2021 Third Quarter	97	%	100	%	99	%	98	%
October 2021	95	%	99	%	99	%	96	%

~~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 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 applied for these loans and several tenants have communicated that loan proceeds ~~are being~~were received and have subsequently remitted rental payments.

As of October 31, ~~2020,~~2021, the Company had ~~$40.6~~$8.9 million of cash and cash equivalents and borrowing availability of approximately ~~$200.3~~$220.2 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~~have helped minimize interruptions to operations and will put the Company in the best position ~~to participate in~~as the economic recovery ~~when the time comes.~~continues. 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~~continues to impact 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.

In accordance with state and local health authority guidance and with safety protocols in place as recommended by the Centers for Disease Control and Prevention, on June 1, 2021, the Company began transitioning employees from a remote working environment to working in the office. On November 1, 2021, the Company formally reopened, without occupancy restrictions, its corporate office in Bethesda, Maryland. 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~~business during the transition back 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.office.

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 September 30, ~~2020.~~2021.

Overview

The Company’s primary strategy is to continue to focus on diversification of its assets through development of ~~transit-centric,~~transit-oriented, residential mixed-use projects in the Washington, D.C. metropolitan area. The Company’s operating strategy also includes improvement of the operating performance ~~and~~of its assets, internal growth of its Shopping Centers through the addition of pad sites, and supplementing its development ~~of residential mixed-used projects~~pipeline with selective redevelopment and renovations of its core Shopping Centers. 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 was placed into service in April 2020. The Company ~~also~~ has a ~~development~~ pipeline of ~~zoned~~entitled sites ~~either~~ in its portfolio, ~~(some~~some of which are currently shopping center operating ~~properties) or under contract,~~properties, 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.

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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~~including anchor stores such as supermarkets and drug stores and fitness centers, as evidenced by the March 2020 addition of a 69,000 square foot Giant Food at Seven Corners, the 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.stores. The Company has 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 ~~seven~~ten more pad ~~sites, tenants of six of which are expected to begin paying rent in 2021. The annualized rent from these pad sites totals approximately $1.1 million.~~sites.

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~~were 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 ways to maximize our future performance. The Company's commercial leasing percentage, on a same property basis, which excludes the impact of properties not in operation for the entirety of the comparable periods, decreased to ~~93.9%~~92.5% at September 30, ~~2020,~~2021, from ~~94.8%~~94.0% at 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.~~2020.

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 September 30, ~~2020,~~2021, amortizing fixed-rate mortgage debt with staggered maturities from ~~2021~~2022 to 2035 represented approximately ~~83.2%~~82.7% of the Company’s notes payable, thus minimizing refinancing risk. The Company’s variable-rate debt consists of ~~$199.5~~$198.0 million outstanding under the credit facility. As of September 30, ~~2020,~~2021, the Company has availability of approximately ~~$200.3~~$228.2 million under its ~~$325.0~~$425.0 million unsecured revolving credit facility.

Although ~~it is management’s present intention~~management intends to concentrate future acquisition and development activities on ~~transit-centric,~~transit-oriented, 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 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.


		Nine months ended September 30,											Nine months ended September 30,
		2020		2019		2018		2017		2016			2021		2020		2019		2018		2017
Base rent	Base rent	$	19.80	$	20.15	$	20.13	$	19.30	$	18.67	Base rent	$	20.59	$	19.80	$	20.15	$	20.13	$	19.30
Effective rent	Effective rent	$	18.09	$	18.27	$	18.25	$	17.49	$	16.87	Effective rent	$	18.87	$	18.09	$	18.27	$	18.25	$	17.49

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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 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 located on North Glebe Road in Arlington, Virginia, 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 $19.1 million of capitalized interest.~~$279.0 million. A portion of the cost ~~is being~~was financed with a $157.0 million construction-to-permanent loan. Including approximately ~~$19.0~~$19.1 million of capitalized interest, ~~and costs of $848,700 which are accrued and unpaid,~~ costs incurred through September 30, ~~2020~~2021 total approximately ~~$275.0~~$277.9 million, of which ~~$143.1~~$148.5 million has been financed by the loan. Leases have been executed for approximately 90% of the total planned retail space, including 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.~~space. Target began operating in August ~~2020. An additional~~2020 and 2,400 square feet of retail space became operational during the third quarter of 2020. ~~Applications have been received for 303~~As of September 30, 2021, the residential ~~leases, totaling approximately 62%~~component of ~~the available units, with 258 units occupied as of November 3, 2020.~~The Waycroft was 98.0% leased.

~~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,~~August 2016, 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 opened for 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 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, Taco Bell leased a pad site within the property, constructed a free-standing building, and began operations in August 2020.

~~In May 2018, the Company acquired~~entered into an agreement to acquire 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,transaction closed on May 9, 2018, and the ~~shopping center is 100% leased. The first small shop opened for business in April 2020, and all tenants, except one~~

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~~3,231 square foot shop tenant, were open and paying rent as of November 3, 2020. All four pad sites have been leased and three of the four were open and paying rent as of November 3, 2020. The~~ Company ~~may be obligated to issue additional~~issued 176,680 limited partnership units to the ~~Saul Trust in the second quarter of 2021. As~~Trust. The Company constructed a shopping center, Ashbrook Marketplace, which, as of September 30, ~~2020,~~2021, is 100% leased. On June 30, 2021, the Company ~~estimates this obligation~~issued 93,674 additional limited partnership units as additional consideration to ~~range~~the Trust in ~~value from $3.2 million to $3.5 million, based on projected net operating income of~~accordance with the Ashbrook ~~Marketplace for the 12 months ending May 31, 2021.~~Contribution Agreement, as amended.

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, known as Hampden House, for the development of up to 366 apartment units and ~~10,300~~10,100 square feet of retail space. In ~~July 2019,~~June 2020, the Montgomery County Planning Commission unanimously approved the Company's amended site plan. Design and construction documents are being ~~prepared and a site plan amendment has been submitted incorporating final design parameters. Additional approvals~~prepared. Approval from the Washington Metropolitan Area Transit Authority was received in 2020 and the approval from Maryland Transit Administration ~~are~~is in process and ~~are~~is expected to be received by the fourth quarter of ~~2020.~~2021. Effective September 1, 2019, the asset was removed from service and transferred to construction in progress. The Company is working with a lender that has ~~completed interior demolition in preparation for future development.~~offered to make a $133.0 million construction-to-permanent loan, the proceeds of which will be used to partially finance the project. The timing of construction of the project has not yet been determined. However, the Company anticipates that demolition of the existing vacant building will ~~depend on issuance~~begin during the fourth quarter of ~~final building permits and market conditions.~~2021 to prepare the site for future development.

On November 5, 2019, the Company entered into ~~an agreement (the "Contribution Agreement")~~the Twinbrook Contribution Agreement to acquire the Contributed Property from 1592 Rockville Pike. The Contributed Property is immediately adjacent to approximately 10.3 acres owned by 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”).Company. In exchange for the Contributed Property, the Company will issue to ~~the Trust~~1592 Rockville Pike 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~~in the ~~Contributed Property. Deed~~Operating Partnership. Title to the Contributed Property and the units were placed in escrow ~~until~~pending satisfaction of certain conditions of the Twinbrook Contribution Agreement.

On March 5, 2021, the Company entered into an amendment to the Twinbrook Contribution Agreement ~~are satisfied.~~in which it and 1592 Rockville Pike agreed to release to the Company from escrow the deed and assignment of the leasehold interest of the Contributed Property, as of that date, and reimburse 1592 Rockville Pike for certain expenses pursuant to the Twinbrook Contribution Agreement. The units continued to remain in escrow pending satisfaction of the conditions of the Twinbrook Contribution Agreement, as amended.

The Company ~~as contract purchaser, received unanimous approval~~acquired title to the Contributed Property earlier than originally contemplated in order to have complete control over the final aspects of predevelopment, project bidding, contractor selection and lender discussions in support of Phase I. This control will also assure the preservation of the Wegmans lease and its value to this site and, as importantly, to the Company’s adjacent holdings.

On June 29, 2021, the third-party landlord under the ground lease contributed the fee simple interest in the land underlying the leasehold interest to the Company in exchange for 469,740 limited partnership units in the Operating Partnership, representing an aggregate value of $21.5 million. Acquisition costs were paid in cash and totaled $0.7 million.

The remaining conditions of the Twinbrook Contribution Agreement were satisfied during the third quarter of 2021, and, effective October 18, 2021, 708,036 units were released to 1592 Rockville Pike from escrow. The remaining 708,035 units continue to be held in escrow and will be released to 1592 Rockville Pike on October 18, 2023.

The full project plan ~~from~~for redevelopment of a major mixed-use project spanning both the Company’s property and the Contributed Property was finalized in 2019 and rights to develop the project extend for a thirty-year term to 2049. A site plan allowing for development of a planned Phase I within the Contributed Property, which includes an 80,000 square foot

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Wegmans, adjacent small shop space, 450 apartments and a 230,000 square foot office building, was approved by the City of Rockville in ~~June 2019 and unanimous~~August 2020. The approval of the site plan ~~for Phase I of the Twinbrook Quarter development in August 2020. A single petitioner has~~was unanimous, however, it was appealed ~~the approved site plan to the~~by a local resident. The Circuit Court for Montgomery County ~~Maryland~~has issued a decision affirming the City's approval of the site plan and that ~~appeal~~decision is ~~ongoing. The~~now final and unappealable. Demolition of the existing improvements within Phase I has been completed and site ~~plan includes approval for up to a 92,000 square foot Wegmans grocery store, 29,000 square feet of retail shop space, 460 residential units and 270,000 square feet of office space.~~excavation is in process. The phasing of ~~these~~remaining improvements and the timing of construction will depend on removal of contingencies, ~~favorable resolution of the site plan appeal,~~ building permit approval and market conditions. The development potential of ~~this 8.1~~the entire 18.4 acre ~~site, when combined with the Company’s adjacent 10.3 acre~~Twinbrook Quarter 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 when identifying impairment indicators including recurring operating losses, significant decreases in occupancy, and significant adverse changes in market conditions, legal factors and business climate. If impairment indicators are present, the Company compares 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, the Company would recognize 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.

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. Individual leases are assessed for collectability and, upon the determination that the collection of rents is not probable, accrued rent and accounts receivable are charged off, and the charge off 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. We also assess whether operating lease receivables, at the portfolio level, are appropriately valued based upon an analysis of balances outstanding, effects of tenant bankruptcies, historical levels of bad debt and current economic trends. Additionally, because of the uncertainties related to the impact of the COVID-19 pandemic, our assessment also takes into consideration the types of business conducted by tenants and current discussions with the tenants, as well as recent rent collection experience. Evaluating and estimating uncollectable lease payments and related receivables requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation. Actual results could differ from these estimates.

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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 September 30, ~~2020~~2021 (the ~~"2020~~"2021 Quarter") compared to the three months ended September 30, ~~2019~~2020 (the ~~"2019~~"2020 Quarter")

Revenue


		Three months ended September 30,				2019 to 2020 Change					Three months ended September 30,				2020 to 2021 Change
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		Percent		(Dollars in thousands)	2021		2020		Amount		Percent
Base rent	Base rent	$	48,268	$	46,250	$	2,018	4.4	%	Base rent	$	49,829	$	48,268	$	1,561	3.2	%
Expense recoveries	Expense recoveries	8,973		9,159		(186)		(2.0)	%	Expense recoveries	8,488		8,973		(485)		(5.4)	%
Percentage rent	Percentage rent	60		147		(87)		(59.2)	%	Percentage rent	208		60		148		246.7	%
Other property revenue	Other property revenue	309		362		(53)		(14.6)	%	Other property revenue	384		309		75		24.3	%
Credit losses on operating lease receivables		(1,861)		(431)		(1,430)		331.8	%
Credit (losses) recoveries on operating lease receivables										Credit (losses) recoveries on operating lease receivables	149		(1,861)		2,010		(108.0)	%
Rental revenue	Rental revenue	55,749		55,487		262		0.5	%	Rental revenue	59,058		55,749		3,309		5.9	%
Other revenue	Other revenue	1,011		1,565		(554)		(35.4)	%	Other revenue	1,198		1,011		187		18.5	%
Total revenue	Total revenue	$	56,760	$	57,052	$	(292)	(0.5)	%	Total revenue	$	60,256	$	56,760	$	3,496	6.2	%

Base rent includes $310,900 and $1.2 million ~~and $(530,300)~~ for the ~~2020~~2021 Quarter and ~~2019~~2020 Quarter, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes ~~$349,300~~$343,000 and ~~$354,200,~~$349,300, for the ~~2020~~2021 Quarter and ~~2019~~2020 Quarter, respectively, to recognize income from the amortization of in-place leases acquired in connection with purchased real estate investment properties.

Total revenue ~~decreased 0.5%~~increased 6.2% in the ~~2020~~2021 Quarter compared to the ~~2019~~2020 Quarter, as described below.

Base Rent. The ~~$2.0~~$1.6 million increase in base rent in the ~~2020~~2021 Quarter compared to the ~~2019~~2020 Quarter is primarily attributable to the ~~commencement of operations of~~increase in occupancy at The Waycroft, which opened in April 2020 ~~and Ashbrook Marketplace in November 2019 (collectively, $2.2~~($2.1 million) partially offset by lower base rent at 601 Pennsylvania Avenue ($0.5 million).

~~Expense Recoveries.~~ Percentage Rent.~~Expense recoveries decreased 2.0%~~ The 246.7% increase in percentage rent in the ~~2020~~2021 Quarter compared to the ~~2019~~2020 Quarter is primarily ~~due~~attributable to ~~a decrease in recoverable property operating expenses.~~increased sales reported by anchor tenants at multiple Shopping Centers.

Credit ~~Losses~~(Losses) Recoveries on Operating Lease Receivables. Credit losses on operating lease receivables for the ~~2020~~2021 Quarter ~~increased $1.4~~decreased $2.0 million from the ~~2019~~2020 Quarter. The ~~increase~~decrease is primarily due to ~~increased reserves~~net collections across the portfolio as ~~a result of the impact of COVID-19 on~~ tenant ~~operations.~~

~~Other Revenue.~~ ~~Other revenue decreased $0.6 million primarily~~operations have improved due to ~~lower parking income ($0.4 million) and lower lease termination fees ($0.1 million).~~restrictions related to COVID-19 being removed or lessened.

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Expenses


		Three months ended September 30,				2019 to 2020 Change					Three months ended September 30,				2020 to 2021 Change
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		Percent		(Dollars in thousands)	2021		2020		Amount		Percent
Property operating expenses	Property operating expenses	$	7,416	$	7,525	$	(109)	(1.4)	%	Property operating expenses	$	8,210	$	7,416	$	794	10.7	%

Real estate taxes	Real estate taxes	7,523		7,114		409		5.7	%	Real estate taxes	7,154		7,523		(369)		(4.9)	%
Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	12,398		10,325		2,073		20.1	%	Interest expense, net and amortization of deferred debt costs	10,914		12,398		(1,484)		(12.0)	%
Depreciation and amortization of deferred leasing costs		13,713		12,018		1,695		14.1	%
Depreciation and amortization of lease costs										Depreciation and amortization of lease costs	12,467		13,713		(1,246)		(9.1)	%
General and administrative	General and administrative	4,107		4,742		(635)		(13.4)	%	General and administrative	4,626		4,107		519		12.6	%

Total expenses	Total expenses	$	45,157	$	41,724	$	3,433	8.2	%	Total expenses	$	43,371	$	45,157	$	(1,786)	(4.0)	%

Total expenses ~~increased 8.2%~~decreased 4.0% in the ~~2020~~2021 Quarter compared to the ~~2019~~2020 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 1.4%~~increased 10.7% in the ~~2020~~2021 Quarter primarily due to increased expenses throughout the portfolio as a result of the deferral of ~~non-essential property expenses~~certain maintenance costs in ~~response to the impact of COVID-19. The Company continues to complete emergency repairs and handle life and safety issues as needed.~~2020 ($0.7 million).

Real Estate Taxes. Real estate taxes ~~increased 5.7%~~decreased 4.9% in the ~~2020~~2021 Quarter primarily due to lower assessments at several properties throughout the ~~substantial completion of The Waycroft ($0.3 million) and cessation of capitalization of those taxes.~~portfolio.

Interest Expense, net and Amortization of Deferred Debt Costs. Interest expense, net and amortization of deferred debt costs ~~increased 20.1%~~decreased 12.0% in the ~~2020~~2021 Quarter primarily due to ~~lower~~higher capitalized interest ~~as a result of~~($1.1 million). The increase was largely driven by 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).~~Twinbrook development project.

General and Administrative. General and administrative expenses ~~decreased 13.4%~~increased 12.6% in the ~~2020~~2021 Quarter primarily due to ~~reduced overhead expenses including salary reductions, a corporate hiring freeze, elimination of business travel~~increased salaries and ~~discretionary spending such as professional seminars.~~benefits ($0.3 million).

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Nine months ended September 30, ~~2020~~2021 (the ~~"2020~~"2021 Period") compared to the nine months ended September 30, ~~2019~~2020 (the ~~"2019~~"2020 Period")

Revenue


		Nine Months Ended September 30,				2019 to 2020 Change					Nine Months Ended September 30,				2020 to 2021 Change
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		Percent		(Dollars in thousands)	2021		2020		Amount		Percent
Base rent	Base rent	$	140,120	$	139,735	$	385	0.3	%	Base rent	$	147,877	$	140,120	$	7,757	5.5	%
Expense recoveries	Expense recoveries	25,775		27,647		(1,872)		(6.8)	%	Expense recoveries	26,235		25,775		460		1.8	%
Percentage rent	Percentage rent	496		760		(264)		(34.7)	%	Percentage rent	1,294		496		798		160.9	%
Other property revenue	Other property revenue	938		1,087		(149)		(13.7)	%	Other property revenue	1,030		938		92		9.8	%
Credit losses on operating lease receivables	Credit losses on operating lease receivables	(4,162)		(987)		(3,175)		321.7	%	Credit losses on operating lease receivables	(802)		(4,162)		3,360		(80.7)	%
Rental revenue	Rental revenue	163,167		168,242		(5,075)		(3.0)	%	Rental revenue	175,634		163,167		12,467		7.6	%
Other revenue	Other revenue	3,756		6,701		(2,945)		(43.9)	%	Other revenue	3,351		3,756		(405)		(10.8)	%
Total revenue	Total revenue	$	166,923	$	174,943	$	(8,020)	(4.6)	%	Total revenue	$	178,985	$	166,923	$	12,062	7.2	%

Base rent includes ~~$987,100~~$1.8 million and ~~$(742,000)~~$987,100 for the ~~2020~~2021 Period and the ~~2019~~2020 Period, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes ~~$1.1~~$1.0 million and $1.1 million for the ~~2020~~2021 Period and the ~~2019~~
2020 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%~~increased 7.2% in the ~~2020~~2021 Period compared to the ~~2019~~2020 Period, as described below.

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Base Rent. The ~~$0.4~~$7.8 million increase in base rent in the ~~2020~~2021 Period compared to ~~2019~~2020 Period is primarily attributable to (a) ~~the commencement of operations of~~increased occupancy at The Waycroft, which opened in April 2020 ($8.3 million) and (b) increased occupancy at Ashbrook Marketplace, which opened in November 2019 ~~(collectively, $2.7~~($1.0 million), partially offset by ~~(b)~~ ~~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~~1.0 million) and ~~(e)~~(d) lower ~~base~~ rent at ~~Clarendon Center~~Washington Square ($~~0.5~~0.7 million).

~~Expense Recoveries.~~Percentage Rent. ~~Expense recoveries decreased 6.8%~~The 160.9% increase in percentage rent in the 2021 Period compared to the 2020 Period is primarily ~~due~~attributable to ~~a decrease in recoverable property operating expenses, largely repairs~~increased sales reported by anchor and ~~maintenance and snow removal.~~retail tenants at multiple Shopping Centers.

Credit Losses on Operating Lease Receivables. Credit losses on operating lease receivables for the ~~2020~~2021 Period represents ~~2.49%~~0.4% of the Company’s revenue, ~~an increase~~a decrease from ~~0.56%~~2.5% for the ~~2019~~2020 Period. The ~~increase~~decrease is primarily due to ~~increased reserves~~collections across the ~~Shopping Center~~ portfolio as ~~a result of the impact of~~tenant operations have improved due to restrictions related to COVID-19 ~~on tenant operations.~~being removed or lessened.

Other Revenue. Other revenue decreased ~~$2.9~~$0.4 million primarily due to (a) lower lease termination fees ($~~1.9~~0.8 million) ~~and lower~~partially offset by (b) higher parking ~~income~~revenue ($~~1.1~~0.4 million).

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Expenses


		Nine Months Ended September 30,				2019 to 2020 Change					Nine Months Ended September 30,				2020 to 2021 Change
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		Percent		(Dollars in thousands)	2021		2020		Amount		Percent
Property operating expenses	Property operating expenses	$	20,862	$	22,641	$	(1,779)	(7.9)	%	Property operating expenses	$	24,420	$	20,862	$	3,558	17.1	%

Real estate taxes	Real estate taxes	22,027		21,081		946		4.5	%	Real estate taxes	22,121		22,027		94		0.4	%
Interest expense, net and amortization of deferred debt costs	Interest expense, net and amortization of deferred debt costs	34,011		32,185		1,826		5.7	%	Interest expense, net and amortization of deferred debt costs	34,559		34,011		548		1.6	%
Depreciation and amortization of deferred leasing costs	Depreciation and amortization of deferred leasing costs	37,593		35,185		2,408		6.8	%	Depreciation and amortization of deferred leasing costs	37,852		37,593		259		0.7	%
General and administrative	General and administrative	13,790		14,696		(906)		(6.2)	%	General and administrative	14,234		13,790		444		3.2	%

Total expenses	Total expenses	$	128,283	$	125,788	$	2,495	2.0	%	Total expenses	$	133,186	$	128,283	$	4,903	3.8	%

Total expenses increased ~~2.0%~~3.8% in the ~~2020~~2021 Period compared to the ~~2019~~2020 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%~~increased 17.1% in the ~~2020~~2021 Period primarily due to (a) increased expenses at The Waycroft, which opened in April 2020 ($1.6 million), (b) increased expenses throughout the ~~deferral of non-essential property~~portfolio related to snow removal ($1.3 million), and (c) increased expenses ~~in response to~~throughout 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~~portfolio, exclusive of The Waycroft ($~~0.6~~0.7 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~~lease 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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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.

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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 months ended September 30, 2021 and 2020 include 50 Shopping Centers and seven Mixed-Use properties. The same property results for the nine months ended September 30, 2021 and 2020 ~~and 2019~~ include 4950 Shopping Centers and six Mixed-Use properties.

Same property revenue

(in thousands) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Total revenue $ 56,760 $ 57,052 $ 166,923 $ 174,943
Less: Acquisitions, dispositions and development properties (2,461) (72) (3,161) (1,155)
Total same property revenue $ 54,299 $ 56,980 $ 163,762 $ 173,788
Shopping Centers $ 39,727 $ 41,313 $ 119,226 $ 126,730
Mixed-Use properties 14,572 15,667 44,536 47,058
Total same property revenue $ 54,299 $ 56,980 $ 163,762 $ 173,788
Total Shopping Center revenue $ 40,336 $ 41,313 $ 120,236 $ 126,730
Less: Shopping Center acquisitions, dispositions and development properties (609) — (1,010) —
Total same Shopping Center revenue $ 39,727 $ 41,313 $ 119,226 $ 126,730
Total Mixed-Use property revenue $ 16,424 $ 15,739 $ 46,687 $ 48,213
Less: Mixed-Use acquisitions, dispositions and development properties (1,852) (72) (2,151) (1,155)
Total same Mixed-Use revenue $ 14,572 $ 15,667 $ 44,536 $ 47,058


(in thousands)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Total revenue	$	60,256	$	56,760	$	178,985	$	166,923
Less: Acquisitions, dispositions and development properties	—		—		(11,309)		(2,151)
Total same property revenue	$	60,256	$	56,760	$	167,676	$	164,772

Shopping Centers	$	42,485	$	40,336	$	126,935	$	120,236
Mixed-Use properties	17,771		16,424		40,741		44,536
Total same property revenue	$	60,256	$	56,760	$	167,676	$	164,772

Total Shopping Center revenue	$	42,485	$	40,336	$	126,935	$	120,236
Less: Shopping Center acquisitions, dispositions and development properties	—		—		—		—
Total same Shopping Center revenue	$	42,485	$	40,336	$	126,935	$	120,236

Total Mixed-Use property revenue	$	17,771	$	16,424	$	52,050	$	46,687
Less: Mixed-Use acquisitions, dispositions and development properties	—		—		(11,309)		(2,151)
Total same Mixed-Use revenue	$	17,771	$	16,424	$	40,741	$	44,536

The ~~$2.7~~$3.5 million ~~decrease~~increase in same property revenue for the ~~2020~~2021 Quarter compared to the ~~2019~~2020 Quarter, was primarily due to (a) lower credit losses on operating lease receivables and corresponding reserves ($2.3 million), (b) higher base rent, largely due to increased occupancy at The Waycroft ($1.3 million) and (c) higher parking income ($0.4 million), partially offset by (d) lower expense recoveries ($0.5 million).

The $2.9 million increase in same property revenue for the 2021 Period compared to the 2020 Period, was primarily due to (a) lower credit losses on operating lease receivables and corresponding reserves ($4.9 million), (b) higher percentage rent ($0.8 million) and (c) higher expense recoveries ($0.2 million), partially offset by (d) lower base rent ($2.0 million) and (e) lower termination fees ($0.9 million).

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Same property operating income


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020












Net income	$	16,885	$	11,603	$	45,799	$	38,640
Add: Interest expense, net and amortization of deferred debt costs	10,914		12,398		34,559		34,011
Add: Depreciation and amortization of lease costs	12,467		13,713		37,852		37,593
Add: General and administrative	4,626		4,107		14,234		13,790


Property operating income	44,892		41,821		132,444		124,034
Less: Acquisitions, dispositions and development properties	—		—		(6,655)		(71)
Total same property operating income	$	44,892	$	41,821	$	125,789	$	123,963

Shopping Centers	$	33,845	$	31,581	$	99,848	$	94,195
Mixed-Use properties	11,047		10,240		25,941		29,768
Total same property operating income	$	44,892	$	41,821	$	125,789	$	123,963

Shopping Center operating income	$	33,845	$	31,581	$	99,848	$	94,195
Less: Shopping Center acquisitions, dispositions and development properties	—		—		—		—
Total same Shopping Center operating income	$	33,845	$	31,581	$	99,848	$	94,195

Mixed-Use property operating income	$	11,047	$	10,240	$	32,596	$	29,839
Less: Mixed-Use acquisitions, dispositions and development properties	—		—		(6,655)		(71)
Total same Mixed-Use property operating income	$	11,047	10,240		$	25,941	$	29,768

Same property operating income increased $3.1 million (7.3%) for the 2021 Quarter compared to the 2020 Quarter. Shopping Center same property operating income for the 2021 Quarter totaled $33.8 million, a $2.3 million increase from the 2020 Quarter. Mixed-Use same property operating income totaled $11.0 million, a $0.8 million increase from the 2020 Quarter. The increase in Shopping Center same property operating income was primarily the result of (a) lower credit losses on operating lease receivables and corresponding reserves (collectively, ~~$1.6~~$2.0 million) and (b) higher base rent ($0.3 million). The increase in Mixed-Use same property operating income was primarily the result of (a) higher base rent ($1.0 million), (b) lower credit losses on operating lease receivables and corresponding reserves (collectively, $0.3 million) and (c) higher parking income, ~~($0.4 million), (c) lower expense recoveries due to decreased recoverable~~net of expenses ($0.3 million), partially offset by (d) lower expense recoveries, net of expenses ($0.7 million) and (e) lower lease termination fees ($0.2 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 ($0.1 million) and (f) lower percentage rent ($0.1 million).

~~The $10.0~~Same property operating income increased $1.8 million ~~decrease in same property revenue~~(1.5%) for the ~~2020~~2021 Period, compared to the ~~2019 Period, was~~2020 Period. Shopping Center same property operating income increased $5.7 million (6.0%) and Mixed-Use same property operating income decreased $3.8 million (12.9%). Shopping Center same property operating income increased primarily due to (a) ~~higher~~lower credit losses on operating lease receivables and corresponding reserves (collectively, $4.3 million), (b) higher base rent ($1.5 million) and (c) higher percentage rent ($0.6 million), partially offset by (d) lower expense recoveries, ~~due to decreased recoverable~~net of expenses ($~~2.1~~0.5 million)~~, (c)~~ and (e) lower ~~lease~~ termination fees ($~~1.3~~0.2 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) 2020 2019 2020 2019
Net income $ 11,603 $ 15,328 $ 38,640 $ 49,155
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 13,713 12,018 37,593 35,185
Add: General and administrative 4,107 4,742 13,790 14,696
Property operating income 41,821 42,413 124,034 131,221
Add (Less): Acquisitions, dispositions and development properties (1,159) 97 (901) (519)
Total same property operating income $ 40,662 $ 42,510 $ 123,133 $ 130,702
Shopping Centers $ 31,059 $ 32,339 $ 93,365 $ 99,516
Mixed-Use properties 9,603 10,171 29,768 31,186
Total same property operating income $ 40,662 $ 42,510 $ 123,133 $ 130,702
Shopping Center operating income $ 31,581 $ 32,339 $ 94,195 $ 99,516
Less: Shopping Center acquisitions, dispositions and development properties (522) — (830) —
Total same Shopping Center operating income $ 31,059 $ 32,339 $ 93,365 $ 99,516
Mixed-Use property operating income $ 10,240 $ 10,074 $ 29,839 $ 31,705
Add (Less): Mixed-Use acquisitions, dispositions and development properties (637) 97 (71) (519)
Total same Mixed-Use property operating income $ 9,603 10,171 $ 29,768 $ 31,186

~~The $1.8 million decrease in~~ Mixed-use same property operating income ~~in the 2020 Quarter compared to the 2019 Quarter was~~decreased primarily due to (a) ~~higher~~lower base rent ($3.5 million), (b) lower termination fees ($0.7 million) and (c) lower expense recoveries, net of expenses ($0.4 million), partially offset by (d) lower credit losses on operating lease receivables and corresponding reserves (collectively, $1.6 million), (b) lower lease termination fees ($0.2 million) and (c) lower parking income, net of parking expenses ($0.2 million), partially offset by (d) lower recoverable expenses, net of expense recoveries ($0.3$0.6 million).

The $7.6 million decrease in same property operating income in 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 lease termination fees ($1.3 million), (c) lower base rent, primarily due to the lease expiration and re-leasing

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Table of the grocery anchor at Shops at Fairfax, which opened in August 2020 ($0.6 million), (d) lower parking income, net of parking expenses ($0.6 million), (e) lower percentage rent ($0.3 million) and (f) lower other property revenue ($0.3 million).Contents

Liquidity and Capital Resources

Cash and cash equivalents totaled ~~$54.3~~$11.9 million and ~~$52.3~~$54.3 million at September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s cash flow is affected by its operating, investing and financing activities, as described below.


		Nine Months Ended September 30,					Nine Months Ended September 30,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
Net cash provided by operating activities	Net cash provided by operating activities	$	56,770	$	82,098	Net cash provided by operating activities	$	89,062	$	56,770
Net cash used in investing activities	Net cash used in investing activities	(48,363)		(105,055)		Net cash used in investing activities	(38,831)		(48,363)
Net cash provided by financing activities		31,993		60,648
Increase in cash and cash equivalents		$	40,400	$	37,691
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(65,170)		31,993
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	$	(14,939)	$	40,400

Operating Activities

Net cash provided by operating activities represents cash received primarily from rental revenue, plus other revenue, less property operating expenses, leasing costs, normal recurring general and administrative expenses and interest payments on debt outstanding. ~~We currently expect a short term decrease in cash provided by operating activities because our tenants are~~

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~~impacted by the COVID-19 pandemic and, while contractually obligated, some have not paid second or third quarter 2020 rent (see "Impact of COVID-19").~~

Investing Activities

Net cash used in investing activities includes property acquisitions, developments, redevelopments, tenant improvements and other property capital expenditures. The ~~$56.7~~$9.5 million decrease in cash used in investing activities is primarily due to (a) ~~lower~~decreased development expenditures ($~~57.0~~19.5 million), partially offset by (b) increased acquisitions of real estate investments ($9.0 million) and (c) increased additions to real estate investments throughout the portfolio ($~~0.3~~0.9 million).

Financing Activities

Net cash provided by (used in) financing activities represents (a) cash received from loan proceeds and issuance of common stock, preferred stock and limited partnership units minus (b) cash used to repay and curtail loans, redeem preferred stock and pay dividends and distributions to holders of common stock, preferred stock and limited partnership units. See note 5 to the consolidated financial statements for a discussion of financing activity.

Liquidity Requirements

Short-term liquidity requirements consist primarily of normal recurring operating expenses and capital expenditures, debt service requirements (including debt service relating to additional and replacement debt), distributions to common and preferred stockholders, distributions to unit holders and amounts required for expansion and renovation of the Current Portfolio Properties and selective acquisition and development of additional properties. In order to qualify as a REIT for federal income tax purposes, the Company must distribute to its stockholders at least 90% of its “real estate investment trust taxable income,” as defined in the Code. The Company expects to meet these short-term liquidity requirements (other than amounts required for additional property acquisitions and developments) through cash provided from operations, available cash and its existing line of credit.

Long-term liquidity requirements consist primarily of obligations under our long-term debt and dividends paid to our preferred shareholders. ~~We anticipate~~The Company anticipates that long-term liquidity requirements will also include amounts required for property acquisitions and developments. The Company is in the early stages of the development of Phase I of the Twinbrook Quarter, a project that includes an 80,000 square foot Wegmans, adjacent small shop space, 450 apartments and a 230,000 square foot office building in Rockville, Maryland. The Company is working with a lender that has offered to make a $145.0 million construction-to-permanent loan, the proceeds of which will be used to partially finance the project. The loan is expected to close in the fourth quarter of 2021, subject to customary loan closing conditions. Costs incurred are currently funded through working capital, including the Company's existing line of credit. The Company has completed ~~construction~~development plans for the combined property, known as Hampden House, for the development of up to 366 apartment units and 10,100 square feet of retail space. The Company is working with a ~~primarily residential project with street-level retail at 750 N. Glebe Road in Arlington, Virginia.~~lender that has offered to make a $133.0 million construction-to-permanent loan, the proceeds of which will be used to partially finance the project. The ~~total cost~~timing of construction of the project ~~including acquisition of land, is expected to be approximately $275.0 million, plus approximately $19.1 million of capitalized interest. A portion~~has not yet been determined. However, the Company anticipates that demolition of the ~~cost is being financed with a $157.0 million construction-to-permanent loan. Including approximately $19.0 million~~existing vacant building will begin during the fourth quarter of ~~capitalized interest and costs of $848,700 which are accrued and unpaid, costs incurred through September 30, 2020 total approximately $275.0 million, of which $143.1 million has been financed by~~2021 to prepare the ~~loan.~~site for future development. The Company may also redevelop certain of the

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Current Portfolio Properties and may develop additional freestanding outparcels or expansions within certain of the Shopping Centers.

Acquisition and development of properties are undertaken only after careful analysis and review, and management’s determination that such properties are expected to provide long-term earnings and cash flow growth. During the coming year, developments, expansions or acquisitions (if any) are expected to be funded with available cash, bank borrowings from the Company’s credit line, construction and permanent financing, proceeds from the operation of the Company’s dividend reinvestment plan or other external debt or equity capital resources available to the Company. Any future borrowings may be at the Saul Centers, Operating Partnership or Subsidiary Partnership level, and securities offerings may include (subject to certain limitations) the issuance of additional limited partnership interests in the Operating Partnership which can be converted into shares of Saul Centers common stock. The availability and terms of any such financing will depend upon market and other conditions.

Management believes that the Company’s capital resources, which at October 31, ~~2020~~2021 included cash balances of approximately ~~$40.6~~$8.9 million and borrowing availability of approximately ~~$200.3~~$220.2 million on its unsecured revolving credit facility, provide sufficient liquidity and flexibility to meet the needs of the Company's operations as the effects of the COVID-19 pandemic continue to evolve.

Dividend Reinvestments

The Company has a DRIP that allows its common stockholders and holders of limited partnership interests an opportunity to buy additional shares of common stock by reinvesting all or a portion of their dividends or distributions. The DRIP provides for investing in newly issued shares of common stock at a 3% discount from market price without payment of any brokerage commissions, service charges or other expenses. All expenses of the DRIP are paid by the Company. The Company issued ~~106,050~~224,706 and ~~322,534~~106,050 shares under the DRIP at a weighted average discounted price of ~~$44.62~~$37.41 and ~~$52.08~~$44.62 per share, during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company issued ~~28,209~~47,312 and ~~47,189~~28,209 limited partnership

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units under the DRIP at a weighted average price of ~~$40.14~~$37.94 and ~~$52.77~~$40.14 per unit during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company also credited ~~5,080~~4,939 and ~~3,370~~5,080 shares to directors pursuant to the reinvestment of dividends specified by the Directors’ Deferred Compensation Plan at a weighted average discounted price of ~~$34.76~~$37.52 and ~~$52.09~~$34.76 per share, during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Capital Strategy and Financing Activity

As a general policy, the Company intends to maintain a ratio of its total debt to total asset value of 50% or less and to actively manage the Company’s leverage and debt expense on an ongoing basis in order to maintain prudent coverage of fixed charges. Asset value is the aggregate fair market value of the Current Portfolio Properties and any subsequently acquired properties as reasonably determined by management by reference to the properties’ aggregate cash flow. Given the Company’s current debt level, it is management’s belief that the ratio of the Company’s debt to total asset value was below 50% as of September 30, ~~2020.~~2021.

The organizational documents of the Company do not limit the absolute amount or percentage of indebtedness that it may incur. The Board of Directors may, from time to time, reevaluate the Company’s debt/capitalization strategy in light of current economic conditions, relative costs of capital, market values of the Company’s property portfolio, opportunities for acquisition, development or expansion, and such other factors as the Board of Directors then deems relevant. The Board of Directors may modify the Company’s debt/capitalization policy based on such a reevaluation without shareholder approval and consequently, may increase or decrease the Company’s debt to total asset ratio above or below 50% or may waive the policy for certain periods of time. The Company selectively continues to refinance or renegotiate the terms of its outstanding debt in order to achieve longer maturities, and obtain generally more favorable loan terms, whenever management determines the financing environment is favorable.

At September 30, ~~2020,~~2021, the Company had a ~~$400.0~~$525.0 million credit facility comprised of a ~~$325.0~~$425.0 million revolving credit facility and a ~~$75.0~~$100.0 million term loan. As of September 30, ~~2020,~~2021, the applicable spread for borrowings was 140 basis points under the ~~revolving credit facility~~Revolving Line and 135 basis points under the ~~term loan.~~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.~~New Facility. Letters of credit may be issued under the revolving credit facility. As of September 30, ~~2020,~~2021, based on the value of the Company’s unencumbered properties, approximately ~~$200.3~~$228.2 million was available under the ~~revolving credit facility, $124.5~~Revolving Line, $98.0 million was outstanding and approximately $185,000 was committed for letters of credit.

The facility requires the Company and its subsidiaries to maintain compliance with certain financial covenants. The material covenants require the Company, on a consolidated basis, to:

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•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

•limit the amount of debt so that interest, scheduled principal amortization and preferred dividend coverage exceeds 1.4x on a trailing four-quarter basis (fixed charge coverage).

As of September 30, ~~2020,~~2021, the Company was in compliance with all such covenants.

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.

On July 24, 2020, the Company closed on a 15-year, non-recourse $30.0 million mortgage loan secured by Kentlands Place, Kentlands Square I and Kentlands Pad. 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.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on the Company’s financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Funds From Operations

Funds From Operations (FFO)1 available to common stockholders and noncontrolling interests for the ~~2020~~2021 Period, totaled ~~$67.8~~$75.3 million, ~~a decrease~~an increase of ~~9.8%~~10.9% compared to the ~~2019~~2020 Period. FFO available to common stockholders and noncontrolling interests ~~decreased~~increased primarily due to (a) ~~initial operations of The Waycroft ($3.9 million), (b) higher~~lower credit losses on operating lease receivables and corresponding reserves (collectively, ~~$4.2~~$4.8 million), (b) increased occupancy at The Waycroft, which opened in April 2020 ($1.2 million), (c) ~~lower lease termination fees ($1.9~~higher percentage rent (0.8 million), and (d) ~~lower parking income, net of parking expenses ($0.6 million) and (e) lower base rent, primarily due to the lease expiration and re-leasing of the grocery anchor~~increased occupancy at ~~Shops at Fairfax,~~Ashbrook Marketplace, which opened in ~~August 2020~~November 2019 ($0.6 million), partially offset by (f) lower interest incurred due to lower average interest rates during the period, exclusive of the impact of The Waycroft ($2.5 million), (g) higher capitalized interest for 7316 Wisconsin Avenue ($1.6 million) and (h) lower recoverable expenses, net of expense recoveries ($0.5 million).

The following table presents a reconciliation from net income to FFO available to common stockholders and noncontrolling interests for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	(In thousands, except per share amounts)	2020		2019		2020		2019		(In thousands, except per share amounts)	2021		2020		2021		2020
Net income	Net income	$	11,603	$	15,328	$	38,640	$	49,155	Net income	$	16,885	$	11,603	$	45,799	$	38,640

Add:	Add:									Add:

Real estate depreciation and amortization	Real estate depreciation and amortization	13,713		12,018		37,593		35,185		Real estate depreciation and amortization	12,467		13,713		37,852		37,593
FFO	FFO	25,316		27,346		76,233		84,340		FFO	29,352		25,316		83,651		76,233
Subtract:	Subtract:									Subtract:

Preferred stock dividends	Preferred stock dividends	(2,798)		(3,210)		(8,394)		(9,116)		Preferred stock dividends	(2,798)		(2,798)		(8,395)		(8,394)

FFO available to common stockholders and noncontrolling interests	FFO available to common stockholders and noncontrolling interests	$	22,518	$	24,136	$	67,839	$	75,224	FFO available to common stockholders and noncontrolling interests	$	26,554	$	22,518	$	75,256	$	67,839
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
Weighted average shares and units:										Weighted average shares and units:
Basic										Basic	32,237		31,264		31,774		31,232
Diluted (2)										Diluted (2)	33,656		31,264		32,877		31,233
Basic FFO per share available to common stockholders and noncontrolling interests										Basic FFO per share available to common stockholders and noncontrolling interests	$	0.82	$	0.72	$	2.37	$	2.17
Diluted FFO per share available to common stockholders and noncontrolling interests										Diluted FFO per share available to common stockholders and noncontrolling interests	$	0.79	$	0.72	$	2.29	$	2.17

1 The National Association of Real Estate Investment Trusts (NAREIT) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO is defined by NAREIT as net income, computed in accordance with GAAP, plus real estate depreciation and amortization, and excluding impairment charges on real estate assets and gains or losses from real estate dispositions. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs, which is disclosed in the Company’s Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of FFO. FFO should not be considered as an alternative to net income, its most directly comparable GAAP measure, as an indicator of the Company’s operating performance, or as an alternative to cash flows as a measure of liquidity. Management considers FFO a meaningful supplemental measure of operating performance because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time (i.e. depreciation), which is contrary to what the Company believes occurs with its

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assets, and because industry analysts have accepted it as a performance measure. FFO may not be comparable to similarly titled measures employed by other REITs.

2 Beginning March 5, 2021, fully diluted shares and units includes 1,416,071 limited partnership units that are held in escrow related to the contribution of Twinbrook Quarter by 1592 Rockville Pike. The units will remain in escrow until the conditions of the Twinbrook Contribution Agreement, as amended, are satisfied.

Acquisitions and Redevelopments

Management anticipates that during the coming year, the Company will complete ~~its development activities~~the remaining retail spaces at The ~~Waycroft,~~Waycroft. The Company may redevelop certain of the Current Portfolio Properties and may develop additional freestanding outparcels or expansions within certain of the Shopping Centers. Acquisition and development of properties are undertaken only after careful analysis and review, and management’s determination that such properties are expected to provide long-term earnings and cash flow growth. During the coming year, any developments, expansions or acquisitions are expected to be funded with bank borrowings from the Company’s credit line, construction financing, proceeds from the operation of the Company’s dividend reinvestment plan or other external capital resources available to the Company.

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The Company has been selectively involved in acquisition, development, redevelopment and renovation activities. It continues to evaluate the acquisition of land parcels for retail and mixed-use development and acquisitions of operating properties for opportunities to enhance operating income and cash flow growth. The Company also continues to analyze redevelopment, renovation and expansion opportunities within the portfolio.

Portfolio Leasing Status

The following chart sets forth certain information regarding Commercial leases at our properties.


		Total Properties		Total Square Footage		Percent Leased					Total Properties		Total Square Footage		Percent Leased
		Shopping Centers	Mixed-Use	Shopping Centers	Mixed-Use	Shopping Centers		Mixed-Use			Shopping Centers	Mixed-Use	Shopping Centers	Mixed-Use	Shopping Centers		Mixed-Use
September 30, 2021										September 30, 2021	50	7	7,872,002	1,136,937	93.6	%	85.0	%
September 30, 2020	September 30, 2020	50	7	7,876,842	1,136,937	94.5	%	90.3	%	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	%

As of September 30, ~~2020, 94.0%~~2021, 92.5% of the Commercial portfolio was leased, compared to ~~94.8%~~94.0% September 30, ~~2019.~~2020. On a same property basis, ~~93.9%~~92.5% of the Commercial portfolio was leased, compared to ~~94.8%~~94.0% at September 30, ~~2019.~~2020. As of September 30, ~~2020,~~2021, the Residential portfolio was ~~73.9%~~97.8% leased compared to ~~97.9%~~73.9% at September 30, ~~2019. The decrease in Residential portfolio occupancy is primarily due to the increase in units available as of a result of the opening of The Waycroft.~~ ~~On a same property basis, 94.4% of the residential portfolio was leased as~~2020. As of September 30, ~~2020,~~2021, excluding The Waycroft, the Residential portfolio was 97.7% leased compared to ~~97.9%~~94.4% at September 30, ~~2019.~~2020.

The following table shows selected data for leases executed in the indicated periods. The information is based on executed leases without adjustment for the timing of occupancy, tenant defaults, or landlord concessions. The base rent for an expiring lease is the annualized contractual base rent, on a cash basis, as of the expiration date of the lease. The base rent for a new or renewed lease is the annualized contractual base rent, on a cash basis, as of the expected rent commencement date. Because tenants that execute leases may not ultimately take possession of their space or pay all of their contractual rent, the changes presented in the table provide information only about trends in market rental rates. The actual changes in rental income received by the Company may be different.


				Average Base Rent per Square Foot
Commercial Property Leasing Activity								Commercial Property Leasing Activity			Average Base Rent per Square Foot
Three months ended September 30,	Three months ended September 30,	Square Feet	Number of Leases	New/Renewed Leases		Expiring Leases		Three months ended September 30,	Square Feet	Number of Leases	New/Renewed Leases		Expiring Leases
2021								2021	242,172	59	$	20.64	$	20.95
2020	2020	288,059	66	$	24.67	$	25.09	2020	288,059	66	24.67		25.09
2019		179,919	54	23.76		24.17

Since December 2019, the Company has extended the leases of three significant tenants within the office portfolio. The earliest expiration of these resulting leases is now 2030. These leases comprise an aggregate of approximately 216,000 square feet (22%) of the office square footage contained within the Mixed-Use Properties.

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Additional information about the ~~2020~~ leasing activity during the three months ended September 30, 2021 is set forth below. The below information includes leases for space which had not been previously leased during the period of the Company's ownership, either a result of acquisition or development.


							Commercial Property Leasing Activity
		New Leases		Renewed Leases			New Leases		First Generation/Development Leases		Renewed Leases
Number of leases	Number of leases	11		55		Number of leases	13		1		46
Square feet	Square feet	23,338		264,721		Square feet	37,545		1,739		204,627
Per square foot average annualized:	Per square foot average annualized:					Per square foot average annualized:
Base rent	Base rent	$	15.41	$	25.49	Base rent	$	22.82	$	63.00	$	20.24
Tenant improvements	Tenant improvements	(0.51)		(0.10)		Tenant improvements	(2.64)		—		(0.32)
Leasing costs	Leasing costs	(0.34)		—		Leasing costs	(0.77)		—		(0.04)
Rent concessions	Rent concessions	(0.57)		(0.28)		Rent concessions	(0.67)		—		(0.11)
Effective rents	Effective rents	$	13.99	$	25.11	Effective rents	$	18.74	$	63.00	$	19.77

During the three months ended September 30, 2021, on a same property basis, the Company entered into 331 new or renewed apartment leases. The average monthly rent per square foot increased to $3.38 from $3.30. During the three months ended September 30, 2020, on a same property basis, the Company entered into 181 new or renewed apartment leases. The average monthly rent per square foot decreased to $3.34 from $3.55. ~~During the three months ended September 30, 2019, the Company entered into 199 new or renewed apartment leases. The average monthly rent per square foot increased to $3.52 from $3.45.~~

As of December 31, ~~2019, 746,234~~2020, 889,250 square feet of Commercial space was subject to leases scheduled to expire in ~~2020.~~2021. Of those leases, as of September 30, ~~2020,~~2021, leases representing ~~379,057~~406,442 square feet of Commercial space have not yet renewed and are scheduled to expire over the next three months. Below is information about existing and estimated market base rents per square foot for that space.


Expiring ~~Leases:~~Commercial Property Leases	Total
Square feet	~~379,057~~406,442
Average base rent per square foot	$	~~24.08~~24.77
Estimated market base rent per square foot	$	~~22.87~~23.52

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to certain financial market risks, the most predominant being fluctuations in interest rates. Interest rate fluctuations are monitored by management as an integral part of the Company’s overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on the Company’s results of operations.

The Company is exposed to interest rate fluctuations which will affect the amount of interest expense of its variable rate debt and the fair value of its fixed rate debt. As of September 30, ~~2020,~~2021, the Company had variable rate indebtedness totaling ~~$199.5~~$198.0 million. If the interest rates on the Company’s variable rate debt instruments outstanding at September 30, ~~2020~~2021 had been one percentage point higher, our annual interest expense relating to these debt instruments would have increased by $2.0 million based on those balances. As of September 30, ~~2020,~~2021, the Company had fixed-rate indebtedness totaling ~~$986.0~~$949.5 million with a weighted average interest rate of ~~4.94%~~4.93%. If interest rates on the Company’s fixed-rate debt instruments at September 30, ~~2020~~2021 had been one percentage point higher, the fair value of those debt instruments on that date would have been approximately ~~$54.0~~$48.6 million less than the carrying value.

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Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chairman and Chief Executive Officer, ~~and President,~~ its ~~Executive~~Senior Vice President-Chief Financial Officer, ~~and Treasurer,~~ and its Senior Vice President-Chief Accounting Officer and Treasurer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including its Chairman and Chief Executive Officer, ~~and President,~~ its ~~Executive~~Senior Vice President-Chief Financial Officer, ~~and Treasurer,~~ and its Senior Vice President-Chief Accounting Officer and Treasurer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, ~~2020.~~2021. Based on the foregoing, the Company’s Chairman and Chief Executive Officer, ~~and President,~~ its ~~Executive~~Senior Vice President-Chief Financial Officer ~~and Treasurer~~ and its Senior Vice President-Chief Accounting Officer and Treasurer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, ~~2020.~~2021.

During the quarter ended September 30, ~~2020,~~2021, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

Except as set forth below, the Company has no material updates to the risk factors presented in Item 1A. Risk Factors in the ~~2019~~2020 Annual Report of the Company on Form 10-K.

The current outbreak of the novel coronavirus (“COVID-19”), or the future outbreak or pandemic of any other highly infectious or contagious diseases, could have a material and adverse effect on or cause disruption to our business or financial condition, results of operations, cash flows and the market value and trading price of our securities.

On March 11, 2020, the World Health Organization declared 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. Many of our tenants have announced mandated or temporary closures of their operations and/or have requested adjustments to their lease terms during this pandemic. Experts predict that the COVID-19 pandemic will trigger a period of global economic slowdown or a global recession. COVID-19 (or a future pandemic) 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 due to, among other factors:

•a complete or partial closure of, or other operational issues at, our properties as a result of government or tenant action;

•the declines in or instability of the economy or financial markets may result in a recession or negatively impact consumer discretionary spending, which could adversely affect retailers and consumers;

•the reduction of economic activity severely impacts our tenants' business operations, financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, to default on their lease, or to otherwise seek modifications of such obligations;

•inability to access debt and equity capital on favorable terms, if at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations, pursue acquisition and development opportunities, refinance existing debt, reduce our ability to make cash distributions to our stockholders and increase our future interest expense;

•a general decline in business activity and demand for real estate transactions could adversely affect our ability to successfully execute investment strategies or expand our property portfolio;

•a significant reduction in our cash flows could impact our ability to continue paying cash dividends to our common and preferred stockholders at expected levels or at all;

•the financial impact of COVID-19 could negatively affect our future compliance with financial and other covenants of our credit facility and other debt instruments, and the failure to comply with such covenants could result in a default that accelerates the payment of such indebtedness;

•the continued service and availability of personnel, including our executive officers and Board of Directors, and our ability to recruit, attract and retain skilled personnel, to the extent our management, Board of Directors or personnel are impacted in significant numbers by the outbreak of pandemic or epidemic disease and are not available or allowed to conduct work, could negatively impact our business and operating results; and

•our ability to ensure business continuity in the event our continuity of operations plan is not effective or is improperly implemented or deployed during a disruption.

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. For example, as of September 30, ~~2020,~~2021, approximately ~~39%~~21% of base rent is generated from tenants in lines of trade that have been ~~significantly~~ impacted by mandated temporary closures or other social-distancing guidelines issued by federal, state and local governments including:

•~~Full-service and limited-service restaurants (16%),~~

•~~Beauty~~beauty services and dry cleaners (6%),;

•~~Apparel~~apparel and footwear ~~(5%~~(4%),;

•~~Health~~full-service and limited-service restaurants (4%);

•specialty retail (3%);

•health and fitness ~~(2%~~(3%),; and

•~~Other (10%~~other (1%).

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A prolonged imposition of, or in some cases a return to, mandated temporary closures or other social-distancing guidelines may adversely impact the ability of these tenants to generate sufficient revenues, and may cause tenants to request additional rent deferrals, and in limited cases, default on their leases, or result in the bankruptcy or insolvency of tenants, which would diminish our ability to receive rental revenue that is owed under their leases. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty and risk with respect to our performance, business or financial condition, results from operations and cash flows.

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

B. Francis Saul II, the Company’s Chairman of the Board and Chief Executive Officer, ~~and President,~~ his spouse and entities affiliated with Mr. Saul II, through participation in the Company’s Dividend Reinvestment and Stock Purchase Plan for the July 31, ~~2020~~2021 dividend distribution acquired ~~3,010~~56,528 shares of common stock at a price of ~~$28.98~~$44.44 per share and ~~13,108~~13,841 limited partnership units at a price of ~~$29.47~~$44.92 per unit. The limited partnership units were sold pursuant to Section 4(a)(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

Item 6. Exhibits


10.	(a)	The Eighteenth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership (filed herewith).

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 September 30, ~~2020,~~2021, 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).

* In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			SAUL CENTERS, INC. (Registrant)

Date: November ~~5, 2020~~4, 2021			/s/ ~~B. Francis Saul II~~D. Todd Pearson
			~~B. Francis Saul II~~D. Todd Pearson ~~Chairman,~~President and Chief ~~Executive~~Operating Officer ~~and President~~

Date: November ~~5, 2020~~4, 2021			/s/ ~~Scott V. Schneider~~Carlos L. Heard
			~~Scott V. Schneider~~Carlos L. Heard ~~Executive~~Senior Vice President and Chief Financial Officer ~~and Treasurer~~ (principal financial officer)

Date: November ~~5, 2020~~4, 2021			/s/ Joel A. Friedman
			Joel A. Friedman Senior Vice President, Chief Accounting Officer and Treasurer (principal accounting officer)

~~-44-~~-42-


(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