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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.03pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.13pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.06pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+6
negatively+2
challenges+2
harm+2
disrupt+2
Positive rising
efficiencies+2
favorable+1
achieve+1
improve+1
improving+1
Risk Factors (Item 1A)
10,588 words
Item 1A. Risk Factors
RISK FACTORS
Carefully consider the following risks and all of the other information set forth in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto. If any of the events or developments described below were actually to occur, the Company’s business, financial condition or results of operations could be adversely affected. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, and results of operations.
In this section, unless the context indicates otherwise, the terms “Company,” “we,” “us” and “our” refer to Saul Centers, Inc., and its subsidiaries, including the Operating Partnership.
Risk Factors Related to our Real Estate Investments and Operations
Revenue from our properties may be negatively impacted if the operations of our retail tenants are not successful.
Adverse changes in consumer spending or consumer preferences for particular goods, services or store-based retailing could negatively impact the ability of our retail tenants to pay rent. Revenue from our properties depends primarily on the ability of our retail tenants to pay the full amount of rent due under their leases on a timely basis, which is in turn dependent on the of their operations, making us to general economic and other conditions affecting the retail industry. Some of our leases provide for the payment of additional rent above the base amount based on a specified percentage of the gross sales generated by the retail tenants. As a result, in our retail tenants’ sales revenue could impact the Company’s receipt of percentage rents required to be paid by tenants under certain leases. Some retail tenants may their leases or vacate space due to an to operate for an extended period of time, impacting the Company’s ability to maintain occupancy levels.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
termination+3
lost+2
losses+1
adverse+1
closed+1
Positive rising
exclusive+9
gains+2
enhance+1
progress+1
MD&A (Item 7)
8,303 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related footnotes included elsewhere in this Annual Report on Form 10-K. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled "Forward-Looking Statements." Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see "Item 1A. Risk Factors."
Overview
The Company's primary strategy is to continue to diversify its assets through development of transit-oriented, residential mixed-use projects and expansion of and additions to its grocery-anchored Shopping Centers in the Washington, DC/Baltimore metropolitan area. The Company's operating strategy also includes improvement of the operating performance of its assets, internal growth of its Shopping Centers through the addition of pad sites, and supplementing its development pipeline with selective redevelopment and renovations of its core Shopping Centers. The Company has a pipeline of entitled sites in its portfolio, some of which are currently Shopping Centers, for development of up to 2,500 apartment units and 850,000 square feet of retail and office space. All such sites are located proximate to Washington Metropolitan Area Transit Authority red line Metro stations in Montgomery County, Maryland. In addition, the Company recently entered into a lease with Publix to develop a new grocery store at Ashland Square in Prince William County, Virginia. When complete, Ashland Square is expected to ultimately comprise approximately 124,000 square feet of retail space including the 50,325 square foot Publix, three existing pad sites, four additional pad sites and approximately 30,000 square feet of small shop space.
Any reduction in the ability of our retail tenants, particularly our anchor tenants, to pay base rent or percentage rent may have a material adverse effect on our financial condition and results of operations. Small business retail tenants and anchor retailers that lease space in the Company’s properties may experience a deterioration in their sales or other revenue, or a constraint on the availability of credit necessary to fund operations, which in turn may adversely impact those tenants’ ability to pay contractual base rents and operating expense recoveries.
We may be unable to collect balances due from tenants that file for bankruptcy protection.
Historically and from time to time, certain of our tenants have experienced financial difficulties and filed for bankruptcy protection, typically under the U.S. Bankruptcy Code. If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-petition amounts owed by that party. In addition, a tenant that files for bankruptcy protection may reject or terminate our lease, in which event we would have a general unsecured claim that would likely be for less than the full amount owed to us for the remainder of the lease term, which could adversely affect our financial condition and results of operations. In the event that a tenant with a significant number of leases in our shopping centers files for bankruptcy protection and rejects its leases, we may experience a significant reduction in our revenues and may not be able to collect all pre-petition amounts owed by such tenant.
Our ability to increase our net income depends on the success and continued presence of our shopping center “anchor” tenants and other significant tenants.
A majority of our shopping center properties are anchored by one or more major tenants, most of whom primarily offer day-to-day necessities and services. Thirty-four of our properties are anchored by a grocery store. Our net income could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant. Our largest shopping center anchor tenant by revenue is Giant Food, which accounted for 4.5% of our total revenue for the year ended December 31, 2025. The closing of one or more anchor stores prior to the expiration of the applicable lease term, or the termination of a lease by one or more of a property’s anchor tenants could adversely affect that property and result in lease terminations by, or reductions in rent from, other tenants whose leases may permit termination or rent reduction in those circumstances or whose own operations may suffer as a result. In the event that we are unable to re-lease space vacated by an anchor tenant, we may incur additional expenses to reconfigure or re-model the space to be able to re-lease the space to one or more new anchor tenants or other tenants. This could reduce our net income and negatively impact our financial condition and results of operations.
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We may experience difficulty or delay in renewing leases or leasing vacant space.
We derive most of our revenue directly or indirectly from rent received from our office and retail tenants. We are subject to the risks that, upon expiration, leases for space in our properties may not be renewed, the space and other vacant space may not be re-leased, or the terms of renewal or re-lease, including the cost of required renovations or concessions to tenants, may be less favorable than previous lease terms. There can be no assurance that we will be able to retain tenants in any of our properties upon the expiration of their leases. See Item 2. Properties—Lease Expirations of Shopping Center Properties and Lease Expirations of Mixed-Use Properties for additional information regarding the scheduled lease expirations in our portfolio. Constraints on the availability of credit to office and retail tenants could impact the Company’s ability to procure new office and retail tenants for spaces currently vacant in existing operating properties or properties under development. As a result, our results of operations and our net income could be reduced.
Our development activities are inherently risky.
The ground-up development of improvements on real property, which is different from the renovation and redevelopment of existing improvements, presents substantial risks. In addition to the risks associated with real estate investment in general as described elsewhere, the risks associated with our development activities include:
• significant time lag between commencement and completion subjects us to greater risks due to fluctuations in the general economy;
• failure or inability to obtain construction or permanent financing on favorable terms;
• expenditure of money and time on projects that may never be completed;
• inability to achieve projected rental rates or anticipated pace of lease-up;
• higher-than-estimated construction costs, including inflation of labor and material costs; and
• possible delay in completion of the project because of a number of factors, including weather, labor disruptions, supply-chain related delays, construction delays or delays in receipt of zoning or other regulatory approvals, or acts of God (such as fires, earthquakes or floods).
As a result of these and other risks, our ground-up development projects may be unsuccessful and may have a negative impact on our results of operations and may reduce our net income.
Redevelopments and acquisitions may fail to perform as expected.
Our primary strategy is to diversify our assets through development of transit-oriented, residential mixed-use projects and expansion of and additions to our grocery-anchored Shopping Centers in the Washington, DC/Baltimore metropolitan area. The redevelopment and acquisition of properties entail risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:
• our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, and, as a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time;
• we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
• we may not be able to integrate new developments or acquisitions into our existing operations successfully;
• properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project at the time we make the decision to invest, which may result in the properties’ failure to achieve the returns we projected;
• our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition costs; and
• our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
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Our performance and value are subject to general risks associated with the real estate industry.
Our economic performance and the value of our real estate assets, and, consequently, the value of our investments, are subject to the risk that if our properties do not generate revenue sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our stockholders will be adversely affected. As a real estate company, we are susceptible to the following real estate industry risks:
• economic downturns in the areas where our properties are located;
• adverse changes in local real estate market conditions, such as oversupply or reduction in demand;
• changes in tenant preferences that reduce the attractiveness of our properties to tenants;
• zoning or regulatory restrictions;
• decreases in market rental rates;
• weather conditions that may increase energy costs and other operating expenses;
• costs associated with the need to periodically repair, renovate and re-lease space; and
• increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more properties, which may occur even when circumstances such as market factors and competition cause a reduction in revenue from one or more properties.
Geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.
Over 85% of our property net operating income is generated by properties in the metropolitan Washington, DC/Baltimore metropolitan area. As a result, significant adverse economic changes, including actions of the Federal government, affecting the real estate markets in that area could have a material adverse effect on our financial condition, operating results and ability to make distributions. In turn, our common stock is subject to greater risk vis-à-vis other enterprises whose portfolio contains greater geographic diversity.
Our results of operations may be negatively affected by adverse trends in the retail, office and residential real estate sectors.
Tenants at our retail properties face continual competition in attracting customers from online merchants, retailers at other shopping centers, catalogue companies, television shopping networks, warehouse stores, large discounters, outlet malls, wholesale clubs, direct mail and telemarketers. Such competition could have a material adverse effect on our ability to lease space in our retail properties and on the rents we can charge or the concessions we grant. This in turn could have a material adverse effect on our results of operations and cash flows and could affect the realizable value of our assets upon sale. Further, as new technologies emerge, the relationships among customers, retailers, and shopping centers evolve rapidly and it is critical we adapt to such new technologies and relationships on a timely basis. We may be unable to adapt quickly and effectively, which could adversely impact our financial performance.
Employee telecommuting, flexible work schedules, open workplaces and teleconferencing have become increasingly common. These practices enable businesses to reduce their space requirements, and wider adoption could erode the overall demand for office space and, in turn, place downward pressure on occupancy, rental rates and property valuations, each of which could have an adverse effect on our financial position, results of operations, cash flows and ability to make distributions to our stockholders.
Our residential properties face competition for residents from other existing or new multifamily properties, condominiums, single family homes and other living arrangements, whether owned or rental, that may attract residents from our properties or prospective residents that would otherwise choose to live with us. As a result, we may not be able to renew existing resident leases or enter into new resident leases, or if we are able to renew or enter into new leases, they may be at rates or terms that are less favorable than our current rates or terms, resulting in a material impact on our results of operations.
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The short-term nature of apartment leases exposes us more quickly to the effects of declining market rents, potentially making our results of operations and cash flows more volatile.
The average remaining term of our residential apartment leases is 12 months or less. If the contractual terms of the renewal or re-leasing are less favorable than current terms, then our results of operations and financial condition could be negatively affected. Given our shorter-term residential lease structure, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms. In addition, operating expenses associated with each property, such as real estate taxes, insurance, utilities, maintenance costs and employee wages and benefits, may not decline as quickly as revenues, or at all, if revenues at our properties decline.
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the investment. As a result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without delays, and may incur substantial legal costs. Additionally, new properties that we may acquire or develop may not immediately produce any significant revenue, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is fully leased.
Competition may limit our ability to purchase new properties and generate sufficient income from tenants.
Numerous commercial developers and real estate companies compete with us in seeking tenants for properties and properties for acquisition. This competition may:
• reduce properties available for acquisition;
• increase the cost of properties available for acquisition;
• reduce rents payable to us;
• interfere with our ability to attract and retain tenants;
• lead to increased vacancy rates at our properties; and
• adversely affect our ability to minimize expenses of operation.
Retailers at our shopping center properties also face increasing competition from online retailers, outlet stores, discount shopping clubs, and other forms of marketing of goods, such as direct mail, internet marketing and telemarketing. This competition may reduce percentage rents payable to us and may contribute to lease defaults and insolvency of tenants. If we are unable to continue to attract appropriate retail tenants to our properties, or to purchase new properties in our geographic markets, it could materially affect our ability to generate net income, service our debt and make distributions to our stockholders.
The continued shift in retail sales towards e-commerce may adversely affect our financial condition, cash flows, and results of operations.
Retailers are increasingly affected by e-commerce and changes in customer buying habits. While many of the retailers in our shopping centers provide services that are unable to be performed online or sell goods, the continuing increase in e-commerce sales may cause retailers to adjust the size or number of retail locations in the future or close stores. Our grocery anchors are likewise increasingly incorporating online ordering, home delivery or curbside pickup into their business models, which could reduce foot traffic at our shopping centers and adversely affect our occupancy and rental rates. Changes in shopping trends as a result of the growth in e-commerce may also affect the profitability of retailers that do not adapt to changes in market conditions. If we are unable to anticipate and respond promptly to trends in the market, our occupancy levels and rental rates may decline, and our financial condition and results of operations may be adversely impacted.
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AI presents risks and challenges that could adversely affect our business, results of operations and reputations.
We are evaluating and may in the future adopt certain AI tools, including generative AI and other automated decision-making technologies, to support certain internal functions and operations with the goal of improving operating efficiencies. Implementing and maintaining these technologies may require significant investments in software, data management, cybersecurity, governance and controls, and personnel with the requisite skills. If we are unable to effectively adopt AI tools, or if we do not do so as quickly as needed to remain competitive, we may not achieve expected efficiencies, could fall behind competitors, and our business could be adversely affected. Conversely, deploying AI tools too rapidly or without appropriate policies, testing, oversight and controls could result in ineffective adoption, operational disruptions, and flawed, biased or misleading outputs (which may appear reliable), leading to incorrect decisions, competitive harm, reputational damage, and legal or regulatory liability.
Certain of our vendors and other third parties may incorporate AI tools into the products or services they provide to us, sometimes without disclosure, may use or implement such tools improperly or ineffectively, and the providers of such tools may not meet existing or evolving standards for security, privacy, and data protection. As a result, our use of, or reliance on, such vendors could increase the risk of cybersecurity or privacy incidents, litigation or regulatory action, and reputational harm.
The legal and regulatory environment governing AI continues to evolve rapidly and remains uncertain. New or changing laws, regulations, or industry standards could require us to devote significant resources to compliance, modify or limit our use of AI, implement additional controls, or change business practices. Any such requirements could increase our costs, reduce anticipated benefits, restrict our ability to use AI effectively, or expose us to fines, penalties or other enforcement actions.
Cybersecurity risks and cyber incidents could adversely affect our business, disrupt operations and expose us to liabilities to tenants, employees, capital providers and other third parties.
We use information technology and other computer resources to carry out important operational activities and to maintain our business records. As part of our normal business activities, we collect and store certain personal identifying and confidential information relating to our tenants, employees, vendors and suppliers, and maintain operational and financial information related to our business. Although we and our service providers employ what we believe are adequate security, disaster recovery and other preventative and corrective measures, our security measures, taken as a whole, may not be sufficient for all possible situations and may be vulnerable to, among other things, hacking, ransomware, employee error, system error, and faulty password management. Further, malicious actors increasingly use AI technologies to deploy more sophisticated cyber security attacks that are difficult to detect, which could increase the frequency and severity of cyber-attacks. Additionally, information technology security breaches may go undetected and persist as a latent threat to our security measures.
Our ability to conduct our business may be impaired if our information technology resources, including our websites or e-mail systems, are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third-party, natural disaster, hardware or software corruption or failure or error or poor product or vendor/developer selection (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions, or lost connectivity to our networked resources. A significant and extended disruption could damage our reputation and cause us to lose tenants and revenues; result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information; and require us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues. The release of confidential information may also lead to litigation or other proceedings against us by affected individuals, business partners and/or regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings and cause us reputational harm, could have a material and adverse effect on our business and consolidated financial statements. In addition, the costs of maintaining adequate protection against data security threats, based on considerations of their evolution, increasing sophistication, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to our consolidated financial statements in a particular period or over various periods.
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We may be unable to sell properties when appropriate because real estate investments are illiquid.
Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to real estate and in particular to REITs that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our stockholders.
Our real estate assets may become impaired.
Our real estate properties are carried at cost less accumulated depreciation, unless circumstances indicate that the carrying amount of these assets may not be recoverable. We are required to make subjective assessments as to whether there are impairments in the value of our real estate assets and other investments. A property’s value is impaired if the estimated aggregate future undiscounted property cash flows are less than the carrying amount of the property. In our estimate of cash flows, we consider factors such as trends and prospects and the effects of demand and competition on expected future operating income. If we are evaluating the potential sale of an asset or redevelopment alternatives, the undiscounted future cash flows weight potential estimated outcomes as of the balance sheet date based on current plans, intended holding periods and available market information. During the year ended December 31, 2025, we incurred no impairments within our property portfolio, but there can be no assurance that we will not experience impairment within our property portfolio in the future. Any future impairment could have a material adverse effect on our operating results in the period in which it is recognized.
Risk Factors Related to our Funding Strategies and Capital Structure
We have substantial relationships with members of the Saul Organization whose interests could conflict with the interests of other stockholders.
Influence of Officers, Directors and Significant Stockholders.
Mr. B. F. Saul II, our Chief Executive Officer and Chairman of the Board, D. Todd Pearson, our President and Chief Operating Officer, Joel A. Friedman, our Executive Vice President, Chief Accounting Officer and Treasurer, and Bettina T. Guevara, our Executive Vice President-Chief Legal and Administrative Officer, are officers of certain entities within the Saul Organization, and persons associated with the Saul Organization constitute five of the 11 members of our Board of Directors. In addition, as of December 31, 2025, Mr. B. F. Saul II had the potential to exercise control over 10,887,456 shares of our common stock representing 45.0% of our issued and outstanding shares of common stock. Mr. B. F. Saul II also beneficially owned, as of December 31, 2025, 10,615,771 units of the Operating Partnership. In general, these units are convertible into shares of our common stock on a one-for-one basis. The ownership limitation set forth in our articles of incorporation with respect to the Saul Organization is 39.9% in value of our issued and outstanding equity securities (which includes both common and preferred stock but not Operating Partnership units). As of December 31, 2025, Mr. B. F. Saul II and members of the Saul Organization owned common stock representing approximately 37.1% in value of all our issued and outstanding equity securities. Members of the Saul Organization are permitted under our articles of incorporation to convert Operating Partnership units into shares of common stock or acquire additional shares of common stock until the Saul Organization’s actual ownership of common stock reaches 39.9% in value of our equity securities. As of December 31, 2025, approximately 1,349,000 of the 10,615,771 units of the Operating Partnership would have been permitted to convert into additional shares of common stock, and would have resulted in Mr. B. F. Saul II and members of the Saul Organization owning common stock representing approximately 39.9% in value of all our issued and outstanding equity securities.
As a result of these relationships, officers of the Saul Organization exercise significant influence over our affairs, which influence might not be consistent with the interests of other stockholders. All related party transactions are reviewed and approved by the Audit Committee in accordance with the Audit Committee charter. Except as discussed below, we do not have any additional written policies or procedures for the review, approval or ratification of transactions with related persons.
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Management Time.
Our Chief Executive Officer, President and Chief Operating Officer, Executive Vice President-Chief Legal and Administrative Officer and Executive Vice President-Chief Accounting Officer and Treasurer are also officers of various entities of the Saul Organization. Although we believe that these officers spend management time sufficient to meet their responsibilities as our officers, the amount of management time devoted to us will depend on our specific circumstances at any given point in time. As a result, in a given period, these officers may spend less than a majority of their management time on our matters. Over extended periods of time, we believe that our Chief Executive Officer will spend less than a majority of his management time on Company matters, while our President and Chief Operating Officer, Executive Vice President-Chief Legal and Administrative Officer and Executive Vice President-Chief Accounting Officer and Treasurer may or may not spend less than a majority of their time on our matters.
Exclusivity and Right of First Refusal Agreements.
We acquire, develop, own and manage shopping center properties and own and manage other commercial properties, and, subject to certain exclusivity agreements and rights of first refusal to which we are a party, the Saul Organization separately develops, acquires, owns and manages commercial properties and owns land suitable for development as, among other things, shopping centers and other commercial properties. Therefore, conflicts could develop in the allocation of acquisition and development opportunities with respect to commercial properties other than shopping centers and with respect to development sites, as well as potential tenants and other matters, between us and the Saul Organization. The agreement relating to exclusivity and the right of first refusal between us and the Saul Organization generally requires the Saul Organization to conduct its shopping center business exclusively through us and to grant us a right of first refusal to purchase commercial properties and development sites in certain market areas that become available to the Saul Organization. See Item 13 for risk factor mitigants. See Note 9 to the Consolidated Financial Statements for a discussion of related party transactions.
Shared Services.
We share with the Saul Organization certain ancillary functions, such as information technology, payroll services, human resources and benefits administration, accounting services, and in-house legal services. Included in our general and administrative expenses or capitalized to specific development projects, for the year ended December 31, 2025, are charges totaling $12.0 million, net, related to such shared services, which included rental payments for the Company’s headquarters lease, which were billed by the Saul Organization. Although we believe that the amounts allocated to us for such shared services represent a fair allocation between us and the Saul Organization, we have not obtained a third-party appraisal of the value of these services. See Item 13 for risk factor mitigants.
The B. F. Saul Insurance Agency of Maryland, 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 counter-signature fees in connection with our insurance program. Such commissions and fees amounted to approximately $573,300 for the year ended December 31, 2025.
Related Party Rents.
We sublease our corporate headquarters from a member of the Saul Organization, the building of which is owned by another member of the Saul Organization. The lease commenced in March 2002 and expires in February 2027. The Company and the Saul Organization entered into a shared services agreement whereby each party pays a portion of the total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company’s rent expense for the year ended December 31, 2025 was $876,600. Although the Company believes that this lease has terms comparable to what would have been obtained from a third-party landlord, it did not seek bid proposals from any independent third parties when entering into its new corporate headquarters lease.
Conflicts Based on Individual Tax Considerations.
The tax basis of members of the Saul Organization in our portfolio properties that were contributed to certain partnerships at the time of our initial public offering in 1993 was substantially less than the fair market value thereof at the time of their contribution. In the event that we dispose of such properties, a disproportionately large share of the gain for federal income tax purposes would be allocated to members of the Saul Organization. In addition, future reductions of the level of our debt, or future releases of the guarantees or indemnities with respect thereto by members of the Saul Organization, would cause members of the Saul Organization to be considered, for federal income tax purposes, to have received constructive distributions. Depending on the overall level of debt and other factors, these distributions could exceed the Saul Organization’s basis in their Partnership units, in which case such excess constructive distributions would be taxable.
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Consequently, it is in the interests of the Saul Organization that we continue to hold the contributed portfolio properties, that a portion of our debt remains outstanding or is refinanced and that the Saul Organization guarantees and indemnities remain in place, to defer the taxable gain to members of the Saul Organization. Therefore, the Saul Organization may seek to cause us to retain the contributed portfolio properties, and to refrain from reducing our debt or releasing the Saul Organization guarantees and indemnities, even when such action may not be in the interests of some, or a majority, of our stockholders. See Item 13 for risk factor mitigants.
Ability to Block Certain Actions.
Under applicable law and the limited partnership agreement of the Operating Partnership, consent of the limited partners is required to permit certain actions, including the sale of all or substantially all of the Operating Partnership’s assets. Therefore, members of the Saul Organization, through their status as limited partners in the Operating Partnership, could prevent the taking of any such actions, even if they were in the interests of other stockholders.
The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial condition.
As of December 31, 2025, we had approximately $1.63 billion of debt outstanding, approximately $1.44 billion of which was fixed-rate debt and approximately $189.0 million of which was variable-rate debt outstanding under our New Credit Facility.
We currently have a general policy of limiting our borrowings to 50% of asset value, i.e., the value of our portfolio, as determined by our Board of Directors by reference to the aggregate annualized cash flow from our portfolio. However, our organizational documents contain no limitation on the amount or percentage of indebtedness that we may incur. Therefore, the Board of Directors could alter or eliminate the current limitation on borrowing at any time. If our debt capitalization policy were changed, we could increase our leverage, resulting in an increase in debt service that could adversely affect our operating cash flow and our ability to make expected distributions to stockholders, and in an increased risk of default on our obligations.
We have established our debt capitalization policy relative to asset value, which is computed by reference to the aggregate annualized cash flow from the properties in our portfolio rather than relative to book value. We have used a measure tied to cash flow because we believe that the book value of our portfolio properties, which is the depreciated historical cost of the properties, does not accurately reflect our ability to borrow. Asset value, however, is somewhat more variable than book value. Book value may not reflect the fair market value of the underlying properties.
The amount of our debt outstanding from time to time could have important consequences for our stockholders. For example, it could:
• require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, property acquisitions and other appropriate business opportunities that may arise in the future;
• limit our ability to obtain any additional financing we may need in the future for working capital, debt refinancing, capital expenditures, acquisitions, development or other general corporate purposes;
• make it difficult to satisfy our debt service requirements;
• limit our ability to make distributions on our outstanding common and preferred stock;
• require us to dedicate increased amounts of our cash flow from operations to payments on our variable rate, unhedged debt if interest rates rise; and
• limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance, our indebtedness will depend primarily on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors described in this section. If we are unable to generate sufficient cash flow from our business in the future to service our debt or meet our other cash needs, we may be required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our debt obligations and other cash needs. Our ability to refinance, sell assets or obtain additional financing may not be possible on terms that we would find acceptable.
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We are obligated to comply with financial and other covenants in our debt that could restrict our operating activities, and the failure to comply could result in defaults that accelerate the payment under our debt.
Our secured debt contains covenants, including, among others, provisions:
• relating to the maintenance of the property securing the debt;
• restricting our ability to assign or further encumber the properties securing the debt; and
• restricting our ability to enter into certain new leases or to amend or modify certain existing leases without obtaining consent of the lenders.
Our unsecured debt generally contains covenants including, among others, provisions restricting our ability to:
• incur additional unsecured debt;
• guarantee additional debt;
• make certain distributions, investments and other restricted payments, including distribution payments on our outstanding stock;
• create certain liens;
• increase our overall secured and unsecured borrowing beyond certain levels; and
• consolidate, merge or sell all or substantially all of our assets.
Our ability to meet some of the covenants in our debt, including covenants related to the condition of the property or payment of real estate taxes, may be dependent on the performance by our tenants under their leases.
In addition, our New Credit Facility requires us to satisfy financial covenants. The material financial covenants require us, on a consolidated basis, to:
• 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 December 31, 2025, we were in compliance with all such covenants. If we were to breach any of our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Some of our debt arrangements are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a covenant under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.
The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.
As with other publicly traded securities, the market price of our debt and equity securities depends on various factors, which may change from time to time and/or may be unrelated to our financial condition, operating performance or prospects that may cause significant fluctuations or volatility in such prices. These factors include, among others:
• general economic and financial market conditions;
• level and trend of interest rates;
• our ability to access the capital markets to raise additional capital;
• the issuance of additional equity or debt securities;
• changes in our funds from operations (“FFO”) or earnings estimates;
• changes in our credit or analyst ratings;
• our financial condition and performance;
• market perception of our business compared to other REITs; and
• market perception of REITs, in general, compared to other investment alternatives.
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Our ability to grow will be limited if we cannot obtain additional capital.
Our growth strategy includes the redevelopment of properties we already own and the acquisition of additional properties. Because we are required to distribute to our stockholders at least 90% of our taxable income each year to continue to qualify as a real estate investment trust, or REIT, for federal income tax purposes, in addition to our undistributed operating cash flow, we rely upon the availability of debt or equity capital to fund our growth, which financing may or may not be available on favorable terms or at all. The debt could include mortgage loans from third parties or the sale of debt securities. Equity capital could include our common stock or preferred stock. Additional financing, refinancing or other capital may not be available in the amounts we desire or on favorable terms. Our access to debt or equity capital depends on a number of factors, including the general state of the capital markets, the market’s perception of the Company, our ability to pay dividends, and our current and potential future earnings. Depending on the outcome of these factors, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement our strategy.
Risk Factors Related to our REIT Status and Other Laws and Regulations
Environmental laws and regulations could reduce the value or profitability of our properties.
All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to hazardous materials, environmental protection and human health and safety. Under various federal, state and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or toxic substances released on or in properties we own or operate, and we and our tenants also may be required to pay other costs relating to hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the release of these types of substances or were responsible for their release. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. We are not currently aware of any environmental condition with respect to any of our properties that management believes would have a material adverse effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior to our acquisition of the property and the building materials used at the property are among the property-specific factors that will affect how environmental laws are applied to our properties. If we are subject to any material environmental liabilities, such liabilities could adversely affect our results of operations and financial condition.
We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental problems. Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect their potential profitability. Generally, our tenants are required to comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a tenant fails to or cannot comply, we could be forced to pay these costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent payments.
The Americans with Disabilities Act of 1990 (the “ADA”) or similar current or future legislation could require us to take remedial steps with respect to our properties.
All of our properties, as commercial facilities, are required to comply with Title III of the ADA. Compliance with the ADA requirements could require removal of access barriers, and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. Investigation of a property may reveal non-compliance with the ADA. The requirements of the ADA, or of other federal, state or local laws, also may change in the future and restrict further renovations of our properties to ensure access for disabled persons. Future compliance with the ADA may require expensive changes to the properties.
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The revenue generated by our tenants could be negatively affected by various federal, state and local laws to which they are subject.
We and our tenants are subject to a wide range of federal, state and local laws and regulations, such as local licensing requirements, consumer protection laws and state and local fire, life-safety and similar requirements that affect the use of the properties. Our leases typically require that each tenant comply with all applicable laws and regulations. Failure to comply could result in fines by governmental authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on such properties. Such non-compliance could reduce our rental revenue, require us to pay penalties or fines, and adversely affect our ability to sell or lease a property.
We could be subject to legal or regulatory proceedings that may adversely affect our financial condition and results of operations.
As an owner and operator of commercial properties, we are party to legal and regulatory proceedings from time to time that arise in the ordinary course of business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such litigation or proceedings. An unfavorable outcome could result in a material adverse effect on our financial condition and results of operations.
Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation, which would substantially reduce funds available for payment of distributions.
We believe that we are organized and qualified as a REIT, and currently intend to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes under the Code. However, the IRS could successfully assert that we are not qualified as such. In addition, we may not remain qualified as a REIT in the future. Qualification as a REIT involves the application of highly technical and complex Code provisions. The complexity of these provisions and of the applicable income tax regulations that have been issued under the Code by the United States Department of Treasury is greater in the case of a REIT that holds its assets in partnership form. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying rents and other income. Satisfying this requirement could be difficult, for example, if defaults by tenants reduced the amount of income from qualifying rents. Also, we must make annual distributions to stockholders of at least 90% of our net taxable income (excluding capital gains). In addition, new legislation, new regulations, new administrative interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. If we fail to qualify as a REIT:
• we would not be allowed a deduction for dividend distributions to stockholders in computing taxable income;
• we would be subject to federal income tax at regular corporate rates;
• unless we are entitled to relief under specific statutory provisions, we may not be permitted to elect to be taxed as a REIT for four taxable years following the year during which we were disqualified;
• we could be required to pay significant income taxes, which would substantially reduce the funds available for investment and for distribution to our stockholders for each year in which we are not taxed as a REIT; and
• we would no longer be required by law to make any distributions to our stockholders.
We believe that the Operating Partnership is treated as a partnership, and not as a corporation, for federal income tax purposes. If the IRS were to challengesuccessfully the status of the Operating Partnership as a partnership for federal income tax purposes:
• the Operating Partnership would be taxed as a corporation;
• we would cease to qualify as a REIT for federal income tax purposes; and
• the amount of cash available for distribution to our stockholders would be substantially reduced.
We may be required to incur additional debt to qualify as a REIT.
As a REIT, we must make annual distributions to stockholders of at least 90% of our REIT taxable income. We are subject to income tax on amounts of undistributed REIT taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to stockholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:
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• our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
• non-deductible capital expenditures or debt service requirements may reduce available cash but not taxable income.
To preserve our qualification as a REIT in these circumstances, we might choose to borrow funds on unfavorable terms even if our management believes the market conditions make borrowing financially unattractive.
Legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the IRS, could have a material adverse effect on us and our investors.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process, and by the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury (“Treasury”). Changes to the tax laws or interpretations thereof by the IRS and the Treasury, with or without retroactive application, could have a material adverse effect on us and our investors. No prediction can be made as to the likelihood of passage of new tax legislation or other provisions, or the direct or indirect effect on us and our investors. Accordingly, such new legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify to be taxed as a REIT and/or the U.S. federal income tax consequences to us and our investors of such qualification
To maintain our status as a REIT, we limit the amount of shares any one stockholder can own.
The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code). To protect our REIT status, our articles of incorporation restrict beneficial and constructive ownership (defined by reference to various Code provisions) to no more than 2.5% in value of our issued and outstanding equity securities by any single stockholder with the exception of the Saul Organization, who are restricted to beneficial and constructive ownership of no more than 39.9% in value of our issued and outstanding equity securities.
The constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or entities. As a result, a single entity or individual could own less than 2.5% or 39.9% in value of our issued and outstanding equity securities and such ownership could potentially cause a group of related individuals and/or entities to own constructively more than 2.5% or 39.9% in value of the outstanding stock. If that happened, either the transfer of ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the respective ownership limit.
As of December 31, 2025, Mr. B. F. Saul II and members of the Saul Organization owned common stock representing approximately 37.1% in value of all our issued and outstanding equity securities. In addition, members of the Saul Organization beneficially owned Operating Partnership units that are, in general, convertible into our common stock on a one-for-one basis. Members of the Saul Organization are permitted under our articles of incorporation to convert Operating Partnership units into shares of common stock or acquire additional shares of common stock until the Saul Organization’s actual ownership of common stock reaches 39.9% in value of our equity securities.
The ownership restrictions may delay, defer or prevent a transaction or a change of our control that might involve a premium price for our equity stock or otherwise be in the stockholders’ best interest.
General Risk Factors
Financial and economic conditions may have an adverse impact on us, our tenants’ businesses and our results of operations.
Our business may be affected by market and economic challenges experienced by the U.S. economy and real estate industry as a whole, as well as by the economic conditions in the markets in which our properties are located. Current geopolitical and domestic challenges could impact the U.S. economy and overall consumer spending and willingness to visit shopping centers in person, including, but not limited to, trade restrictions (such as existing and potential tariffs and retaliatory measures from foreign countries), foreign wars, and domestic civil unrest. Additional economic challenges that can adversely affect our retail tenants and anchor retailers include high inflation and unemployment levels, labor shortages, supply chain constraints, and increases in energy prices and interest rates.
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Potential consequences of a prolongeddeterioration of economic and other market conditions include:
• the financial condition of our tenants, many of which operate in the retail industry, may be adversely affected by bankruptcy, lack of liquidity, operational failures or for other reasons, which may result in tenant defaults under their leases, including, but not limited to, defaults due to non-payment of rent to us;
• the ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from acquisition and development activities and increase our future interest expense;
• reduced values of our properties may limit our ability to dispose of assets at attractive prices and may reduce the ability to refinance loans; and
• one or more lenders under our New Credit Facility could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
Loss of our key management could adversely affect performance and the value of our common shares.
We are dependent on the efforts of our key management. Although we believe qualified replacements could be found for any departures of key executives, the loss of their services could adversely affect our performance and the value of our common stock.
The outbreak or pandemic of any highly infectious or contagious diseases or other public emergencies, could have a material adverse effect on or disrupt our business and financial condition, results of operations, cash flows and the market value and trading price of our securities.
A pandemic or public health emergency could have a material adverse effect on or disrupt our business and financial condition, results of operations and cash flows 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;
• declines in or instability of the economy or financial markets, which could adversely affect our tenants' business operations, financial condition and liquidity and may cause them to be unable to meet their obligations to us or to seek modifications of such obligations;
• an inability to access debt and equity capital on favorable terms, if at all, and a severedisruption 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 on favorable terms or at all, and may affect cash distributions to our stockholders;
• a general decline in business activity and 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 a pandemic or public health emergency could negatively affect our future compliance with financial and other covenants under our debt instruments, and the failure to comply with such covenants could result in a default that accelerates the payment of such indebtedness;
• the discontinued service or lack of availability of personnel 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 a pandemic or public health emergency 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.
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Insurance coverage on our properties may be inadequate.
We carry comprehensive insurance on all of our properties, including insurance for liability, earthquake, fire, flood, terrorism and rental loss. These policies contain coverage limitations. We believe this coverage is of the type and amount customarily obtained for or by an owner of real property assets. We intend to obtain similar insurance coverage on subsequently acquired properties.
Following significant catastrophic events and other large losses incurred by the insurance industry, the availability of insurance coverage has decreased and the prices for insurance have increased. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsuredloss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Events such as these could have a material adverse effect on our results of operations and our ability to meet our financial obligations, including distributions to our stockholders.
Natural disasters and climate change could have a material adverse effect on our cash flows and operating results.
Climate change may add to the unpredictability and frequency of natural disasters and severe weather conditions and create additional uncertainty as to future trends and exposures. Certain of our operations are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, droughts, snow storms, floods and fires. The impact of climate change or the occurrence of natural disasters can delay new development projects, increase costs to repair or replace damaged properties, increase operating costs, require additional capital expenditures to improve existing properties, including to comply with applicable climate-related laws and regulations, increase future property insurance costs, and negatively impact the tenant demand for space. If insurance is unavailable to us or is unavailable on acceptable terms, or if our insurance is not adequate to cover business interruption or losses from these events, such events could have a material adverse effect on our earnings, liquidity or capital resources.
We cannot assure you we will continue to pay dividends at historical rates.
Any and all dividends that we pay to stockholders are declared at the sole discretion of our Board of Directors and depend on our actual and projected financial condition, results of operations, cash flows, maintenance of our REIT qualification, and such other matters as the Board of Directors may deem relevant from time to time. Our ability to continue to pay dividends on our common stock at historical rates or to increase our common stock dividend rate will depend on a number of factors, including, among others, the following:
• our financial condition and results of future operations;
• our tenant’s performance under their leases;
• the terms of our loan covenants; and
• our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
Stockholders have no contractual or other legal right to dividends, other than those that have been authorized by the Board of Directors in its sole discretion and declared by the Company. If we do not maintain or increase the dividend rate on our common stock, it could have a material adverse effect on the market price of our common stock and other securities. Payment of dividends on our common stock may be subject to the prior payment in full of the dividends on any preferred stock or depositary shares and payment of interest on any debt securities we may offer.
Certain tax and anti-takeover provisions of our articles of incorporation and bylaws may inhibit a change of our control.
Certain provisions contained in our articles of incorporation and bylaws and the Maryland General Corporation Law may discourage a third party from making a tender offer or acquisition proposal to purchase the Company. If such an offer or proposal was made, these provisions could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or prevent the stockholders from receiving a premium for their stock over then-prevailing market prices. These provisions include:
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• the REIT ownership limit described above;
• authorization of the issuance of our preferred stock with powers, preferences or rights to be determined by the Board of Directors;
• a staggered, fixed-size Board of Directors consisting of three classes of directors;
• special meetings of our stockholders may be called only by the Chairman of the Board, the president, by a majority of the directors or by stockholders possessing no less than 25% of all the votes entitled to be cast at the meeting;
• the Board of Directors, without a stockholder vote, can classify or reclassify unissued shares of preferred stock;
• a member of the Board of Directors may be removed only for cause upon the affirmative vote of 75% of the Board of Directors or 75% of the then-outstanding capital stock;
• advance notice requirements for proposals to be presented at stockholder meetings; and
• the terms of our articles of incorporation regarding business combinations and control share acquisitions.
We may amend or revise our business policies without shareholder approval.
Our Board of Directors may amend or revise our operating policies without stockholder approval. Our investment, financing and borrowing policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are determined by the Board of Directors or those committees or officers to whom the Board of Directors has delegated that authority. The Board of Directors may amend or revise these policies at any time and from time to time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the market price of our securities.
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, including anchor stores such as grocery stores. The Company has two executed leases and six leases are under negotiation for a total of eight more pad sites.
In recent years, there has been a limited amount of quality properties for sale. Management believes it will continue to be challenging to identify acquisition opportunities for investment in existing and new shopping center and mixed-use properties into the near future. 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.
Actions taken by the Federal government will likely continue to impact the office, retail and residential real estate markets in the Washington, DC/Baltimore metropolitan area over the coming years. Because the majority of the Company’s property net 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 and closure 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 94.6% at December 31, 2025, from 95.2% at December 31, 2024.
The Company maintains a ratio of total debt to total asset value of under 50%, which allows us to obtain additional secured borrowings if necessary. As of December 31, 2025, including $100.0 million of hedged variable-rate debt, total fixed-rate debt with staggered maturities from 2026 to 2041 represented approximately 88.4% of the Company’s notes payable, thus minimizing refinancing risk. The Company’s unhedged variable-rate debt consists of $189.0 million outstanding under the New Credit Facility. As of December 31, 2025, the Company has availability of approximately $96.2 million under its New Credit Facility.
Although it is management’s present intention to concentrate future acquisition and development activities on transit-oriented, residential mixed-use properties and grocery-anchored shopping centers in the Washington, DC/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.
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Critical Accounting Policies
The Company’s consolidated 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. See Note 2 to the Consolidated Financial Statements in this report. The Company has identified the following policies that, due to estimates and assumptions inherent in those 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 amount 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, to the carrying amount 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 amount is greater than the undiscounted projected cash flows, the Company would recognize an impairmentloss 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 are primarily comprised of rental and reimbursement billings due from tenants, and straight-line rent receivables representing the cumulative amount of adjustments necessary to present rental income 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, 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. 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.
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.
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Results of Operations
The following is a discussion of the components of revenue and expense for the entire Company. This section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed on February 28, 2025.
Net income for 2025 decreased to $49.2 million from $67.7 million in 2024. The $18.5 million decline in net income primarily resulted from the adverse impact of the initial operations of Twinbrook Quarter Phase I of $14.3 million and Hampden House of $5.1 million. Significant changes in revenue and expenses are discussed below.
Revenue
Year ended December 31,
Percentage Change
(Dollars in thousands)
2025 from
2024 from
Base rent
Expense recoveries
Percentage rent
Other property revenue
Credit losses on operating lease receivables, net
Rental revenue
Other revenue
Total revenue
Total revenue increased 7.8% in 2025 compared to 2024 as described below.
Base rent: Base rent includes $9.5 million and $(7.8) million for 2025 and 2024, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes $0.6 million and $0.8 million for 2025 and 2024, respectively, to recognize income from the accretion of discounts related to in-place leases acquired in connection with purchased real estate investment properties. The $20.8 million increase in base rent in 2025 compared to 2024 was primarily attributable to (a) higher residential and commercial base rent related to Twinbrook Quarter Phase I of $11.0 million, (b) higher commercial base rent, exclusive of Twinbrook Quarter Phase I and Hampden House, of $7.7 million, (c) higher residential base rent, exclusive of Twinbrook Quarter Phase I and Hampden House, of $1.4 million and (d) higher residential and commercial base rent of Hampden House of $0.7 million.
Expense recoveries: The $3.5 million increase in expense recoveries in 2025 compared to 2024 is primarily attributable to an increase in recoverable property operating expenses.
Credit losses on operating lease receivables, net: Credit losses on operating lease receivables, net was a loss of $1.7 million during 2025. The loss is primarily due to higher reserves on lease receivables in 2025.
Other Revenue: The $2.2 million decrease in other revenue was primarily due to (a) lower lease termination fees of $2.6 million partially offset by (b) higher parking revenue of $0.4 million.
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Expenses
Year ended December 31,
Percentage Change
(Dollars in thousands)
2025 from
2024 from
Property operating expenses
Real estate taxes
Interest expense, net and amortization of deferred debt costs
Depreciation and amortization of deferred leasing costs
General and administrative
Total expenses
Total expenses increased 19.6% in 2025 compared to 2024, primarily due to the initial operations of Twinbrook Quarter Phase I and Hampden House.
Property operating expenses: Property operating expenses increased $10.3 million in 2025 compared to 2024 primarily due to (a) the initial operations of Twinbrook Quarter Phase I of $4.3 million, (b) higher repairs and maintenance expenses, exclusive of Twinbrook Quarter Phase I and Hampden House, of $3.6 million, of which $2.2 million relates to snow removal costs, (c) higher utility expenses, exclusive of Twinbrook Quarter Phase I and Hampden House, of $1.0 million, (d) the initial operations of Hampden House of $0.9 million and (e) higher insurance costs, exclusive of Twinbrook Quarter Phase I and Hampden House of $0.3 million.
Real estate taxes: Real estate taxes increased $2.1 million in 2025 compared to 2024, primarily due to (a) the initial operations of Twinbrook Quarter Phase I of $1.1 million and Hampden House of $0.6 million and (b) higher tax assessments across the portfolio, exclusive of Twinbrook Quarter Phase I and Hampden House.
Interest expense, net and amortization of deferred debt costs: Interest expense, net and amortization of deferred debt costs increased 31.4% in 2025 compared to 2024 primarily due to (a) the initial operations of Twinbrook Quarter Phase I of $14.8 million and Hampden House of $2.8 million, (b) $2.1 million of higher interest incurred as a result of higher average outstanding debt and (c) higher amortization of deferred debt costs of $0.6 million partially offset by (d) $2.8 million of lower interest incurred as a result of lower average interest rates and (e) higher capitalized interest, exclusive of Twinbrook Quarter Phase I and Hampden House, prior to Hampden House opening on October 1, 2025, of $0.6 million.
Depreciation and amortization of deferred leasing costs: Depreciation and amortization of deferred leasing costs increased $8.3 million in 2025 compared to 2024 primarily due to Twinbrook Quarter Phase I of $6.7 million and Hampden House of $1.6 million as a result of being placed into service in 2024 and 2025, respectively.
General and administrative: General and administrative costs increased $1.9 million in 2025 compared to 2024 primarily due to higher employment costs of $1.9 million.
Same property revenue and same property net operating income
Same property revenue and same property net operating income are non-GAAP financial measures of performance intended to enhance period-to-period comparability by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods.
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We define same property revenue as total revenue less straight-line base rent and above/below market lease amortization of leases acquired in connection with purchased real estate investment properties minus the revenue of properties not in operation for the entirety of the comparable reporting periods, and we define same property net operating income as net income plus (a) interest expense, net and amortization of deferred debt costs, (b) depreciation and amortization of deferred leasing costs, (c) general and administrative expenses, (d) change in fair value of derivatives, and (e) loss on the early extinguishment of debt minus (f) gains on sale of property, (g) straight-line base rent and above/below market lease amortization of leases acquired in connection with purchased real estate investment properties and (h) the operating income of properties that 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 net operating income. Accordingly, our same property revenue and same property net operating income may not be comparable to those of other REITs.
Same property revenue and same property net 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 revenue and operating income is useful because the resulting measures capture the actual revenue generated and actual expenses incurred by operating our properties.
Same property revenue and same property net operating income are measures of the operating performance of our properties but do not measure our performance as a whole. Such measures are therefore not substitutes for total revenue, net income or operating income as computed in accordance with GAAP.
The tables below provide reconciliations of property revenue and property net operating income under GAAP to same property revenue and same property net operating income for the indicated periods. Two properties, Twinbrook Quarter Phase I and Hampden House, were excluded from same property results.
Same property revenue
Year ended December 31,
(In thousands)
Total revenue
Revenue adjustments (1)
Acquisitions, dispositions and development properties
Total same property revenue
Shopping Centers
Mixed-Use properties
Total same property revenue
Total Shopping Center revenue
Shopping Center acquisitions, dispositions and development properties
Total same Shopping Center revenue
Total Mixed-Use property revenue
Mixed-Use acquisitions, dispositions and development properties
Total same Mixed-Use revenue
(1) Revenue adjustments are straight-line base rent and above/below market lease amortization.
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The $1.7 million increase in same property revenue in 2025 compared to 2024 was primarily due to (a) higher property operating expense recoveries of $3.1 million, (b) higher residential base rent of $1.3 million and (c) higher commercial base rent of $1.3 million partially offset by (d) lower lease terminations fees of $2.6 million (e) higher credit losses on lease operating receivables, net, of $0.8 million and (f) lower other property revenue primarily attributable to insurance proceeds in the 2024 relating to lost rents because of a tenant that temporarily closed its operations of $0.5 million.
Mixed-Use same property revenue is composed of the following:
(1) Includes Avenel Business Park, Clarendon Center – North and South Blocks, 601 Pennsylvania Avenue and Washington Square
(2) Includes Clarendon South Block, The Waycroft and Park Van Ness
(3) Includes The Waycroft and Park Van Ness
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Same property net operating income
Year Ended December 31,
(In thousands)
Net income
Interest expense, net and amortization of deferred debt costs
Depreciation and amortization of deferred leasing costs
General and administrative
Gains on dispositions of properties
Revenue adjustments (1)
Total property net operating income
Acquisition, dispositions and development properties
Total same property net operating income
Shopping Centers
Mixed-Use properties
Total same property net operating income
Shopping Center property net operating income
Shopping Center acquisitions, dispositions and development properties
Total Shopping Center same property net operating income
Mixed-Use property net operating income
Mixed-Use acquisitions, dispositions and development properties
Total Mixed-Use same property net operating income
(1) Revenue adjustments are straight-line base rent and above/below market lease amortization.
During 2025, Shopping Center same property net operating income decreased $2.6 million, or 1.8%, and Mixed-Use same property net operating income decreased $1.3 million, or 2.6%. Shopping Center same property net operating income decreased primarily due to (a) lower lease termination fees of $2.7 million, (b) lower property operating expense recoveries, net of expenses, of $1.3 million, (c) higher credit losses on operating lease receivables, net, of $0.8 million and (d) lower other property revenue primarily attributable to insurance proceeds in the 2024 relating to lost rents because of a tenant that temporarily closed its operations of $0.6 million partially offset by (e) higher base rent of $2.8 million. Mixed-Use same property net operating income decreased primarily due to (a) lower commercial base rent of $1.5 million and (b) lower property operating expense recoveries, net of $1.2 million partially offset by (c) higher residential base rent of $1.3 million.
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Mixed-Use same property net operating income is composed of the following:
Total Mixed-Use same property net operating income
(1) Includes Avenel Business Park, Clarendon Center – North and South Blocks, 601 Pennsylvania Avenue and Washington Square
(2) Includes Clarendon South Block, The Waycroft and Park Van Ness
(3) Includes The Waycroft and Park Van Ness
Impact of Inflation
The impact of rising operating expenses due to inflation on the operating performance of the Company’s portfolio is partially mitigated by terms in substantially all of the Company’s retail and office leases, which contain provisions designed to increase revenues to offset the adverse impact of inflation on the Company’s results of operations. These provisions include upward periodic adjustments in base rent due from tenants, usually based on a stipulated increase, and, to a lesser extent, on the change in the consumer price index, commonly referred to as the CPI.
In addition, many of the Company’s properties are leased to retail and office tenants under long-term leases, which provide for reimbursement of operating expenses by tenants. These leases tend to reduce the Company’s exposure to rising property expenses due to inflation. Inflation and increased costs may have an adverse impact on the Company’s retail and office tenants if increases in their operating expenses exceed increases in their revenue. In a highly inflationary environment, we may not be able to raise apartment rental rates at or above the rate of inflation, which could reduce our profit margins.
Liquidity and Capital Resources
Cash and cash equivalents were $8.7 million and $10.3 million at December 31, 2025 and 2024, respectively. The changes in cash and cash equivalents during the years ended December 31, 2025 and 2024 were attributable to operating, investing and financing activities, as described below.
Year Ended December 31,
(In thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
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 outstanding debt.
Investing Activities
Net cash used in investing activities includes property acquisitions, developments, redevelopments, tenant improvements and other property capital expenditures. The $92.9 million decrease in cash used in investing activities is primarily due to (a) decreased development expenditures of $98.9 million partially offset by (b) increased additions to real estate investments throughout the portfolio of $5.9 million.
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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. 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.
The Company is developing Twinbrook Quarter Phase I located in Rockville, Maryland. It includes 452 apartment units, an 81,000 square foot Wegmans supermarket, approximately 25,000 square feet of small shop space, and a 230,000 square foot office building. The office tower portion is not being constructed at this time. In connection with the development of the residential and retail portions of Twinbrook Quarter Phase I, we also invested in infrastructure and other items that will support both Twinbrook Quarter Phase I and other portions of the development of Twinbrook Quarter. Excluding imputed capitalized interest, the remaining investment to complete Twinbrook Quarter Phase I is not expected to exceed $9.9 million. A portion of the cost of the project is being financed by a $145.0 million construction-to-permanent loan. As of December 31, 2025, the outstanding balance of the loan was $139.3 million, net of unamortized deferred debt costs. The Milton at Twinbrook Quarter opened and residential tenants began moving in on October 1, 2024. As of February 23, 2026, 440 of the 452 (97.3%) residential units were leased and occupied. Of the approximately 106,000 square feet of ground floor retail, the base building is complete and 101,400 square feet (95.7%) has been leased. The Wegmans supermarket at Twinbrook Quarter opened for business on June 25, 2025. As of February 23, 2026, including the Wegmans supermarket, approximately 88,500 square feet of the retail space is open and the remaining leased retail space is expected to open at various times during 2026 as tenants complete their buildouts. The development potential of all phases of the entire 18.4 acre Twinbrook Quarter site totals 1,865 residential units, 473,000 square feet of retail space, and 431,000 square feet of office space.
The Company is also developing Hampden House, located in downtown Bethesda, Maryland, which includes 366 apartment units and 10,100 square feet of retail space. Excluding imputed capitalized interest, the remaining investment to complete the project is not expected to exceed $6.8 million. A portion of the cost of the project is being financed by a $133.0 million construction-to-permanent loan. As of December 31, 2025, the outstanding balance of the loan was $115.4 million, net of unamortized deferred debt costs. Hampden House opened and residential tenants began moving in on October 1, 2025. As of February 23, 2026, 130 of the 366 (35.5%) residential units are leased and occupied. Of the approximately 10,100 square feet of ground floor retail, 8,600 square feet (85.1%) has been leased and tenant build-outs are in progress.
During 2025, the Company entered into a lease with Publix for a new grocery store, which we will construct, at Ashland Square in Prince William County, Virginia. The Ashland Square property currently includes three pad sites with operating tenants. We have executed leases at Ashland Square for two additional pad sites. When complete, Ashland Square is expected to ultimately comprise approximately 124,000 square feet of retail space, including the 50,325 square foot Publix, the three existing pad sites, four additional pad sites and approximately 30,000 square feet of small shop space.
Long-term liquidity requirements consist primarily of obligations under our long-term debt and dividends paid to our preferred shareholders. The Company anticipates that long-term liquidity requirements will also include amounts required for property acquisitions and developments.
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The Company may also 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, 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 and Share Purchase 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.
Contractual Payment Obligations
As of December 31, 2025, the Company had unfunded contractual payment obligations totaling approximately $239.7 million, excluding operating obligations, due within the next 12 months. The table below shows the total contractual payment obligations as of December 31, 2025.
Payments Due By Period
(In thousands)
One Year or
Less
More Than One Year
Total
Notes Payable:
Interest
Scheduled Principal
Balloon Payments (1)
Subtotal
Corporate Headquarters Lease (2)
Development and Predevelopment Obligations
Tenant Improvements
Total Contractual Obligations
(1) Includes $289.0 million outstanding under the New Credit Facility. See Note 5 to the Consolidated Financial Statements.
(2) See Note 7 to Consolidated Financial Statements. Corporate Headquarters Lease amounts represent an allocation to the Company based upon employees’ time dedicated to the Company’s business as specified in the Shared Services Agreement. Future amounts are subject to change as the number of employees employed by each of the parties to the lease fluctuates.
Dividend Reinvestments
In December 1995, the Company established a Dividend Reinvestment and Stock Purchase Plan (the “Plan”) to allow 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 Plan 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 Plan are paid by the Company. The Company issued 95,370 and 57,689 shares under the Plan at a weighted average discounted price of $30.77 and $37.50 per share during the years ended December 31, 2025 and 2024, respectively. The Company issued 603,868 and 431,495 limited partnership units under the Plan at a weighted average price of $30.95 and $38.20 per unit during the years ended December 31, 2025 and 2024, respectively. The Company also credited 9,174 and 7,539 shares to directors pursuant to the reinvestment of dividends specified by the Directors’ Deferred Compensation Plan at a weighted average discounted price of $31.49 and $37.50 per share, during the years ended December 31, 2025 and 2024, respectively.
Capital Strategy and Financing Activity
As a general policy, the Company intends to maintain a ratio of its total debt to total estimated 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 estimated asset value was below 50% as of December 31, 2025.
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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 policy in light of current economic conditions, relative costs of capital, market values of the Company 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 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.
On July 30, 2025, the Company refinanced its existing $525.0 million (the “Existing Credit Facility”) comprised of a $425.0 million revolving credit facility (the “Existing Revolving Credit Facility”) and a $100.0 million term loan (the “Existing Term Loan”). The Company’s new $600.0 million credit facility (the "New Credit Facility") is comprised of a $460.0 million revolving credit facility (the "New Revolving Credit Facility") and a $140.0 million term loan (the "New Term Loan"). Except as set forth in the summary below, the terms of the New Credit Facility are substantially the same as the terms of the Existing Credit Facility.
(Dollars in thousands)
New Credit Facility
Existing Credit Facility
New Term Loan
New Revolving Credit Facility
Total
Existing Term Loan
Existing Revolving Credit Facility
Total
Facility Size
Maturity
July 28, 2028
July 30, 2029
February 26, 2027
August 29, 2025
Extension
Two for one year each
One for one year
None
One for one year
Interest Rate
SOFR
SOFR
SOFR+0.10%
SOFR+0.10%
Spread
Issue Letters of Credit
Yes
Yes
Guarantee
Saul Centers and certain subsidiaries of the Operating Partnership
Saul Centers and certain subsidiaries of the Operating Partnership
On December 15, 2025, the Company closed on a 14-year, non-recourse, $15.0 million mortgage secured by Ravenwood. The loan matures in 2040, bears interest at a fixed-rate of 5.58%, requires monthly principal and interest payments of $92,800 based on a 25-year amortization schedule and requires a final payment of $9.2 million at maturity. Proceeds were used to repay the remaining balance of approximately $10.0 million on the existing mortgage and reduce the outstanding balance of the New Credit Facility.
On December 17, 2025, the Company closed on a 15-year, non-recourse, $46.0 million mortgage secured by Lansdowne Town Center. The loan matures in 2041, bears interest at a fixed-rate of 5.74%, requires monthly principal and interest payments of $289,100 based on a 25-year amortization schedule and requires a final payment of $26.6 million at maturity. Proceeds were used to reduce the outstanding balance of the New Credit Facility.
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The Company's 2025 financing activity is described within Note 5 to the Consolidated Financial Statements. The following is a summary of notes payable as of December 31, 2025 and 2024.
December 31,
(Dollars in thousands)
Interest Rate *
Scheduled Maturity *
Ravenwood
Jan-26
Clarendon Center
Apr-26
Severna Park Marketplace
Oct-26
Kentlands Square II
Nov-26
Cranberry Square
Dec-26
Hampshire-Langley
Apr-28
Fixed rate portion of New Credit Facility
Jul-28
Seabreeze Plaza
Sep-28
Great Falls Center
Sep-29
Shops at Fairfax / Boulevard
Mar-30
Northrock
Apr-30
Burtonsville Town Square
Feb-32
Park Van Ness
Sep-32
Washington Square
Dec-32
BJ's Wholesale Club
Mar-33
Broadlands Village
Nov-33
The Glen
Jan-34
Olde Forte Village
Feb-34
Olney
Apr-34
Shops at Monocacy
Dec-34
Ashbrook Marketplace
Aug-35
Kentlands
Aug-35
The Waycroft
Sep-35
Village Center
Aug-37
Beacon Center / Seven Corners
Oct-37
Avenel Business Park / Leesburg Pike Plaza / White Oak
Oct-37
Thruway
Oct-39
Ravenwood
Jan-40
Ashburn Village
Jan-40
Hampden House
Mar-40
Lansdowne
Jan-41
Twinbrook Quarter Phase I
Dec-41
Total fixed rate
years
Variable rate loans:
Variable-rate portion of New Term Loan **
SOFR + 1.35%
Jul-28
Variable-rate portion of New Revolving Credit Facility**
SOFR + 1.40%
Jul-29
Total variable rate**
years
Total notes payable
years
* Totals computed using weighted averages.
** At December 31, 2025, the interest rate incurred on our variable rate debt is based on the 1-month Term Secured Overnight Financing Rate (“SOFR”) plus a spread.
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Funds From Operations
We use certain non-GAAP measures, in addition to certain performance metrics calculated under GAAP, because we believe these measures improve the understanding of our operating results. We believe these non-GAAP measures provide useful information to our Board, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, as well as for determining management incentive compensation and budgeting, forecasting and planning purposes. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP measures.
Funds From Operations (“FFO”) 1 available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) for 2025 totaled $96.7 million, a 9.5% decrease from 2024 FFO available to common stockholders and noncontrolling interests of $106.8 million. FFO available to common stockholders and noncontrolling interests was adversely impacted by $11.2 million, or $0.32 per basic and diluted share, due to the initial operations of Twinbrook Quarter Phase I and Hampden House. Exclusive of Twinbrook Quarter Phase I and Hampden House, FFO available to common stockholders and noncontrolling interest increased by $1.2 million primarily due to (a) higher commercial base rent of $7.7 million and (b) higher residential rent of $1.4 million partially offset by (c) lower lease termination fees of $2.6 million, (d) lower property operating expense recoveries, net of expenses of $2.5 million, (e) higher general and administrative expenses of $1.5 million, (f) higher credit losses on operating lease receivables, net, of $0.8 million and (g) lower other property revenue of $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:
Year ended December 31,
(In thousands, except per share amounts)
Net income
Subtract:
Gains on dispositions of properties
Add:
Real estate depreciation and amortization
FFO
Subtract:
Preferred stock dividends
FFO available to common stockholders and noncontrolling interests
Weighted average shares and units:
Basic
Diluted (2)
Basic FFO per share available to common stockholders and noncontrolling interests
Diluted FFO per share available to common stockholders and noncontrolling interests.
(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 depreciable real estate assets and gains or losses from property 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 we believe occurs with our 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 held in escrow related to the contribution of Twinbrook Quarter by 1592 Rockville Pike. Half of the units held in escrow were released on October 18, 2021. The remaining units held in escrow were released on October 18, 2023.
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Acquisitions and Redevelopments
Management anticipates that during the coming year, 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 New Credit Facility, construction financing, proceeds from the operation of the Company’s dividend reinvestment plan or other external capital resources available to the Company.
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.
Restricted Stock Compensation
On May 17, 2024, following shareholder approval, the Company established the Saul Centers, Inc. 2024 Stock Incentive Plan (the “Incentive Plan”), under which various equity incentives may be granted. On May 9, 2025, the Company granted 59,500 shares of restricted stock to officers, that will vest on an annual basis over five years, 16,000 shares of restricted stock to non-employee directors, which will vest on an annual basis over three years, and 59,500 performance-based shares of restricted stock to officers, which will vest on the fifth anniversary of the grant date.
For accounting purposes, performance-based awards of restricted stock are not treated as granted until the Board establishes the target for those awards.
The Company uses the fair value method to value and account for restricted stock awards. The fair value of granted restricted stock is determined at the time of the grant using a discounted cash flow analysis, and the following assumptions: (1) 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; (2) the closing price of the Company’s common stock on the date of the grant; (3) estimated forfeitures; and (4) a present value discount rate equal to the Expected Dividend Yield.
For the year ended December 31, 2025, restricted stock compensation expense totaled $1.3 million, which was included in general and administrative expense in the Consolidated Statement of Operations. As of December 31, 2025, the estimated future expense related to unvested restricted stock awards that are granted for accounting purposes was approximately $5.5 million.
As of December 31, 2025, (a) no expense has been recognized and (b) no estimate of future expense has been made for the 59,100 performance-based restricted stock awarded to officers where the accounting grant date has not occurred. If those awards had been granted for accounting purposes as of December 31, 2025, the additional estimated future expense would have been approximately $1.7 million, calculated using the fair value method and based on the closing share price of $31.53 on December 31, 2025, the final trading day of 2025.
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Portfolio Leasing Status
Commercial Properties
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 apartments within The Waycroft, Clarendon Center, Park Van Ness, The Milton at Twinbrook Quarter and Hampden House properties). For purposes of this table, annualized effective rent is annualized base rent minus amortized tenant improvements and amortized leasing commissions.
Average Annualized Commercial Rents per Square Foot
Year ended December 31,
Base rent
Effective rent
The following chart sets forth certain information regarding commercial leases at our properties for the periods indicated. This section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed on February 28, 2025.
Total Properties
Total Square Footage
Percentage Leased
As of December 31,
Shopping
Centers
Mixed-Use
Shopping
Centers
Mixed-Use
Shopping
Centers
Mixed-Use
The overall commercial portfolio leased percentage, on a comparative same property basis, decreased to 94.6% at December 31, 2025 from 95.2% at December 31, 2024. Included in the 94.6% of space leased as of December 31, 2025, is approximately 197,718 square feet of space, representing 2.2% of total commercial square footage, that has not been occupied by the tenant. Collectively, these leases are expected to produce approximately $5.0 million of additional annualized base rent, an average of $25.50 per square foot, upon tenant occupancy and following any contractual rent concessions.
The Mixed-Use commercial leased percentage is composed of commercial leases at office mixed-use properties and residential mixed-use properties. On a comparable same property basis, excluding Hampden House, the Mixed-Use portfolio includes 174,819 square feet of leasable retail space and 1,067,990 square feet of leasable office space at December 31, 2025. On a comparative same property basis the leased percentage at office mixed-use properties increased to 87.3% at December 31, 2025 from 86.9% at December 31, 2024 and the retail leased percentage at residential mixed-use properties increased to 97.1% from 93.9% at December 31, 2025 and 2024.
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The following table shows selected data for leases executed in the indicated periods, excluding first generation and/or development leases. 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.
Commercial Property Leasing Activity
Average Base Rent per Square Foot
Year ended
December 31,
Square Feet
Number
of Leases
New/Renewed
Leases
Expiring
Leases
Shopping Centers
Mixed-Use
Shopping Centers
Mixed-Use
Shopping Centers
Mixed-Use
Shopping Centers
Mixed-Use
Additional information about commercial leasing activity during the three months ended December 31, 2025, 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 as a result of acquisition or development.
Commercial Property Leasing Activity
New
Leases
First Generation/Development Leases
Renewed
Leases
Number of leases
Square feet
Per square foot average annualized:
Base rent
Tenant improvements
Leasing costs
Rent concessions
Effective rents
As of December 31, 2025, 736,846 square feet of Commercial space was subject to leases scheduled to expire in 2026. Below is information about existing and estimated market base rents per square foot for that space.
Expiring Commercial Property Leases:
Total
Square feet
Average base rent per square foot
Estimated market base rent per square foot
Table of Contents
Residential Properties
On a same property basis, excluding the apartments at Hampden House, the Residential portfolio was 97.7% leased at December 31, 2025, compared to 82.8% at December 31, 2024.
The following table shows the number of new or renewed leases, exclusive of first generation leases, as December 31, 2025.
