10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For The Quarterly Period Ended June 30, 2014

Commission File Number 1-12254

SAUL CENTERS, INC.

(Exact name of registrant as specified in its charter)

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

7501 Wisconsin Avenue, Bethesda, Maryland 20814

(Address of principal executive office) (Zip Code)

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES   x    NO   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES  o    NO  x

Number of shares of common stock, par value $0.01 per share outstanding as of July 31, 2014: 20.8 million.

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SAUL CENTERS, INC.

Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
(a) Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	4
(b) Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013	5
(c) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013	6
(d) Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2014	7
(e) Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013	8
(f) Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(a) Critical Accounting Policies	29
(b) Results of Operations:
Same Property Revenue	31
Same Property Operating Income	32
Three months ended June 30, 2014 compared to three months ended June 30, 2013	32
Six months ended June 30, 2014 compared to six months ended June 30, 2013	33
(c) Liquidity and Capital Resources	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3. Defaults Upon Senior Securities	43
Item 4. Mine Safety Disclosures	43
Item 5. Other Information	43
Item 6. Exhibits	44
Signatures	47

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PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for the fair presentation of the financial position and results of operations of Saul Centers, Inc. for the interim periods have been included. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of Saul Centers, Inc. for the year ended December 31, 2013, which are included in its Annual Report on Form 10-K. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.

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Saul Centers, Inc.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)	June 30, 2014			December 31, 2013
	(Unaudited)
Assets
Real estate investments
Land	$	373,898		$	354,967
Buildings and equipment	1,102,390			1,094,605
Construction in progress	16,259			9,867
	1,492,547			1,459,439
Accumulated depreciation	(380,608		)	(364,663		)
	1,111,939			1,094,776
Cash and cash equivalents	21,829			17,297
Accounts receivable and accrued income, net	44,114			43,884
Deferred leasing costs, net	26,693			26,052
Prepaid expenses, net	1,634			4,047
Deferred debt costs, net	10,564			9,675
Other assets	10,655			2,944
Total assets	$	1,227,428		$	1,198,675
Liabilities
Notes payable	$	820,145		$	820,068
Revolving credit facility payable	—			—
Dividends and distributions payable	14,398			13,135
Accounts payable, accrued expenses and other liabilities	24,655			20,141
Deferred income	31,575			30,205
Total liabilities	890,773			883,549
Stockholders’ equity
Preferred stock, 1,000,000 shares authorized:
Series A Cumulative Redeemable, 16,000 shares issued and outstanding	40,000			40,000
Series C Cumulative Redeemable, 56,000 shares issued and outstanding	140,000			140,000
Common stock, $0.01 par value, 40,000,000 shares authorized, 20,779,740 and 20,576,616 shares issued and outstanding, respectively	208			206
Additional paid-in capital	279,243			270,428
Accumulated deficit	(169,222		)	(172,564		)
Accumulated other comprehensive loss	(1,873		)	(1,392		)
Total Saul Centers, Inc. stockholders’ equity	288,356			276,678
Noncontrolling interest	48,299			38,448
Total stockholders’ equity	336,655			315,126
Total liabilities and stockholders’ equity	$	1,227,428		$	1,198,675

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)	Three Months Ended   June 30,						Six Months Ended   June 30,
	2014			2013			2014			2013
Revenue
Base rent	$	41,038		$	39,553		$	81,601		$	79,293
Expense recoveries	7,825			7,463			16,614			15,077
Percentage rent	453			338			905			938
Other	2,970			1,455			6,113			2,687
Total revenue	52,286			48,809			105,233			97,995
Operating expenses
Property operating expenses	6,138			6,041			13,723			11,990
Provision for credit losses	107			285			310			549
Real estate taxes	5,584			5,433			11,037			11,196
Interest expense and amortization of deferred debt costs	11,486			11,709			22,953			23,426
Depreciation and amortization of deferred leasing costs	10,309			12,472			20,489			28,824
General and administrative	4,023			3,925			8,703			7,329
Acquisition related costs	216			—			379			—
Predevelopment expenses	—			1,233			503			3,582
Total operating expenses	37,863			41,098			78,097			86,896
Operating income	14,423			7,711			27,136			11,099
Change in fair value of derivatives	(5		)	51			(7		)	61
Gain on sale of property	6,069			—			6,069			—
Net Income	20,487			7,762			33,198			11,160
Noncontrolling interest
(Income) loss attributable to noncontrolling interests	(4,433		)	(1,168		)	(6,857		)	418
Net income attributable to Saul Centers, Inc.	16,054			6,594			26,341			11,578
Preferred stock redemption	—			—			—			(5,228		)
Preferred stock dividends	(3,207		)	(3,207		)	(6,413		)	(7,571		)
Net income (loss) attributable to common stockholders	$	12,847		$	3,387		$	19,928		$	(1,221	)
Per share net income (loss) attributable to common stockholders
Basic and diluted	$	0.62		$	0.17		$	0.96		$	(0.06	)
Dividends declared per common share outstanding	$	0.40		$	0.36		$	0.80		$	0.72

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended   June 30,						Six Months Ended   June 30,
(Dollars in thousands)	2014			2013			2014			2013
Net income	$	20,487		$	7,762		$	33,198		$	11,160
Other comprehensive income
Change in unrealized loss on cash flow hedge	(420		)	1,763			(647		)	2,264
Total comprehensive income	20,067			9,525			32,551			13,424
Comprehensive income attributable to noncontrolling interests	(4,325		)	(1,617		)	(6,691		)	(159		)
Total comprehensive income attributable to Saul Centers, Inc.	15,742			7,908			25,860			13,265
Preferred stock redemption	—			—			—			(5,228		)
Preferred stock dividends	(3,207		)	(3,207		)	(6,413		)	(7,571		)
Total comprehensive income attributable to common stockholders	$	12,535		$	4,701		$	19,447		$	466

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share amounts)	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Total Saul Centers, Inc.			Noncontrolling Interest			Total
Balance, December 31, 2013	$	180,000	$	206	$	270,428	$	(172,564	)	$	(1,392	)	$	276,678		$	38,448		$	315,126
Issuance of 203,124 shares of common stock:
99,800 shares pursuant to dividend reinvestment plan	—		1		4,447		—			—			4,448			—			4,448
103,324 shares due to exercise of employee stock options and issuance of directors’ deferred stock	—		1		4,368		—			—			4,369			—			4,369
Issuance of 196,183 partnership units pursuant to dividend reinvestment plan	—		—		—		—			—			—			8,877			8,877
Net income	—		—		—		26,341			—			26,341			6,857			33,198
Change in unrealized loss on cash flow hedge	—		—		—		—			(481		)	(481		)	(166		)	(647		)
Preferred stock distributions:
Series A	—		—		—		(800		)	—			(800		)	—			(800		)
Series C	—		—		—		(2,406		)	—			(2,406		)	—			(2,406		)
Common stock distributions	—		—		—		(8,275		)	—			(8,275		)	—			(8,275		)
Distributions payable preferred stock:
Series A, $50.00 per share	—		—		—		(800		)	—			(800		)	—			(800		)
Series C, $42.97 per share	—		—		—		(2,406		)	—			(2,406		)	—			(2,406		)
Distributions payable common stock ($0.40/share) and distributions payable partnership units ($0.40/unit)	—		—		—		(8,312		)	—			(8,312		)	(5,717		)	(14,029		)
Balance, June 30, 2014	$	180,000	$	208	$	279,243	$	(169,222	)	$	(1,873	)	$	288,356		$	48,299		$	336,655

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six months ended June 30,
(Dollars in thousands)	2014			2013
Cash flows from operating activities:
Net income	$	33,198		$	11,160
Adjustments to reconcile net income to net cash provided by operating activities:
Change in fair value of derivatives	7			(61		)
Gain on sale of property	(6,069		)	—
Depreciation and amortization of deferred leasing costs	20,489			28,824
Amortization of deferred debt costs	614			625
Non cash compensation costs of stock grants and options	658			695
Provision for credit losses	310			549
(Increase) decrease in accounts receivable and accrued income	(218		)	(844		)
Additions to deferred leasing costs	(1,862		)	(1,862		)
(Increase) decrease in prepaid expenses	2,399			2,226
Increase in other assets	(7,711		)	(1,886		)
Increase in accounts payable, accrued expenses and other liabilities	4,309			(1,024		)
Decrease in deferred income	(3,379		)	(4,359		)
Net cash provided by operating activities	42,745			34,043
Cash flows from investing activities:
Acquisitions of real estate investments (1)	(8,545		)	—
Additions to real estate investments	(7,002		)	(7,322		)
Additions to development and redevelopment projects	(6,343		)	(4,054		)
Proceeds from sale of property	6,679			—
Net cash used in investing activities	(15,211		)	(11,376		)
Cash flows from financing activities:
Proceeds from notes payable (1)	—			83,600
Repayments on notes payable	(10,923		)	(47,152		)
Proceeds from revolving credit facility	11,000			123,000
Repayments on revolving credit facility	(11,000		)	(161,000		)
Additions to deferred debt costs	(1,303		)	(1,254		)
Proceeds from the issuance of:
Common stock	8,159			12,683
Partnership units	8,877			—
Series C preferred stock	—			135,221
Preferred stock redemption payments:
Series A preferred	—			(60,000		)
Series B preferred	—			(79,328		)
Preferred stock redemption costs	—			(9		)
Distributions to:
Series A preferred stockholders	(1,600		)	(3,613		)
Series B preferred stockholders	—			(3,253		)
Series C preferred stockholders	(4,812		)	(1,283		)
Common stockholders	(15,683		)	(14,489		)
Noncontrolling interest	(5,717		)	(4,978		)
Net cash used in financing activities	(23,002		)	(21,855		)
Net increase in cash and cash equivalents	4,532			812
Cash and cash equivalents, beginning of period	17,297			12,133
Cash and cash equivalents, end of period	$	21,829		$	12,945
Supplemental discussion of non-cash investing and financing activities:         (1) The 2014 acquisition of real estate and proceeds from notes payable each exclude $11,000 in connection with the sale and leaseback of the Company's Olney property.
The Notes to Financial Statements are an integral part of these statements.

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Notes to Consolidated Financial Statements (Unaudited)

1. Organization, Formation and Structure

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

Saul Centers was formed to continue and expand the shopping center business previously owned and conducted by the B. F. Saul Real Estate Investment Trust, the B. F. Saul Company and certain other affiliated entities, each of which is controlled by B. Francis Saul II and his family members (collectively, the “Saul Organization”). On August 26, 1993, members of the Saul Organization transferred to Saul Holdings Limited Partnership, a newly formed Maryland limited partnership (the “Operating Partnership”), and two newly formed subsidiary limited partnerships (the “Subsidiary Partnerships,” and, collectively with the Operating Partnership, the “Partnerships”), shopping center and mixed-use properties and the management functions related to the transferred properties. Since its formation, the Company has developed and purchased additional properties.

The following table lists the properties acquired, in development and disposed since December 31, 2012.

Name of Property	Location	Type	Year of Acquisition/ Development/Disposition
Acquisitions
1580 Rockville Pike	Rockville, MD	Shopping Center	2014
1582 Rockville Pike	Rockville, MD	Shopping Center	2014
Developments
Park Van Ness	Washington, DC	Mixed-Use	2013
Dispositions
Giant	Baltimore, MD	Shopping Center	2014

As of June 30, 2014, the Company’s properties (the “Current Portfolio Properties”) consisted of 49 operating shopping center properties (the “Shopping Centers”), six mixed-use properties which are comprised of office, retail and multi-family residential uses (the “Mixed-Use Properties”) and three (non-operating) development properties.

2. Summary of Significant Accounting Policies

Nature of Operations

The Company, which conducts all of its activities through its subsidiaries, the Operating Partnership and Subsidiary Partnerships, engages in the ownership, operation, management, leasing, acquisition, renovation, expansion, development and financing of community and neighborhood shopping centers and mixed-use properties, primarily in the Washington, DC/Baltimore metropolitan area.

Because the properties are located primarily in the Washington, DC/Baltimore metropolitan area, the Company is subject to a concentration of credit risk related to these properties. A majority of the Shopping Centers are anchored by one or more major tenants. As of June 30, 2014, 31 of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. Two tenants individually accounted for 2.5% or more of the Company’s total revenue for the six months endedJune 30, 2014. Excluding the results of the Giant Center, which was recently sold and at which Giant Food is a tenant, Giant Food, a tenant at nine Shopping Centers, and Safeway, a tenant at eight Shopping Centers, individually accounted for 4.6% and 2.5%, respectively, of the Company's total revenue for the six months endedJune 30, 2014.

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of Saul Centers and its subsidiaries, including the Operating Partnership and Subsidiary Partnerships, which are majority owned by Saul Centers. All significant intercompany balances and transactions have been eliminated in consolidation.

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Notes to Consolidated Financial Statements (Unaudited)

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for the fair presentation of the financial position and results of operations of Saul Centers, Inc. for the interim periods have been included. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of Saul Centers, Inc. for the year ended December 31, 2013, which are included in its Annual Report on Form 10-K. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable, Accrued Income and Allowance for Doubtful Accounts

Accounts receivable primarily represent amounts currently due from tenants in accordance with the terms of the respective leases. Receivables are reviewed monthly and reserves are established with a charge to current period operations when, in the opinion of management, collection of the receivable is doubtful. Accounts receivable in the accompanying financial statements are shown net of an allowance for doubtful accounts of approximately $0.4 million and $0.6 million at June 30, 2014 and December 31, 2013, respectively.

In addition to rents due currently, accounts receivable includes approximately $37.5 million and $37.2 million, at June 30, 2014 and December 31, 2013, respectively, net of allowance for doubtful accounts totaling $0.2 million and $0.5 million, respectively, representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of their respective leases.

Assets Held for Sale

The Company considers properties to be assets held for sale when all of the following criteria are met:

• management commits to a plan to sell a property;

• it is unlikely that the disposal plan will be significantly modified or discontinued;

• the property is available for immediate sale in its present condition;

• actions required to complete the sale of the property have been initiated;

• sale of the property is probable and the Company expects the completed sale will occur within one year; and

• the property is actively being marketed for sale at a price that is reasonable given its current market value.

The Company must make a determination as to the point in time that it is probable that a sale will be consummated, which generally occurs when an executed sales contract has no contingencies and the prospective buyer has significant funds at risk to ensure performance. Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases depreciation. As of June 30, 2014, no properties were classified as held for sale.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments. Short-term investments include money market accounts and other investments which generally mature within three months, measured from the acquisition date, and/or are readily convertible to cash.

Construction In Progress

Construction in progress includes land, preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as

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Notes to Consolidated Financial Statements (Unaudited)

architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance. Construction in progress as of June 30, 2014 and December 31, 2013, is composed of the following:

(in thousands)	June 30, 2014		December 31, 2013
Park Van Ness	$	13,845	$	7,901
Other	2,414		1,966
Total	$	16,259	$	9,867

Deferred Debt Costs

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the revolving line of credit. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaled $10.6 million and $9.7 million, net of accumulated amortization of $5.2 million and $4.5 million, at June 30, 2014 and December 31, 2013, respectively.

Deferred Income

Deferred income consists of payments received from tenants prior to the time they are earned and recognized by the Company as revenue, including tenant prepayment of rent for future periods, real estate taxes when the taxing jurisdiction has a fiscal year differing from the calendar year, reimbursements specified in the lease agreement and tenant construction work provided by the Company. In addition, deferred income includes the fair value of certain below market leases.

Deferred Leasing Costs

Deferred leasing costs consist of commissions paid to third-party leasing agents, internal direct costs such as employee compensation and payroll-related fringe benefits directly related to time spent performing leasing-related activities for successful commercial leases and amounts attributed to in-place leases associated with acquired properties. Leasing related activities include evaluating the prospective tenant’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating lease terms, preparing lease documents and closing the transaction. Unamortized deferred costs are charged to expense if the applicable lease is terminated prior to expiration of the initial lease term. Deferred leasing costs are amortized over the term of the lease or remaining term of acquired leases. Collectively, deferred leasing costs totaled $26.7 million and $26.1 million, net of accumulated amortization of $19.1 million and $16.6 million, as of June 30, 2014 and December 31, 2013, respectively. Amortization expense, included in depreciation and amortization of deferred leasing costs in the consolidated statements of operations, totaled $2.6 million and $3.2 million for the six months endedJune 30, 2014 and 2013, respectively.

Derivative Financial Instruments

The Company may, when appropriate, employ derivative instruments, such as interest-rate swaps, to mitigate the risk of interest rate fluctuations. The Company does not enter into derivative or other financial instruments for trading or speculative purposes. Derivative financial instruments are carried at fair value as either assets or liabilities on the consolidated balance sheets. For those derivative instruments that qualify and are designated as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge. For those derivative instruments that qualify and are designated as hedging instruments, the effective portion of the gain or loss on the hedge instruments is reported as a component of accumulated other comprehensive income (loss) and recognized in earnings within the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the change in fair value of a derivative instrument is immediately recognized in earnings. For derivative instruments that do not qualify, or that qualify and are not designated, as hedging instruments, changes in fair value are immediately recognized in earnings.

Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparties under the terms of the derivative instrument. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions as determined by management, and therefore, it believes that the likelihood of realizing losses from counterparty non-performance is remote.

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Notes to Consolidated Financial Statements (Unaudited)

Income Taxes

The Company made an election to be treated, and intends to continue operating so as to qualify, as a REIT under the Code, commencing with its taxable year ended December 31, 1993. A REIT generally will not be subject to federal income taxation, provided that distributions to its stockholders equal or exceed its REIT taxable income and it complies with certain other requirements. Therefore, no provision has been made for federal income taxes in the accompanying consolidated financial statements.

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 such matters will not have a material adverse effect on its financial position or results of operations. Upon determination that a loss is probable to occur and can be reasonably estimated, 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.

Postemployment Benefits

From time to time, the Company may enter into an arrangement with an employee at the time of the employee’s separation from service whereby the employee will receive certain payments in exchange for certain releases, covenants not to compete, or other promises. If no future services are required in order for the employee to receive the payments, the Company estimates the amount of payments to be made over the life of the arrangement and records that amount as an expense as of the date of the arrangement with a corresponding liability representing the amount to be paid in the future. During the six months endedJune 30, 2014, the Company recorded as compensation expense $1.1 million of severance payments to be made in the future pursuant to a separation agreement entered into during March 2014.

Predevelopment Expenses

Predevelopment expenses represent certain costs incurred by the Company in connection with active development and redevelopment projects and include, for example, costs related to the early termination of tenant leases and demolition of existing structures.

Real Estate Investment Properties

The Company purchases real estate investment properties from time to time and records assets acquired and liabilities assumed, including land, buildings, and intangibles related to in-place leases and customer relationships, based on their fair values. The fair value of buildings generally is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates and considers the present value of all cash flows expected to be generated by the property including an initial lease up period. From time to time the Company may purchase a property for future development purposes. The Company determines the fair value of above and below market intangibles associated with in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition taking into consideration the remaining contractual lease period, renewal periods, and the likelihood of the tenant exercising its renewal options. The fair value of below market lease intangibles is recorded as deferred income and accreted as additional revenue over the remaining contractual lease period and any renewal option periods included in the valuation analysis. The fair value of above market lease intangibles is recorded as a deferred asset and amortized as a reduction of revenue over the remaining contractual lease term. The Company determines the fair value of at-market in-place leases considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period and carrying costs associated with the lease-up period. Intangible assets associated with at-market in-place leases are amortized as additional expense over the remaining contractual lease term. To the extent customer relationship intangibles are present in an acquisition, the fair values of the intangibles are amortized over the lives of the customer relationships. The Company has never recorded a customer relationship intangible asset. Acquisition-related transaction costs are generally charged to expense as incurred and reported as acquisition related costs in the consolidated statements of operations.

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

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Notes to Consolidated Financial Statements (Unaudited)

undiscounted basis, to the carrying value of that property. The Company assesses its undiscounted projected cash flows based upon estimated capitalization rates, historic operating results and market conditions that may affect the property. If the carrying value is greater than the undiscounted projected cash flows, the Company would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its then estimated fair value. The 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. The Company did not recognize an impairment loss on any of its real estate during the six months endedJune 30, 2014 and 2013.

Interest, real estate taxes, development-related salary costs and other carrying costs are capitalized on projects under development and construction. Upon substantial completion of construction and the placement of the assets into service, rental income, real estate tax expense, property operating expenses (consisting of payroll, repairs and maintenance, utilities, insurance and other property related expenses) and depreciation are included in current operations and capitalization of interest ceases. Property operating expenses are charged to operations as incurred. Interest capitalized totaled $243,000 and $34,000 for the six months endedJune 30, 2014 and 2013, respectively. Commercial development projects are considered substantially complete and available for occupancy upon completion of tenant improvements, but no later than one year from the cessation of major construction activity. Multi-family residential development projects are considered substantially complete and available for occupancy upon receipt of the certificate of occupancy from the appropriate licensing authority. Substantially completed portions of a project are accounted for as separate projects.

Depreciation is calculated using the straight-line method and estimated useful lives of generally between 35 and 50 years for base buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements that extend the useful lives. Leasehold improvement expenditures are capitalized when certain criteria are met, including when the Company supervises construction and will own the improvements. Tenant improvements are amortized, over the shorter of the lives of the related leases or the useful life of the improvements, using the straight-line method. Depreciation expense in the consolidated statements of operations totaled $17.9 million and $25.6 million for the six months endedJune 30, 2014 and 2013, respectively. The $7.7 milliondecrease was primarily due to $8.0 million of additional depreciation expense recorded in 2013 on the building at Van Ness Square as a result of the reduction of its estimated remaining useful life to four months effective January 1, 2013. Repairs and maintenance expense totaled $6.5 million and $4.9 million for the six months endedJune 30, 2014 and 2013, respectively, and is included in property operating expenses in the Consolidated Statements of Operations. An increase of $1.7 million in snow removal costs was the primary cause of increased property operating expenses.

Revenue Recognition

Rental and interest income are accrued as earned except when doubt exists as to collectability, in which case the accrual is discontinued. Recognition of rental income commences when control of the space has been given to the tenant. When rental payments due under leases vary from a straight-line basis because of free rent periods or scheduled rent increases, income is recognized on a straight-line basis. Expense recoveries represent a portion of property operating expenses billed to tenants, including common area maintenance, real estate taxes and other recoverable costs, and are recognized in the period in which the expenses are incurred. Rental income based on a tenant’s revenue (“percentage rent”) is accrued when a tenant reports sales that exceed a breakpoint specified in the lease agreement.

Stock-based Employee Compensation, Stock Plan and Deferred Compensation Plan for Directors

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

The Company has a stock plan, which was originally approved in 2004, amended in 2008 and 2013 and which expires in 2023, for the purpose of attracting and retaining executive officers, directors and other key personnel (the “Stock Plan”). Pursuant to the Stock Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of its directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors.

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Notes to Consolidated Financial Statements (Unaudited)

A director may make an annual election to defer all or part of his or her director’s fees and has the option to have the fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If the director elects to have fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company’s common stock on the first trading day of the following quarter to determine the number of shares to be credited to the director. As of June 30, 2014, the director's deferred fee accounts comprise 227,233 shares.

The Compensation Committee has also approved an annual award of shares of the Company’s common stock as additional compensation to each director serving on the Board of Directors as of the record date for the Annual Meeting of Stockholders. The shares are awarded as of each Annual Meeting of Stockholders, and their issuance may not be deferred.

Noncontrolling Interest

Saul Centers is the sole general partner of the Operating Partnership, owning a 74.3% common interest as of June 30, 2014. Noncontrolling interest in the Operating Partnership is comprised of limited partnership units owned by the Saul Organization. Noncontrolling interest reflected on the accompanying consolidated balance sheets is increased for earnings allocated to limited partnership interests and distributions reinvested in additional units, and is decreased for limited partner distributions. Noncontrolling interest reflected on the consolidated statements of operations represents earnings allocated to limited partnership interests.

Per Share Data

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

	Three Months Ended   June 30,		Six Months Ended   June 30,
(In thousands)	2014	2013	2014	2013
Weighted average common shares outstanding-Basic	20,717	20,301	20,670	20,224
Effect of dilutive options	26	22	32	27
Weighted average common shares outstanding-Diluted	20,743	20,323	20,702	20,251
Non-dilutive options (1)	113	118	113	118

(1) The non-dilutive options were issued in 2007 and 2008.

Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property Plant and Equipment (Topic 360)” (“ASU 2014-08”). ASU 2014-08 changes the requirements for reporting discontinued operations such that disposals of components of an entity will be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations. ASU 2014-08 also requires additional disclosures about discontinued operations. ASU 2014-08 is effective for annual periods beginning after December 15, 2014, and interim periods within those years and early adoption is permitted. The Company retrospectively adopted ASU 2014-08 on April 15, 2014. The adoption of ASU 2014-08 did not have a material impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 will replace most existing revenue recognition guidance and will require an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those years and early adoption is not permitted. ASU 2014-09 must be applied retrospectively by either restating prior periods or by recognizing the cumulative effect as of the first date of application. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

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Notes to Consolidated Financial Statements (Unaudited)

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the presentation used for the six months endedJune 30, 2014.

3. Real Estate Acquired and Sold

Kentlands Pad

In August 2013, the Company purchased for $4.3 million a retail pad with a 7,100 square foot restaurant located in Gaithersburg, Maryland, which is contiguous with and an expansion of the Company's other Kentlands assets, and incurred acquisition costs of $99,000.

Hunt Club Pad

In December 2013, the Company purchased for $0.8 million, including acquisition costs, a retail pad with a 5,500 square foot vacant building located in Apopka, Florida, which is contiguous with and an expansion of the Company's other Hunt Club asset.

1580 Rockville Pike

In January 2014, the Company purchased for $8.0 million a single-tenant retail property with a 12,100 square foot CVS Pharmacy located in Rockville, Maryland, which is contiguous with and an expansion of the Company's asset at 1500 Rockville Pike, and incurred acquisition costs of $163,000. Of the total purchase price, $4.3 million was allocated to a below market lease, which is included in deferred income on the accompanying consolidated balance sheet and is being accreted to income over the remaining life of the lease, or approximately 10 years. The impact on the Company's results of operations is not material. The acquisition was recorded as follows.

(in thousands)
Land	$	9,600
Building	2,200
In-place lease	513
Below-market rents	(4,313		)
	$	8,000

1582 Rockville Pike and Olney Center

In April 2014, the Company purchased for $11.0 million a single-tenant retail property with a 40,700 square foot furniture store located at 1582 Rockville Pike in Rockville, Maryland, and concurrently sold to the seller, for $11.0 million, the 53,765 square foot Olney Center located in Olney, Maryland. 1582 Rockville Pike is contiguous with and an expansion of the Company’s assets at 1500 and 1580 Rockville Pike. In connection with the purchase, the Company incurred approximately $0.2 million of acquisition costs. The impact on the Company's results of operations is not material. The acquisition was recorded as follows.

(in thousands)
Land	$	9,742
Building	828
In-place lease	849
Below-market rents	(419		)
	$	11,000

Simultaneously with the sale of the Olney Center, the Company entered into a lease of the property with the buyer and continues to operate, lease and manage the property. The lease term is 20 years and the Company has the option to purchase the property for $14.6 million at the end of the lease term. The purchaser has the right to sell the property to the Company at any time from and after April 2016 at a price equal to $11.0 million increased by 1.5% annually beginning January 1, 2015 and continuing each January thereafter. The Company has accounted for this transaction as a secured financing.

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Notes to Consolidated Financial Statements (Unaudited)

Giant Center

In April 2014, the Company sold for $7.5 million the 70,040 square foot Giant Center located in Milford Mill, Maryland and recognized a $6.1 million gain. As of March 31, 2014, the carrying amounts of the associated assets and liabilities were $0.5 million and $0.1 million, respectively. There was no debt on the property.

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

As of June 30, 2014, the Saul Organization holds a 25.7% limited partnership interest in the Operating Partnership represented by approximately 7.2 million convertible limited partnership units. These units are convertible into shares of Saul Centers’ common stock, at the option of the unit holder, on a one-for-one basis provided that, in accordance with the Saul Centers, Inc. Articles of Incorporation, the rights may not be exercised at any time that the Saul Organization beneficially owns, directly or indirectly, in the aggregate more than 39.9% of the value of the outstanding common stock and preferred stock of Saul Centers (the “Equity Securities”). As of June 30, 2014, approximately 975,000 units were convertible into shares of Saul Centers common stock.

The impact of the Saul Organization’s approximately 25.7% limited partnership interest in the Operating Partnership is reflected as Noncontrolling Interest in the accompanying consolidated financial statements. Fully converted partnership units and diluted weighted average shares outstanding for the three months endedJune 30, 2014 and 2013, were approximately 27.9 million and 27.2 million, respectively, and for the six months endedJune 30, 2014 and 2013, were approximately 27.8 million and 27.2 million, respectively.

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

The Company’s outstanding debt totaled approximately $820.1 million at June 30, 2014, of which approximately $790.2 million was fixed-rate debt and approximately $29.9 million was variable rate debt. The carrying value of the properties collateralizing the notes payable totaled $901.0 million as of June 30, 2014.

During the three months ended June 30, 2014, the Company amended and restated its revolving credit facility. At June 30, 2014, the Company had a $275.0 million unsecured revolving credit facility, which can be used for working capital, property acquisitions, development projects or letters of credit. The revolving credit facility matures on June 23, 2018, and may be extended by the Company for one additional year subject to the Company’s satisfaction of certain conditions. Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the revolving credit facility. Letters of credit may be issued under the revolving credit facility. On June 30, 2014, based on the value of the Company’s unencumbered properties, approximately $274.4 million was available under the line, no borrowings were outstanding and approximately $628,000 was committed for letters of credit. The interest rate under the facility is variable and equals the sum of one-month LIBOR and a margin that is based on the Company’s leverage ratio, and which can range from 145 basis points to 200 basis points. As of June 30, 2014, the margin was 145 basis points.

At June 30, 2014, the Company had a $71.6 million construction-to-permanent loan, with no amount outstanding, which is secured by and will be used to partially finance the construction of Park Van Ness.

Saul Centers is a guarantor of the revolving credit facility, of which the Operating Partnership is the borrower. The Operating Partnership is the guarantor of (a) a portion of each of the Northrock bank loan (approximately $7.5 million of the $14.7 million outstanding at June 30, 2014) and the Metro Pike Center bank loan (approximately $7.8 million of the $15.2 million outstanding at June 30, 2014) and (b) the $71.6 million Park Van Ness construction-to-permanent loan, which guarantee will be reduced and eventually eliminated subject to the achievement of certain leasing and cash flow levels. The fixed-rate notes payable are all non-recourse.

The Company accounts for the sale-leaseback of the Olney Center as a secured financing and, accordingly, the $11.0 million proceeds from the sale are included in notes payable. Monthly payments of approximately $60,400, which increase by 1.5% annually, are required under the lease and interest accrues at a fixed rate of 8.0%, which is the implicit rate under the lease. The purchaser has the right to sell the property to the Company at any time from and after April 2016 at a price equal to $11.0 million increased by 1.5% annually beginning January 1, 2015 and continuing each January thereafter. The Company has an option to repurchase the property for $14.6 million when the lease expires in April 2034.

At December 31, 2013, the Company’s outstanding debt totaled approximately $820.1 million, of which $789.9 million was fixed rate debt and $30.2 million was variable rate debt. No borrowings were outstanding on the Company’s unsecured

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Notes to Consolidated Financial Statements (Unaudited)

revolving credit facility. The carrying value of the properties collateralizing the notes payable totaled $907.2 million as of December 31, 2013.

At June 30, 2014, the scheduled maturities of debt, including scheduled principal amortization, for years ending December 31, were as follows:

(In thousands)	Balloon Payments		Scheduled Principal Amortization		Total
July 1 through December 31, 2014	$	—	$	11,223	$	11,223
2015	14,885		23,208		38,093
2016	28,879		23,496		52,375
2017	—		24,679		24,679
2018	27,748		24,821		52,569
2019	60,793		23,489		84,282
Thereafter	421,169		135,755		556,924
	$	553,474	$	266,671	$	820,145

Interest expense and amortization of deferred debt costs for the three and six months ended June 30, 2014 and 2013, were as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
(In thousands)	2014			2013			2014			2013
Interest incurred	$	11,342		$	11,429		$	22,582		$	22,835
Amortization of deferred debt costs	284			314			614			625
Capitalized interest	(140		)	(34		)	(243		)	(34		)
	$	11,486		$	11,709		$	22,953		$	23,426

6. Stockholders’ Equity and Noncontrolling Interest

The consolidated statements of operations for the six months endedJune 30, 2014 and 2013, reflect noncontrolling interest of $6.9 million and ($0.4 million), respectively, representing the Saul Organization’s share of net income (loss) for each period.

In March 2013, the Company redeemed 60% of its then-outstanding 8% Series A Cumulative Redeemable Preferred Stock (the “Series A Stock”) and all of its 9% Series B Cumulative Redeemable Preferred Stock. Costs associated with the redemptions were charged against accumulated deficit.

The Company has outstanding 1.6 million depositary shares, each representing 1/100th of a share of Series A Stock. The depositary shares are redeemable, in whole or in part at the Company’s option, from time to time, at $25.00 per share. The depositary shares pay an annual dividend of $2.00 per share, equivalent to 8% of the $25.00 per share liquidation preference. The Series A preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

On February 12, 2013, the Company sold, in an underwritten public offering, 5.6 million depositary shares, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred Stock, and received net cash proceeds of approximately $135.2 million. The depositary shares may be redeemed on or after February 12, 2018 at the Company’s option, in whole or in part, at the $25.00 liquidation preference plus accrued but unpaid dividends. The depositary shares pay an annual dividend of $1.71875 per share, equivalent to 6.875% of the $25.00 liquidation preference. The first dividend was paid on April 15, 2013 and covered the period from February 12, 2013 through March 31, 2013. The Series C preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes of control or delisting events. Investors in the depositary shares

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Notes to Consolidated Financial Statements (Unaudited)

generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

7. Related Party Transactions

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

The Company participates in a multiemployer 401K plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. Company contributions, which are included in general and administrative expense or property operating expenses in the consolidated statements of operations, at the discretionary amount of up to six percent of the employee’s cash compensation, subject to certain limits, were $191,600 and $189,000 for the six months endedJune 30, 2014 and 2013, respectively. All amounts deferred by employees and the Company are fully vested.

The Company also participates in a multiemployer nonqualified deferred compensation plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. According to the plan, which can be modified or discontinued at any time, participating employees defer 2% of their compensation in excess of a specified amount. For the six months endedJune 30, 2014 and 2013, the Company contributed $71,100 and $103,000, respectively, which is three times the amount deferred by employees and is included in general and administrative expense. All amounts deferred by employees and the Company are fully vested. The cumulative unfunded liability under this plan was $1.7 million and $1.6 million, at June 30, 2014 and December 31, 2013, respectively, and is included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.

The Company has entered into a shared services agreement (the “Agreement”) with the Saul Organization that provides for the sharing of certain personnel and ancillary functions such as computer hardware, software, and support services and certain direct and indirect administrative personnel. The method for determining the cost of the shared services is provided for in the Agreement and is based upon head count, estimates of usage or estimates of time incurred, as applicable. The terms of the Agreement and the payments made thereunder are deemed reasonable by management and are reviewed annually by the Audit Committee of the Board of Directors, which consists entirely of independent directors. Billings by the Saul Organization for the Company’s share of these ancillary costs and expenses for the six months endedJune 30, 2014 and 2013, which included rental expense for the Company’s headquarters lease, totaled approximately $3.6 million and $3.2 million, respectively. The amounts are generally expensed as incurred and are primarily reported as general and administrative expenses in the consolidated financial statements. As of June 30, 2014 and December 31, 2013, accounts payable, accrued expenses and other liabilities included approximately $479,900 and $499,000, respectively, representing amounts due to the Saul Organization for the Company’s share of these ancillary costs and expenses.

The Company subleases its corporate headquarters space from a member of the Saul Organization. The lease commenced in March 2002, was extended in 2012 for five years, and provides for base rent increases of 3% per year, with payment of a pro-rata share of operating expenses over a base year amount. The Agreement requires each party to pay an allocation of total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company’s rent expense was $414,000 and $428,000 for the six months endedJune 30, 2014 and 2013, respectively, and is included in general and administrative expense.

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 fees in connection with the Company’s insurance program. Such commissions and fees amounted to $169,700 and $167,000 for the six months endedJune 30, 2014 and 2013, respectively.

Effective as of September 4, 2012, the Company entered into a consulting agreement with B. F. Saul III, a former president of the Company, whereby Mr. Saul III will provide certain consulting services to the Company as an independent contractor and will be paid at a rate of $60,000 per month. The consulting agreement includes certain noncompete, nonsolicitation and nondisclosure covenants, and has a term of up to two years, although the consulting agreement is terminable by the Company at any time. For each of the six months endedJune 30, 2014 and 2013, such consulting fees totaled $360,000.

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Notes to Consolidated Financial Statements (Unaudited)

8. Stock Option Plans

The Company has established two stock incentive plans, the 1993 plan and the 2004 plan, as amended, (together, the “Plans”). Under the Plans, options were granted at an exercise price not less than the market value of the common stock on the date of grant and expire ten years from the date of grant. Officer options vest ratably over four years following the grant and are charged to expense using the straight-line method over the vesting period. Director options vest immediately and are charged to expense as of the date of grant.

The following table summarizes the amount and activity of each grant with outstanding unexercised options, the total value and variables used in the computation and the amount expensed and included in general and administrative expense in the Consolidated Statements of Operations for the six months endedJune 30, 2014.

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Notes to Consolidated Financial Statements (Unaudited)

Stock options issued

	Directors
Grant date	5/6/2005			5/1/2006			4/27/2007			4/25/2008			4/24/2009			5/7/2010			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals
Total grant	30,000			30,000			30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Vested	30,000			30,000			30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Exercised	22,500			10,000			—			—			20,000			10,000			10,000			10,000			7,500			—			90,000
Forfeited	—			2,500			7,500			7,500			—			2,500			2,500			—			—			—			22,500
Exercisable at June 30, 2014	7,500			17,500			22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Remaining unexercised	7,500			17,500			22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Exercise price	$	33.22		$	40.35		$	54.17		$	50.15		$	32.68		$	38.76		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.198			0.206			0.225			0.237			0.344			0.369			0.358			0.348			0.333			0.173
Expected life (years)	10.0			9.0			8.0			7.0			6.0			5.0			5.0			5.0			5.0			5.0
Assumed yield	6.91		%	5.93		%	4.39		%	4.09		%	4.54		%	4.23		%	4.16		%	4.61		%	4.53		%	4.48		%
Risk-free rate	4.28		%	5.11		%	4.65		%	3.49		%	2.19		%	2.17		%	1.86		%	0.78		%	0.82		%	1.63		%
Total value at grant date	$	71,100		$	143,400		$	285,300		$	254,700		$	222,950		$	287,950		$	297,375		$	244,388		$	262,946		$	101,726		$	2,171,835
Expensed in previous years	71,100			143,400			285,300			254,700			222,950			287,950			297,375			244,388			262,946			—			2,070,109
Expensed in 2014	—			—			—			—			—			—			—			—			—			101,726			101,726
Future expense	—			—			—			—			—			—			—			—			—			—			—
	Officers
Grant date	5/6/2005			4/27/2007			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals												Grand  Totals
Total grant	132,500			135,000			162,500			242,500			202,500			170,000			1,045,000												1,362,500
Vested	118,750			67,500			105,625			56,250			50,625			—			398,750												716,250
Exercised	84,850			—			30,955			18,902			8,853			—			143,560												233,560
Forfeited	13,750			67,500			43,750			135,000			30,000			—			290,000												312,500
Exercisable at June 30, 2014	33,900			67,500			63,420			37,348			41,772			—			243,940												448,940
Remaining unexercised	33,900			67,500			87,795			88,598			163,647			170,000			611,440												816,440
Exercise price	$	33.22		$	54.17		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.207			0.233			0.330			0.315			0.304			0.306
Expected life (years)	8.0			6.5			8.0			8.0			8.0			7.0
Assumed yield	6.37		%	4.13		%	4.81		%	5.28		%	5.12		%	4.89		%
Risk-free rate	4.15		%	4.61		%	2.75		%	1.49		%	1.49		%	2.17		%
Gross value at grant date	$	413,400		$	1,339,200		$	1,366,625		$	1,518,050		$	1,401,300		$	1,397,400		$	7,435,975											$	9,607,810
Estimated forfeitures	35,100			80,350			387,550			889,690			280,468			174,700			1,847,858												1,847,858
Expensed in previous years	378,300			1,258,850			692,088			261,807			209,027			—			2,800,072												4,870,181
Expensed in 2014	—			—			113,205			78,546			149,360			50,947			392,058												493,784
Future expense	—			—			173,782			288,007			762,445			1,171,753			2,395,987												2,395,987
Weighted average term of remaining future expense (in years)										3.1

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Notes to Consolidated Financial Statements (Unaudited)

The table below summarizes the option activity for the six months endedJune 30, 2014:

	Number of Shares		Weighted Average Exercise Price per share		Aggregate Intrinsic Value
Outstanding at January 1	753,625		$	42.55	$	4,529,206
Granted	200,000		47.03		314,000
Exercised	(99,685	)	37.23		1,018,511
Expired/Forfeited	(37,500	)	43.56
Outstanding June 30	816,440		44.26		4,078,348
Exercisable June 30	448,940		43.87		2,659,611

The intrinsic value measures the price difference between the options’ exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. The intrinsic value for shares exercised during the period was calculated by using the closing share price on the date of exercise. At June 30, 2014, the closing share price of $48.60 was lower than the exercise price of the 90,000 and 22,500 outstanding options granted in 2007 and 2008, respectively, and, therefore, those options had no intrinsic value as of June 30, 2014. The weighted average remaining contractual life of the Company’s outstanding and exercisable options is 7.2 years and 5.7 years, respectively.

9. Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value. The aggregate fair value of the notes payable with fixed-rate payment terms was determined using Level 3 data in a discounted cash flow approach, which is based upon management’s estimate of borrowing rates and loan terms currently available to the Company for fixed-rate financing and, assuming long-term interest rates of approximately 4.35% and 4.85%, would be approximately $852.0 million and $828.7 million, respectively, compared to the carrying value of $790.2 million and $789.9 million at June 30, 2014 and December 31, 2013, respectively. A change in any of the significant inputs may lead to a change in the Company’s fair value measurement of its debt.

The Company carries its interest rate swap at fair value. The Company has determined the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy with the exception of the impact of counter-party risk, which was determined using Level 3 inputs and is not significant. Derivative instruments are classified within Level 2 of the fair value hierarchy because their values are determined using third-party pricing models which contain inputs that are derived from observable market data. Where possible, the values produced by the pricing models are verified by market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measure of volatility, and correlations of such inputs. The swap agreement terminates on July 1, 2020. As of June 30, 2014, the fair value of the interest-rate swap was approximately $3.2 million and is included in “Accounts payable, accrued expenses and other liabilities” in the consolidated balance sheets. The decrease in value from inception of the swap is reflected in “Other Comprehensive Income” in the Consolidated Statements of Comprehensive Income. Amounts recognized in earnings are included in Changes in Fair Value of Derivatives in the Consolidated Statements of Operations.

	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2014			2013		2014			2013
Change in fair value:
Recognized in earnings	$	(5	)	$	51	$	(7	)	$	61
Recognized in other comprehensive income	(420		)	1,763		(647		)	2,264
	$	(425	)	$	1,814	$	(654	)	$	2,325

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Notes to Consolidated Financial Statements (Unaudited)

10. Commitments and Contingencies

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

11. Business Segments

The Company has two reportable business segments: Shopping Centers and Mixed-Use Properties. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). The Company evaluates performance based upon income and cash flows from real estate of the combined properties in each segment. All of our properties within each segment generate similar types of revenues and expenses related to tenant rent, reimbursements and operating expenses. Although services are provided to a range of tenants, the types of services provided to them are similar within each segment. The properties in each portfolio have similar economic characteristics and the nature of the products and services provided to our tenants and the method to distribute such services are consistent throughout the portfolio. Certain reclassifications have been made to prior year information to conform to the 2014 presentation.

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)	Shopping Centers			Mixed-Use Properties			Corporate and Other			Consolidated Totals
Three months ended June 30, 2014
Real estate rental operations:
Revenue	$	39,056		$	13,210		$	20		$	52,286
Expenses	(8,002		)	(3,827		)	—			(11,829		)
Income from real estate	31,054			9,383			20			40,457
Interest expense and amortization of deferred debt costs	—			—			(11,486		)	(11,486		)
General and administrative	—			—			(4,023		)	(4,023		)
Acquisition related costs	(216		)	—			—			(216		)
Predevelopment expenses	—			—			—			—
Subtotal	30,838			9,383			(15,489		)	24,732
Depreciation and amortization of deferred leasing costs	(6,911		)	(3,398		)	—			(10,309		)
Gain on sale of property	6,069			—			—			6,069
Change in fair value of derivatives	—			—			(5		)	(5		)
Net income (loss)	$	29,996		$	5,985		$	(15,494	)	$	20,487
Capital investment	$	13,592		$	4,865		$	—		$	18,457
Total assets	$	906,399		$	297,009		$	24,020		$	1,227,428
Three months ended June 30, 2013
Real estate rental operations:
Revenue	$	35,749		$	13,047		$	13		$	48,809
Expenses	(7,222		)	(4,537		)	—			(11,759		)
Income from real estate	28,527			8,510			13			37,050
Interest expense and amortization of deferred debt costs	—			—			(11,709		)	(11,709		)
General and administrative	—			—			(3,925		)	(3,925		)
Predevelopment expenses	—			(1,233		)	—			(1,233		)
Subtotal	28,527			7,277			(15,621		)	20,183
Depreciation and amortization of deferred leasing costs	(6,913		)	(5,559		)	—			(12,472		)
Change in fair value of derivatives	—			—			51			51
Net income (loss)	$	21,614		$	1,718		$	(15,570	)	$	7,762
Capital investment	$	2,305		$	4,007		$	—		$	6,312
Total assets	$	885,816		$	292,048		$	13,746		$	1,191,610

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)	Shopping Centers			Mixed-Use Properties			Corporate and Other			Consolidated Totals
Six months ended June 30, 2014
Real estate rental operations:
Revenue	$	78,875		$	26,323		$	35		$	105,233
Expenses	(17,492		)	(7,578		)	—			(25,070		)
Income from real estate	61,383			18,745			35			80,163
Interest expense and amortization of deferred debt costs	—			—			(22,953		)	(22,953		)
General and administrative	—			—			(8,703		)	(8,703		)
Acquisition related costs	(379		)	—			—			(379		)
Predevelopment expenses	—			(503		)	—			(503		)
Subtotal	61,004			18,242			(31,621		)	47,625
Depreciation and amortization of deferred leasing costs	(13,808		)	(6,681		)	—			(20,489		)
Gain on sale of property	6,069			—			—			6,069
Change in fair value of derivatives	—			—			(7		)	(7		)
Net income (loss)	$	53,265		$	11,561		$	(31,628	)	$	33,198
Capital investment	$	24,324		$	8,021		$	—		$	32,345
Total assets	$	906,399		$	297,009		$	24,020		$	1,227,428
Six months ended June 30, 2013
Real estate rental operations:
Revenue	$	71,796		$	26,155		$	44		$	97,995
Expenses	(14,977		)	(8,758		)	—			(23,735		)
Income from real estate	56,819			17,397			44			74,260
Interest expense and amortization of deferred debt costs	—			—			(23,426		)	(23,426		)
General and administrative	—			—			(7,329		)	(7,329		)
Predevelopment expenses	—			(3,582		)	—			(3,582		)
Subtotal	56,819			13,815			(30,711		)	39,923
Depreciation and amortization of deferred leasing costs	(13,742		)	(15,082		)	—			(28,824		)
Change in fair value of derivatives	—			—			61			61
Net income (loss)	$	43,077		$	(1,267	)	$	(30,650	)	$	11,160
Capital investment	$	5,804		$	5,572		$	—		$	11,376
Total assets	$	885,816		$	292,048		$	13,746		$	1,191,610

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Notes to Consolidated Financial Statements (Unaudited)

12. Subsequent Events

The Company has reviewed operating activities for the period subsequent to June 30, 2014 and prior to the date the financial statements are issued or are available to be issued, and determined there are no subsequent events required to be disclosed.

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

This section should be read in conjunction with the consolidated financial statements of the Company and the accompanying notes in “Item 1. Financial Statements” of this report and the more detailed information contained in the Company’s Form 10-K for the year ended December 31, 2013. Historical results and percentage relationships set forth in Item 1 and this section should not be taken as indicative of future operations of the Company. Capitalized terms used but not otherwise defined in this section have the meanings given to them in Item 1 of this Form 10-Q.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are generally characterized by terms such as “believe,” “expect” and “may.”

Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those given in the forward-looking statements as a result of changes in factors which include, among others, the following:

• continuing risks related to the challenging domestic and global credit markets and their effect on discretionary spending;

• risks that the Company’s tenants will not pay rent;

• risks related to the Company’s reliance on shopping center “anchor” tenants and other significant tenants;

• risks related to the Company’s substantial relationships with members of the Saul Organization;

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

• risks related to the Company’s development activities;

• risks that the Company’s growth will be limited if the Company cannot obtain additional capital;

• risks that planned and additional acquisitions or redevelopments may not be consummated, or if they are consummated, that they will not perform as expected;

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

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

• such other risks as described in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2013.

General

The following discussion is based primarily on the consolidated financial statements of the Company as of and for the three and six months ended June 30, 2014.

Recent Developments

Effective as of May 9, 2014, Mr. J. Page Lansdale was promoted and named as President and Chief Operating Officer of the Company. Mr. Lansdale served as our Executive Vice President – Real Estate since September 4, 2012. Prior to that time, he served as a Senior Vice President of the Company since 2009. Beginning in 1990, Mr. Lansdale held various positions with Chevy Chase Bank, F.S.B., including most recently Senior Vice President of Corporate Real Estate from 2004 to 2009.

Also effective as of May 9, 2014, Ms. Christine Nicolaides Kearns was hired as the Company’s Executive Vice President and Chief Legal and Administrative Officer. Prior to joining the Company, Ms. Kearns was a Partner with the law firm Pillsbury Winthrop Shaw Pittman LLP for 20 years, most recently serving as the Managing Partner of the firm’s Washington, DC office.

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Mr. Lansdale and Ms. Kearns are also officers of other entities affiliated with the Company and controlled by B. Francis Saul II and his family members, which we refer to as the Saul Organization. The Company believes that these officers will spend sufficient management time to meet their responsibilities as its officers.

The Operating Partnership entered into an Amended and Restated Credit Agreement dated June 24, 2014, by and among the Operating Partnership, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, Wells Fargo Securities, LLC, as Sole Lead Arranger and Sole Bookrunner and Wells Fargo Bank, National Association, JP Morgan Chase Bank, N.A., Capital One, N.A., and Citizens Bank of Pennsylvania, as Lenders (the “New Credit Agreement”).

The New Credit Agreement replaces the Credit Agreement dated May 21, 2012, by and among the Operating Partnership, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, JP Morgan Chase Bank, N.A., as Syndication Agent, Wells Fargo Securities, LLC, as Sole Lead Arranger and Sole Bookrunner and Wells Fargo Bank, National Association, JP Morgan Chase Bank, N.A., Capital One, N.A. and Citizens Bank of Pennsylvania as Lenders (as amended, the “Original Agreement”). The Original Agreement consisted of a $175,000,000 unsecured revolving credit facility (the “Original Facility”) with a maturity date of May 20, 2016. As of the date the Original Facility was replaced, the applicable interest rate was 1.75% (LIBOR of 0.15% plus a spread of 1.60%).

The New Credit Agreement consists of a $275,000,000 revolving credit facility (the “New Facility”) maturing on June 23, 2018, which term may be extended by the Company for one additional year, subject to satisfaction of certain conditions.

The Company and certain subsidiaries of the Operating Partnership and the Company have guaranteed the payment obligations of the Partnership under the New Facility.

Overview

The Company’s principal business activity is the ownership, management and development of income-producing properties. The Company’s long-term objectives are to increase cash flow from operations and to maximize capital appreciation of its real estate investments.

The Company’s primary operating strategy is to focus on its community and neighborhood shopping center business and to operate its properties to achieve both cash flow growth and capital appreciation. Management believes there is potential for long-term growth in cash flow as existing leases for space in the Shopping Centers and Mixed-Use properties expire and are renewed, or newly-available or vacant space is leased. The Company intends to renegotiate leases where possible and seek new tenants for available space in order to optimize the mix of uses to improve foot traffic through the Shopping Centers. As leases expire, management expects to revise rental rates, lease terms and conditions, relocate existing tenants, reconfigure tenant spaces and introduce new tenants with the goals of increasing occupancy, improving overall retail sales, and ultimately increasing cash flow as economic conditions improve. In those circumstances in which leases are not otherwise expiring, or in connection with renovations or relocations, management selectively attempts to increase cash flow through a variety of means, including recapturing leases with below market rents and re-leasing at market rates, as well as replacing financially troubled tenants. When possible, management also will seek to include scheduled increases in base rent, as well as percentage rental provisions, in its leases.

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 Clarendon Center apartments). For purposes of this table, annualized effective rent is annualized base rent minus amortized tenant improvements and amortized leasing commissions.

	Six months ended June 30,
	2014		2013		2012		2011		2010
Base rent	$	18.03	$	17.67	$	16.95	$	16.54	$	16.46
Effective rent	$	16.42	$	15.77	$	15.41	$	15.09	$	15.09

The Company’s redevelopment and renovation objective is to selectively and opportunistically redevelop and renovate its properties, by replacing leases that have below market rents with strong, traffic-generating anchor stores such as supermarkets and drug stores, as well as other desirable local, regional and national tenants. The Company’s strategy remains focused on continuing the operating performance and internal growth of its existing Shopping Centers, while enhancing this growth with selective retail redevelopments and renovations.

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During the first quarter of 2014, the Company completed the demolition of Van Ness Square and incurred approximately $503,000 of demolition costs. The Company is developing Park Van Ness, a 271-unit residential project with approximately 9,000 square feet of street-level retail, below street-level structured parking, and amenities including a community room, landscaped courtyards, a fitness room and a rooftop pool and deck. Construction is projected to be completed by late 2015. Excavation is substantially complete and sub-surface utility installation and pouring of building footings have commenced. The total cost of the project, excluding predevelopment expense and land, which the Company has owned, is expected to be approximately $93.0 million, a portion of which will be financed with a $71.6 million construction-to-permanent loan of which zero was outstanding at June 30, 2014.

In April 2014, the Company purchased for $11.0 million a single-tenant retail property with a 40,700 square foot furniture store located at 1582 Rockville Pike in Rockville, Maryland, and concurrently sold to the same party, for $11.0 million, the 53,765 square foot Olney Center located in Olney, Maryland. 1582 Rockville Pike is contiguous with and an expansion of the Company’s assets at 1500 and 1580 Rockville Pike.

Simultaneously with the sale of the Olney Center, the Company entered into a lease of the property with the buyer and the Company continues to operate, lease and manage the property. The lease term is 20 years and the Company has the option to purchase the property for $14.6 million at the end of the lease term. The purchaser has the right to sell the property to the Company at any time from and after April 2016 at a price equal to $11.0 million increased by 1.5% annually beginning January 1, 2015 and continuing each January thereafter. The Company has accounted for this transaction as a secured financing.

In April 2014, the Company sold for $7.5 million the 70,040 square foot Giant Center located in Milford Mill, Maryland and recognized a $6.1 million gain. As of March 31, 2014, the carrying amounts of the associated assets and liabilities were $0.5 million and $0.1 million, respectively. There was no debt on the property.

The Company's tenants were further impacted by winter weather, as heavy snowfall in the Mid-Atlantic states during the first quarter of 2014 hindered the ability of customers to shop. The costs of removing snow from the Company's properties during the three months ended March 31, 2014, was approximately $2.0 million, approximately 60% of which will be billable to tenants.

During the most recent downturn in the national real estate market, the effects on the office and retail markets in the metropolitan Washington, D.C. area, where the majority of the Company’s properties are located, initially were less severe than in many other areas of the country. However, continued economic stress in the local economies where the Company’s properties are located resulting from (a) issues facing the Federal government relating to spending cuts and budget policies (b) the severe winter weather conditions may lead to increased tenant bankruptcies, increased vacancies and decreased rental rates.

While overall consumer confidence appears to have improved, retailers continue to be cautious about capital allocation when implementing store expansion. Vacancies continue to remain elevated in certain submarkets compared to pre-recession levels; however the Company’s overall leasing percentage on a comparative same property basis, which excludes the impact of properties not in operation for the entirety of the comparable periods, was 94.2% at June 30, 2014, compared to 93.6% at June 30, 2013.

The Company maintains a ratio of total debt to total asset value of under 50%, which allows the Company to obtain additional secured borrowings if necessary. As of June 30, 2014, amortizing fixed-rate debt with staggered maturities from 2015 to 2028 represented approximately 96.4% of the Company’s notes payable, thus minimizing refinancing risk. As of June 30, 2014, the Company’s variable-rate debt consisted of a $14.7 million bank term loan secured by Northrock Shopping Center, and a $15.2 million bank term loan secured by Metro Pike Center. As of June 30, 2014, the Company has availability of approximately $274.4 million under its $275.0 million unsecured revolving line of credit.

Although it is management’s present intention to concentrate future acquisition and development activities on community and neighborhood shopping centers and Mixed-Use Properties in the Washington, DC/Baltimore metropolitan area and the southeastern region of the United States, the Company may, in the future, also acquire other types of real estate in other areas of the country as opportunities present themselves. While the Company may diversify in terms of property locations, size and market, the Company does not set any limit on the amount or percentage of Company assets that may be invested in any one property or any one geographic area.

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Critical Accounting Policies

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

Real Estate Investments

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

The Company purchases real estate investment properties from time to time and records assets acquired and liabilities assumed, including land, buildings, and intangibles related to in-place leases and customer relationships, based on their fair values. The fair value of buildings generally is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates and considers the present value of all cash flows expected to be generated by the property including an initial lease up period. The Company determines the fair value of above and below market intangibles associated with in-place leases by assessing the net effective rent and remaining term of the in-place lease relative to market terms for similar leases at acquisition taking into consideration the remaining contractual lease period, renewal periods, and the likelihood of the tenant exercising its renewal options. The fair value of below market lease intangibles is recorded as deferred income and accreted as additional lease revenue over the remaining contractual lease period and any renewal option periods included in the valuation analysis. The fair value of above market lease intangibles is recorded as a deferred asset and amortized as a reduction of revenue over the remaining contractual lease term. The Company determines the fair value of at-market in-place leases considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period and carrying costs associated with the lease-up period. Intangible assets associated with at-market in-place leases are amortized as additional expense over the remaining contractual lease term. To the extent customer relationship intangibles are present in an acquisition, the fair value of the intangibles are amortized over the life of the customer relationship.

If there is an event or change in circumstance that indicates a potential impairment in the value of a real estate investment property, the Company prepares an analysis to determine whether the carrying value of the real estate investment property exceeds its estimated fair value. The Company considers both quantitative and qualitative factors including recurring operating losses, significant decreases in occupancy, and significant adverse changes in legal factors and business climate. If impairment indicators are present, the Company compares the projected cash flows of the property over its remaining useful life, on an undiscounted basis, to the carrying value of that property. The Company assesses its undiscounted projected cash flows based upon estimated capitalization rates, historic operating results and market conditions that may affect the property. If the carrying value is greater than the undiscounted projected cash flows, the Company would recognize an impairment loss 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.

When incurred, the Company capitalizes the cost of improvements that extend the useful life of property and equipment. All repair and maintenance expenditures are expensed when incurred. Leasehold improvements expenditures are capitalized when certain criteria are met, including when we supervise construction and will own the improvement. Tenant improvements that we own are depreciated over the life of the respective lease or the estimated useful life of the improvements, whichever is shorter.

Interest, real estate taxes, development-related salary costs and other carrying costs are capitalized on projects under construction. Upon substantial completion of construction and the placement of assets into service, rental income, direct operating expenses, and depreciation associated with such properties are included in current operations and capitalization of interest ceases. Commercial development projects are substantially complete and available for occupancy upon completion of tenant improvements, but no later than one year from the cessation of major construction activity. Residential development projects are considered substantially complete and available for occupancy upon receipt of the certificate of occupancy from the appropriate licensing authority. Substantially completed portions of a project are accounted for as separate projects. Depreciation is calculated using the straight-line method and estimated useful lives generally between 35 and 50 years for base

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buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements.

Deferred Leasing Costs

Certain initial direct costs incurred by the Company in negotiating and consummating successful Commercial leases are capitalized and amortized over the initial base term of the leases. Deferred leasing costs consist of commissions paid to third-party leasing agents as well as internal direct costs such as employee compensation and payroll-related fringe benefits directly related to time spent performing successful leasing-related activities. Such activities include evaluating prospective tenants’ financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating lease terms, preparing lease documents and closing transactions. In addition, deferred leasing costs include amounts attributed to in-place leases associated with acquired properties.

Revenue Recognition

Rental and interest income is accrued as earned except when doubt exists as to collectability, in which case the accrual is discontinued. Recognition of rental income commences when control of the space has been given to the tenant. When rental payments due under leases vary from a straight-line basis because of free rent periods or scheduled rent increases, income is recognized on a straight-line basis. Expense recoveries represent a portion of property operating expenses billed to tenants, including common area maintenance, real estate taxes and other recoverable costs. Expense recoveries are recognized in the period in which the expenses are incurred. Rental income based on a tenant’s revenue, known as percentage rent, is recognized when a tenant reports sales that exceed a breakpoint specified in the lease agreement.

Allowance for Doubtful Accounts - Current and Deferred Receivables

Accounts receivable primarily represent amounts accrued and unpaid from tenants in accordance with the terms of the respective leases, subject to the Company’s revenue recognition policy. Receivables are reviewed monthly and reserves are established with a charge to current period operations when, in the opinion of management, collection of the receivable is doubtful. In addition to rents due currently, accounts receivable include amounts representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of their respective leases. Reserves are established with a charge to income for tenants whose rent payment history or financial condition casts doubt upon the tenant’s ability to perform under its lease obligations.

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. Once it has been determined that a loss is probable to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which its occurrence is considered probable can be difficult to determine.

Results of Operations

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

We define same property revenue as total revenue minus the sum of interest income and revenue of properties not in operation for the entirety of the comparable reporting periods, and we define same property operating income as net income plus the sum of interest expense and amortization of deferred debt costs, depreciation and amortization, general and administrative expense, loss on the early extinguishment of debt (if any), predevelopment expense and acquisition related costs, minus the sum of interest income, the change in the fair value of derivatives, gains on property dispositions (if any) and the results of properties which were not in operation for the entirety of the comparable periods.

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

Same property revenue and same property operating income are used by management to evaluate and compare the operating performance of our properties, and to determine trends in earnings, because these measures are not affected by the cost of our funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of

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

The tables below provide reconciliations of total revenue and operating income under GAAP to same property revenue and operating income for the indicated periods. The same property results include 49 Shopping Centers and 6 Mixed-Use properties for each period.

Same property revenue

(in thousands)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Total revenue	$	52,286		$	48,809		$	105,233		$	97,995
Less: Interest income	(21		)	(13		)	(35		)	(44		)
Less: Acquisitions, dispositions and development properties	(464		)	(247		)	(836		)	(859		)
Total same property revenue	$	51,801		$	48,549		$	104,362		$	97,092
Shopping centers	$	38,592		$	35,575		$	78,039		$	71,443
Mixed-Use properties	13,209			12,974			26,323			25,648
Total same property revenue	$	51,801		$	48,549		$	104,362		$	97,092

The $3.3 million increase in same property revenue for the 2014 quarter compared to the 2013 quarter was primarily due to (a) a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (b) a 55,000 square foot increase in leased space ($240,000) and (c) a $0.57 per square foot increase in base rent ($1.2 million).

The $7.3 million increase in same property revenue for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 is due primarily to (a) a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (b) the impact of a lease termination at Seven Corners ($1.2 million), (c) higher expense recoveries primarily as a result of snow removal ($1.4 million), (d) a 78,100 square foot increase in leased space ($690,000) and (e) a $0.36 per square foot increase in base rent ($1.5 million).

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Same property operating income

	Three Months Ended   June 30,						Six Months Ended   June 30,
(In thousands)	2014			2013			2014			2013
Net income	$	20,487		$	7,762		$	33,198		$	11,160
Add: Interest expense and amortization of deferred debt costs	11,486			11,709			22,953			23,426
Add: Depreciation and amortization of deferred leasing costs	10,309			12,472			20,489			28,824
Add: General and administrative	4,023			3,925			8,703			7,329
Add: Predevelopment expenses	—			1,233			503			3,582
Add: Acquisition related costs	216			—			379			—
Add (Less): Change in fair value of derivatives	5			(51		)	7			(61		)
Less: Gains on property dispositions	(6,069		)	—			(6,069		)	—
Less: Interest income	(21		)	(13		)	(35		)	(44		)
Property operating income	40,436			37,037			80,128			74,216
Less: Acquisitions, dispositions & development property	399			150			672			454
Total same property operating income	$	40,037		$	36,887		$	79,456		$	73,762
Shopping centers	$	30,655		$	27,783		$	60,711		$	55,933
Mixed-Use properties	9,382			9,104			18,745			17,829
Total same property operating income	$	40,037		$	36,887		$	79,456		$	73,762

Same property operating income increased $3.2 million for the 2014 quarter compared to the 2013 quarter due primarily to (a) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (b) a 55,000 square foot increase in leased space ($240,000) and (c) a $0.57 per square foot increase in base rent ($1.2 million).

Same property operating income increased $5.7 million for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 due primarily to (a) the impact of a lease termination at Seven Corners ($1.2 million), (b) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (c) a 78,100 square foot increase in leased space ($690,000) and (d) a $0.36 per square foot increase in base rent ($1.5 million).

Three months ended June 30, 2014 compared to the three months endedJune 30, 2013

Revenue

	Three Months Ended June 30,				2013 to 2014 Change
(Dollars in thousands)	2014		2013		Amount		Percent
Base rent	$	41,038	$	39,553	$	1,485	3.8	%
Expense recoveries	7,825		7,463		362		4.9	%
Percentage rent	453		338		115		34.0	%
Other	2,970		1,455		1,515		104.1	%
Total revenue	$	52,286	$	48,809	$	3,477	7.1	%

Base rent includes $552,700 and $695,000 for the three months endedJune 30, 2014 and 2013, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes $487,200 and $441,000, for the three months endedJune 30, 2014 and 2013, respectively, to recognize income from the amortization of in-place leases acquired in connection with purchased real estate investment properties.

Total revenue increased 7.1% in the three months endedJune 30, 2014 (“2014 Quarter”) compared to the three months endedJune 30, 2013 (“2013 Quarter”) primarily due to (a) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (b) a 55,000 square foot increase in leased space ($240,000) and (c) a $0.57 per square foot increase in base rent ($1.2 million).

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Operating Expenses

	Three Months Ended June 30,				2013 to 2014 Change
(Dollars in thousands)	2014		2013		Amount			Percent
Property operating expenses	$	6,138	$	6,041	$	97		1.6	%
Provision for credit losses	107		285		(178		)	(62.5	)%
Real estate taxes	5,584		5,433		151			2.8	%
Interest expense and amortization of deferred debt costs	11,486		11,709		(223		)	(1.9	)%
Depreciation and amortization of deferred leasing costs	10,309		12,472		(2,163		)	(17.3	)%
General and administrative	4,023		3,925		98			2.5	%
Acquisition related costs	216		—		216			—	%
Predevelopment expenses	—		1,233		(1,233		)	(100.0	)%
Total operating expenses	$	37,863	$	41,098	$	(3,235	)	(7.9	)%

Total operating expenses decreased 7.9% in the 2014 Quarter compared to the 2013 Quarter primarily due to $2.2 million of lower depreciation expense and $1.2 million of lower predevelopment expense, both of which related to the Company’s redevelopment activities at Park Van Ness.

Provision for credit losses. The provision for credit losses for the 2014 Quarter represents 0.20% of the Company’s revenue, a decrease from 0.58% for the 2013 Quarter.

Depreciation and amortization of deferred leasing costs. The decrease in depreciation and amortization to $10.3 million in the 2014 Quarter from $12.5 million in the 2013 Quarter was primarily due to $2.0 million of additional depreciation expense recorded in 2013 related to Park Van Ness.

Predevelopment expenses. Predevelopment expenses represent costs incurred in connection with the redevelopment of Park Van Ness. Predevelopment expenses in the 2013 Quarter were comprised primarily of lease termination costs.

Six months endedJune 30, 2014 compared to the six months endedJune 30, 2013

Revenue

	Six Months Ended   June 30,				2013 to 2014 Change
(Dollars in thousands)	2014		2013		Amount			Percent
Base rent	$	81,601	$	79,293	$	2,308		2.9	%
Expense recoveries	16,614		15,077		1,537			10.2	%
Percentage rent	905		938		(33		)	(3.5	)%
Other	6,113		2,687		3,426			127.5	%
Total revenue	$	105,233	$	97,995	$	7,238		7.4	%

Base rent includes $0.8 million and $1.4 million for the six months endedJune 30, 2014 and 2013, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes $0.9 million and $0.9 million for the six months endedJune 30, 2014 and 2013, respectively, to recognize income from the amortization of in-place leases acquired in connection with purchased real estate investment properties.

Total revenue increased 7.4% in the six months endedJune 30, 2014 (“2014 Period”) compared to the six months endedJune 30, 2013 (“2013 Period”) primarily due to (a) increased base rent resulting from rent generated by the properties acquired in 2013 and 2014 ($500,000) and other base rent increases throughout the core portfolio ($2.2 million), (b) increased expense recoveries primarily related to snow removal, (c) the impact of a lease termination at Seven Corners ($1.2 million) and (d) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), partially offset by (e) reduced base rent at Van Ness Square ($445,000).

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Operating Expenses

	Six Months Ended   June 30,				2013 to 2014 Change
(Dollars in thousands)	2014		2013		Amount			Percent
Property operating expenses	$	13,723	$	11,990	$	1,733		14.5	%
Provision for credit losses	310		549		(239		)	(43.5	)%
Real estate taxes	11,037		11,196		(159		)	(1.4	)%
Interest expense and amortization of deferred debt costs	22,953		23,426		(473		)	(2.0	)%
Depreciation and amortization of deferred leasing costs	20,489		28,824		(8,335		)	(28.9	)%
General and administrative	8,703		7,329		1,374			18.7	%
Acquisition related costs	379		—		379			—	%
Predevelopment expenses	503		3,582		(3,079		)	(86.0	)%
Total operating expenses	$	78,097	$	86,896	$	(8,799	)	10.1	%

Total operating expenses decreased 10.1% in the 2014 Period compared to the 2013 Period primarily due to (a) $8.0 million of additional depreciation expense recorded in 2013 and (b) $3.1 million of lower predevelopment expense, both of which resulted from the Company’s redevelopment activities at Van Ness Square, partially offset by (c) $1.7 million of increased snow removal costs.

Property operating expenses. The increase in property operating expenses for the 2014 Period primarily reflects a $1.7 million increase in snow removal costs.

Provision for credit losses. The provision for credit losses for the 2014 Period represents 0.29% of the Company’s revenue, a decline from 0.56% for the 2013 Period.

Interest expense and amortization of deferred debt. Interest expense decreased in the 2014 Period compared to the 2013 Period primarily because of a $209,000 increase in the amount of interest capitalized.

Depreciation and amortization of deferred leasing costs. The decrease in depreciation and amortization to $20.5 million in the 2014 Period from $28.8 million in the 2013 Period was primarily due to $8.0 million of additional depreciation expense on the building at Van Ness Square as a result of the reduction of its estimated remaining useful life to four months effective January 1, 2013.

General and administrative expense. The increase in general and administrative expense was primarily due to accrued severance costs totaling approximately $1.1 million.

Predevelopment expenses. Predevelopment expenses represent costs incurred, in connection with the redevelopment of Van Ness Square. Predevelopment expenses in the 2014 Period were comprised primarily of demolition costs and in the 2013 Period were comprised primarily of lease termination costs.

Liquidity and Capital Resources

Cash and cash equivalents totaled $21.8 million and $12.9 million at June 30, 2014 and 2013, respectively. The Company’s cash flow is affected by its operating, investing and financing activities, as described below.

	Six Months Ended   June 30,
(Dollars in thousands)	2014			2013
Net cash provided by operating activities	$	42,745		$	34,043
Net cash used in investing activities	(15,211		)	(11,376		)
Net cash used in financing activities	(23,002		)	(21,855		)
Increase in cash and cash equivalents	$	4,532		$	812

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Operating Activities

Net cash provided by operating activities represents cash received primarily from rental income, plus other income, less property operating expenses, leasing costs, normal recurring general and administrative expenses and interest payments on debt outstanding. The $8.7 millionincrease in net cash provided by operating activities from 2013 to 2014 is primarily attributable to (a) increased property operating income ($3.1 million), exclusive of the following Seven Corners items, (b) the impact of a lease termination at Seven Corners ($1.2 million) and (c) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million).

Investing Activities

Net cash used in investing activities includes property acquisitions, developments, redevelopments, tenant improvements and other property capital expenditures. Tenant improvement and property capital expenditures totaled $7.0 million and $7.3 million for the six months endedJune 30, 2014 and 2013, respectively.

Financing Activities

Net cash used in financing activities for the six months endedJune 30, 2014 primarily reflects:

• the repayment of notes payable totaling $10.9 million;

• revolving credit facility principal payments of $11.0 million;

• distributions to common stockholders totaling $15.7 million;

• distributions to holders of convertible limited partnership units in the Operating Partnership totaling $5.7 million; and

• distributions to preferred stockholders totaling $6.4 million,

which was partially offset by:

• advances of $11.0 million from the revolving credit facility;

• proceeds of $8.9 million from the issuance of limited partnership units in the Operating Partnership pursuant to our Dividend Reinvestment and Stock Purchase Plan ("DRIP"); and

• proceeds of $8.2 million from the issuance of common stock pursuant to our DRIP, directors’ Deferred Compensation Plan and the exercise of stock options.

Net cash used in financing activities for the six months endedJune 30, 2013 primarily reflects:

• revolving credit facility payments of $161.0 million;

• repayment of notes payable totaling $47.2 million;

• partial redemption of Series A Preferred Stock totaling $60.0 million;

• redemption of Series B Preferred Stock totaling $79.3 million;

• distributions to common stockholders totaling $14.5 million;

• payments of $1.3 million for debt financing costs;

• distributions to holders of convertible limited partnership units in the Operating Partnership totaling $5.0 million; and

• distributions made to preferred stockholders totaling $8.1 million;

which was partially offset by:

• proceeds of $83.6 million received from notes payable;

• advances from the revolving credit facility totaling $123.0 million;

• proceeds of $135.2 million from the issuance of Series C Preferred Stock; and

• proceeds of $12.7 million from the issuance of common stock pursuant to our DRIP, directors’ Deferred Compensation Plan and the exercise of stock options.

Liquidity Requirements

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

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additional property acquisitions and developments) through cash provided from operations, available cash and its existing line of credit.

Long-term liquidity requirements consist primarily of obligations under our long-term debt and dividends paid to our preferred shareholders. The Company anticipates that long-term liquidity requirements will also include amounts required for property acquisitions and developments. The Company is developing Park Van Ness, a primarily residential project with street-level retail. The total cost of the project, excluding predevelopment expense and land costs, is expected to be approximately $93.0 million, a portion of which will be funded with a $71.6 million construction-to-permanent loan and the remainder will be funded with the Company's working capital, including its existing line of credit. 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 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.

As of June 30, 2014, the scheduled maturities of debt, including scheduled principal amortization, for years ending December 31, were as follows:

(In thousands)	Balloon Payments		Scheduled Principal Amortization		Total
July 1 through December 31, 2014	$	—	$	11,223	$	11,223
2015	14,885		23,208		38,093
2016	28,879		23,496		52,375
2017	—		24,679		24,679
2018	27,748		24,821		52,569
2019	60,793		23,489		84,282
Thereafter	421,169		135,755		556,924
	$	553,474	$	266,671	$	820,145

Management believes that the Company’s capital resources, which at June 30, 2014 included cash balances of approximately $21.8 million and borrowing availability of approximately $274.4 million on its unsecured revolving credit facility, will be sufficient to meet its liquidity needs for the foreseeable future.

Dividend Reinvestments

In December 1995, the Company established a DRIP 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 DRIP provides for investing in newly issued shares of common stock at a 3% discount from market price without payment of any brokerage commissions, service charges or other expenses. All expenses of the DRIP are paid by the Company. The Company issued 96,037 and 284,580 shares under the DRIP at a weighted average discounted price of $44.54 and $42.25 per share, during the six months endedJune 30, 2014 and 2013, respectively. The Company issued 196,183 limited partnership units under the DRIP at a weighted average price of $45.25 per unit during the six months endedJune 30, 2014. No limited partnership units were issued under the DRIP during 2013. The Company also credited 3,763 and 3,727 shares to directors pursuant to the reinvestment of dividends specified by the Directors’ Deferred Compensation Plan at a weighted average discounted price of $44.61 and $42.25 per share, during the six months endedJune 30, 2014 and 2013, respectively.

Capital Strategy and Financing Activity

As a general policy, the Company intends to maintain a ratio of its total debt to total asset value of 50% or less and to actively manage the Company’s leverage and debt expense on an ongoing basis in order to maintain prudent coverage of fixed charges. Asset value is the aggregate fair market value of the Current Portfolio Properties and any subsequently acquired

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properties as reasonably determined by management by reference to the properties’ aggregate cash flow. Given the Company’s current debt level, it is management’s belief that the ratio of the Company’s debt to total asset value was below 50% as of June 30, 2014.

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

The Company maintains an unsecured revolving credit facility which was amended and restated in June 2014. The facility provides working capital and funds for acquisitions, certain developments, redevelopments and letters of credit, expires on June 23, 2018, and provides for an additional one-year extension at the Company’s option, subject to the Company’s satisfaction of certain conditions. As of June 30, 2014, no borrowings were outstanding, approximately $274.4 million was available under the line and approximately $628,000 was committed for letters of credit. The interest rate under the facility is variable and equals the sum of one-month LIBOR and a margin that is based on the Company’s leverage ratio, and which can range from 145 basis points to 200 basis points. Based on the leverage ratio as of June 30, 2014, the margin was 145 basis points.

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

• maintain tangible net worth, as defined in the loan agreement, of at least $542.1 million plus 80% of the Company’s net equity proceeds received after March 2014;

• 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 1.3x on a trailing four-quarter basis (fixed charge coverage).

As of June 30, 2014, the Company was in compliance with all such covenants.

At June 30, 2014, the Company had a $71.6 million construction-to-permanent loan, with no amount outstanding, which is secured by and will be used to partially finance the construction of Park Van Ness.

Saul Centers is a guarantor of the revolving credit facility, of which the Operating Partnership is the borrower. The Operating Partnership is the guarantor of (a) a portion of each of the Northrock bank term loan (approximately $7.5 million of the $14.7 million outstanding at June 30, 2014) and the Metro Pike Center bank loan (approximately $7.8 million of the $15.2 million outstanding at June 30, 2014) and (b) the $71.6 million Park Van Ness construction-to-permanent loan, which guarantee will be reduced and eventually eliminated subject to the achievement of certain leasing and cash flow levels. The fixed-rate notes payable are non-recourse.

Preferred Stock

In March 2013, the Company redeemed 60% of its then-outstanding 8% Series A Cumulative Redeemable Preferred Stock (the “Series A Stock”) and all of its 9% Series B Cumulative Redeemable Preferred Stock.

The Company has outstanding 1.6 million depositary shares, each representing 1/100th of a share of Series A Stock. The depositary shares may be redeemed at the Company’s option, in whole or in part from time to time, at the $25.00 liquidation preference. The depositary shares pay an annual dividend of $2.00 per share, equivalent to 8% of the $25.00 liquidation preference. The Series A preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

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On February 12, 2013, the Company sold, in an underwritten public offering, 5.6 million depositary shares, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred Stock, providing net cash proceeds of approximately $135.2 million. The depositary shares may be redeemed at the Company’s option, in whole or in part, at the $25.00 liquidation preference plus accrued but unpaid dividends on or after February 12, 2018. The depositary shares pay an annual dividend of $1.71875 per share, equivalent to 6.875% of the $25.00 liquidation preference. The first dividend was paid on April 15, 2013 and covered the period from February 12, 2013 through March 31, 2013. The Series C preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes of control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

Off-Balance Sheet Arrangements

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

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Funds From Operations

Funds From Operations (FFO)¹ available to common shareholders for the six months endedJune 30, 2014, totaled $41.2 million, an increase of 51.6% compared to the six months endedJune 30, 2013. The increase in FFO available to common shareholders for the six months endedJune 30, 2014 was primarily due to (a) a charge against common equity in the 2013 Period resulting from the redemption of preferred stock ($5.2 million), (b) increased property operating income ($3.1 million) exclusive of the following Seven Corners items, (c) the impact of a lease termination at Seven Corners ($1.2 million), (d) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (e) lower predevelopment expenses related to Park Van Ness ($3.1 million) and (f) lower preferred stock dividends ($1.2 million), partially offset by higher general and administrative expenses ($1.4 million).

The following table presents a reconciliation from net income to FFO available to common shareholders for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share amounts)	2014			2013			2014			2013
Net income	$	20,487		$	7,762		$	33,198		$	11,160
Subtract:
Gain on sale of property	(6,069		)	—			(6,069		)	—
Add:
Real estate depreciation and amortization	10,309			12,472			20,489			28,824
FFO	24,727			20,234			47,618			39,984
Subtract:
Preferred stock dividends	(3,207		)	(3,207		)	(6,413		)	(7,571		)
Preferred stock redemption	—			—			—			(5,228		)
FFO available to common shareholders	$	21,520		$	17,027		$	41,205		$	27,185
Weighted average shares:
Diluted weighted average common stock	20,743			20,323			20,702			20,251
Convertible limited partnership units	7,164			6,914			7,114			6,914
Average shares and units used to compute FFO per share	27,907			27,237			27,816			27,165
FFO per share available to common shareholders	$	0.77		$	0.63		$	1.48		$	1.00

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 extraordinary items, 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 the Company believes occurs with its 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.

Acquisitions and Redevelopments

During the remainder of the year, the Company will continue its activities related to the development of Park Van Ness, 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 balance of the year, any developments, expansions or acquisitions are expected to be funded with bank borrowings from the Company’s credit line, construction financing, proceeds from the operation of the Company’s dividend reinvestment plan or other external capital resources available to the Company.

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The Company has been selectively involved in acquisition, development, redevelopment and renovation activities. It continues to evaluate the acquisition of land parcels for retail and mixed-use development and acquisitions of operating properties for opportunities to enhance operating income and cash flow growth. The Company also continues to analyze redevelopment, renovation and expansion opportunities within the portfolio. The following describes the acquisition, development, redevelopment and renovation activities of the Company in 2013 and the six months endedJune 30, 2014.

Park Van Ness

During the first quarter of 2014, the Company completed the demolition of Van Ness Square and incurred approximately $503,000 of demolition costs. The Company is developing Park Van Ness, a 271-unit residential project with approximately 9,000 square feet of street-level retail, below street-level structured parking, and amenities including a community room, landscaped courtyards, a fitness room and a rooftop pool and deck. Construction is projected to be completed by late 2015. Excavation is substantially complete and sub-surface utility installation and pouring of building footings have commenced. The total cost of the project, excluding predevelopment expense and land (which the Company has owned), is expected to be approximately $93.0 million, a portion of which will be financed with a $71.6 million construction-to-permanent loan.

Kentlands Pad

In August 2013, the Company purchased for $4.3 million, a retail pad with a 7,100 square foot restaurant building located in Gaithersburg, Maryland, which is contiguous with and an expansion of the Company's other Kentlands assets, and incurred acquisition costs of $99,000. The Company has leased the building to a restaurant which opened in the second quarter of 2014.

Hunt Club Pad

In December 2013, the Company purchased for $0.8 million, including acquisition costs, a retail pad with a 5,500 square foot vacant building located in Apopka, Florida, which is contiguous with and an expansion of the Company's other Hunt Club asset.

1580 and 1582 Rockville Pike

In January 2014, the Company purchased for $8.0 million a single-tenant retail property with a 12,100 square foot CVS Pharmacy located at 1580 Rockville Pike in Rockville, Maryland, and incurred acquisition costs of $163,000.

In April 2014, the Company purchased for $11.0 million a single-tenant retail property with a 40,700 square foot furniture store located at 1582 Rockville Pike in Rockville, Maryland, and incurred acquisition costs totaling approximately $0.2 million. Concurrently with the purchase, the Company sold to the same party, for $11.0 million, the 53,765 square foot Olney Center located in Olney, Maryland.

The properties at 1580 and 1582 Rockville Pike are contiguous with and an expansion of the Company’s assets at 1500 Rockville Pike. When combined with 1500 Rockville Pike, the three properties comprise 9.2 acres which are zoned for development potential of up to 1.1 million square feet of mixed-use space. The Company is actively engaged in a plan for redevelopment but has not committed to any timetable for commencement of construction.

Olney

Simultaneously with the sale of Olney Center, the Company entered into a lease of the property with the buyer and the Company continues to operate and manage the property. The lease term is 20 years and the Company has the option to purchase the property for $14.6 million at the end of the lease term. The purchaser has the right to sell the property to the Company at any time from and after April 2016 at a price equal to $11.0 million increased by 1.5% annually beginning January 1, 2015 and continuing each January thereafter. The Company has accounted for this transaction as a secured financing.

Giant Center

In April 2014, the Company sold for $7.5 million the 70,040 square foot Giant Center located in Milford Mill, Maryland and recognized a $6.1 million gain. As of March 31, 2014, the carrying amounts of the associated assets and liabilities were $0.5 million and $0.1 million, respectively. There was no debt on the property.

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Portfolio Leasing Status

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

	Total Properties		Total Square Footage		Percent Leased
	Shopping Centers	Mixed-Use	Shopping Centers	Mixed-Use	Shopping Centers		Mixed-Use
June 30, 2014	49	6	7,862,771	1,453,159	94.8	%	90.3	%
June 30, 2013	50	6	7,878,300	1,452,700	94.3	%	89.0	%

As of June 30, 2014, 94.2% of the Commercial portfolio was leased, an increase from 93.6% at June 30, 2013. On a same property basis, 94.2% of the Commercial portfolio was leased, an increase from 93.6% at June 30, 2013. As of June 30, 2014, the Clarendon Center apartments were 100.0% leased compared to 98.4% at June 30, 2013.

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

			Average Base Rent per Square Foot
Three months ended June 30,	Square Feet	Number of Leases	New/Renewed Leases		Expiring Leases
2014	327,288	82	$	19.60	$	19.60
2013	383,836	65	16.01		16.11

Additional information about the 2014 leasing activity is set forth below. The below information includes leases for space which had not been previously leased during the period of the Company's ownership, either a result of acquisition or development.

	New Leases			Renewed Leases
Number of leases	21			64
Square feet	52,692			283,460
Per square foot average annualized:
Base rent	$	22.00		$	19.19
Tenant improvements	(4.72		)	(0.12		)
Leasing costs	(0.79		)	(0.04		)
Rent concessions	(0.40		)	(0.10		)
Effective rents	$	16.09		$	18.93

During the three months ended June 30, 2014, the Company entered into 97 new or renewed apartment leases. The average monthly rent per square foot for these leases increased to $3.44 from $3.37. During the three months ended June 30, 2013, the Company entered into 98 new or renewed apartment leases. The average monthly rent per square foot for these leases increased to $3.37 from $3.23.

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As of December 31, 2013, 911,638 square feet of Commercial space was subject to leases scheduled to expire in 2014. Of those leases, as of June 30, 2014, leases representing 468,891 square feet of Commercial space have not yet renewed and are scheduled to expire over the next six months. Below is information about existing and estimated market base rents per square foot for that space.

Expiring Leases:	Total
Square feet	468,891
Average base rent per square foot	$	17.76
Estimated market base rent per square foot	$	18.25

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

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

The Company may, where appropriate, employ derivative instruments, such as interest rate swaps, to mitigate the risk of interest rate fluctuations. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. On June 29, 2010, the Company entered into an interest rate swap agreement with a $45.6 million notional amount to manage the interest rate risk associated with $45.6 million of variable-rate debt. The swap agreement was effective July 1, 2010, terminates on July 1, 2020 and effectively fixes the interest rate on the debt at 5.83%. The fair value of the swap at June 30, 2014 was approximately $3.2 million and is reflected in accounts payable, accrued expenses and other liabilities in the consolidated balance sheet.

The Company is exposed to interest rate fluctuations which will affect the amount of interest expense of its variable rate debt and the fair value of its fixed rate debt. As of June 30, 2014, the Company had variable rate indebtedness totaling $29.9 million. If the interest rates on the Company’s variable rate debt instruments outstanding at June 30, 2014 had been one percentage point higher, our annual interest expense relating to these debt instruments would have increased by $299,000 based on those balances. As of June 30, 2014, the Company had fixed-rate indebtedness totaling $790.2 million with a weighted average interest rate of 5.67%. If interest rates on the Company’s fixed-rate debt instruments at June 30, 2014 had been one percentage point higher, the fair value of those debt instruments on that date would have been approximately $46.8 million less than the carrying value.

Item 4. Controls and Procedures

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

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including its Chairman and Chief Executive Officer, its Senior Vice President-Chief Financial Officer, Secretary and Treasurer, and its Senior Vice President-Chief Accounting Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2014. Based on the foregoing, the Company’s Chairman and Chief Executive Officer, its Senior Vice President-Chief Financial Officer, Secretary and Treasurer and its Senior Vice President-Chief Accounting Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2014.

During the quarter ended June 30, 2014, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

The Company has no material updates to the risk factors presented in Item 1A. Risk Factors in the 2013 Annual Report of the Company on Form 10-K.

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

B. Francis Saul II, the Company’s Chairman of the Board and Chief Executive Officer, his spouse and entities affiliated with Mr. Saul II, through participation in the Company’s Dividend Reinvestment and Stock Purchase Plan for the April 30, 2014 dividend distribution acquired 25,961 shares of common stock at a price of $44.14 per share and 104,831 limited partnership units at a price of $44.77 per unit.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

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Item 6. Exhibits

3.	(a)	First Amended and Restated Articles of Incorporation of Saul Centers, Inc. filed with the Maryland Department of Assessments and Taxation on August 23, 1994 and filed as Exhibit 3.(a) of the 1993 Annual Report of the Company on Form 10-K are hereby incorporated by reference. Articles of Amendment to the First Amended and Restated Articles of Incorporation of Saul Centers, Inc., filed with the Maryland Department of Assessments and Taxation on May 28, 2004 and filed as Exhibit 3.(a) of the June 30, 2004 Quarterly Report of the Company is hereby incorporated by reference. Articles of Amendment to the First Amended and Restated Articles of Incorporation of Saul Centers, Inc., filed with the Maryland Department of Assessments and Taxation on May 26, 2006 and filed as Exhibit 3.(a) of the Company’s Current Report on Form 8-K filed May 30, 2006 is hereby incorporated by reference. Articles of Amendment to the First Amended and Restated Articles of Incorporation of Saul Centers, Inc., filed with the Maryland Department of Assessments and Taxation on May 14, 2013 and filed as Exhibit 3.(a) of the Company’s Current Report on Form 8-K filed May 14, 2013 is hereby incorporated by reference.
	(b)	Amended and Restated Bylaws of Saul Centers, Inc. as in effect at and after August 24, 1993 and as of August 26, 1993 and filed as Exhibit 3.(b) of the 1993 Annual Report of the Company on Form 10-K are hereby incorporated by reference. Amendment No. 1 to Amended and Restate Bylaws of Saul Centers, Inc. adopted November 29, 2007 and filed as Exhibit 3(b) of the Company’s Current Report on Form 8-K filed December 3, 2007 is hereby incorporated by reference.
	(c)	Articles Supplementary to First Amended and Restated Articles of Incorporation of the Company, dated October 30, 2003, filed as Exhibit 2 to the Company’s Current Report on Form 8-A dated October 31, 2003, is hereby incorporated by reference.
	(d)	Articles Supplementary to First Amended and Restated Articles of Incorporation of the Company, as amended, dated March 26, 2008, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed March 27, 2008, is hereby incorporated by reference.
	(e)	Articles Supplementary to First Amended and Restated Articles of Incorporation of the Company, dated February 6, 2013, filed as Exhibit 3.2 to Saul Centers’ Registration Statement on Form 8-A, filed February 7, 2013, is hereby incorporated by reference.
4.	(a)	Deposit Agreement, dated November 5, 2003, among the Company, Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, each representing 1/100th of a share of 8% Series A Cumulative Redeemable Preferred Stock of Saul Centers, Inc. and filed as Exhibit 4 to the Registration Statement on Form 8-A on October 31, 2003 is hereby incorporated by reference.
	(b)	Deposit Agreement, dated March 27, 2008, among the Company, Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, each representing 1/100th of a share of 9% Series B Cumulative Redeemable Preferred Stock of Saul Centers, Inc. and filed as Exhibit 4.1 to the Registration Statement on Form 8-A on March 27, 2008 is hereby incorporated by reference.
	(c)	Deposit Agreement, dated February 6, 2013, among the Company, Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred Stock of Saul Centers, Inc. filed as Exhibit 4.1 to Saul Centers’ Registration Statement on Form 8-A on February 7, 2013 is hereby incorporated by reference.
	(d)	Form specimen of receipt representing the depositary shares, each representing 1/100th of a share of 8% Series A Cumulative Redeemable Preferred Stock of Saul Centers, Inc. and included as part of Exhibit 4 to the Registration Statement on Form 8-A on October 31, 2003 is hereby incorporated by reference.
	(e)	Form specimen of receipt representing the depositary shares, each representing 1/100th of a share of 9% Series B Cumulative Redeemable Preferred Stock of Saul Centers, Inc. and included as part of Exhibit 4.2 to the Registration Statement on Form 8-A on March 27, 2008 is hereby incorporated by reference.
	(f)	Form specimen of receipt representing the depositary shares, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred Stock of Saul Centers, Inc. and included as part of Exhibit 4.1 to Saul Centers’ Registration Statement on Form 8-A on February 7, 2013 is hereby incorporated by reference.

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10.	(a)	First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit No. 10.1 to Registration Statement No. 33-64562 is hereby incorporated by reference. The First Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership, the Second Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership, and the Third Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the 1995 Annual Report of the Company on Form 10-K is hereby incorporated by reference. The Fourth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the March 31, 1997 Quarterly Report of the Company is hereby incorporated by reference. The Fifth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 4.(c) to Registration Statement No. 333-41436, is hereby incorporated by reference. The Sixth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the September 30, 2003 Quarterly Report of the Company on Form 10-Q is hereby incorporated by reference. The Seventh Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the December 31, 2003 Annual Report of the Company on Form 10-K is hereby incorporated by reference. The Eighth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the December 31, 2007 Annual Report of the Company on Form 10-K is hereby incorporated by reference. The Ninth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the March 31, 2008 Quarterly Report of the Company on Form 10-Q is hereby incorporated by reference. The Tenth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the March 31, 2008 Quarterly Report of the Company on Form 10-Q is hereby incorporated by reference. The Eleventh Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.(a) of the September 30, 2011 Quarterly Report of the Company on Form 10-Q is hereby incorporated by reference. The Twelfth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Holdings Limited Partnership filed as Exhibit 10.1 of the Current Report of the Company on Form 8-K dated February 12, 2013 is hereby incorporated by reference.
	(b)	First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary I Limited Partnership and Amendment No. 1 thereto filed as Exhibit 10.2 to Registration Statement No. 33-64562 are hereby incorporated by reference. The Second Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary I Limited Partnership, the Third Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary I Limited Partnership and the Fourth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary I Limited Partnership as filed as Exhibit 10.(b) of the 1997 Annual Report of the Company on Form 10-K are hereby incorporated by reference.
	(c)	First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary II Limited Partnership and Amendment No. 1 thereto filed as Exhibit 10.3 to Registration Statement No. 33-64562 are hereby incorporated by reference. The Second Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary II Limited Partnership filed as Exhibit 10.(c) of the June 30, 2001 Quarterly Report of the Company is hereby incorporated by reference. The Third Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary II Limited Partnership as filed as exhibit 10.(c) of the 2006 Annual Report of the Company on Form 10-K are hereby incorporated by reference. The Fourth Amendment to the First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary II Limited Partnership as filed as Exhibit 10.(c) of the 2009 Annual Report of the Company on Form 10-K are hereby incorporated by reference.
	(d)	Property Conveyance Agreement filed as Exhibit 10.4 to Registration Statement No. 33-64562 is hereby incorporated by reference.
	(e)	Management Functions Conveyance Agreement filed as Exhibit 10.5 to Registration Statement No. 33-64562 is hereby incorporated by reference.
	(f)	Registration Rights and Lock-Up Agreement filed as Exhibit 10.6 to Registration Statement No. 33-64562 is hereby incorporated by reference.
	(g)	Exclusivity and Right of First Refusal Agreement filed as Exhibit 10.7 to Registration Statement No. 33-64562 is hereby incorporated by reference.
	(h)	Agreement of Assumption dated as of August 26, 1993 executed by Saul Holdings Limited Partnership and filed as Exhibit 10.(i) of the 1993 Annual Report of the Company on Form 10-K is hereby incorporated by reference.
	(i)	Deferred Compensation Plan for Directors, dated as of April 23, 2004 and filed as Exhibit 10.(k) of the June 30, 2004 Quarterly Report of the Company is hereby incorporated by reference.
	(j)	Amended and Restated Credit Agreement, dated as of June 24, 2014, by and among Saul Holdings Limited Partnership as Borrower; Wells Fargo Bank, National Association, as Administrative Agent and Sole Lead Arranger; JP Morgan Chase Bank, N.A., as Syndication Agent; and Wells Fargo Bank, National Association, JP Morgan Chase Bank, N.A., Capital One, N.A. and Citizens Bank of Pennsylvania as Lenders, as filed as Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated June 19, 2014, is hereby incorporated by reference.
	(k)	Amended and Restated Guaranty, dated as of June 24, 2014, by and between Saul Centers, Inc., as Guarantor, and Wells Fargo Bank, National Association, as Administrative Agent and Sole Lead Arranger for itself and other financial institutions as Lenders, as filed as Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated June 19, 2014, is hereby incorporated by reference.

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	(l)	The Saul Centers, Inc. 2004 Stock Plan, as filed as Annex A to the Proxy Statement of the Company for its 2004 Annual Meeting of Stockholders, is hereby incorporated by reference. The Amendment to Saul Centers, Inc. 2004 Stock Plan, as filed as Annex A to the Proxy Statement of the Company for its 2008 Annual Meeting of Stockholders, is hereby incorporated by reference. The Amendment to Saul Centers, Inc. 2004 Stock Plan, as filed as Annex B to the Proxy Statement of the Company for its 2013 Annual Meeting of Stockholders, is hereby incorporated by reference.
	(m)	Form of Director Stock Option Agreements, as filed as Exhibit 10.(j) of the September 30, 2004 Quarterly Report of the Company, is hereby incorporated by reference.
	(n)	Form of Officer Stock Option Grant Agreements, as filed as Exhibit 10.(k) of the September 30, 2004 Quarterly Report of the Company, is hereby incorporated by reference.
	(o)	Promissory Note, dated as of March 23, 2011, by Clarendon Center LLC to The Prudential Life Insurance Company of America as filed as Exhibit 10.(a) of the Company’s Current Report on Form 8-K dated April 28, 2011, is hereby incorporated by reference.
	(p)	Deed of Trust, Security Agreement and Fixture Filing, dated as of March 23, 2011, by Clarendon Center LLC to Lawyers Title Realty Services, Inc. as trustee for the benefit of The Prudential Insurance Company of America, as beneficiary, as filed as Exhibit 10.(b) of the Company’s Current Report on Form 8-K dated April 28, 2011, is hereby incorporated by reference.
	(q)	Shared Services Agreement, dated as of July 1, 2004, between B. F. Saul Company and Saul Centers, Inc., as filed as Exhibit 10. (c) of the Company’s Current Report on Form 8-K dated August 11, 2010, is hereby incorporated by reference.
	(r)	Purchase Agreement, dated as of August 9, 2011, by and among the Company, Saul Holdings Limited Partnership and B. F. Saul Real Estate Investment Trust and filed as Exhibit 10.(r) of the September 30, 2011 Quarterly Report of the Company is hereby incorporated by reference.
	(s)	Agreement of Purchase and Sale, dated as of August 9, 2011, between Cranberry Retail, Inc. and Saul Holdings Limited Partnership, as amended and filed as Exhibit 2.(a) of the September 30, 2011 Quarterly Report of the Company is hereby incorporated by reference.
	(t)	Agreement of Purchase and Sale, dated as of August 9, 2011, between Kentlands Retail, Inc. and Saul Holdings Limited Partnership, as amended and filed as Exhibit 2.(b) of the September 30, 2011 Quarterly Report of the Company is hereby incorporated by reference.
	(u)	Agreement of Purchase and Sale, dated as of August 9, 2011, between Severna Retail, Inc. and Saul Holdings Limited Partnership, as amended and filed as Exhibit 2.(c) of the September 30, 2011 Quarterly Report of the Company is hereby incorporated by reference.
	(v)	Consulting Agreement, dated as of September 4, 2012, by and among Saul Centers, Inc., its subsidiary entities and B. Francis Saul III and filed as Exhibit 10(v) of the September 30, 2012 Quarterly Report of the Company is hereby incorporated by reference.
	(w)	Separation Agreement, dated as of March 25, 2014, by and among Saul Centers, Inc., B. F. Saul Company and Thomas H. McCormick and filed as Exhibit 10(w) of the March 31, 2014 Quarterly Report of the Company is hereby incorporated by reference.
31.		Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer and Chief Financial Officer (filed herewith).
32.		Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer (filed herewith).
99.	(a)	Schedule of Portfolio Properties (filed herewith).
	(b)	Letter agreement by and among Saul Centers, Inc., Saul Holdings Limited Partnership and B. F. Saul Real Estate Investment Trust regarding Twinbrook area properties (filed herewith).
101.		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2014, formatted in Extensible Business Reporting Language (“XBRL”): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of changes in stockholders’ equity and comprehensive income, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements.

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SIGNATURES

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

	SAUL CENTERS, INC. (Registrant)
Date: August 4, 2014	/s/ J. Page Lansdale
	J. Page Lansdale, President and Chief Operating Officer
Date: August 4, 2014	/s/ Scott V. Schneider
	Scott V. Schneider Senior Vice President, Chief Financial Officer (principal financial officer)
Date: August 4, 2014	/s/ Joel A. Friedman
	Joel A. Friedman Senior Vice President, Chief Accounting Officer (principal accounting officer)

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EX-31

Exhibit 31

CERTIFICATIONS

I, B. Francis Saul II, certify that:

1. I have reviewed this report on Form 10-Q of Saul Centers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal period that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 4, 2014

/s/ B. Francis Saul II

B. Francis Saul II

Chairman and Chief Executive Officer

CERTIFICATIONS

I, Scott V. Schneider, certify that:

1. I have reviewed this report on Form 10-Q of Saul Centers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal period that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 4, 2014

/s/ Scott V. Schneider

Scott V. Schneider

Senior Vice President,

Chief Financial Officer,

Secretary and Treasurer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, B. Francis Saul II, the Chairman and Chief Executive Officer of Saul Centers, Inc. (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the period ending June 30, 2014 (the “Report”). The undersigned hereby certifies that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:August 4, 2014/s/ B. Francis Saul II_____________________

Name: B. Francis Saul II

Title: Chairman and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Scott V. Schneider, the Chief Financial Officer of Saul Centers, Inc. (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the period ending June 30, 2014 (the “Report”). The undersigned hereby certifies that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:August 4, 2014/s/ Scott V. Schneider

Name: Scott V. Schneider

Title: Senior Vice President,

Chief Financial Officer, Secretary and

Treasurer

EX-99

																		Exhibit 99 (a)
Saul Centers, Inc.
Schedule of Current Portfolio Properties
June 30, 2014
					Leasable Area (Square Feet)	Year Acquired or Developed (Renovated)	Land Area (Acres)	Percentage Leased as of June 30,										(1)
		Property		Location				2014		2013		2012		2011		2010		Anchor / Significant Tenants
Shopping Centers
	Ashburn Village			Ashburn, VA	221,273	1994/00/01/02/06	26.4	93	%	93	%	91	%	90	%	95	%	Giant Food, Hallmark Cards, McDonald's, Burger King, Dunkin Donuts, Kinder Care
	Ashland Square Phase I			Dumfries, VA	23,120	2007	2.0	100	%	100	%	100	%	100	%	100	%	Capital One Bank, CVS Pharmacy, The All American Steakhouse
	Beacon Center			Alexandria, VA	358,071	1972 (1993/99/07)	32.3	100	%	100	%	100	%	100	%	100	%	Lowe's Home Improvement Center, Giant Food, Outback Steakhouse, Marshalls, Hancock Fabrics, Home Goods, Party Depot, Panera Bread, TGI Fridays, Starbucks, Famous Dave's, Chipotle, Subway
	BJ's Wholesale Club			Alexandria, VA	115,660	2008	9.6	100	%	100	%	100	%	100	%	100	%	BJ's Wholesale Club
	Boca Valley Plaza			Boca Raton, FL	121,269	2004	12.7	93	%	91	%	81	%	78	%	81	%	Publix, Wachovia Bank, Jaco Hybrid Training, Subway
	Boulevard			Fairfax, VA	49,140	1994 (1999/09)	5.0	95	%	100	%	100	%	100	%	100	%	Panera Bread, Party City, Petco
	Briggs Chaney MarketPlace			Silver Spring, MD	194,347	2004	18.2	99	%	99	%	100	%	100	%	99	%	Safeway, Ross Dress For Less, Family Dollar, Advance Auto Parts, McDonald's, Wendy's, Chuck E. Cheese's
	Broadlands Village			Ashburn, VA	159,734	2003/4/6	24.0	94	%	88	%	86	%	86	%	87	%	Safeway, The All American Steakhouse, Bonefish Grill, Dollar Tree, Starbucks, Subway
	Countryside Marketplace			Sterling, VA	137,662	2004	16.0	92	%	86	%	92	%	92	%	91	%	Safeway, CVS Pharmacy, Starbucks, McDonald's, Seven-Eleven
	Cranberry Square			Westminster, MD	141,450	2011	18.9	98	%	95	%	91	%	N/A		N/A		Giant Food, Staples, Party City, Pier 1 Imports, Jos. A. Bank, Wendy's, Giant Gas Station, Mattress Discounters
	Cruse MarketPlace			Cumming, GA	78,686	2004	10.6	81	%	84	%	90	%	86	%	88	%	Publix, Subway, Orange Theory
	Flagship Center			Rockville, MD	21,500	1972, 1989	0.5	100	%	100	%	100	%	100	%	100	%	Capital One Bank
	French Market			Oklahoma City, OK	244,718	1974 (1984/98)	13.8	100	%	94	%	94	%	98	%	97	%	Burlington Coat Factory, Bed Bath & Beyond, Petco, The Tile Shop, Staples, Lakeshore Learning Center, Dollar Tree
	Germantown			Germantown, MD	27,241	1992	2.7	82	%	81	%	86	%	82	%	86	%	Jiffy Lube
	The Glen			Woodbridge, VA	136,440	1994 (2005)	14.7	97	%	98	%	98	%	97	%	91	%	Safeway Marketplace, The All American Steakhouse, Panera Bread, Five Guys, Chipotle
	Great Eastern			District Heights, MD	255,398	1972 (1995)	31.9	74	%	74	%	98	%	98	%	98	%	Pep Boys, No Excuse Workout, Room Style Furniture
	Great Falls Center			Great Falls, VA	91,666	2008	11.0	98	%	95	%	97	%	93	%	93	%	Safeway, CVS Pharmacy, Capital One Bank, Starbucks, Subway
	Hampshire Langley			Takoma Park, MD	131,700	1972 (1979)	9.9	100	%	100	%	97	%	100	%	96	%	Expo E Mart, Radio Shack, Starbucks, Chuck E. Cheese's, Sardi's Chicken
	Hunt Club Corners			Apopka, FL	101,522	2006	13.9	97	%	94	%	94	%	94	%	93	%	Publix, Walgreens, Radio Shack, Hallmark
	Jamestown Place			Altamonte Springs, FL	96,372	2005	10.9	89	%	88	%	92	%	92	%	89	%	Publix, Carrabas Italian Grill
	Kentlands Square I			Gaithersburg, MD	114,381	2002	11.5	100	%	100	%	100	%	100	%	100	%	Lowe's Home Improvement Center, Chipotle
	Kentlands Square II			Gaithersburg, MD	247,783	2011	23.4	99	%	96	%	96	%	N/A		N/A		Giant Food, Kmart, Party City, Panera Bread, Not Your Average Joe's, Payless Shoes, Hallmark, Chick-Fil-A, Coal Fire Pizza, Brasserie Beck, Cava Mezza Grill, Zengo Cycle
	Kentlands Place			Gaithersburg, MD	40,648	2005	3.4	100	%	100	%	100	%	93	%	100	%	Elizabeth Arden's Red Door Salon, Bonefish Grill, Subway
	Saul Centers, Inc.
	Schedule of Current Portfolio Properties
	June 30, 2014
					Leasable Area (Square Feet)	Year Acquired or Developed (Renovated)	Land Area (Acres)	Percentage Leased as of June 30,										(1)
		Property		Location				2014		2013		2012		2011		2010		Anchor / Significant Tenants
	Shopping Centers (continued)
	Lansdowne Town Center			Leesburg, VA	189,422	2006	23.4	93	%	95	%	93	%	93	%	91	%	Harris Teeter, CVS Pharmacy, Panera Bread, Not Your Average Joe's, Starbucks, Capital One Bank, Pike's Fish House
	Leesburg Pike Plaza			Baileys Crossroads, VA	97,752	1966 (1982/95)	9.4	96	%	100	%	95	%	100	%	97	%	CVS Pharmacy, Party Depot, FedEx Kinko's, Radio Shack, Verizon Wireless
	Lumberton Plaza			Lumberton, NJ	192,718	1975 (1992/96)	23.3	94	%	93	%	80	%	66	%	98	%	Bottom Dollar Food, Rite Aid, Virtua Health Center, Radio Shack, Family Dollar, Retro Fitness, Big Lots, Burger King
	Metro Pike Center			Rockville, MD	67,488	2010	4.6	92	%	91	%	79	%	91	%	N/A		McDonald's, Jennifer Convertibles, FedEx Kinko's, Dunkin Donuts, Seven Eleven, Mattress Warehouse
	Shops at Monocacy			Frederick, MD	109,144	2004	13.0	98	%	93	%	86	%	90	%	99	%	Giant Food, Giant Gas Station, Panera Bread, Starbucks, Five Guys, California Tortilla, Firehouse Subs, Comcast
	Northrock			Warrenton, VA	99,789	2009	15.4	90	%	82	%	81	%	72	%	72	%	Harris Teeter, Longhorn Steakhouse, Ledo's Pizza, Capital One Bank, Jos. A Bank
	Olde Forte Village			Ft. Washington, MD	143,577	2003	16.0	98	%	97	%	93	%	90	%	88	%	Safeway, Advance Auto Parts, Dollar Tree, Radio Shack, McDonald's, Wendy's, Ledo's Pizza
	Olney			Olney, MD	53,765	1975 (1990)	3.7	94	%	94	%	93	%	97	%	95	%	Rite Aid, Olney Grill, Ledo's Pizza, Popeye's
	Orchard Park			Dunwoody, GA	87,885	2007	10.5	97	%	92	%	90	%	92	%	89	%	Kroger, GNC, Subway, Pacific Dental
	Palm Springs Center			Altamonte Springs, FL	126,446	2005	12.0	98	%	98	%	95	%	94	%	91	%	Albertson's, Office Depot, Mimi's Cafe, Toojay's Deli
	Ravenwood			Baltimore, MD	93,328	1972 (2006)	8.0	94	%	96	%	90	%	91	%	90	%	Giant Food, Starbucks
	11503 Rockville Pk / 5541 Nicholson Ln			Rockville, MD	40,249	2010 / 2012	3.0	63	%	70	%	100	%	100	%	N/A		Staples, Casual Male
	1500/1580/1582 Rockville Pike			Rockville, MD	105,428	2012/2014	9.2	100	%	81	%	N/A		N/A		N/A		Party City, CVS
	Seabreeze Plaza			Palm Harbor, FL	146,673	2005	18.4	97	%	91	%	98	%	95	%	95	%	Publix, Earth Origins Health Food, Petco, Planet Fitness, Vision Works
	Marketplace at Sea Colony			Bethany Beach, DE	21,677	2008	5.1	95	%	91	%	90	%	92	%	96	%	Seacoast Realty, Armand's Pizza, Candy Kitchen, Turquoise Restaurant
	Seven Corners			Falls Church, VA	574,831	1973 (1994-7/07)	31.6	100	%	100	%	100	%	100	%	100	%	The Home Depot, Shoppers Food & Pharmacy, Michaels Arts & Crafts, Barnes & Noble, Ross Dress For Less, Ski Chalet, G Street Fabrics, Off-Broadway Shoes, JoAnn Fabrics, Dress Barn, Starbucks, Dogfishhead Ale House, Red Robin Gourmet Burgers, Chipotle, Wendy's, Burlington Coat Factory
	Severna Park Marketplace			Severna Park, MD	254,174	2011	20.6	100	%	100	%	100	%	N/A		N/A		Giant Food, Kohl's, Office Depot, A.C. Moore, Goodyear, Chipotle, McDonald's, Jos. A. Bank, Radio Shack, Atlanta Bread Company, Five Guys, Unleashed (Petco)
	Shops at Fairfax			Fairfax, VA	68,762	1975 (1993/99)	6.7	96	%	100	%	100	%	95	%	93	%	Super H Mart
	Smallwood Village Center			Waldorf, MD	174,749	2006	25.1	72	%	74	%	70	%	63	%	78	%	Safeway, CVS Pharmacy, Family Dollar
	Southdale			Glen Burnie, MD	484,045	1972 (1986)	39.6	88	%	97	%	93	%	94	%	94	%	The Home Depot, Michaels Arts & Crafts, Marshalls, PetSmart, Value City Furniture, Athletic Warehouse, Starbucks, Gallo Clothing, Office Depot, The Tile Shop
	Southside Plaza			Richmond, VA	371,761	1972	32.8	98	%	98	%	93	%	93	%	91	%	Community Supermarket, Maxway, Citi Trends, City of Richmond, McDonald's, Burger King, Kool Smiles, Anna's Linens, Hibachi Grill
	Saul Centers, Inc.
	Schedule of Current Portfolio Properties
	June 30, 2014
					Leasable Area (Square Feet)	Year Acquired or Developed (Renovated)	Land Area (Acres)	Percentage Leased as of June 30,										(1)
		Property		Location				2014		2013		2012		2011		2010		Anchor / Significant Tenants
	Shopping Centers (continued)
	South Dekalb Plaza			Atlanta, GA	163,418	1976	14.6	93	%	88	%	89	%	89	%	88	%	Maxway, Big Lots, Emory Clinic, Deal$ (Dollar Tree), Shoe Land
	Thruway			Winston-Salem, NC	362,056	1972 (1997)	30.5	95	%	95	%	92	%	90	%	95	%	Harris Teeter, Trader Joe's, Stein Mart, Talbots, Hanes Brands, Jos. A. Bank, Bonefish Grill, Chico's, Ann Taylor Loft, Coldwater Creek, Rite Aid, FedEx Kinkos, Plow & Hearth, New Balance, Aveda Salon, Christies Hallmark, Carter's Kids, McDonald's, Chick-Fil-A, Wells Fargo Bank, Francesca's Collections, Great Outdoor Provision Company, White House / Black Market, Soma
	Village Center			Centreville, VA	146,032	1990	17.2	98	%	99	%	98	%	93	%	88	%	Giant Food, Tuesday Morning, Starbucks, McDonald's, Pet Supplies Plus, Bikram Yoga
	Westview Village			Frederick, MD	97,145	2009	10.4	90	%	83	%	72	%	51	%	31	%	Mimi's Cafe, Sleepy's, Music & Arts, Firehouse Subs, CiCi's Pizza, Café Rio, Five Guys, Regus
	White Oak			Silver Spring, MD	480,676	1972 (1993)	28.5	100	%	100	%	100	%	99	%	99	%	Giant Food, Sears, Walgreens, Radio Shack, Boston Market, Sarku, Capital One Bank
				Total Shopping Centers	7,862,771		755.9	94.9	%	94.3	%	93.6	%	92.4	%	93.1	%
Saul Centers, Inc.
Schedule of Current Portfolio Properties
June 30, 2014
					Leasable Area (Square Feet)	Year Acquired or Developed (Renovated)	Land Area (Acres)	Percentage Leased as of June 30,										(1)
		Property		Location				2014		2013		2012		2011		2010		Anchor / Significant Tenants
Mixed-Use Properties
	Avenel Business Park			Gaithersburg, MD	390,683	1981-2000	37.1	92	%	85	%	80	%	81	%	85	%	General Services Administration, SeraCare Life Sciences, Gene Dx, Inc., Direct Buy
	Clarendon Center-North Block			Arlington, VA	108,387	2010	0.6	96	%	96	%	86	%	86	%	N/A		Pete's New Haven Pizza, AT&T, Airline Reporting Corporation
	Clarendon Center-South Block			Arlington, VA	104,894	2010	1.3	100	%	100	%	99	%	57	%	N/A		Trader Joe's, Circa, Burke & Herbert Bank, Bracket Room, Cannon Design, Winston Partners, Keppler Speakers Bureau, ECG Management Co., Leadership Institute, Capital One
	Clarendon Center Residential-South Block (244 units)				188,671	2010		100	%	98	%	99	%	100	%	N/A
	Crosstown Business Center			Tulsa, OK	197,127	1975 (2000)	22.4	81	%	81	%	87	%	87	%	78	%	Compass Group, Roxtec, Keystone Automotive, Freedom Express, Direct TV, Auto Panels Plus
	601 Pennsylvania Ave.			Washington, DC	227,021	1973 (1986)	1.0	94	%	95	%	95	%	96	%	100	%	National Gallery of Art, American Assn. of Health Plans, Credit Union National Assn., Southern Company, HQ Global, Freedom Forum, Pharmaceutical Care Management Assn., Capital Grille
	Washington Square			Alexandria, VA	236,376	1975 (2000)	2.0	86	%	89	%	85	%	80	%	97	%	Vanderweil Engineering, AECOM, Freeman Decorating Services, Tauri Group, Cooper Carry, Bank of America, Marketing General, Alexandria Economic Development, Trader Joe's, Fed Ex Kinko's, Talbots, Teaism Restaurant, Starbucks, Cardinal Bank
				Total Mixed-Use Properties	1,453,159		64.4	90.3	%	89.0	%	87.0	%	82.9	%	89.7	%	(2)
				Total Portfolio	9,315,930		820.3	94.2	%	93.6	%	92.7	%	90.9	%	92.7	%	(2)
Land and Development Parcels
	Ashland Square Phase II			Manassas, VA		2004	17.3	Marketing to grocers and other retail businesses, with a development timetable yet to be finalized.
	Park Van Ness			Washington, DC		1973	1.4	Construction of a 271-unit residential project with street-level retail is currently in process.
	New Market			New Market, MD		2005	35.5	Parcel will accommodate retail development in excess of 120,000 SF near I-70, east of Frederick, Maryland. A development timetable has not been determined.
				Total Development Properties			54.2
		(1	)	Percentage leased is a percentage of rentable square feet leased for commercial space and a percentage of units leased for apartments. Includes only operating properties owned as of June 30, 2014. As such, prior year totals do not agree to prior year tables.
		(2	)	Total percentage leased is for commercial space only.

EX-99

Exhibit 99 (b)

B. F. SAUL REAL ESTATE

Investment Trust

7501 WISCONSIN AVENUE, SUITE 1500E, BETHESDA, MARYLAND 20814

(301) 986-6000

June 19, 2014

Saul Holdings Limited Partnership

c/o Saul Centers, Inc.

Attn: Page Lansdale, President & COO

7501 Wisconsin Avenue, Suite 1500E

Bethesda, Maryland 20814

Saul Centers, Inc.

Attn: Page Lansdale, President & COO

7501 Wisconsin Avenue, Suite 1500E

Bethesda, Maryland 20814

RE:Agreement Regarding Twinbrook Area Properties

Mr. Lansdale:

On February 19, 2014, with your prior knowledge, the B.F. Saul Real Estate Investment Trust (the “Trust”) purchased approximately 6.75 acres of land at 1592 Rockville Pike, Rockville, Maryland (the “Trust Twinbrook Property”). The Trust understands that it has certain obligations pursuant to the terms of the Exclusivity and Right of First Refusal Agreement dated as of August 26, 1993 by and among the Trust, Saul Centers, Inc. (“Saul Centers”), the general partner of Saul Holdings Limited Partnership (“Holdings”), and various other affiliated entities (the “Agreement”) and it wishes to memorialize its understanding with Saul Centers with respect thereto.

To the extent that the Agreement would have been applicable to the purchase of the Trust Twinbrook Property by the Trust, Saul Centers hereby waives compliance with the terms of the Agreement with respect to the Trust Twinbrook Property under the following conditions:

a. the Trust Twinbrook Property shall be deemed a “First Right Property” as such term is defined in the Agreement and, as a result, Saul Centers shall have a right of first refusal to acquire the Trust Twinbrook Property if and when the Trust, in its sole discretion, elects to sell; and

b. the Trust and Saul Centers shall cooperate reasonably and in good faith to coordinate their respective development plans for their respective Twinbrook Properties to minimize any disruptions to their respective development plans.

Please indicate your agreement and acceptance of the terms of this letter by signing where indicated below and returning one executed copy of this letter to me. Upon execution by both parties, this agreement will be effective as of February 19, 2014.

Sincerely yours,

/s/Patrick T. Connors

Name: Patrick T. Connors

Title: Vice President

AGREED AND APPROVED:

Saul Centers, Inc.

/s/ J. Page Lansdale

Name: J. Page Lansdale

Title: President and Chief Operating Officer

Saul Holdings Limited Partnership

By: Saul Centers, Inc., General Partner

/s/ J. Page Lansdale

    Name: J. Page Lansdale

Title: President and Chief Operating Officer

XML

Related Party Transactions - Additional Information (Detail) (USD $)	1 Months Ended	6 Months Ended		12 Months Ended
	Sep. 04, 2012	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2013
Related Party Transactions [Abstract]
Company contribution to a multi employer 401K plan at discretionary amount of employee's cash compensation, maximum percentage		6.00%
Company contribution to a multi employer 401K plan at discretionary amount of employee's cash compensation, amount		$ 191,600	$ 189,000
Deferred compensation, employee contribution, percentage		2.00%
Deferred compensation, company contribution, amount		71,100	103,000
Number of times the employer contribution is higher than the amount deferred by employees		300.00%
Deferred compensation, cumulative unfunded liability		1,700,000			1,600,000
Ancillary costs and expenses		3,600,000	3,200,000
Liability due to The Saul Organization for the Company's share of these ancillary costs and expenses		479,900			499,000
Operating Leases, Extended Expiration Period				5 years
Percentage of annual increase in base rent				3.00%
Rent expense		414,000	428,000
Insurance Commissions and fees expense		169,700	167,000
Monthly consulting fees	60,000
Term of consulting agreement	2 years
Consulting fees		$ 360,000	$ 360,000,000

XML

Business Segments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Revenue	$ 52,286	$ 48,809	$ 105,233	$ 97,995
Expenses	(11,829)	(11,759)	(25,070)	(23,735)
Income from real estate	40,457	37,050	80,163	74,260
Interest expense and amortization of deferred debt costs	(11,486)	(11,709)	(22,953)	(23,426)
General and administrative	(4,023)	(3,925)	(8,703)	(7,329)
Acquisition related costs	(216)	0	(379)	0
Predevelopment expenses	0	(1,233)	(503)	(3,582)
Subtotal	24,732	20,183	47,625	39,923
Depreciation and amortization of deferred leasing costs	(10,309)	(12,472)	(20,489)	(28,824)
Gain on sale of property	6,069	0	6,069	0
Change in fair value of derivatives	(5)	51	(7)	61
Net Income	20,487	7,762	33,198	11,160
Capital investment	18,457	6,312	32,345	11,376
Total assets	1,227,428	1,191,610	1,227,428	1,191,610	1,198,675
Shopping Centers
Segment Reporting Information [Line Items]
Revenue	39,056	35,749	78,875	71,796
Expenses	(8,002)	(7,222)	(17,492)	(14,977)
Income from real estate	31,054	28,527	61,383	56,819
Interest expense and amortization of deferred debt costs	0	0	0	0
General and administrative	0	0	0	0
Acquisition related costs	(216)		(379)
Predevelopment expenses	0	0	0	0
Subtotal	30,838	28,527	61,004	56,819
Depreciation and amortization of deferred leasing costs	(6,911)	(6,913)	(13,808)	(13,742)
Gain on sale of property	6,069		6,069
Change in fair value of derivatives	0	0	0	0
Net Income	29,996	21,614	53,265	43,077
Capital investment	13,592	2,305	24,324	5,804
Total assets	906,399	885,816	906,399	885,816
Mixed-Use Properties
Segment Reporting Information [Line Items]
Revenue	13,210	13,047	26,323	26,155
Expenses	(3,827)	(4,537)	(7,578)	(8,758)
Income from real estate	9,383	8,510	18,745	17,397
Interest expense and amortization of deferred debt costs	0	0	0	0
General and administrative	0	0	0	0
Acquisition related costs	0		0
Predevelopment expenses	0	(1,233)	(503)	(3,582)
Subtotal	9,383	7,277	18,242	13,815
Depreciation and amortization of deferred leasing costs	(3,398)	(5,559)	(6,681)	(15,082)
Gain on sale of property	0		0
Change in fair value of derivatives	0	0	0	0
Net Income	5,985	1,718	11,561	(1,267)
Capital investment	4,865	4,007	8,021	5,572
Total assets	297,009	292,048	297,009	292,048
Corporate and Other
Segment Reporting Information [Line Items]
Revenue	20	13	35	44
Expenses	0	0	0	0
Income from real estate	20	13	35	44
Interest expense and amortization of deferred debt costs	(11,486)	(11,709)	(22,953)	(23,426)
General and administrative	(4,023)	(3,925)	(8,703)	(7,329)
Acquisition related costs	0		0
Predevelopment expenses	0	0	0	0
Subtotal	(15,489)	(15,621)	(31,621)	(30,711)
Depreciation and amortization of deferred leasing costs	0	0	0	0
Gain on sale of property	0		0
Change in fair value of derivatives	(5)	51	(7)	61
Net Income	(15,494)	(15,570)	(31,628)	(30,650)
Capital investment	0	0	0	0
Total assets	$ 24,020	$ 13,746	$ 24,020	$ 13,746

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Real Estate Acquired and Sold - Additional Information (Detail) (USD $)	1 Months Ended				1 Months Ended			0 Months Ended	1 Months Ended
	Aug. 31, 2013 Kentlands Pad sqft	Dec. 31, 2013 Hunt Club Pad sqft	Jan. 31, 2014 1580 Rockville Pike sqft	Jan. 31, 2014 1580 Rockville Pike In-place Lease	Apr. 30, 2014 1582 Rockville Pike	Apr. 24, 2014 1582 Rockville Pike sqft	Apr. 30, 2014 1582 Rockville Pike In-place Lease	Apr. 24, 2014 Olney Center sqft	Apr. 30, 2014 Olney Center	Apr. 30, 2014 Giant Center sqft	Mar. 31, 2014 Giant Center
Business Acquisition [Line Items]
Name of property	Kentlands Pad	Hunt Club Pad	1580 Rockville Pike						Olney Center	Giant Center
Purchase price	$ 4,300,000	$ 800,000	$ 8,000,000		$ 11,000,000
Property type	retail pad	retail pad
Area of real estate property (in sq ft)	7,100	5,500	12,100			40,700		53,765		70,040
Location of property	Gaithersburg, Maryland	Apopka, Florida	Rockville, Maryland		Rockville, Maryland				Olney, Maryland	Milford Mill, Maryland
Property acquisition costs	99,000		163,000			200,000
Remaining life of the lease			10 years
Purchase Price Allocation:
Land			9,600,000		9,742,000
Building			2,200,000		828,000
In-place lease				513,000			849,000
Below-market rents			(4,313,000)		(419,000)
Total acquisition cost			8,000,000
Lease term									P20Y
Sale leaseback, option to purchase the property								14,600,000	14,600,000
Proceeds from sale of real estate								11,000,000	11,000,000	7,500,000
Assets held-for-sale											500,000
Sales price of property									11,000,000
Annual increase in rental payments, percentage								1.50%	1.50%
Gain on sale of real estate										6,100,000
Liabilities of assets held-for-sale											$ 100,000

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Notes Payable, Revolving Credit Facility, Interest and Amortization of Deferred Debt Costs (Tables)

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Scheduled Maturities of Debt, Including Scheduled Principal Amortization

At June 30, 2014, the scheduled maturities of debt, including scheduled principal amortization, for years ending December 31, were as follows:

(In thousands)	Balloon Payments		Scheduled Principal Amortization		Total
July 1 through December 31, 2014	$	—	$	11,223	$	11,223
2015	14,885		23,208		38,093
2016	28,879		23,496		52,375
2017	—		24,679		24,679
2018	27,748		24,821		52,569
2019	60,793		23,489		84,282
Thereafter	421,169		135,755		556,924
	$	553,474	$	266,671	$	820,145

Interest Expense and Amortization of Deferred Debt Costs

Interest expense and amortization of deferred debt costs for the three and six months ended June 30, 2014 and 2013, were as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
(In thousands)	2014			2013			2014			2013
Interest incurred	$	11,342		$	11,429		$	22,582		$	22,835
Amortization of deferred debt costs	284			314			614			625
Capitalized interest	(140		)	(34		)	(243		)	(34		)
	$	11,486		$	11,709		$	22,953		$	23,426

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Stock Option Plans - Summary of Option Activity (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014
Number of Shares
Outstanding at beginning of period (in shares)	753,625
Granted (in shares)	200,000
Exercised (in shares)	(99,685)
Expired/Forfeited (in shares)	(37,500)
Outstanding at end of period (in shares)	816,440
Exercisable at end of period (in shares)	448,940
Weighted average exercise price per share
Outstanding at beginning of period (in usd per share)	$ 42.55
Granted (in usd per share)	$ 47.03
Exercised (in usd per share)	$ 37.23
Expired/Forfeited (in usd per share)	$ 43.56
Outstanding at end of period (in usd per share)	$ 44.26
Exercisable at end of period (in usd per share)	$ 43.87
Aggregate intrinsic value
Outstanding at beginning of period	$ 4,529,206
Granted	314,000
Exercised	1,018,511
Expired/Forfeited
Outstanding at end of period	4,078,348
Exercisable at end of period	$ 2,659,611

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Notes Payable, Revolving Credit Facility, Interest and Amortization of Deferred Debt Costs - Interest Expense and Amortization of Deferred Debt Costs (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Debt Disclosure [Abstract]
Interest incurred	$ 11,342	$ 11,429	$ 22,582	$ 22,835
Amortization of deferred debt costs	284	314	614	625
Capitalized interest	(140)	(34)	(243)	(34)
Interest expense and amortization of deferred debt costs	$ 11,486	$ 11,709	$ 22,953	$ 23,426

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Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) (Olney Center, USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended
	Apr. 24, 2014	Apr. 30, 2014
Olney Center
Real Estate Properties [Line Items]
Proceeds from sale of real estate	$ 11.0	$ 11.0

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Fair Value of Financial Instruments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified			6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Interest Rate Swap
Fair Value of Financial Instruments [Line Items]
Long-term debt, fixed interest rate	4.35%	4.85%
Notes payable, fair value	$ 852.0	$ 828.7
Notes payable, carrying value	790.2	789.9
Interest rate swap agreement, termination date			Jul. 01, 2020
Fair value of derivative liability			$ 3.2

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Organization, Formation and Structure - Additional Information (Details)	Jun. 30, 2014 partnership
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Distribution of REIT taxable income (excluding net capital gains) to its stockholders	90.00%
Number of partnerships	2
Shopping Centers
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of real estate properties	49
Mixed-Use Properties
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of real estate properties	6
Non-operating Development Properties
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of real estate properties	3

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Business Segments (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Business Segments

(Dollars in thousands)	Shopping Centers			Mixed-Use Properties			Corporate and Other			Consolidated Totals
Three months ended June 30, 2014
Real estate rental operations:
Revenue	$	39,056		$	13,210		$	20		$	52,286
Expenses	(8,002		)	(3,827		)	—			(11,829		)
Income from real estate	31,054			9,383			20			40,457
Interest expense and amortization of deferred debt costs	—			—			(11,486		)	(11,486		)
General and administrative	—			—			(4,023		)	(4,023		)
Acquisition related costs	(216		)	—			—			(216		)
Predevelopment expenses	—			—			—			—
Subtotal	30,838			9,383			(15,489		)	24,732
Depreciation and amortization of deferred leasing costs	(6,911		)	(3,398		)	—			(10,309		)
Gain on sale of property	6,069			—			—			6,069
Change in fair value of derivatives	—			—			(5		)	(5		)
Net income (loss)	$	29,996		$	5,985		$	(15,494	)	$	20,487
Capital investment	$	13,592		$	4,865		$	—		$	18,457
Total assets	$	906,399		$	297,009		$	24,020		$	1,227,428
Three months ended June 30, 2013
Real estate rental operations:
Revenue	$	35,749		$	13,047		$	13		$	48,809
Expenses	(7,222		)	(4,537		)	—			(11,759		)
Income from real estate	28,527			8,510			13			37,050
Interest expense and amortization of deferred debt costs	—			—			(11,709		)	(11,709		)
General and administrative	—			—			(3,925		)	(3,925		)
Predevelopment expenses	—			(1,233		)	—			(1,233		)
Subtotal	28,527			7,277			(15,621		)	20,183
Depreciation and amortization of deferred leasing costs	(6,913		)	(5,559		)	—			(12,472		)
Change in fair value of derivatives	—			—			51			51
Net income (loss)	$	21,614		$	1,718		$	(15,570	)	$	7,762
Capital investment	$	2,305		$	4,007		$	—		$	6,312
Total assets	$	885,816		$	292,048		$	13,746		$	1,191,610

(Dollars in thousands)	Shopping Centers			Mixed-Use Properties			Corporate and Other			Consolidated Totals
Six months ended June 30, 2014
Real estate rental operations:
Revenue	$	78,875		$	26,323		$	35		$	105,233
Expenses	(17,492		)	(7,578		)	—			(25,070		)
Income from real estate	61,383			18,745			35			80,163
Interest expense and amortization of deferred debt costs	—			—			(22,953		)	(22,953		)
General and administrative	—			—			(8,703		)	(8,703		)
Acquisition related costs	(379		)	—			—			(379		)
Predevelopment expenses	—			(503		)	—			(503		)
Subtotal	61,004			18,242			(31,621		)	47,625
Depreciation and amortization of deferred leasing costs	(13,808		)	(6,681		)	—			(20,489		)
Gain on sale of property	6,069			—			—			6,069
Change in fair value of derivatives	—			—			(7		)	(7		)
Net income (loss)	$	53,265		$	11,561		$	(31,628	)	$	33,198
Capital investment	$	24,324		$	8,021		$	—		$	32,345
Total assets	$	906,399		$	297,009		$	24,020		$	1,227,428
Six months ended June 30, 2013
Real estate rental operations:
Revenue	$	71,796		$	26,155		$	44		$	97,995
Expenses	(14,977		)	(8,758		)	—			(23,735		)
Income from real estate	56,819			17,397			44			74,260
Interest expense and amortization of deferred debt costs	—			—			(23,426		)	(23,426		)
General and administrative	—			—			(7,329		)	(7,329		)
Predevelopment expenses	—			(3,582		)	—			(3,582		)
Subtotal	56,819			13,815			(30,711		)	39,923
Depreciation and amortization of deferred leasing costs	(13,742		)	(15,082		)	—			(28,824		)
Change in fair value of derivatives	—			—			61			61
Net income (loss)	$	43,077		$	(1,267	)	$	(30,650	)	$	11,160
Capital investment	$	5,804		$	5,572		$	—		$	11,376
Total assets	$	885,816		$	292,048		$	13,746		$	1,191,610

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Fair Value of Financial Instruments - Changes in Fair Value of Swaps (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Change in fair value:
Recognized in earnings	$ (5)	$ 51	$ (7)	$ 61
Recognized in other comprehensive income	(420)	1,763	(647)	2,264
Total change in fair value	$ (425)	$ 1,814	$ (654)	$ 2,325

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Summary of Significant Accounting Policies - Additional Information (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014 tenant store	Jun. 30, 2013	Jun. 30, 2014 tenant store	Jun. 30, 2013	Dec. 31, 2013
Significant Accounting Policies [Line Items]
Number of tenants	1		1
Number of shopping centers	31		31
Allowance for doubtful accounts receivables	$ 400,000		$ 400,000		$ 600,000
Period expected for the sale of property to occur			1 year
Deferred debt costs, net	10,564,000		10,564,000		9,675,000
Accumulated amortization deferred leasing cost	5,200,000		5,200,000		4,500,000
Deferred leasing costs, net	26,693,000		26,693,000		26,052,000
Accumulated amortization deferred leasing cost	19,100,000		19,100,000		16,600,000
Amortization expense deferred leasing cost			2,600,000	3,200,000
Severance payments			1,100,000
Interest expensed capitalized	140,000	34,000	243,000	34,000
Commercial development projects, availability for occupancy, maximum period after major construction activity			1 year
Depreciation and amortization expense			17,900,000	25,600,000
Increase (decrease) in depreciation expense			(7,700,000)
Repairs and maintenance expense			6,500,000	4,900,000
Property operating expenses	6,138,000	6,041,000	13,723,000	11,990,000
Shares credited to directors' deferred fee accounts			227,233
Percentage of ownership in Operating Partnership			74.30%
Snow removal costs
Significant Accounting Policies [Line Items]
Property operating expenses			1,700,000
Held-for-sale
Significant Accounting Policies [Line Items]
Number of real estate properties	0		0
Van Ness Square
Significant Accounting Policies [Line Items]
Additional depreciation expense as a result of reduction in estimated useful life			8,000,000
Estimated remaining useful life			4 months
Minimum
Significant Accounting Policies [Line Items]
Accounts receivable, net representing rental income accrued	37,500,000		37,500,000		37,200,000
Allowance for doubtful accounts receivables representing rental income accrued	$ 200,000		$ 200,000		$ 500,000
Minimum | Building
Significant Accounting Policies [Line Items]
Estimated useful life			35 years
Maximum | Building
Significant Accounting Policies [Line Items]
Estimated useful life			50 years
Maximum | Building Improvements
Significant Accounting Policies [Line Items]
Estimated useful life			20 years
Giant Food
Significant Accounting Policies [Line Items]
Percentage of total revenue			4.60%
Number of shopping centers			9
Safeway
Significant Accounting Policies [Line Items]
Percentage of total revenue			2.50%
Number of shopping centers			8
Revenues
Significant Accounting Policies [Line Items]
Number of tenants	2		2
Percentage of total revenue			2.50%

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Summary of Significant Accounting Policies - Construction in Progress (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Construction in progress	$ 16,259	$ 9,867
Park Van Ness
Property, Plant and Equipment [Line Items]
Construction in progress	13,845	7,901
Other
Property, Plant and Equipment [Line Items]
Construction in progress	$ 2,414	$ 1,966

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013
Cash flows from operating activities:
Net income	$ 33,198		$ 11,160
Adjustments to reconcile net income to net cash provided by operating activities:
Change in fair value of derivatives	7		(61)
Gain on sale of property	(6,069)		0
Depreciation and amortization of deferred leasing costs	20,489		28,824
Amortization of deferred debt costs	614		625
Non cash compensation costs of stock grants and options	658		695
Provision for credit losses	310		549
(Increase) decrease in accounts receivable and accrued income	(218)		(844)
Additions to deferred leasing costs	(1,862)		(1,862)
(Increase) decrease in prepaid expenses	2,399		2,226
Increase in other assets	(7,711)		(1,886)
Increase in accounts payable, accrued expenses and other liabilities	4,309		(1,024)
Decrease in deferred income	(3,379)		(4,359)
Net cash provided by operating activities	42,745		34,043
Cash flows from investing activities:
Acquisitions of real estate investments (1)	(8,545)	[1]	0
Additions to real estate investments	(7,002)		(7,322)
Additions to development and redevelopment projects	(6,343)		(4,054)
Proceeds from sale of property	6,679		0
Net cash used in investing activities	(15,211)		(11,376)
Cash flows from financing activities:
Proceeds from notes payable (1)	0	[1]	83,600
Repayments on notes payable	(10,923)		(47,152)
Proceeds from revolving credit facility	11,000		123,000
Repayments on revolving credit facility	(11,000)		(161,000)
Additions to deferred debt costs	(1,303)		(1,254)
Proceeds from the issuance of:
Common stock	8,159		12,683
Partnership units	8,877		0
Preferred stock redemption costs	0		(9)
Distributions to:
Common stockholders	(15,683)		(14,489)
Noncontrolling interest	(5,717)		(4,978)
Net cash used in financing activities	(23,002)		(21,855)
Net increase in cash and cash equivalents	4,532		812
Cash and cash equivalents, beginning of period	17,297		12,133
Cash and cash equivalents, end of period	21,829		12,945
Series C Preferred Stock
Proceeds from the issuance of:
Series C preferred stock	0		135,221
Distributions to:
Preferred stockholders	(4,812)		(1,283)
Series A Preferred Stock
Proceeds from the issuance of:
Preferred stock redemption payments	0		(60,000)
Distributions to:
Preferred stockholders	(1,600)		(3,613)
Series B Preferred Stock
Proceeds from the issuance of:
Preferred stock redemption payments	0		(79,328)
Distributions to:
Preferred stockholders	$ 0		$ (3,253)

[1] The 2014 acquisition of real estate and proceeds from notes payable each exclude $11,000 in connection with the sale and leaseback of the Company's Olney property.

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Summary of Significant Accounting Policies - Basic and Diluted Shares Outstanding (Details) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Earnings Per Share [Abstract]
Weighted average common shares outstanding-Basic	20,717		20,301		20,670		20,224
Effect of dilutive options (in shares)	26		22		32		27
Weighted average common shares outstanding-Diluted	20,743		20,323		20,702		20,251
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	113	[1]	118	[1]	113	[1]	118	[1]

[1] The non-dilutive options were issued in 2007 and 2008.

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Stock Option Plans - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014 CompensationPlan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock incentive plans	2
Option expiration period	10 years
Option vesting period	4 years
Closing share price (in usd per share)	$ 48.60
Outstanding options granted (in shares)	200,000
Weighted average remaining contractual life of the Company's outstanding options	7 years 2 months 13 days
Weighted average remaining contractual life of the Company's exercisable options	5 years 8 months 12 days
Stock Options | 2007
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted (in shares)	90,000
Stock Options | 2008
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options granted (in shares)	22,500

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Real estate investments
Land	$ 373,898	$ 354,967
Buildings and equipment	1,102,390	1,094,605
Construction in progress	16,259	9,867
Real estate investments	1,492,547	1,459,439
Accumulated depreciation	(380,608)	(364,663)
Real estate investments, net	1,111,939	1,094,776
Cash and cash equivalents	21,829	17,297
Accounts receivable and accrued income, net	44,114	43,884
Deferred leasing costs, net	26,693	26,052
Prepaid expenses, net	1,634	4,047
Deferred debt costs, net	10,564	9,675
Other assets	10,655	2,944
Total assets	1,227,428	1,198,675
Liabilities
Notes payable	820,145	820,068
Revolving credit facility payable	0	0
Dividends and distributions payable	14,398	13,135
Accounts payable, accrued expenses and other liabilities	24,655	20,141
Deferred income	31,575	30,205
Total liabilities	890,773	883,549
Preferred stock, 1,000,000 shares authorized:
Common stock, $0.01 par value, 40,000,000 shares authorized, 20,779,740 and 20,576,616 shares issued and outstanding, respectively	208	206
Additional paid-in capital	279,243	270,428
Accumulated deficit	(169,222)	(172,564)
Accumulated other comprehensive loss	(1,873)	(1,392)
Total Saul Centers, Inc. stockholders’ equity	288,356	276,678
Noncontrolling interest	48,299	38,448
Total stockholders’ equity	336,655	315,126
Total liabilities and stockholders’ equity	1,227,428	1,198,675
Series A Preferred Stock
Preferred stock, 1,000,000 shares authorized:
Cumulative Redeemable Preferred stock	40,000	40,000
Series C Preferred Stock
Preferred stock, 1,000,000 shares authorized:
Cumulative Redeemable Preferred stock	$ 140,000	$ 140,000

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Business Segments - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2014 segment
Segment Reporting [Abstract]
Number of reportable business segments	2

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Consolidated Statements of Stockholders' Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Total	Dividend Declared	Series A Preferred Stock Dividend Distributions	Series A Preferred Stock Dividend Declared	Series C Preferred Stock Dividend Distributions	Series C Preferred Stock Dividend Declared	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Deficit Dividend Declared	Accumulated Deficit Series A Preferred Stock Dividend Distributions	Accumulated Deficit Series A Preferred Stock Dividend Declared	Accumulated Deficit Series C Preferred Stock Dividend Distributions	Accumulated Deficit Series C Preferred Stock Dividend Declared	Accumulated Other Comprehensive (Loss)	Total Saul Centers, Inc.	Total Saul Centers, Inc. Dividend Declared	Total Saul Centers, Inc. Series A Preferred Stock Dividend Distributions	Total Saul Centers, Inc. Series A Preferred Stock Dividend Declared	Total Saul Centers, Inc. Series C Preferred Stock Dividend Distributions	Total Saul Centers, Inc. Series C Preferred Stock Dividend Declared	Noncontrolling Interest	Noncontrolling Interest Dividend Declared
Beginning Balance at Dec. 31, 2013	$ 315,126						$ 180,000	$ 206	$ 270,428	$ (172,564)						$ (1,392)	$ 276,678						$ 38,448
Issuance of 203,124 shares of common stock:
99,800 shares pursuant to dividend reinvestment plan	4,448							1	4,447								4,448
103,324 shares due to exercise of employee stock options and issuance of directors’ deferred stock	4,369							1	4,368								4,369
Issuance of 196,183 partnership units pursuant to dividend reinvestment plan	8,877																						8,877
Net income	33,198									26,341							26,341						6,857
Change in unrealized loss on cash flow hedge	(647)															(481)	(481)						(166)
Preferred stock distributions:
Preferred stock distributions			(800)	(800)	(2,406)	(2,406)						(800)	(800)	(2,406)	(2,406)				(800)	(800)	(2,406)	(2,406)
Common stock distributions	(8,275)									(8,275)							(8,275)						0
Distributions payable preferred stock:
Distributions payable common stock ($0.40/share) and distributions payable partnership units ($0.40/unit)		(14,029)									(8,312)							(8,312)						(5,717)
Ending Balance at Jun. 30, 2014	$ 336,655						$ 180,000	$ 208	$ 279,243	$ (169,222)						$ (1,873)	$ 288,356						$ 48,299

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Notes Payable, Revolving Credit Facility, Interest and Amortization of Deferred Debt Costs - Additional Information (Detail) (USD $)			0 Months Ended	1 Months Ended							6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Apr. 24, 2014 Olney Center	Apr. 30, 2014 Olney Center	Jun. 30, 2014 Van Ness Square	Jun. 30, 2014 Northrock Loan	Jun. 30, 2014 Variable Rate Loans Payable Northrock Loan	Jun. 30, 2014 Variable Rate Loans Payable Metro Pike Center Bank Loan	Jun. 30, 2014 Fixed Rate Mortgage Notes Payable Metro Pike Center	Jun. 30, 2014 Fixed Rate Mortgage Notes Payable Metro Pike Center Bank Loan	Jun. 30, 2014 Unsecured Revolving Credit Facility	Jun. 30, 2014 Unsecured Revolving Credit Facility LIBOR	Jun. 30, 2014 Unsecured Revolving Credit Facility LIBOR Minimum	Jun. 30, 2014 Unsecured Revolving Credit Facility LIBOR Maximum	Jun. 30, 2014 Letter of Credit
Debt Instrument [Line Items]
Notes payable	$ 820,145,000	$ 820,068,000
Debt outstanding with fixed-rate	790,200,000	789,900,000
Debt outstanding with variable-rate	29,900,000	30,200,000
Carrying value of properties collateralizing mortgage notes	901,000,000	907,200,000
Line of credit facility, maximum borrowing capacity											275,000,000				628,000
Line of credit facility maturity date											Jun. 23, 2018
Extension in line of credit facility period											1 year
Line of credit facility, maximum borrowing capacity											274,400,000
Description of variable rate basis											one-month LIBOR
Interest rate spread on LIBOR												1.45%	1.45%	2.00%
Guarantor obligations, maximum exposure, percentage									50.00%
Construction-to-permanent loan					71,600,000
Guarantor obligations, maximum exposure						7,500,000				7,800,000
Amount oustanding							14,662,000	15,248,000
Total outstanding debt		820,100,000
Proceeds from sale of real estate			11,000,000	11,000,000
Sale-leaseback, monthly lease payments			60,400
Annual increase in rental payments, percentage			1.50%	1.50%
Sale-leaseback, fixed interest rate			8.00%
Sales price of property				11,000,000
Sale leaseback, option to purchase the property			$ 14,600,000	$ 14,600,000

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

The Company, which conducts all of its activities through its subsidiaries, the Operating Partnership and Subsidiary Partnerships, engages in the ownership, operation, management, leasing, acquisition, renovation, expansion, development and financing of community and neighborhood shopping centers and mixed-use properties, primarily in the Washington, DC/Baltimore metropolitan area.

Because the properties are located primarily in the Washington, DC/Baltimore metropolitan area, the Company is subject to a concentration of credit risk related to these properties. A majority of the Shopping Centers are anchored by one or more major tenants.

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of Saul Centers and its subsidiaries, including the Operating Partnership and Subsidiary Partnerships, which are majority owned by Saul Centers. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for the fair presentation of the financial position and results of operations of Saul Centers, Inc. for the interim periods have been included. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of Saul Centers, Inc. for the year ended December 31, 2013, which are included in its Annual Report on Form 10-K. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable, Accrued Income and Allowance for Doubtful Accounts

Accounts Receivable, Accrued Income and Allowance for Doubtful Accounts

Accounts receivable primarily represent amounts currently due from tenants in accordance with the terms of the respective leases. Receivables are reviewed monthly and reserves are established with a charge to current period operations when, in the opinion of management, collection of the receivable is doubtful.

Assets Held for Sale

Assets Held for Sale

The Company considers properties to be assets held for sale when all of the following criteria are met:

• management commits to a plan to sell a property;

• it is unlikely that the disposal plan will be significantly modified or discontinued;

• the property is available for immediate sale in its present condition;

• actions required to complete the sale of the property have been initiated;

• sale of the property is probable and the Company expects the completed sale will occur within one year; and

• the property is actively being marketed for sale at a price that is reasonable given its current market value.

The Company must make a determination as to the point in time that it is probable that a sale will be consummated, which generally occurs when an executed sales contract has no contingencies and the prospective buyer has significant funds at risk to ensure performance. Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases depreciation.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments. Short-term investments include money market accounts and other investments which generally mature within three months, measured from the acquisition date, and/or are readily convertible to cash.

Construction In Progress

Construction In Progress

Construction in progress includes land, preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance.

Deferred Debt Costs

Deferred Debt Costs

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the revolving line of credit. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method.

Deferred Income

Deferred Income

Deferred income consists of payments received from tenants prior to the time they are earned and recognized by the Company as revenue, including tenant prepayment of rent for future periods, real estate taxes when the taxing jurisdiction has a fiscal year differing from the calendar year, reimbursements specified in the lease agreement and tenant construction work provided by the Company. In addition, deferred income includes the fair value of certain below market leases.

Deferred Leasing Costs

Deferred Leasing Costs

Deferred leasing costs consist of commissions paid to third-party leasing agents, internal direct costs such as employee compensation and payroll-related fringe benefits directly related to time spent performing leasing-related activities for successful commercial leases and amounts attributed to in-place leases associated with acquired properties. Leasing related activities include evaluating the prospective tenant’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating lease terms, preparing lease documents and closing the transaction. Unamortized deferred costs are charged to expense if the applicable lease is terminated prior to expiration of the initial lease term. Deferred leasing costs are amortized over the term of the lease or remaining term of acquired leases.

Derivative Financial Instruments

Derivative Financial Instruments

The Company may, when appropriate, employ derivative instruments, such as interest-rate swaps, to mitigate the risk of interest rate fluctuations. The Company does not enter into derivative or other financial instruments for trading or speculative purposes. Derivative financial instruments are carried at fair value as either assets or liabilities on the consolidated balance sheets. For those derivative instruments that qualify and are designated as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge. For those derivative instruments that qualify and are designated as hedging instruments, the effective portion of the gain or loss on the hedge instruments is reported as a component of accumulated other comprehensive income (loss) and recognized in earnings within the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the change in fair value of a derivative instrument is immediately recognized in earnings. For derivative instruments that do not qualify, or that qualify and are not designated, as hedging instruments, changes in fair value are immediately recognized in earnings.

Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparties under the terms of the derivative instrument. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions as determined by management, and therefore, it believes that the likelihood of realizing losses from counterparty non-performance is remote.

Income Taxes

Income Taxes

The Company made an election to be treated, and intends to continue operating so as to qualify, as a REIT under the Code, commencing with its taxable year ended December 31, 1993. A REIT generally will not be subject to federal income taxation, provided that distributions to its stockholders equal or exceed its REIT taxable income and it complies with certain other requirements. Therefore, no provision has been made for federal income taxes in the accompanying consolidated financial statements.

Legal Contingencies

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 such matters will not have a material adverse effect on its financial position or results of operations. Upon determination that a loss is probable to occur and can be reasonably estimated, 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.

Postemployment Benefits

Postemployment Benefits

From time to time, the Company may enter into an arrangement with an employee at the time of the employee’s separation from service whereby the employee will receive certain payments in exchange for certain releases, covenants not to compete, or other promises. If no future services are required in order for the employee to receive the payments, the Company estimates the amount of payments to be made over the life of the arrangement and records that amount as an expense as of the date of the arrangement with a corresponding liability representing the amount to be paid in the future. During the six months endedJune 30, 2014, the Company recorded as compensation expense $1.1 million of severance payments to be made in the future pursuant to a separation agreement entered into during March 2014.

Predevelopment Expenses

Predevelopment Expenses

Predevelopment expenses represent certain costs incurred by the Company in connection with active development and redevelopment projects and include, for example, costs related to the early termination of tenant leases and demolition of existing structures.

Real Estate Investment Properties

Real Estate Investment Properties

The Company purchases real estate investment properties from time to time and records assets acquired and liabilities assumed, including land, buildings, and intangibles related to in-place leases and customer relationships, based on their fair values. The fair value of buildings generally is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates and considers the present value of all cash flows expected to be generated by the property including an initial lease up period. From time to time the Company may purchase a property for future development purposes. The Company determines the fair value of above and below market intangibles associated with in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition taking into consideration the remaining contractual lease period, renewal periods, and the likelihood of the tenant exercising its renewal options. The fair value of below market lease intangibles is recorded as deferred income and accreted as additional revenue over the remaining contractual lease period and any renewal option periods included in the valuation analysis. The fair value of above market lease intangibles is recorded as a deferred asset and amortized as a reduction of revenue over the remaining contractual lease term. The Company determines the fair value of at-market in-place leases considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period and carrying costs associated with the lease-up period. Intangible assets associated with at-market in-place leases are amortized as additional expense over the remaining contractual lease term. To the extent customer relationship intangibles are present in an acquisition, the fair values of the intangibles are amortized over the lives of the customer relationships. The Company has never recorded a customer relationship intangible asset. Acquisition-related transaction costs are generally charged to expense as incurred and reported as acquisition related costs in the consolidated statements of operations.

If there is an event or change in circumstance that indicates a potential impairment in the value of a real estate investment property, the Company prepares an analysis to determine whether the carrying value of the real estate investment property exceeds its estimated fair value. The Company considers both quantitative and qualitative factors including recurring operating losses, significant decreases in occupancy, and significant adverse changes in legal factors and business climate. If impairment indicators are present, the Company compares the projected cash flows of the property over its remaining useful life, on an undiscounted basis, to the carrying value of that property. The Company assesses its undiscounted projected cash flows based upon estimated capitalization rates, historic operating results and market conditions that may affect the property. If the carrying value is greater than the undiscounted projected cash flows, the Company would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its then estimated fair value. The 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. The Company did not recognize an impairment loss on any of its real estate during the six months endedJune 30, 2014 and 2013.

Interest, real estate taxes, development-related salary costs and other carrying costs are capitalized on projects under development and construction. Upon substantial completion of construction and the placement of the assets into service, rental income, real estate tax expense, property operating expenses (consisting of payroll, repairs and maintenance, utilities, insurance and other property related expenses) and depreciation are included in current operations and capitalization of interest ceases. Property operating expenses are charged to operations as incurred. Interest capitalized totaled $243,000 and $34,000 for the six months endedJune 30, 2014 and 2013, respectively. Commercial development projects are considered substantially complete and available for occupancy upon completion of tenant improvements, but no later than one year from the cessation of major construction activity. Multi-family residential development projects are considered substantially complete and available for occupancy upon receipt of the certificate of occupancy from the appropriate licensing authority. Substantially completed portions of a project are accounted for as separate projects.

Depreciation is calculated using the straight-line method and estimated useful lives of generally between 35 and 50 years for base buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements that extend the useful lives. Leasehold improvement expenditures are capitalized when certain criteria are met, including when the Company supervises construction and will own the improvements. Tenant improvements are amortized, over the shorter of the lives of the related leases or the useful life of the improvements, using the straight-line method.

Revenue Recognition

Revenue Recognition

Rental and interest income are accrued as earned except when doubt exists as to collectability, in which case the accrual is discontinued. Recognition of rental income commences when control of the space has been given to the tenant. When rental payments due under leases vary from a straight-line basis because of free rent periods or scheduled rent increases, income is recognized on a straight-line basis. Expense recoveries represent a portion of property operating expenses billed to tenants, including common area maintenance, real estate taxes and other recoverable costs, and are recognized in the period in which the expenses are incurred. Rental income based on a tenant’s revenue (“percentage rent”) is accrued when a tenant reports sales that exceed a breakpoint specified in the lease agreement.

Stock-based Employee Compensation, Stock Plan and Deferred Compensation Plan for Directors

Stock-based Employee Compensation, Stock Plan and Deferred Compensation Plan for Directors

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

The Company has a stock plan, which was originally approved in 2004, amended in 2008 and 2013 and which expires in 2023, for the purpose of attracting and retaining executive officers, directors and other key personnel (the “Stock Plan”). Pursuant to the Stock Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of its directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. A director may make an annual election to defer all or part of his or her director’s fees and has the option to have the fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If the director elects to have fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company’s common stock on the first trading day of the following quarter to determine the number of shares to be credited to the director. As of June 30, 2014, the director's deferred fee accounts comprise 227,233 shares.

The Compensation Committee has also approved an annual award of shares of the Company’s common stock as additional compensation to each director serving on the Board of Directors as of the record date for the Annual Meeting of Stockholders. The shares are awarded as of each Annual Meeting of Stockholders, and their issuance may not be deferred.

Noncontrolling Interest

Noncontrolling Interest

Saul Centers is the sole general partner of the Operating Partnership, owning a 74.3% common interest as of June 30, 2014. Noncontrolling interest in the Operating Partnership is comprised of limited partnership units owned by the Saul Organization. Noncontrolling interest reflected on the accompanying consolidated balance sheets is increased for earnings allocated to limited partnership interests and distributions reinvested in additional units, and is decreased for limited partner distributions. Noncontrolling interest reflected on the consolidated statements of operations represents earnings allocated to limited partnership interests.

Per Share Data

Per Share Data

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

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property Plant and Equipment (Topic 360)” (“ASU 2014-08”). ASU 2014-08 changes the requirements for reporting discontinued operations such that disposals of components of an entity will be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations. ASU 2014-08 also requires additional disclosures about discontinued operations. ASU 2014-08 is effective for annual periods beginning after December 15, 2014, and interim periods within those years and early adoption is permitted. The Company retrospectively adopted ASU 2014-08 on April 15, 2014. The adoption of ASU 2014-08 did not have a material impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 will replace most existing revenue recognition guidance and will require an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those years and early adoption is not permitted. ASU 2014-09 must be applied retrospectively by either restating prior periods or by recognizing the cumulative effect as of the first date of application. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the presentation used for the six months endedJune 30, 2014.

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Notes Payable, Revolving Credit Facility, Interest and Amortization of Deferred Debt Costs - Scheduled Maturities of Debt, Including Scheduled Principal Amortization (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Balloon Payments
July 1 through December 31, 2014	$ 0
2015	14,885
2016	28,879
2017	0
2018	27,748
2019	60,793
Thereafter	421,169
Balloon Payments, Total	553,474
Scheduled Principal Amortization
July 1 through December 31, 2014	11,223
2015	23,208
2016	23,496
2017	24,679
2018	24,821
2019	23,489
Thereafter	135,755
Principal Amortization, Total	266,671
Total
July 1 through December 31, 2014	11,223
2015	38,093
2016	52,375
2017	24,679
2018	52,569
2019	84,282
Thereafter	556,924
Total	$ 820,145

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Schedule of Construction in Progress

Construction in progress as of June 30, 2014 and December 31, 2013, is composed of the following:

(in thousands)	June 30, 2014		December 31, 2013
Park Van Ness	$	13,845	$	7,901
Other	2,414		1,966
Total	$	16,259	$	9,867

Basic and Diluted Shares Outstanding

The following table sets forth, for the indicated periods, weighted averages of the number of common shares outstanding, basic and dilutive, the effect of dilutive options and the number of options which are not dilutive because the average price of the Company's common stock was less than the exercise prices. The treasury stock method was used to measure the effect of the dilution.

	Three Months Ended   June 30,		Six Months Ended   June 30,
(In thousands)	2014	2013	2014	2013
Weighted average common shares outstanding-Basic	20,717	20,301	20,670	20,224
Effect of dilutive options	26	22	32	27
Weighted average common shares outstanding-Diluted	20,743	20,323	20,702	20,251
Non-dilutive options (1)	113	118	113	118

(1) The non-dilutive options were issued in 2007 and 2008.

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Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2014
Issuance of stock, shares	203,124
Pursuant to dividend reinvestment plan, shares	99,800
Exercise of employee stock options and issuance of directors' deferred stock, shares	103,324
Issuance of partnership units, shares	196,183
Distributions payable common stock, per share (in usd per share)	$ 0.8
Dividend Declared
Distributions payable common stock, per share (in usd per share)	$ 0.40
Distributions partnership units, per unit (in usd per unit)	$ 0.40
Series A Preferred Stock | Dividend Declared
Preferred stock, per share (in usd per share)	$ 50.00
Series C Preferred Stock | Dividend Declared
Preferred stock, per share (in usd per share)	$ 42.97

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Preferred stock, shares authorized	1,000,000	1,000,000
Common stock, par value (in usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	20,779,740	20,576,616
Common stock, shares outstanding	20,779,740	20,576,616
Series A Preferred Stock
Cumulative Redeemable Preferred stock, shares issued	16,000	40,000
Cumulative Redeemable Preferred stock, shares outstanding	16,000	40,000
Series C Preferred Stock
Cumulative Redeemable Preferred stock, shares issued	56,000	56,000
Cumulative Redeemable Preferred stock, shares outstanding	56,000	56,000

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Stock Option Plans

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Option Plans

Stock Option Plans

The Company has established two stock incentive plans, the 1993 plan and the 2004 plan, as amended, (together, the “Plans”). Under the Plans, options were granted at an exercise price not less than the market value of the common stock on the date of grant and expire ten years from the date of grant. Officer options vest ratably over four years following the grant and are charged to expense using the straight-line method over the vesting period. Director options vest immediately and are charged to expense as of the date of grant.

The following table summarizes the amount and activity of each grant with outstanding unexercised options, the total value and variables used in the computation and the amount expensed and included in general and administrative expense in the Consolidated Statements of Operations for the six months endedJune 30, 2014.

Stock options issued

	Directors
Grant date	5/6/2005			5/1/2006			4/27/2007			4/25/2008			4/24/2009			5/7/2010			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals
Total grant	30,000			30,000			30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Vested	30,000			30,000			30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Exercised	22,500			10,000			—			—			20,000			10,000			10,000			10,000			7,500			—			90,000
Forfeited	—			2,500			7,500			7,500			—			2,500			2,500			—			—			—			22,500
Exercisable at June 30, 2014	7,500			17,500			22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Remaining unexercised	7,500			17,500			22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Exercise price	$	33.22		$	40.35		$	54.17		$	50.15		$	32.68		$	38.76		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.198			0.206			0.225			0.237			0.344			0.369			0.358			0.348			0.333			0.173
Expected life (years)	10.0			9.0			8.0			7.0			6.0			5.0			5.0			5.0			5.0			5.0
Assumed yield	6.91		%	5.93		%	4.39		%	4.09		%	4.54		%	4.23		%	4.16		%	4.61		%	4.53		%	4.48		%
Risk-free rate	4.28		%	5.11		%	4.65		%	3.49		%	2.19		%	2.17		%	1.86		%	0.78		%	0.82		%	1.63		%
Total value at grant date	$	71,100		$	143,400		$	285,300		$	254,700		$	222,950		$	287,950		$	297,375		$	244,388		$	262,946		$	101,726		$	2,171,835
Expensed in previous years	71,100			143,400			285,300			254,700			222,950			287,950			297,375			244,388			262,946			—			2,070,109
Expensed in 2014	—			—			—			—			—			—			—			—			—			101,726			101,726
Future expense	—			—			—			—			—			—			—			—			—			—			—
	Officers
Grant date	5/6/2005			4/27/2007			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals												Grand  Totals
Total grant	132,500			135,000			162,500			242,500			202,500			170,000			1,045,000												1,362,500
Vested	118,750			67,500			105,625			56,250			50,625			—			398,750												716,250
Exercised	84,850			—			30,955			18,902			8,853			—			143,560												233,560
Forfeited	13,750			67,500			43,750			135,000			30,000			—			290,000												312,500
Exercisable at June 30, 2014	33,900			67,500			63,420			37,348			41,772			—			243,940												448,940
Remaining unexercised	33,900			67,500			87,795			88,598			163,647			170,000			611,440												816,440
Exercise price	$	33.22		$	54.17		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.207			0.233			0.330			0.315			0.304			0.306
Expected life (years)	8.0			6.5			8.0			8.0			8.0			7.0
Assumed yield	6.37		%	4.13		%	4.81		%	5.28		%	5.12		%	4.89		%
Risk-free rate	4.15		%	4.61		%	2.75		%	1.49		%	1.49		%	2.17		%
Gross value at grant date	$	413,400		$	1,339,200		$	1,366,625		$	1,518,050		$	1,401,300		$	1,397,400		$	7,435,975											$	9,607,810
Estimated forfeitures	35,100			80,350			387,550			889,690			280,468			174,700			1,847,858												1,847,858
Expensed in previous years	378,300			1,258,850			692,088			261,807			209,027			—			2,800,072												4,870,181
Expensed in 2014	—			—			113,205			78,546			149,360			50,947			392,058												493,784
Future expense	—			—			173,782			288,007			762,445			1,171,753			2,395,987												2,395,987
Weighted average term of remaining future expense (in years)										3.1

The table below summarizes the option activity for the six months endedJune 30, 2014:

	Number of Shares		Weighted Average Exercise Price per share		Aggregate Intrinsic Value
Outstanding at January 1	753,625		$	42.55	$	4,529,206
Granted	200,000		47.03		314,000
Exercised	(99,685	)	37.23		1,018,511
Expired/Forfeited	(37,500	)	43.56
Outstanding June 30	816,440		44.26		4,078,348
Exercisable June 30	448,940		43.87		2,659,611

The intrinsic value measures the price difference between the options’ exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. The intrinsic value for shares exercised during the period was calculated by using the closing share price on the date of exercise. At June 30, 2014, the closing share price of $48.60 was lower than the exercise price of the 90,000 and 22,500 outstanding options granted in 2007 and 2008, respectively, and, therefore, those options had no intrinsic value as of June 30, 2014. The weighted average remaining contractual life of the Company’s outstanding and exercisable options is 7.2 years and 5.7 years, respectively.

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Document and Entity Information In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document And Entity Information [Abstract]
Entity Registrant Name	SAUL CENTERS INC
Entity Central Index Key	0000907254
Trading Symbol	BFS
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		20.8

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value. The aggregate fair value of the notes payable with fixed-rate payment terms was determined using Level 3 data in a discounted cash flow approach, which is based upon management’s estimate of borrowing rates and loan terms currently available to the Company for fixed-rate financing and, assuming long-term interest rates of approximately 4.35% and 4.85%, would be approximately $852.0 million and $828.7 million, respectively, compared to the carrying value of $790.2 million and $789.9 million at June 30, 2014 and December 31, 2013, respectively. A change in any of the significant inputs may lead to a change in the Company’s fair value measurement of its debt.

The Company carries its interest rate swap at fair value. The Company has determined the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy with the exception of the impact of counter-party risk, which was determined using Level 3 inputs and is not significant. Derivative instruments are classified within Level 2 of the fair value hierarchy because their values are determined using third-party pricing models which contain inputs that are derived from observable market data. Where possible, the values produced by the pricing models are verified by market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measure of volatility, and correlations of such inputs. The swap agreement terminates on July 1, 2020. As of June 30, 2014, the fair value of the interest-rate swap was approximately $3.2 million and is included in “Accounts payable, accrued expenses and other liabilities” in the consolidated balance sheets. The decrease in value from inception of the swap is reflected in “Other Comprehensive Income” in the Consolidated Statements of Comprehensive Income. Amounts recognized in earnings are included in Changes in Fair Value of Derivatives in the Consolidated Statements of Operations.

	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2014			2013		2014			2013
Change in fair value:
Recognized in earnings	$	(5	)	$	51	$	(7	)	$	61
Recognized in other comprehensive income	(420		)	1,763		(647		)	2,264
	$	(425	)	$	1,814	$	(654	)	$	2,325

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenue
Base rent	$ 41,038	$ 39,553	$ 81,601	$ 79,293
Expense recoveries	7,825	7,463	16,614	15,077
Percentage rent	453	338	905	938
Other	2,970	1,455	6,113	2,687
Total revenue	52,286	48,809	105,233	97,995
Operating expenses
Property operating expenses	6,138	6,041	13,723	11,990
Provision for credit losses	107	285	310	549
Real estate taxes	5,584	5,433	11,037	11,196
Interest expense and amortization of deferred debt costs	11,486	11,709	22,953	23,426
Depreciation and amortization of deferred leasing costs	10,309	12,472	20,489	28,824
General and administrative	4,023	3,925	8,703	7,329
Acquisition related costs	216	0	379	0
Predevelopment expenses	0	1,233	503	3,582
Total operating expenses	37,863	41,098	78,097	86,896
Operating income	14,423	7,711	27,136	11,099
Change in fair value of derivatives	(5)	51	(7)	61
Gain on sale of property	6,069	0	6,069	0
Net Income	20,487	7,762	33,198	11,160
Noncontrolling interest
(Income) loss attributable to noncontrolling interests	(4,433)	(1,168)	(6,857)	418
Net income attributable to Saul Centers, Inc.	16,054	6,594	26,341	11,578
Preferred stock redemption	0	0	0	(5,228)
Preferred stock dividends	(3,207)	(3,207)	(6,413)	(7,571)
Net income (loss) attributable to common stockholders	$ 12,847	$ 3,387	$ 19,928	$ (1,221)
Per share net income (loss) attributable to common stockholders
Basic and diluted (in usd per share)	$ 0.62	$ 0.17	$ 0.96	$ (0.06)
Dividends declared per common share outstanding (in usd per share)	$ 0.4	$ 0.36	$ 0.8	$ 0.72

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Real Estate Acquired and Sold

6 Months Ended

Jun. 30, 2014

Banking and Thrift [Abstract]

Real Estate Acquired and Sold

Real Estate Acquired and Sold

Kentlands Pad

In August 2013, the Company purchased for $4.3 million a retail pad with a 7,100 square foot restaurant located in Gaithersburg, Maryland, which is contiguous with and an expansion of the Company's other Kentlands assets, and incurred acquisition costs of $99,000.

Hunt Club Pad

In December 2013, the Company purchased for $0.8 million, including acquisition costs, a retail pad with a 5,500 square foot vacant building located in Apopka, Florida, which is contiguous with and an expansion of the Company's other Hunt Club asset.

1580 Rockville Pike

In January 2014, the Company purchased for $8.0 million a single-tenant retail property with a 12,100 square foot CVS Pharmacy located in Rockville, Maryland, which is contiguous with and an expansion of the Company's asset at 1500 Rockville Pike, and incurred acquisition costs of $163,000. Of the total purchase price, $4.3 million was allocated to a below market lease, which is included in deferred income on the accompanying consolidated balance sheet and is being accreted to income over the remaining life of the lease, or approximately 10 years. The impact on the Company's results of operations is not material. The acquisition was recorded as follows.

(in thousands)
Land	$	9,600
Building	2,200
In-place lease	513
Below-market rents	(4,313		)
	$	8,000

1582 Rockville Pike and Olney Center

In April 2014, the Company purchased for $11.0 million a single-tenant retail property with a 40,700 square foot furniture store located at 1582 Rockville Pike in Rockville, Maryland, and concurrently sold to the seller, for $11.0 million, the 53,765 square foot Olney Center located in Olney, Maryland. 1582 Rockville Pike is contiguous with and an expansion of the Company’s assets at 1500 and 1580 Rockville Pike. In connection with the purchase, the Company incurred approximately $0.2 million of acquisition costs. The impact on the Company's results of operations is not material. The acquisition was recorded as follows.

(in thousands)
Land	$	9,742
Building	828
In-place lease	849
Below-market rents	(419		)
	$	11,000

Simultaneously with the sale of the Olney Center, the Company entered into a lease of the property with the buyer and continues to operate, lease and manage the property. The lease term is 20 years and the Company has the option to purchase the property for $14.6 million at the end of the lease term. The purchaser has the right to sell the property to the Company at any time from and after April 2016 at a price equal to $11.0 million increased by 1.5% annually beginning January 1, 2015 and continuing each January thereafter. The Company has accounted for this transaction as a secured financing.

Giant Center

In April 2014, the Company sold for $7.5 million the 70,040 square foot Giant Center located in Milford Mill, Maryland and recognized a $6.1 million gain. As of March 31, 2014, the carrying amounts of the associated assets and liabilities were $0.5 million and $0.1 million, respectively. There was no debt on the property.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Nature of Operations

The Company, which conducts all of its activities through its subsidiaries, the Operating Partnership and Subsidiary Partnerships, engages in the ownership, operation, management, leasing, acquisition, renovation, expansion, development and financing of community and neighborhood shopping centers and mixed-use properties, primarily in the Washington, DC/Baltimore metropolitan area.

Because the properties are located primarily in the Washington, DC/Baltimore metropolitan area, the Company is subject to a concentration of credit risk related to these properties. A majority of the Shopping Centers are anchored by one or more major tenants. As of June 30, 2014, 31 of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. Two tenants individually accounted for 2.5% or more of the Company’s total revenue for the six months endedJune 30, 2014. Excluding the results of the Giant Center, which was recently sold and at which Giant Food is a tenant, Giant Food, a tenant at nine Shopping Centers, and Safeway, a tenant at eight Shopping Centers, individually accounted for 4.6% and 2.5%, respectively, of the Company's total revenue for the six months endedJune 30, 2014.

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of Saul Centers and its subsidiaries, including the Operating Partnership and Subsidiary Partnerships, which are majority owned by Saul Centers. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for the fair presentation of the financial position and results of operations of Saul Centers, Inc. for the interim periods have been included. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of Saul Centers, Inc. for the year ended December 31, 2013, which are included in its Annual Report on Form 10-K. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable, Accrued Income and Allowance for Doubtful Accounts

Accounts receivable primarily represent amounts currently due from tenants in accordance with the terms of the respective leases. Receivables are reviewed monthly and reserves are established with a charge to current period operations when, in the opinion of management, collection of the receivable is doubtful. Accounts receivable in the accompanying financial statements are shown net of an allowance for doubtful accounts of approximately $0.4 million and $0.6 million at June 30, 2014 and December 31, 2013, respectively.

In addition to rents due currently, accounts receivable includes approximately $37.5 million and $37.2 million, at June 30, 2014 and December 31, 2013, respectively, net of allowance for doubtful accounts totaling $0.2 million and $0.5 million, respectively, representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of their respective leases.

Assets Held for Sale

The Company considers properties to be assets held for sale when all of the following criteria are met:

• management commits to a plan to sell a property;

• it is unlikely that the disposal plan will be significantly modified or discontinued;

• the property is available for immediate sale in its present condition;

• actions required to complete the sale of the property have been initiated;

• sale of the property is probable and the Company expects the completed sale will occur within one year; and

• the property is actively being marketed for sale at a price that is reasonable given its current market value.

The Company must make a determination as to the point in time that it is probable that a sale will be consummated, which generally occurs when an executed sales contract has no contingencies and the prospective buyer has significant funds at risk to ensure performance. Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases depreciation. As of June 30, 2014, no properties were classified as held for sale.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments. Short-term investments include money market accounts and other investments which generally mature within three months, measured from the acquisition date, and/or are readily convertible to cash.

Construction In Progress

Construction in progress includes land, preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance. Construction in progress as of June 30, 2014 and December 31, 2013, is composed of the following:

(in thousands)	June 30, 2014		December 31, 2013
Park Van Ness	$	13,845	$	7,901
Other	2,414		1,966
Total	$	16,259	$	9,867

Deferred Debt Costs

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the revolving line of credit. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaled $10.6 million and $9.7 million, net of accumulated amortization of $5.2 million and $4.5 million, at June 30, 2014 and December 31, 2013, respectively.

Deferred Income

Deferred income consists of payments received from tenants prior to the time they are earned and recognized by the Company as revenue, including tenant prepayment of rent for future periods, real estate taxes when the taxing jurisdiction has a fiscal year differing from the calendar year, reimbursements specified in the lease agreement and tenant construction work provided by the Company. In addition, deferred income includes the fair value of certain below market leases.

Deferred Leasing Costs

Deferred leasing costs consist of commissions paid to third-party leasing agents, internal direct costs such as employee compensation and payroll-related fringe benefits directly related to time spent performing leasing-related activities for successful commercial leases and amounts attributed to in-place leases associated with acquired properties. Leasing related activities include evaluating the prospective tenant’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating lease terms, preparing lease documents and closing the transaction. Unamortized deferred costs are charged to expense if the applicable lease is terminated prior to expiration of the initial lease term. Deferred leasing costs are amortized over the term of the lease or remaining term of acquired leases. Collectively, deferred leasing costs totaled $26.7 million and $26.1 million, net of accumulated amortization of $19.1 million and $16.6 million, as of June 30, 2014 and December 31, 2013, respectively. Amortization expense, included in depreciation and amortization of deferred leasing costs in the consolidated statements of operations, totaled $2.6 million and $3.2 million for the six months endedJune 30, 2014 and 2013, respectively.

Derivative Financial Instruments

The Company may, when appropriate, employ derivative instruments, such as interest-rate swaps, to mitigate the risk of interest rate fluctuations. The Company does not enter into derivative or other financial instruments for trading or speculative purposes. Derivative financial instruments are carried at fair value as either assets or liabilities on the consolidated balance sheets. For those derivative instruments that qualify and are designated as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge. For those derivative instruments that qualify and are designated as hedging instruments, the effective portion of the gain or loss on the hedge instruments is reported as a component of accumulated other comprehensive income (loss) and recognized in earnings within the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the change in fair value of a derivative instrument is immediately recognized in earnings. For derivative instruments that do not qualify, or that qualify and are not designated, as hedging instruments, changes in fair value are immediately recognized in earnings.

Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparties under the terms of the derivative instrument. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions as determined by management, and therefore, it believes that the likelihood of realizing losses from counterparty non-performance is remote.

Income Taxes

The Company made an election to be treated, and intends to continue operating so as to qualify, as a REIT under the Code, commencing with its taxable year ended December 31, 1993. A REIT generally will not be subject to federal income taxation, provided that distributions to its stockholders equal or exceed its REIT taxable income and it complies with certain other requirements. Therefore, no provision has been made for federal income taxes in the accompanying consolidated financial statements.

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 such matters will not have a material adverse effect on its financial position or results of operations. Upon determination that a loss is probable to occur and can be reasonably estimated, 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.

Postemployment Benefits

From time to time, the Company may enter into an arrangement with an employee at the time of the employee’s separation from service whereby the employee will receive certain payments in exchange for certain releases, covenants not to compete, or other promises. If no future services are required in order for the employee to receive the payments, the Company estimates the amount of payments to be made over the life of the arrangement and records that amount as an expense as of the date of the arrangement with a corresponding liability representing the amount to be paid in the future. During the six months endedJune 30, 2014, the Company recorded as compensation expense $1.1 million of severance payments to be made in the future pursuant to a separation agreement entered into during March 2014.

Predevelopment Expenses

Predevelopment expenses represent certain costs incurred by the Company in connection with active development and redevelopment projects and include, for example, costs related to the early termination of tenant leases and demolition of existing structures.

Real Estate Investment Properties

The Company purchases real estate investment properties from time to time and records assets acquired and liabilities assumed, including land, buildings, and intangibles related to in-place leases and customer relationships, based on their fair values. The fair value of buildings generally is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates and considers the present value of all cash flows expected to be generated by the property including an initial lease up period. From time to time the Company may purchase a property for future development purposes. The Company determines the fair value of above and below market intangibles associated with in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition taking into consideration the remaining contractual lease period, renewal periods, and the likelihood of the tenant exercising its renewal options. The fair value of below market lease intangibles is recorded as deferred income and accreted as additional revenue over the remaining contractual lease period and any renewal option periods included in the valuation analysis. The fair value of above market lease intangibles is recorded as a deferred asset and amortized as a reduction of revenue over the remaining contractual lease term. The Company determines the fair value of at-market in-place leases considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period and carrying costs associated with the lease-up period. Intangible assets associated with at-market in-place leases are amortized as additional expense over the remaining contractual lease term. To the extent customer relationship intangibles are present in an acquisition, the fair values of the intangibles are amortized over the lives of the customer relationships. The Company has never recorded a customer relationship intangible asset. Acquisition-related transaction costs are generally charged to expense as incurred and reported as acquisition related costs in the consolidated statements of operations.

If there is an event or change in circumstance that indicates a potential impairment in the value of a real estate investment property, the Company prepares an analysis to determine whether the carrying value of the real estate investment property exceeds its estimated fair value. The Company considers both quantitative and qualitative factors including recurring operating losses, significant decreases in occupancy, and significant adverse changes in legal factors and business climate. If impairment indicators are present, the Company compares the projected cash flows of the property over its remaining useful life, on an undiscounted basis, to the carrying value of that property. The Company assesses its undiscounted projected cash flows based upon estimated capitalization rates, historic operating results and market conditions that may affect the property. If the carrying value is greater than the undiscounted projected cash flows, the Company would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its then estimated fair value. The 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. The Company did not recognize an impairment loss on any of its real estate during the six months endedJune 30, 2014 and 2013.

Interest, real estate taxes, development-related salary costs and other carrying costs are capitalized on projects under development and construction. Upon substantial completion of construction and the placement of the assets into service, rental income, real estate tax expense, property operating expenses (consisting of payroll, repairs and maintenance, utilities, insurance and other property related expenses) and depreciation are included in current operations and capitalization of interest ceases. Property operating expenses are charged to operations as incurred. Interest capitalized totaled $243,000 and $34,000 for the six months endedJune 30, 2014 and 2013, respectively. Commercial development projects are considered substantially complete and available for occupancy upon completion of tenant improvements, but no later than one year from the cessation of major construction activity. Multi-family residential development projects are considered substantially complete and available for occupancy upon receipt of the certificate of occupancy from the appropriate licensing authority. Substantially completed portions of a project are accounted for as separate projects.

Depreciation is calculated using the straight-line method and estimated useful lives of generally between 35 and 50 years for base buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements that extend the useful lives. Leasehold improvement expenditures are capitalized when certain criteria are met, including when the Company supervises construction and will own the improvements. Tenant improvements are amortized, over the shorter of the lives of the related leases or the useful life of the improvements, using the straight-line method. Depreciation expense in the consolidated statements of operations totaled $17.9 million and $25.6 million for the six months endedJune 30, 2014 and 2013, respectively. The $7.7 milliondecrease was primarily due to $8.0 million of additional depreciation expense recorded in 2013 on the building at Van Ness Square as a result of the reduction of its estimated remaining useful life to four months effective January 1, 2013. Repairs and maintenance expense totaled $6.5 million and $4.9 million for the six months endedJune 30, 2014 and 2013, respectively, and is included in property operating expenses in the Consolidated Statements of Operations. An increase of $1.7 million in snow removal costs was the primary cause of increased property operating expenses.

Revenue Recognition

Rental and interest income are accrued as earned except when doubt exists as to collectability, in which case the accrual is discontinued. Recognition of rental income commences when control of the space has been given to the tenant. When rental payments due under leases vary from a straight-line basis because of free rent periods or scheduled rent increases, income is recognized on a straight-line basis. Expense recoveries represent a portion of property operating expenses billed to tenants, including common area maintenance, real estate taxes and other recoverable costs, and are recognized in the period in which the expenses are incurred. Rental income based on a tenant’s revenue (“percentage rent”) is accrued when a tenant reports sales that exceed a breakpoint specified in the lease agreement.

Stock-based Employee Compensation, Stock Plan and Deferred Compensation Plan for Directors

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

The Company has a stock plan, which was originally approved in 2004, amended in 2008 and 2013 and which expires in 2023, for the purpose of attracting and retaining executive officers, directors and other key personnel (the “Stock Plan”). Pursuant to the Stock Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of its directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. A director may make an annual election to defer all or part of his or her director’s fees and has the option to have the fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If the director elects to have fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company’s common stock on the first trading day of the following quarter to determine the number of shares to be credited to the director. As of June 30, 2014, the director's deferred fee accounts comprise 227,233 shares.

The Compensation Committee has also approved an annual award of shares of the Company’s common stock as additional compensation to each director serving on the Board of Directors as of the record date for the Annual Meeting of Stockholders. The shares are awarded as of each Annual Meeting of Stockholders, and their issuance may not be deferred.

Noncontrolling Interest

Saul Centers is the sole general partner of the Operating Partnership, owning a 74.3% common interest as of June 30, 2014. Noncontrolling interest in the Operating Partnership is comprised of limited partnership units owned by the Saul Organization. Noncontrolling interest reflected on the accompanying consolidated balance sheets is increased for earnings allocated to limited partnership interests and distributions reinvested in additional units, and is decreased for limited partner distributions. Noncontrolling interest reflected on the consolidated statements of operations represents earnings allocated to limited partnership interests.

Per Share Data

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

	Three Months Ended   June 30,		Six Months Ended   June 30,
(In thousands)	2014	2013	2014	2013
Weighted average common shares outstanding-Basic	20,717	20,301	20,670	20,224
Effect of dilutive options	26	22	32	27
Weighted average common shares outstanding-Diluted	20,743	20,323	20,702	20,251
Non-dilutive options (1)	113	118	113	118

(1) The non-dilutive options were issued in 2007 and 2008.

Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property Plant and Equipment (Topic 360)” (“ASU 2014-08”). ASU 2014-08 changes the requirements for reporting discontinued operations such that disposals of components of an entity will be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations. ASU 2014-08 also requires additional disclosures about discontinued operations. ASU 2014-08 is effective for annual periods beginning after December 15, 2014, and interim periods within those years and early adoption is permitted. The Company retrospectively adopted ASU 2014-08 on April 15, 2014. The adoption of ASU 2014-08 did not have a material impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 will replace most existing revenue recognition guidance and will require an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those years and early adoption is not permitted. ASU 2014-09 must be applied retrospectively by either restating prior periods or by recognizing the cumulative effect as of the first date of application. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the presentation used for the six months endedJune 30, 2014.

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Organization, Formation and Structure (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Properties Acquired and/or Developed

The following table lists the properties acquired, in development and disposed since December 31, 2012.

Name of Property	Location	Type	Year of Acquisition/ Development/Disposition
Acquisitions
1580 Rockville Pike	Rockville, MD	Shopping Center	2014
1582 Rockville Pike	Rockville, MD	Shopping Center	2014
Developments
Park Van Ness	Washington, DC	Mixed-Use	2013
Dispositions
Giant	Baltimore, MD	Shopping Center	2014

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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

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Stockholders' Equity and Noncontrolling Interest

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Stockholders' Equity and Noncontrolling Interest

Stockholders’ Equity and Noncontrolling Interest

The consolidated statements of operations for the six months endedJune 30, 2014 and 2013, reflect noncontrolling interest of $6.9 million and ($0.4 million), respectively, representing the Saul Organization’s share of net income (loss) for each period.

In March 2013, the Company redeemed 60% of its then-outstanding 8% Series A Cumulative Redeemable Preferred Stock (the “Series A Stock”) and all of its 9% Series B Cumulative Redeemable Preferred Stock. Costs associated with the redemptions were charged against accumulated deficit.

The Company has outstanding 1.6 million depositary shares, each representing 1/100th of a share of Series A Stock. The depositary shares are redeemable, in whole or in part at the Company’s option, from time to time, at $25.00 per share. The depositary shares pay an annual dividend of $2.00 per share, equivalent to 8% of the $25.00 per share liquidation preference. The Series A preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

On February 12, 2013, the Company sold, in an underwritten public offering, 5.6 million depositary shares, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred Stock, and received net cash proceeds of approximately $135.2 million. The depositary shares may be redeemed on or after February 12, 2018 at the Company’s option, in whole or in part, at the $25.00 liquidation preference plus accrued but unpaid dividends. The depositary shares pay an annual dividend of $1.71875 per share, equivalent to 6.875% of the $25.00 liquidation preference. The first dividend was paid on April 15, 2013 and covered the period from February 12, 2013 through March 31, 2013. The Series C preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes of control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

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Noncontrolling Interest - Holders of Convertible Limited Partnership Units in the Operating Partnership

6 Months Ended

Jun. 30, 2014

Noncontrolling Interest [Abstract]

Noncontrolling Interest - Holders of Convertible Limited Partnership Units in the Operating Partnership

Noncontrolling Interest - Holders of Convertible Limited Partnership Units in the Operating Partnership

As of June 30, 2014, the Saul Organization holds a 25.7% limited partnership interest in the Operating Partnership represented by approximately 7.2 million convertible limited partnership units. These units are convertible into shares of Saul Centers’ common stock, at the option of the unit holder, on a one-for-one basis provided that, in accordance with the Saul Centers, Inc. Articles of Incorporation, the rights may not be exercised at any time that the Saul Organization beneficially owns, directly or indirectly, in the aggregate more than 39.9% of the value of the outstanding common stock and preferred stock of Saul Centers (the “Equity Securities”). As of June 30, 2014, approximately 975,000 units were convertible into shares of Saul Centers common stock.

The impact of the Saul Organization’s approximately 25.7% limited partnership interest in the Operating Partnership is reflected as Noncontrolling Interest in the accompanying consolidated financial statements. Fully converted partnership units and diluted weighted average shares outstanding for the three months endedJune 30, 2014 and 2013, were approximately 27.9 million and 27.2 million, respectively, and for the six months endedJune 30, 2014 and 2013, were approximately 27.8 million and 27.2 million, respectively.

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

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

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

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

The Company’s outstanding debt totaled approximately $820.1 million at June 30, 2014, of which approximately $790.2 million was fixed-rate debt and approximately $29.9 million was variable rate debt. The carrying value of the properties collateralizing the notes payable totaled $901.0 million as of June 30, 2014.

During the three months ended June 30, 2014, the Company amended and restated its revolving credit facility. At June 30, 2014, the Company had a $275.0 million unsecured revolving credit facility, which can be used for working capital, property acquisitions, development projects or letters of credit. The revolving credit facility matures on June 23, 2018, and may be extended by the Company for one additional year subject to the Company’s satisfaction of certain conditions. Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the revolving credit facility. Letters of credit may be issued under the revolving credit facility. On June 30, 2014, based on the value of the Company’s unencumbered properties, approximately $274.4 million was available under the line, no borrowings were outstanding and approximately $628,000 was committed for letters of credit. The interest rate under the facility is variable and equals the sum of one-month LIBOR and a margin that is based on the Company’s leverage ratio, and which can range from 145 basis points to 200 basis points. As of June 30, 2014, the margin was 145 basis points.

At June 30, 2014, the Company had a $71.6 million construction-to-permanent loan, with no amount outstanding, which is secured by and will be used to partially finance the construction of Park Van Ness.

Saul Centers is a guarantor of the revolving credit facility, of which the Operating Partnership is the borrower. The Operating Partnership is the guarantor of (a) a portion of each of the Northrock bank loan (approximately $7.5 million of the $14.7 million outstanding at June 30, 2014) and the Metro Pike Center bank loan (approximately $7.8 million of the $15.2 million outstanding at June 30, 2014) and (b) the $71.6 million Park Van Ness construction-to-permanent loan, which guarantee will be reduced and eventually eliminated subject to the achievement of certain leasing and cash flow levels. The fixed-rate notes payable are all non-recourse.

The Company accounts for the sale-leaseback of the Olney Center as a secured financing and, accordingly, the $11.0 million proceeds from the sale are included in notes payable. Monthly payments of approximately $60,400, which increase by 1.5% annually, are required under the lease and interest accrues at a fixed rate of 8.0%, which is the implicit rate under the lease. The purchaser has the right to sell the property to the Company at any time from and after April 2016 at a price equal to $11.0 million increased by 1.5% annually beginning January 1, 2015 and continuing each January thereafter. The Company has an option to repurchase the property for $14.6 million when the lease expires in April 2034.

At December 31, 2013, the Company’s outstanding debt totaled approximately $820.1 million, of which $789.9 million was fixed rate debt and $30.2 million was variable rate debt. No borrowings were outstanding on the Company’s unsecured revolving credit facility. The carrying value of the properties collateralizing the notes payable totaled $907.2 million as of December 31, 2013.

At June 30, 2014, the scheduled maturities of debt, including scheduled principal amortization, for years ending December 31, were as follows:

(In thousands)	Balloon Payments		Scheduled Principal Amortization		Total
July 1 through December 31, 2014	$	—	$	11,223	$	11,223
2015	14,885		23,208		38,093
2016	28,879		23,496		52,375
2017	—		24,679		24,679
2018	27,748		24,821		52,569
2019	60,793		23,489		84,282
Thereafter	421,169		135,755		556,924
	$	553,474	$	266,671	$	820,145

Interest expense and amortization of deferred debt costs for the three and six months ended June 30, 2014 and 2013, were as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
(In thousands)	2014			2013			2014			2013
Interest incurred	$	11,342		$	11,429		$	22,582		$	22,835
Amortization of deferred debt costs	284			314			614			625
Capitalized interest	(140		)	(34		)	(243		)	(34		)
	$	11,486		$	11,709		$	22,953		$	23,426

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

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

The Company participates in a multiemployer 401K plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. Company contributions, which are included in general and administrative expense or property operating expenses in the consolidated statements of operations, at the discretionary amount of up to six percent of the employee’s cash compensation, subject to certain limits, were $191,600 and $189,000 for the six months endedJune 30, 2014 and 2013, respectively. All amounts deferred by employees and the Company are fully vested.

The Company also participates in a multiemployer nonqualified deferred compensation plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. According to the plan, which can be modified or discontinued at any time, participating employees defer 2% of their compensation in excess of a specified amount. For the six months endedJune 30, 2014 and 2013, the Company contributed $71,100 and $103,000, respectively, which is three times the amount deferred by employees and is included in general and administrative expense. All amounts deferred by employees and the Company are fully vested. The cumulative unfunded liability under this plan was $1.7 million and $1.6 million, at June 30, 2014 and December 31, 2013, respectively, and is included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.

The Company has entered into a shared services agreement (the “Agreement”) with the Saul Organization that provides for the sharing of certain personnel and ancillary functions such as computer hardware, software, and support services and certain direct and indirect administrative personnel. The method for determining the cost of the shared services is provided for in the Agreement and is based upon head count, estimates of usage or estimates of time incurred, as applicable. The terms of the Agreement and the payments made thereunder are deemed reasonable by management and are reviewed annually by the Audit Committee of the Board of Directors, which consists entirely of independent directors. Billings by the Saul Organization for the Company’s share of these ancillary costs and expenses for the six months endedJune 30, 2014 and 2013, which included rental expense for the Company’s headquarters lease, totaled approximately $3.6 million and $3.2 million, respectively. The amounts are generally expensed as incurred and are primarily reported as general and administrative expenses in the consolidated financial statements. As of June 30, 2014 and December 31, 2013, accounts payable, accrued expenses and other liabilities included approximately $479,900 and $499,000, respectively, representing amounts due to the Saul Organization for the Company’s share of these ancillary costs and expenses.

The Company subleases its corporate headquarters space from a member of the Saul Organization. The lease commenced in March 2002, was extended in 2012 for five years, and provides for base rent increases of 3% per year, with payment of a pro-rata share of operating expenses over a base year amount. The Agreement requires each party to pay an allocation of total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company’s rent expense was $414,000 and $428,000 for the six months endedJune 30, 2014 and 2013, respectively, and is included in general and administrative expense.

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 fees in connection with the Company’s insurance program. Such commissions and fees amounted to $169,700 and $167,000 for the six months endedJune 30, 2014 and 2013, respectively.

Effective as of September 4, 2012, the Company entered into a consulting agreement with B. F. Saul III, a former president of the Company, whereby Mr. Saul III will provide certain consulting services to the Company as an independent contractor and will be paid at a rate of $60,000 per month. The consulting agreement includes certain noncompete, nonsolicitation and nondisclosure covenants, and has a term of up to two years, although the consulting agreement is terminable by the Company at any time. For each of the six months endedJune 30, 2014 and 2013, such consulting fees totaled $360,000.

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Noncontrolling Interest - Holders of Convertible Limited Partnership Units in Operating Partnership - Additional Information (Detail) (Noncontrolling Interest)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Noncontrolling Interest
Noncontrolling Interest [Line Items]
Percentage of ownership interest of noncontrolling interest	25.70%		25.70%
Limited partnership units	7,200,000		7,200,000
Limited partnership units, conversion ratio	1		1
Outstanding stock percent that should be acquired for rights to be exercised	39.90%		39.90%
Limited partnership units convertible in to shares of common stock, eligible for conversion	975,000		975,000
Fully converted partnership units and diluted weighted average shares outstanding	27,900,000	27,200,000	27,800,000	27,200,000

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company has reviewed operating activities for the period subsequent to June 30, 2014 and prior to the date the financial statements are issued or are available to be issued, and determined there are no subsequent events required to be disclosed.

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Stock Option Plans (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options Issued

The following table summarizes the amount and activity of each grant with outstanding unexercised options, the total value and variables used in the computation and the amount expensed and included in general and administrative expense in the Consolidated Statements of Operations for the six months endedJune 30, 2014.

Stock options issued

	Directors
Grant date	5/6/2005			5/1/2006			4/27/2007			4/25/2008			4/24/2009			5/7/2010			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals
Total grant	30,000			30,000			30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Vested	30,000			30,000			30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Exercised	22,500			10,000			—			—			20,000			10,000			10,000			10,000			7,500			—			90,000
Forfeited	—			2,500			7,500			7,500			—			2,500			2,500			—			—			—			22,500
Exercisable at June 30, 2014	7,500			17,500			22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Remaining unexercised	7,500			17,500			22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Exercise price	$	33.22		$	40.35		$	54.17		$	50.15		$	32.68		$	38.76		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.198			0.206			0.225			0.237			0.344			0.369			0.358			0.348			0.333			0.173
Expected life (years)	10.0			9.0			8.0			7.0			6.0			5.0			5.0			5.0			5.0			5.0
Assumed yield	6.91		%	5.93		%	4.39		%	4.09		%	4.54		%	4.23		%	4.16		%	4.61		%	4.53		%	4.48		%
Risk-free rate	4.28		%	5.11		%	4.65		%	3.49		%	2.19		%	2.17		%	1.86		%	0.78		%	0.82		%	1.63		%
Total value at grant date	$	71,100		$	143,400		$	285,300		$	254,700		$	222,950		$	287,950		$	297,375		$	244,388		$	262,946		$	101,726		$	2,171,835
Expensed in previous years	71,100			143,400			285,300			254,700			222,950			287,950			297,375			244,388			262,946			—			2,070,109
Expensed in 2014	—			—			—			—			—			—			—			—			—			101,726			101,726
Future expense	—			—			—			—			—			—			—			—			—			—			—
	Officers
Grant date	5/6/2005			4/27/2007			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals												Grand  Totals
Total grant	132,500			135,000			162,500			242,500			202,500			170,000			1,045,000												1,362,500
Vested	118,750			67,500			105,625			56,250			50,625			—			398,750												716,250
Exercised	84,850			—			30,955			18,902			8,853			—			143,560												233,560
Forfeited	13,750			67,500			43,750			135,000			30,000			—			290,000												312,500
Exercisable at June 30, 2014	33,900			67,500			63,420			37,348			41,772			—			243,940												448,940
Remaining unexercised	33,900			67,500			87,795			88,598			163,647			170,000			611,440												816,440
Exercise price	$	33.22		$	54.17		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.207			0.233			0.330			0.315			0.304			0.306
Expected life (years)	8.0			6.5			8.0			8.0			8.0			7.0
Assumed yield	6.37		%	4.13		%	4.81		%	5.28		%	5.12		%	4.89		%
Risk-free rate	4.15		%	4.61		%	2.75		%	1.49		%	1.49		%	2.17		%
Gross value at grant date	$	413,400		$	1,339,200		$	1,366,625		$	1,518,050		$	1,401,300		$	1,397,400		$	7,435,975											$	9,607,810
Estimated forfeitures	35,100			80,350			387,550			889,690			280,468			174,700			1,847,858												1,847,858
Expensed in previous years	378,300			1,258,850			692,088			261,807			209,027			—			2,800,072												4,870,181
Expensed in 2014	—			—			113,205			78,546			149,360			50,947			392,058												493,784
Future expense	—			—			173,782			288,007			762,445			1,171,753			2,395,987												2,395,987
Weighted average term of remaining future expense (in years)										3.1

Summary of Option Activity

The table below summarizes the option activity for the six months endedJune 30, 2014:

	Number of Shares		Weighted Average Exercise Price per share		Aggregate Intrinsic Value
Outstanding at January 1	753,625		$	42.55	$	4,529,206
Granted	200,000		47.03		314,000
Exercised	(99,685	)	37.23		1,018,511
Expired/Forfeited	(37,500	)	43.56
Outstanding June 30	816,440		44.26		4,078,348
Exercisable June 30	448,940		43.87		2,659,611

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Stock Option Plans - Stock Options Issued (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Exercisable at end of period (in shares)	448,940
Exercise price (in usd per share)	$ 37.23
Weighted average term of remaining future expense	3 years 1 month 6 days
Directors | 5/6/2005
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 06, 2005
Total grant (in shares)	30,000
Vested (in shares)	$ 30,000
Exercised (in shares)	22,500
Forfeited (in shares)	0
Exercisable at end of period (in shares)	7,500
Remaining unexercised (in shares)	7,500
Exercise price (in usd per share)	$ 33.22
Volatility	0.198
Expected life (years)	10 years
Assumed yield	6.91%
Risk-free rate	4.28%
Total value at grant date	71,100
Expensed in previous years	71,100
Expensed in 2013	0
Future expense	0
Directors | 5/1/2006
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 01, 2006
Total grant (in shares)	30,000
Vested (in shares)	30,000
Exercised (in shares)	10,000
Forfeited (in shares)	2,500
Exercisable at end of period (in shares)	17,500
Remaining unexercised (in shares)	17,500
Exercise price (in usd per share)	$ 40.35
Volatility	0.206
Expected life (years)	9 years
Assumed yield	5.93%
Risk-free rate	5.11%
Total value at grant date	143,400
Expensed in previous years	143,400
Expensed in 2013	0
Future expense	0
Directors | 4/27/2007
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	Apr. 27, 2007
Total grant (in shares)	30,000
Vested (in shares)	30,000
Exercised (in shares)	0
Forfeited (in shares)	7,500
Exercisable at end of period (in shares)	22,500
Remaining unexercised (in shares)	22,500
Exercise price (in usd per share)	$ 54.17
Volatility	0.225
Expected life (years)	8 years
Assumed yield	4.39%
Risk-free rate	4.65%
Total value at grant date	285,300
Expensed in previous years	285,300
Expensed in 2013	0
Future expense	0
Directors | 4/25/2008
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	Apr. 25, 2008
Total grant (in shares)	30,000
Vested (in shares)	30,000
Exercised (in shares)	0
Forfeited (in shares)	7,500
Exercisable at end of period (in shares)	22,500
Remaining unexercised (in shares)	22,500
Exercise price (in usd per share)	$ 50.15
Volatility	0.237
Expected life (years)	7 years
Assumed yield	4.09%
Risk-free rate	3.49%
Total value at grant date	254,700
Expensed in previous years	254,700
Expensed in 2013	0
Future expense	0
Directors | 4/24/2009
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	Apr. 24, 2009
Total grant (in shares)	32,500
Vested (in shares)	32,500
Exercised (in shares)	20,000
Forfeited (in shares)	0
Exercisable at end of period (in shares)	12,500
Remaining unexercised (in shares)	12,500
Exercise price (in usd per share)	$ 32.68
Volatility	0.344
Expected life (years)	6 years
Assumed yield	4.54%
Risk-free rate	2.19%
Total value at grant date	222,950
Expensed in previous years	222,950
Expensed in 2013	0
Future expense	0
Directors | 5/7/2010
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 07, 2010
Total grant (in shares)	32,500
Vested (in shares)	32,500
Exercised (in shares)	10,000
Forfeited (in shares)	2,500
Exercisable at end of period (in shares)	20,000
Remaining unexercised (in shares)	20,000
Exercise price (in usd per share)	$ 38.76
Volatility	0.369
Expected life (years)	5 years
Assumed yield	4.23%
Risk-free rate	2.17%
Total value at grant date	287,950
Expensed in previous years	287,950
Expensed in 2013	0
Future expense	0
Directors | 5/13/2011
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 13, 2011
Total grant (in shares)	32,500
Vested (in shares)	32,500
Exercised (in shares)	10,000
Forfeited (in shares)	2,500
Exercisable at end of period (in shares)	20,000
Remaining unexercised (in shares)	20,000
Exercise price (in usd per share)	$ 41.82
Volatility	0.358
Expected life (years)	5 years
Assumed yield	4.16%
Risk-free rate	1.86%
Total value at grant date	297,375
Expensed in previous years	297,375
Expensed in 2013	0
Future expense	0
Directors | 5/4/2012
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 04, 2012
Total grant (in shares)	35,000
Vested (in shares)	35,000
Exercised (in shares)	10,000
Forfeited (in shares)	0
Exercisable at end of period (in shares)	25,000
Remaining unexercised (in shares)	25,000
Exercise price (in usd per share)	$ 39.29
Volatility	0.348
Expected life (years)	5 years
Assumed yield	4.61%
Risk-free rate	0.78%
Total value at grant date	244,388
Expensed in previous years	244,388
Expensed in 2013	0
Future expense	0
Directors | 5/10/2013
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 10, 2013
Total grant (in shares)	35,000
Vested (in shares)	35,000
Exercised (in shares)	7,500
Forfeited (in shares)	0
Exercisable at end of period (in shares)	27,500
Remaining unexercised (in shares)	27,500
Exercise price (in usd per share)	$ 44.42
Volatility	0.333
Expected life (years)	5 years
Assumed yield	4.53%
Risk-free rate	0.82%
Total value at grant date	262,946
Expensed in previous years	262,946
Expensed in 2013	0
Future expense	0
Directors | 5/9/2014
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Total grant (in shares)	30,000
Vested (in shares)	30,000
Exercised (in shares)	0
Forfeited (in shares)	0
Exercisable at end of period (in shares)	30,000
Remaining unexercised (in shares)	30,000
Exercise price (in usd per share)	$ 47.03
Volatility	0.173
Expected life (years)	5 years
Assumed yield	4.48%
Risk-free rate	1.63%
Total value at grant date	101,726
Expensed in previous years	0
Expensed in 2013	101,726
Future expense	0
Directors | Subtotals
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Total grant (in shares)	317,500
Vested (in shares)	317,500
Exercised (in shares)	90,000
Forfeited (in shares)	22,500
Exercisable at end of period (in shares)	205,000
Remaining unexercised (in shares)	205,000
Total value at grant date	2,171,835
Expensed in previous years	2,070,109
Expensed in 2013	101,726
Future expense	0
Officers
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Total grant (in shares)	1,362,500
Vested (in shares)	716,250
Exercised (in shares)	233,560
Forfeited (in shares)	312,500
Exercisable at end of period (in shares)	448,940
Remaining unexercised (in shares)	816,440
Total value at grant date	9,607,810
Estimated forfeitures	1,847,858
Expensed in previous years	4,870,181
Expensed in 2013	493,784
Future expense	2,395,987
Officers | 5/6/2005
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 06, 2005
Total grant (in shares)	132,500
Vested (in shares)	118,750
Exercised (in shares)	84,850
Forfeited (in shares)	13,750
Exercisable at end of period (in shares)	33,900
Remaining unexercised (in shares)	33,900
Exercise price (in usd per share)	$ 33.22
Volatility	0.207
Expected life (years)	8 years
Assumed yield	6.37%
Risk-free rate	4.15%
Total value at grant date	413,400
Estimated forfeitures	35,100
Expensed in previous years	378,300
Expensed in 2013	0
Future expense	0
Officers | 4/27/2007
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	Apr. 27, 2007
Total grant (in shares)	135,000
Vested (in shares)	67,500
Exercised (in shares)	0
Forfeited (in shares)	67,500
Exercisable at end of period (in shares)	67,500
Remaining unexercised (in shares)	67,500
Exercise price (in usd per share)	$ 54.17
Volatility	0.233
Expected life (years)	6 years 6 months
Assumed yield	4.13%
Risk-free rate	4.61%
Total value at grant date	1,339,200
Estimated forfeitures	80,350
Expensed in previous years	1,258,850
Expensed in 2013	0
Future expense	0
Officers | 5/13/2011
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 13, 2011
Total grant (in shares)	162,500
Vested (in shares)	105,625
Exercised (in shares)	30,955
Forfeited (in shares)	43,750
Exercisable at end of period (in shares)	63,420
Remaining unexercised (in shares)	87,795
Exercise price (in usd per share)	$ 41.82
Volatility	0.330
Expected life (years)	8 years
Assumed yield	4.81%
Risk-free rate	2.75%
Total value at grant date	1,366,625
Estimated forfeitures	387,550
Expensed in previous years	692,088
Expensed in 2013	113,205
Future expense	173,782
Officers | 5/4/2012
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 04, 2012
Total grant (in shares)	242,500
Vested (in shares)	56,250
Exercised (in shares)	18,902
Forfeited (in shares)	135,000
Exercisable at end of period (in shares)	37,348
Remaining unexercised (in shares)	88,598
Exercise price (in usd per share)	$ 39.29
Volatility	0.315
Expected life (years)	8 years
Assumed yield	5.28%
Risk-free rate	1.49%
Total value at grant date	1,518,050
Estimated forfeitures	889,690
Expensed in previous years	261,807
Expensed in 2013	78,546
Future expense	288,007
Officers | 5/10/2013
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 10, 2013
Total grant (in shares)	202,500
Vested (in shares)	50,625
Exercised (in shares)	8,853
Forfeited (in shares)	30,000
Exercisable at end of period (in shares)	41,772
Remaining unexercised (in shares)	163,647
Exercise price (in usd per share)	$ 44.42
Volatility	0.304
Expected life (years)	8 years
Assumed yield	5.12%
Risk-free rate	1.49%
Total value at grant date	1,401,300
Estimated forfeitures	280,468
Expensed in previous years	209,027
Expensed in 2013	149,360
Future expense	762,445
Officers | 5/9/2014
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Grant date	May 09, 2014
Total grant (in shares)	170,000
Vested (in shares)	0
Exercised (in shares)	0
Forfeited (in shares)	0
Exercisable at end of period (in shares)	0
Remaining unexercised (in shares)	170,000
Exercise price (in usd per share)	$ 47.03
Volatility	0.306
Expected life (years)	7 years
Assumed yield	4.89%
Risk-free rate	2.17%
Total value at grant date	1,397,400
Estimated forfeitures	174,700
Expensed in previous years	0
Expensed in 2013	50,947
Future expense	1,171,753
Officers | Subtotals
Share Based Compensation Arrangements By Share Based Payment Award Options [Line Items]
Total grant (in shares)	1,045,000
Vested (in shares)	398,750
Exercised (in shares)	143,560
Forfeited (in shares)	290,000
Exercisable at end of period (in shares)	243,940
Remaining unexercised (in shares)	611,440
Total value at grant date	7,435,975
Estimated forfeitures	1,847,858
Expensed in previous years	2,800,072
Expensed in 2013	392,058
Future expense	$ 2,395,987

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Net income	$ 20,487	$ 7,762	$ 33,198	$ 11,160
Other comprehensive income
Change in unrealized loss on cash flow hedge	(420)	1,763	(647)	2,264
Total comprehensive income	20,067	9,525	32,551	13,424
Comprehensive income attributable to noncontrolling interests	(4,325)	(1,617)	(6,691)	(159)
Total comprehensive income attributable to Saul Centers, Inc.	15,742	7,908	25,860	13,265
Preferred stock redemption	0	0	0	(5,228)
Preferred stock dividends	(3,207)	(3,207)	(6,413)	(7,571)
Total comprehensive income attributable to common stockholders	$ 12,535	$ 4,701	$ 19,447	$ 466

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Organization, Formation and Structure

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Organization, Formation and Structure

Organization, Formation and Structure

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

Saul Centers was formed to continue and expand the shopping center business previously owned and conducted by the B. F. Saul Real Estate Investment Trust, the B. F. Saul Company and certain other affiliated entities, each of which is controlled by B. Francis Saul II and his family members (collectively, the “Saul Organization”). On August 26, 1993, members of the Saul Organization transferred to Saul Holdings Limited Partnership, a newly formed Maryland limited partnership (the “Operating Partnership”), and two newly formed subsidiary limited partnerships (the “Subsidiary Partnerships,” and, collectively with the Operating Partnership, the “Partnerships”), shopping center and mixed-use properties and the management functions related to the transferred properties. Since its formation, the Company has developed and purchased additional properties.

The following table lists the properties acquired, in development and disposed since December 31, 2012.

Name of Property	Location	Type	Year of Acquisition/ Development/Disposition
Acquisitions
1580 Rockville Pike	Rockville, MD	Shopping Center	2014
1582 Rockville Pike	Rockville, MD	Shopping Center	2014
Developments
Park Van Ness	Washington, DC	Mixed-Use	2013
Dispositions
Giant	Baltimore, MD	Shopping Center	2014

As of June 30, 2014, the Company’s properties (the “Current Portfolio Properties”) consisted of 49 operating shopping center properties (the “Shopping Centers”), six mixed-use properties which are comprised of office, retail and multi-family residential uses (the “Mixed-Use Properties”) and three (non-operating) development properties.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Changes in Fair Value of Swaps

The decrease in value from inception of the swap is reflected in “Other Comprehensive Income” in the Consolidated Statements of Comprehensive Income. Amounts recognized in earnings are included in Changes in Fair Value of Derivatives in the Consolidated Statements of Operations.

	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2014			2013		2014			2013
Change in fair value:
Recognized in earnings	$	(5	)	$	51	$	(7	)	$	61
Recognized in other comprehensive income	(420		)	1,763		(647		)	2,264
	$	(425	)	$	1,814	$	(654	)	$	2,325

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Stockholders' Equity and Noncontrolling Interest - Additional Information (Detail) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended		1 Months Ended			0 Months Ended		0 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Mar. 31, 2013 Series A Cumulative Redeemable Preferred Stock	Mar. 31, 2013 9% Series B Cumulative Redeemable Preferred Stock	Mar. 31, 2013 Series A Preferred Stock	Feb. 12, 2013 6.875 Series C Cumulative Redeemable Preferred Stock	Feb. 12, 2013 6.875 Series C Cumulative Redeemable Preferred Stock	Feb. 12, 2013 6.875 Series C Cumulative Redeemable Preferred Stock Minimum	Feb. 12, 2013 6.875 Series C Cumulative Redeemable Preferred Stock Maximum
Class of Stock [Line Items]
Income (loss) attributable to noncontrolling interests	$ 4,433,000	$ 1,168,000	$ 6,857,000	$ (418,000)
Percentage of redeemable preferred stock					60.00%			6.875%
Dividend rate on preferred stock					8.00%	9.00%	8.00%
Outstanding depositary shares							1.6
Depository shares to cumulative redeemable preferred stock ratio							0.01	0.01
Cumulative redeemable preferred stock liquidation preference							$ 25.00		$ 25.00
Annual dividend on depositary shares							$ 2.00	$ 1.71875
Number of depositary shares sold								5.6
Cash proceeds from sale depositary shares								$ 135,200,000
Dividend payment accrual date										Feb. 12, 2018
Dividend payment date								Apr. 15, 2013
Dividends record date										Feb. 12, 2013	Mar. 31, 2013

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Business Segments

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Business Segments

Business Segments

The Company has two reportable business segments: Shopping Centers and Mixed-Use Properties. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). The Company evaluates performance based upon income and cash flows from real estate of the combined properties in each segment. All of our properties within each segment generate similar types of revenues and expenses related to tenant rent, reimbursements and operating expenses. Although services are provided to a range of tenants, the types of services provided to them are similar within each segment. The properties in each portfolio have similar economic characteristics and the nature of the products and services provided to our tenants and the method to distribute such services are consistent throughout the portfolio. Certain reclassifications have been made to prior year information to conform to the 2014 presentation.

(Dollars in thousands)	Shopping Centers			Mixed-Use Properties			Corporate and Other			Consolidated Totals
Three months ended June 30, 2014
Real estate rental operations:
Revenue	$	39,056		$	13,210		$	20		$	52,286
Expenses	(8,002		)	(3,827		)	—			(11,829		)
Income from real estate	31,054			9,383			20			40,457
Interest expense and amortization of deferred debt costs	—			—			(11,486		)	(11,486		)
General and administrative	—			—			(4,023		)	(4,023		)
Acquisition related costs	(216		)	—			—			(216		)
Predevelopment expenses	—			—			—			—
Subtotal	30,838			9,383			(15,489		)	24,732
Depreciation and amortization of deferred leasing costs	(6,911		)	(3,398		)	—			(10,309		)
Gain on sale of property	6,069			—			—			6,069
Change in fair value of derivatives	—			—			(5		)	(5		)
Net income (loss)	$	29,996		$	5,985		$	(15,494	)	$	20,487
Capital investment	$	13,592		$	4,865		$	—		$	18,457
Total assets	$	906,399		$	297,009		$	24,020		$	1,227,428
Three months ended June 30, 2013
Real estate rental operations:
Revenue	$	35,749		$	13,047		$	13		$	48,809
Expenses	(7,222		)	(4,537		)	—			(11,759		)
Income from real estate	28,527			8,510			13			37,050
Interest expense and amortization of deferred debt costs	—			—			(11,709		)	(11,709		)
General and administrative	—			—			(3,925		)	(3,925		)
Predevelopment expenses	—			(1,233		)	—			(1,233		)
Subtotal	28,527			7,277			(15,621		)	20,183
Depreciation and amortization of deferred leasing costs	(6,913		)	(5,559		)	—			(12,472		)
Change in fair value of derivatives	—			—			51			51
Net income (loss)	$	21,614		$	1,718		$	(15,570	)	$	7,762
Capital investment	$	2,305		$	4,007		$	—		$	6,312
Total assets	$	885,816		$	292,048		$	13,746		$	1,191,610

(Dollars in thousands)	Shopping Centers			Mixed-Use Properties			Corporate and Other			Consolidated Totals
Six months ended June 30, 2014
Real estate rental operations:
Revenue	$	78,875		$	26,323		$	35		$	105,233
Expenses	(17,492		)	(7,578		)	—			(25,070		)
Income from real estate	61,383			18,745			35			80,163
Interest expense and amortization of deferred debt costs	—			—			(22,953		)	(22,953		)
General and administrative	—			—			(8,703		)	(8,703		)
Acquisition related costs	(379		)	—			—			(379		)
Predevelopment expenses	—			(503		)	—			(503		)
Subtotal	61,004			18,242			(31,621		)	47,625
Depreciation and amortization of deferred leasing costs	(13,808		)	(6,681		)	—			(20,489		)
Gain on sale of property	6,069			—			—			6,069
Change in fair value of derivatives	—			—			(7		)	(7		)
Net income (loss)	$	53,265		$	11,561		$	(31,628	)	$	33,198
Capital investment	$	24,324		$	8,021		$	—		$	32,345
Total assets	$	906,399		$	297,009		$	24,020		$	1,227,428
Six months ended June 30, 2013
Real estate rental operations:
Revenue	$	71,796		$	26,155		$	44		$	97,995
Expenses	(14,977		)	(8,758		)	—			(23,735		)
Income from real estate	56,819			17,397			44			74,260
Interest expense and amortization of deferred debt costs	—			—			(23,426		)	(23,426		)
General and administrative	—			—			(7,329		)	(7,329		)
Predevelopment expenses	—			(3,582		)	—			(3,582		)
Subtotal	56,819			13,815			(30,711		)	39,923
Depreciation and amortization of deferred leasing costs	(13,742		)	(15,082		)	—			(28,824		)
Change in fair value of derivatives	—			—			61			61
Net income (loss)	$	43,077		$	(1,267	)	$	(30,650	)	$	11,160
Capital investment	$	5,804		$	5,572		$	—		$	11,376
Total assets	$	885,816		$	292,048		$	13,746		$	1,191,610