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

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

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

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

At December 31, 2024, the principal amount of outstanding debt totaled $1.55 billion, of which $1.37 billion was fixed rate debt and $187.0 million was variable rate debt. The principal amount of the Company’s outstanding debt totaled $1.41 billion at December 31, 2023, of which $1.13 billion was fixed rate debt and $276.0 million was variable rate debt.

At December 31, 2024, the Company had a $525.0 million Credit Facility comprised of a $425.0 million revolving credit facility and a $100.0 million term loan. The revolving credit facility matures on August 29, 2025, which may be extended by the Company for one additional year, subject to satisfaction of certain conditions. The term loan matures on February 26, 2027, and may not be extended. Interest accrues at the Secured Overnight Financing Rate (“SOFR”) plus 10 basis points plus an applicable spread, which is determined by certain leverage tests. As of December 31, 2024, the applicable spread for borrowings was 140 basis points related to the revolving credit facility and 135 basis points related to the term loan. Letters of credit may be issued under the Credit Facility. On December 31, 2024, based on the value of the Company’s unencumbered properties, approximately $134.5 million was available under the Credit Facility, $287.0 million was outstanding and approximately $185,000 was committed for letters of credit.

On August 23, 2022, the Company entered into two floating-to-fixed interest rate swap agreements to manage the interest rate risk associated with $100.0 million of its variable-rate debt. Each swap agreement became effective October 3, 2022 and each has a $50.0 million notional amount. One agreement terminates on October 1, 2027 and effectively fixes SOFR at 2.96%. The other agreement terminates on October 1, 2030 and effectively fixes SOFR at 2.91%. Because the interest-rate swaps effectively fix SOFR for $100.0 million of variable-rate debt, unless otherwise indicated, $100.0 million of variable-rate debt is treated as fixed-rate debt for disclosure purposes. The Company has designated the agreements as cash flow hedges for accounting purposes.

As of December 31, 2024 and 2023, the fair value of the interest-rate swaps totaled approximately $4.1 million and $2.7 million, respectively, and is included in Other assets in the Consolidated Balance Sheets. The increase in value from inception of the swaps is reflected in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income.

On December 18, 2024, the Company closed on a 15-year, non-recourse, $50.0 million mortgage secured by Ashburn Village Shopping Center. The loan matures in 2040, bears interest at a fixed-rate of 5.47%, requires monthly principal and interest payments of $306,100 based on a 25-year amortization schedule and requires a final principal payment of $28.4 million at maturity. Proceeds were used to repay the remaining balance of approximately $20.5 million on the existing mortgage and reduce the outstanding balance of the Company’s Credit Facility.

On September 24, 2024, the Company closed on a 15-year, $70.0 million mortgage secured by Thruway Shopping Center. The loan matures in 2039, bears interest at a fixed-rate of 6.41%, requires monthly principal and interest payments of $468,700 based on a 25-year amortization schedule and requires a final principal payment of $41.7 million at maturity. Proceeds were used to reduce the outstanding balance of the Company’s Credit Facility.

On May 28, 2024, the Company closed on a 13.4-year, non-recourse, $100.0 million mortgage secured by Avenel Business Park, Leesburg Pike Plaza, and White Oak Shopping Center. The loan matures in 2037, bears interest at a fixed-rate of 6.38%, requires monthly principal and interest payments of $686,300 based on a 23.4-year amortization schedule and requires a final principal payment of $61.5 million at maturity. Proceeds were used to repay the remaining balance of approximately $51.2 million on the existing mortgages secured by the properties and reduce the outstanding balance of the Company’s Credit Facility. The loan is cross-collateralized and coterminous with the mortgage secured by Beacon Center and Seven Corners Center.

On March 8, 2023, the Company closed on a 10-year, non-recourse, $15.3 million mortgage secured by BJ’s Wholesale Club in Alexandria, Virginia. The loan matures in 2033, bears interest at a fixed-rate of 6.07%, requires monthly principal and interest payments of $99,200 based on a 25-year amortization schedule and requires a final principal payment of $11.7 million at maturity. Proceeds were used to repay the remaining balance of approximately $9.3 million on the existing mortgage and reduce the outstanding balance of the Credit Facility.

On November 19, 2021, the Company closed on a $145.0 million construction-to-permanent loan, the proceeds of which will be used to partially fund Phase I of the Twinbrook Quarter development project. The loan matures in 2041, bears interest at a fixed rate of 3.83%, and requires interest only payments, which will be funded by the loan, until conversion to permanent. The conversion is expected in the fourth quarter of 2026 and, thereafter, monthly principal and interest payments based on a 25-year amortization schedule will be required. During the second quarter of 2023, the Company commenced drawing on the loan and as of December 31, 2024, the balance of the loan was $127.3 million, net of unamortized deferred debt costs.

On September 6, 2022, the Company closed on a 15-year, non-recourse, $143.0 million mortgage secured by Beacon Center and Seven Corners Center. The loan matures in 2037, bears interest at a fixed-rate of 5.05%, requires monthly principal and interest payments of $840,100 based on a 25-year amortization schedule and requires a final payment of $79.9 million at maturity. Proceeds were used to repay the remaining balance of approximately $85.3 million on the existing mortgages and reduce the outstanding balance of the Credit Facility. This transaction was treated as a modification of the original debt agreement. A prepayment penalty of $5.9 million was incurred, which was deferred and will be amortized as interest expense over the life of the loan and is included as a reduction to notes payable, net in the Consolidated Balance Sheets.

On August 24, 2022, the Company closed on a 7-year, non-recourse, $31.5 million mortgage secured by Great Falls Center. The loan matures in 2029, bears interest at a fixed-rate of 3.91%, requires monthly principal and interest payments of $164,700 based on a 25-year amortization schedule and requires a final payment of $25.7 million at maturity. Proceeds were used to repay the remaining balance of approximately $8.0 million on the existing mortgage and reduce the outstanding balance of the Credit Facility. A $0.2 million loss on early extinguishment of debt was recognized.

On August 4, 2022, the Company closed on a 15-year, non-recourse, $25.3 million mortgage secured by Village Center. The loan matures in 2037, bears interest at a fixed-rate of 4.14%, requires monthly principal and interest payments of $135,200 based on a 25-year amortization schedule and requires a final payment of $13.4 million at maturity. Proceeds were used to repay the remaining balance of approximately $11.2 million on the existing mortgage and reduce the outstanding balance of the Credit Facility. A $0.4 million loss on early extinguishment of debt was recognized.

On June 7, 2022, the Company repaid in full the remaining principal balance of $8.6 million of the mortgage loan secured by Orchard Park, which was scheduled to mature in September 2022.

On March 11, 2022, the Company repaid in full the remaining principal balance of $28.3 million of the mortgage loan secured by Lansdowne Town Center, which was scheduled to mature in June 2022.

On February 23, 2022, the Company closed on a $133.0 million construction-to-permanent loan, the proceeds of which will be used to partially fund Hampden House. The loan matures in 2040, bears interest at a fixed rate of 3.90%, and requires interest only payments, which will be funded by the loan, until conversion to permanent. The conversion is expected in the first quarter of 2026, and thereafter, monthly principal and interest payments based on a 25-year amortization schedule will be required. During the fourth quarter of 2023, the Company commenced drawing on the loan and as of December 31, 2024, the balance of the loan was $71.4 million, net of unamortized deferred debt costs.

Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the Credit Facility. The Operating Partnership is the guarantor of (a) the mortgage secured by Kentlands Place, Kentlands Square I and Kentlands pad (totaling $26.5 million at December 31, 2024) and (b) a portion of the Thruway mortgage (totaling $17.5 million of the $69.8 million outstanding balance at December 31, 2024).

The Company provides a repayment guaranty of 100% of the loan secured by Twinbrook Quarter during construction and lease-up. Such guaranty is expected to be reduced in the future as the development achieves certain metrics. As of December 31, 2024, the loan balance and the amount guaranteed were $129.6 million. The Company also provides the lender with a 100% construction completion guaranty.

The Company provides a limited repayment guaranty of $26.6 million during construction and lease-up for the loan secured by Hampden House. Such guaranty is expected to be reduced in the future as the development achieves certain metrics. As of December 31, 2024, the loan balance was $74.0 million. The Company also provides the lender with a 100% construction completion guaranty.

All other notes payable are non-recourse.

The carrying amount of the properties collateralizing the mortgage notes payable totaled $1.6 billion and $1.5 billion, as of December 31, 2024 and 2023, respectively. The Company’s Credit Facility requires the Company and its subsidiaries to maintain certain financial covenants, which are summarized below. The Company was in compliance as of December 31, 2024.

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

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

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

Mortgage notes payable totaling $2.0 million at each of December 31, 2024 and 2023, are guaranteed by a member of the Saul Organization.

As of December 31, 2024, the scheduled maturities of all debt including scheduled principal amortization for years ended December 31 are as follows:

(In thousands)	Balloon Payments			Scheduled Principal Amortization		Total
2025	$	187,000	(1)	$	35,646	$	222,646
2026	134,088			34,010		168,098
2027	100,000		(2)	33,436		133,436
2028	17,811			34,188		51,999
2029	25,514			34,748		60,262
Thereafter	632,489			283,758		916,247
Principal amount	$	1,096,902		$	455,786	1,552,688
Unamortized deferred debt costs						20,072
Net						$	1,532,616
(1)Includes $187.0 million outstanding under the revolving credit facility of the Credit Facility. The revolving credit facility may be extended by the Company for one additional year, subject to satisfaction of certain conditions. (2)Includes $100.0 million outstanding under the term loan of the Credit Facility.

Deferred Debt Costs

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the Credit Facility. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaled $20.1 million and $19.3 million, net of accumulated amortization of $11.2 million and $10.6 million at December 31, 2024 and 2023, respectively, and are reflected as a reduction of the related debt in the Consolidated Balance Sheets.

The components of interest expense are set forth below.

	Year ended December 31,
(In thousands)	2024		2023		2022
Interest incurred	$	74,359	$	66,717	$	53,219
Amortization of deferred debt costs	2,353		2,250		1,985
Capitalized interest	(22,857)		(19,519)		(11,191)
Interest expense	53,855		49,448		44,013
Less: Interest income	(159)		(295)		(76)
Interest expense, net and amortization of deferred debt costs	$	53,696	$	49,153	$	43,937

Deferred debt costs capitalized during the years ended December 31, 2024, 2023 and 2022 totaled $3.5 million, $0.4 million and $9.9 million, respectively.