<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SAUL CENTERS, INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
SAUL CENTERS, INC.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-6200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 23, 1999
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of SAUL
CENTERS, INC., a Maryland corporation, will be held at 11:00 a.m. local time, on
April 23, 1999, at the Embassy Suites Chevy Chase Pavilion, 4300 Military Road,
N.W., Washington, D.C. (at the intersection of Western and Wisconsin Avenues,
adjacent to Friendship Heights Metro Stop on the Metro Red Line), for the
following purposes.
1. To elect four directors to serve until the annual meeting of
stockholders in 2002, or until their successors are duly elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Stockholders of record at the close of business on February 22, 1999 will
be entitled to notice of and to vote at the annual meeting or at any adjournment
thereof.
Stockholders are cordially invited to attend the meeting in person. WHETHER
OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO COMPLETE, DATE, SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A POSTAGE PAID RETURN
ENVELOPE IS PROVIDED. If you decide to attend the meeting, you may revoke your
proxy and vote your shares in person. It is important that your shares be voted.
By Order of the Board of Directors
/s/ Scott V. Schneider
Scott V. Schneider
Chief Financial Officer and Secretary
March 12, 1999
Chevy Chase, Maryland
<PAGE>
SAUL CENTERS, INC.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-6200
----------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1999
-------------------------------
GENERAL
This Proxy Statement is furnished by the Board of Directors of Saul
Centers, Inc. (the "Company") in connection with the solicitation by the Board
of Directors of proxies to be voted at the annual meeting of stockholders to be
held on April 23, 1999, and at any adjournment or adjournments thereof, for the
purposes set forth in the accompanying notice of such meeting. All stockholders
of record at the close of business on February 22, 1999 will be entitled to
vote.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder. If
no directions are specified, the proxy will be voted for the Proposal set forth
in this Proxy Statement. Any stockholder giving a proxy has the power to revoke
it at any time before it is exercised. A proxy may be revoked (i) by delivery of
a written statement to the Secretary of the Company stating that the proxy is
revoked, (ii) by presentation at the annual meeting of a subsequent proxy
executed by the person executing the prior proxy, or (iii) by attendance at the
annual meeting and voting in person.
Votes cast in person or by proxy at the annual meeting will be tabulated
and a determination will be made as to whether or not a quorum is present. The
Company will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence or absence of a quorum, but as unvoted
for purposes of determining the approval of any matter submitted to the
stockholders. If a broker submits a proxy indicating that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to such matter.
Solicitation of proxies will be primarily by mail. However, directors and
officers of the Company also may solicit proxies by telephone or telegram or in
person. The Company has retained Corporate Investor Communications, Inc. to
assist with distribution of soliciting materials and solicitation of proxies.
Corporate Investor Communications, Inc. will be paid a fee of $4,500 for its
services, plus reasonable and customary expenses. All of the expenses of
preparing, assembling, printing and mailing the materials used in the
solicitation of proxies will be paid by the Company. Arrangements may be made
with brokering houses and other custodians, nominees and fiduciaries to forward
soliciting materials, at the expense of the Company, to the beneficial owners of
shares held of record by such persons. It is anticipated that this Proxy
Statement and the enclosed proxy card first will be mailed to stockholders on or
about March 12, 1999.
2
<PAGE>
As of February 19, 1999, 12,956,670 shares of Common Stock of the Company,
$0.01 par value per share (Common Stock), were outstanding. Each share of
Common Stock entitles the holder thereof to one vote on each of the matters to
be voted upon at the annual meeting. As of the record date, officers and
directors of the Company had the power to vote approximately 22.7% of the
outstanding shares of Common Stock, excluding 6.5% of the outstanding Common
Stock held by the B. F. Saul Company Employees' Profit Sharing Retirement Trust,
two of five trustees of which are officers and directors of the Company. The
Company's officers and directors have advised the Company that they intend to
vote their shares of Common Stock in favor of the Proposal set forth in this
Proxy Statement.
ELECTION OF DIRECTORS
Nominees and Directors
The First Amended and Restated Articles of Incorporation and the Amended
and Restated Bylaws of the Company provide that there shall be no fewer than
three, nor more than fifteen directors, as determined from time to time by the
directors in office. From June 1993 until June 1997, the Board of Directors was
composed of nine directors, and in June 1997 two additional directors were
elected. The Board of Directors is divided into three classes with staggered
three-year terms. The term of each class expires at the annual meeting of
stockholders, which is expected to be held in April of each year. The directors
elected at the annual meeting of stockholders in 1999 will serve until the
annual meeting of stockholders in 2002. Under the Company's First Amended and
Restated Articles of Incorporation, a majority of the directors must be
independent directors, who are directors unaffiliated with B. F. Saul Real
Estate Investment Trust, Chevy Chase Bank, B. F. Saul Company and certain
affiliated entities (collectively, "The Saul Organization"). Messrs. Jackson,
Kelley, Longsworth, Noonan, Sullivan and Symington are independent directors.
The Company's officers and directors have advised the Company that they
intend to vote their shares of Common Stock for the election of each of the
nominees. Proxies will be voted FOR the election of the nominees listed below
unless authority is withheld.
The following list sets forth the name, age, position with the Company,
present principal occupation or employment and material occupations, positions,
offices or employment during the past five years of each nominee and director of
the Company. Nominees Saul II, Symington and Whitmore are presently directors of
the Company and have served as such since June 1993. Nominee Sullivan is
presently a director of the Company and has served as such since June 1997. All
shall, if elected, continue to serve as a director until his successor has been
duly elected and qualified.
Class Three Directors Term Ends at 2002 Annual Meeting (if elected)
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Current Directorships
- ---- --- ------------------------
<S> <C> <C>
B. Francis Saul II 66 Chairman and Chief Executive Officer of the Company. President and Chairman of
the Board of Directors of the B.F. Saul Company since 1969. Chairman of the
Board of Trustees of the B.F. Saul Real Estate Investment Trust since 1969 and
a Trustee since 1964. Chairman of the Board and Chief Executive Officer of
Chevy Chase Bank since 1969. Member of National Gallery of Art Trustees
Council. Trustee of the National Geographic Society and the Brookings
Institution. Director of Board of Visitors & Governors of Washington College.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Mark Sullivan III 57 Director of the Company. President since 1996 of the Small Business Funding
Corporation, a company providing a secondary market facility for the purchase
and securitization of small business loans. Practiced law in Washington,
D.C., advising senior management of financial institutions on legal and
policy matters from 1989 to 1996.
James W. Symington 71 Director of the Company. Of Counsel in the law firm of O'Connor & Hannan
since 1986. Member of Congress from 1969 to 1977. Chairman Emeritus of
National Rehabilitation Hospital.
John R. Whitmore 65 Director of the Company. Senior Advisor to the Bessemer Group, Inc. since
1998. Formerly President and Chief Executive Officer of the Bessemer Group
and its Bessemer Trust Company subsidiaries (a financial management and
banking group) and director of Bessemer Securities Corporation from 1975 to
1998. Director of the B.F. Saul Company and Chevy Chase Property Company.
Trustee of the B.F. Saul Real Estate Investment Trust.
</TABLE>
Class One Directors Term Ends at 2000 Annual Meeting
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Current Directorships
- ---- --- ---------------------
<S> <C> <C>
Philip D. Caraci 60 President and a Director of the Company. Senior Vice President and Secretary
of the B.F. Saul Real Estate Investment Trust since 1987. Executive Vice
President of the B.F. Saul Company with which he has been associated since
1972. President of Franklin Property Company since 1986.
Gilbert M. Grosvenor 67 Director of the Company. President (1980 through 1996) and Chairman of the
Board of Trustees since 1987 of the National Geographic Society, with which
he has been associated since 1954. Director of Chevy Chase Bank, Marriott
International Corporation, Ethyl Corp., and a Trustee of the B.F. Saul Real
Estate Investment Trust.
Philip C. Jackson, Jr. 70 Director of the Company. Adjunct Professor at Birmingham-Southern College
since 1989. Member of the Thrift Depositors Protection Oversight Board from
1990 until 1993. Vice Chairman and a Director of Central Bancshares of the
South from 1980 to 1989. Member of the Board of Governors of the Federal
Reserve System from 1975 to 1978. Director of USG Corporation, International
Realty Corporation and Jackson Insurance Agency.
</TABLE>
4
<PAGE>
Class Two Directors Term Ends at 2001 Annual Meeting
<TABLE>
Principal Occupation and
Name Age Current Directorships
- ---- --- ---------------------
<S> <C> <C>
General Paul X. Kelley 70 Director of the Company. Partner of J.F. Lehman & Company since 1998. Vice
Chairman of Cassidy & Associates from 1989 to 1998. Commandant of the Marine
Corps and member of the Joint Chiefs of Staff from 1983 to 1987. Director of
Allied Signal Inc., GenCorp. Inc., Sturm Ruger & Company Inc., UST, Inc., and
The Wackenhut Corporation.
Charles R. Longsworth 69 Director of the Company. Chairman Emeritus of Colonial Williamsburg
Foundation. Chairman and Trustee of Colonial Williamsburg Foundation from
1977 through 1994. Chairman Emeritus, Trustees of Amherst College. Director
of Crestar Financial Corporation, Houghton Mifflin, Inc., and Virginia
Eastern Shore Economic Development Corp.
Patrick F. Noonan 56 Director of the Company. Chairman of The Conservation Fund since 1985.
Trustee of the National Geographic Society. On the Board of Advisors of Duke
University School of the Environment. Director of Ashland, International
Paper, American Gas Index Fund and Rushmore Funds.
B. Francis Saul III 37 Senior Vice President and a Director of the Company. Senior Vice President of
the B. F. Saul Company since 1991. Senior Vice President and a Trustee of the
B.F. Saul Real Estate Investment Trust. Director of Chevy Chase Bank.
Director of the Greater Washington Boys & Girls Club and The Heights School.
</TABLE>
In the event that any nominee(s) should be unable to accept the office of
director, which is not anticipated, it is intended that the persons named in the
proxy will vote for the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a plurality of the shares of Common Stock present is
required for the election of directors.
The Board of Directors met five times during 1998. Each member of the Board
attended at least 83% of the aggregate meetings of the Board and of the
Committees of the Board on which he served.
5
<PAGE>
Compensation of Directors
Directors of the Company are currently paid an annual retainer of $18,000
and a fee of $1,000 for each Board or Committee meeting attended. Directors from
outside the Washington, D.C. area also are reimbursed for out-of-pocket expenses
in connection with their attendance at meetings. For the year ended December 31,
1998, the Company paid its directors total compensation of $268,000, of which
$87,450 was paid in cash and $180,550 was paid in deferred stock compensation
(as described below).
In addition, directors may elect to participate in the Deferred
Compensation Plan discussed below. For the year ended December 31, 1998, 15,578
shares were credited to the directors deferred fee accounts.
Committees of the Board of Directors
The Board of Directors has three standing committees: the Audit Committee,
the Compensation Committee and the Executive Committee.
The Audit Committee is composed of Messrs. Kelley, Longsworth, Noonan and
Symington. It makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the plans
and results of each audit engagement, approves professional services provided by
the independent public accountants, considers the range of audit and non-audit
fees, reviews the Company's financial statements, evaluates the performance of
the independent public accountants and the Company's financial and accounting
personnel, and reviews the adequacy of the Company's internal accounting
controls. This Committee met three times during 1998.
The Compensation Committee is composed of Messrs. Grosvenor and Whitmore.
It determines compensation for the Company's executive officers and administers
any stock, incentive or other compensation plans adopted by the Company,
including the Company's 1993 Stock Option Plan (the Stock Option Plan). This
Committee met once during 1998.
The Executive Committee is composed of Messrs. Caraci, Jackson and Saul II.
It has such authority as is delegated to it by the Board of Directors and
advises the Board of Directors from time to time with respect to such matters as
the Board of Directors directs. This Committee met once during 1998.
The Company does not have a nominating committee.
Compensation Committee Interlocks and Insider Participation
B. Francis Saul II, Chairman of the Board and Chief Executive Officer of
the Company, served on the Board of Trustees and the Compensation Committee of
the National Geographic Society during 1998. Gilbert M. Grosvenor, a director of
the Company and a member of the Company's Compensation Committee during 1998,
serves as Chairman of the Board of Trustees of the National Geographic Society.
Executive Officers Who Are Not Directors
The following list sets forth the name, age, position with the Company,
present principal occupation or employment and material occupations, positions,
offices or employment during the past ten years of each executive officer who is
not a director of the Company. Each listed individual has held an office with
the Company since its inception in June 1993.
6
<PAGE>
<TABLE>
<CAPTION>
Name Age Position and Background
- ---- --- -----------------------
<S> <C> <C>
Christopher H. Netter 44 Senior Vice President - Leasing. Vice President of
the B.F. Saul Company and Franklin Property Company
and Assistant Vice President of the B.F. Saul Real Estate
Investment Trust from 1987 to 1993.
Scott V. Schneider 41 Senior Vice President - Chief Financial Officer, Treasurer
and Secretary. Vice President of the B.F. Saul
Company and Franklin Property Company and Assistant
Vice President of the B.F. Saul Real Estate Investment
Trust from 1985 to 1993.
Charles W. Sherren, Jr. 45 Vice President - Management. Vice President of the B.F.
Saul Company and Franklin Property Company and
Assistant Vice President of the B.F. Saul Real Estate
Investment Trust from 1981 to 1993.
</TABLE>
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Companys officers and directors, and persons who
own more than 10% of a registered class of the Companys equity securities, to
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Forms 3, 4 and 5 which
they file.
To the best of the Company s knowledge, based upon copies of forms
furnished to it and written representations from officers, directors and 10%
beneficial holders, no person was late filing SEC Forms 3, 4 or 5 during the
period January 1, 1998 through December 31, 1998.
Deferred Compensation Plan
A Deferred Compensation Plan was established by the Company, effective
January 1, 1994, for the benefit of its directors and their beneficiaries.
Before the beginning of any calendar year, a director may elect to defer all or
part of his or her director's fees to be earned in that year and the following
years. A director has the option to have deferred fees paid in cash, in shares
of Common Stock or in a combination of cash and Common Stock. If the director
elects to have the deferred fees paid in stock, the number of shares allocated
to the director is determined based on the market value of the Common Stock on
the day the deferred director's fees were earned.
In connection with the Company's initial public offering of its Common
Stock in 1993, 20,000 shares of Common Stock were authorized for a deferred
compensation plan and were reserved for listing with the New York Stock Exchange
upon issuance. In 1996, the Company reserved for listing with the New York Stock
Exchange an additional 50,000 shares of Common Stock in connection with the
Deferred Compensation Plan. Through December 31, 1998, 54,185 of these 70,000
shares have been credited to the directors deferred fee accounts.
7
<PAGE>
EXECUTIVE COMPENSATION
Annual Compensation
The Company pays compensation to its executive officers for their services
in such capacity. The following Summary Compensation Table sets forth the annual
and long-term compensation paid by the Company to the executive officers for, or
with respect to, the fiscal periods ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
-------------------
Compensation All
------------
Stock Option Other
Name and Principal Position Year Salary Bonus Awards (Shs) Compensation (1)
---- ------ ----- ------------ ----------------
<S> <C> <C> <C> <C> <C>
B. Francis Saul II 1998 $125,000 $10,000 ----- ------
Chairman and 1997 125,000 10,000 ----- ------
Chief Executive Officer 1996 125,000 10,000 ----- ------
Philip D. Caraci 1998 258,333 21,200 ----- ------
President 1997 238,333 19,600 ----- ------
1996 218,333 18,000 ----- ------
B. Francis Saul III (2) 1998 138,333 10,150 ----- ------
Senior Vice President 1997 66,346 8,750 ----- ------
1996 ----- ----- ----- ------
Christopher H. Netter 1998 167,809 12,250 ----- $11,297
Senior Vice President 1997 149,028 10,850 ----- 10,921
Leasing 1996 140,084 9,905 ----- 10,338
Scott V. Schneider 1998 165,154 11,900 ----- 11,987
Senior Vice President 1997 150,584 10,850 ----- 11,013
Chief Financial Officer 1996 141,151 10,115 ----- 10,349
Charles W. Sherren, Jr. 1998 127,277 8,750 ----- 8,967
Vice President 1997 115,610 8,260 ----- 8,462
Management 1996 110,596 7,875 ----- 8,165
</TABLE>
(1) Amounts paid represent Companys contribution to Employees Profit Sharing
Retirement Trust and Companys payment of life insurance premiums for the
benefit of the named executive officers.
(2) Became an officer of the Company in June 1997.
8
<PAGE>
Options Exercised and Fiscal Year-End Values
The following table sets forth certain information with respect to
unexercised stock options held by the Chief Executive Officer and the named
executive officers at December 31, 1998. None of such officers exercised any
stock options during the year ended December 31, 1998.
VALUE OF UNEXERCISED OPTIONS (1)
<TABLE>
<CAPTION>
Number of
Unexercised Options
at December 31, 1998 (2)
------------------------------------------
Name and Principal Position Exercisable Unexercisable
----------- -------------
<S> <C> <C>
B. Francis Saul II ----- ------
Chairman and
Chief Executive Officer
Philip D. Caraci 100,000 ------
President
B. Francis Saul III
Senior Vice President ------ ------
Christopher H. Netter 25,000 ------
Senior Vice President
Leasing
Scott V. Schneider 25,000 ------
Senior Vice President
Chief Financial Officer
Charles W. Sherren, Jr. 20,000 ------
Vice President
Management
</TABLE>
(1) No options were in-the-money at December 31, 1998.
(2) All unexercised options are fully vested, have an exercise price of $20 per
share and expire on September 23, 2003, with
earlier expiration to occur at employment termination.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee is comprised of Messrs. Grosvenor and Whitmore.
Members of the Compensation Committee are selected each year by the full Board
of Directors. All members of the Compensation Committee must be outside
directors, who are not (i) officers or former officers of the Company; (ii)
employees of the Company or any of its subsidiaries; (iii) relatives of the
Chief Executive Officer; (iv) holders of more than 5% of the Company's voting
stock; (v) members of an organization acting as an advisor, legal counsel or in
similar capacity with respect to the Company and receiving compensation therefor
on an ongoing basis from the Company, in addition to director's fees; or (vi)
with reference to a particular transaction, interested directors within the
meaning of Section 2-419 of the Maryland General Corporation Law.
The Compensation Committee determines compensation for the Company's
executive officers and administers any stock incentive or other compensation
plans adopted by the Company, including the Stock Option Plan. The Compensation
Committee believes that the Company's compensation package must be structured in
a manner that will help the Company attract and retain qualified executives and
will align compensation of such executives with the interests of stockholders.
The compensation package currently consists of salary, bonus and long-term
compensation in the form of stock options issued pursuant to the Stock Option
Plan.
Salary and Bonus
Salary and bonus are determined by the Compensation Committee using a
subjective evaluation process. In making determinations of salary and bonus for
particular officers, including the Chief Executive Officer, the Compensation
Committee considers the general performance of the Company, the officer's
position, level and scope of responsibility, the officer's anticipated
performance and contributions to the Company's achievement of its long-term
goals, and the salary and bonus for the officer recommended by management.
Stock Option Grants
The Compensation Committee is responsible for administering the Stock
Option Plan, which includes determining the individuals to be granted stock
option awards and defining the terms of such awards, including the number of
shares subject to each option, exercise price, vesting schedule and expiration
date.
The purpose of the Stock Option Plan is to provide compensation to persons
whose services are considered essential to the Company. By linking this
compensation to the market performance of the Company's Common Stock, the
Company intends to provide additional incentive for officers and key employees
to enhance the value and success of the Company and align the long-term
interests of the officers and key employees with the interests of the Company.
Under the terms of the Stock Option Plan, Mr. Saul II is not eligible to
participate in the plan.
10
<PAGE>
The Compensation Committee uses a subjective evaluation process to
determine whether an officer or key employee should receive an option grant and
the number of shares subject to stock options granted to such officer or key
employee, and has not set specific objective goals or standards that an officer
or key employee must meet to receive a stock option grant. The factors
considered by the Compensation Committee include the general performance of the
company, the position, level and scope of responsibility of the respective
officer or key employee and the officer's or key employee's anticipated
performance and contributions to the Company's achievement of its long-term
goals.
During 1998, the Compensation Committee did not grant any options.
Gilbert M. Grosvenor
John R. Whitmore
PERFORMANCE GRAPH
Rules promulgated under the Exchange Act require the Company to present a
graph comparing the cumulative total stockholder return on its Common Stock with
the cumulative total stockholder return of (i) a broad equity market index, and
(ii) a published industry index or peer group. The graph compares the cumulative
total stockholder return of the Company Common Stock (BFS), based on the
market price of the Common Stock and assuming reinvestment of dividends, with
the National Association of Real Estate Investment Trust Equity Index (NAREIT)
and the S&P 500 Index (S&P 500). The graph assumes the investment of $100 on
January 1, 1994.
Comparison of Total Return
<TABLE>
<CAPTION>
Total Return
Comparative Indicies
------------------------------------------
Saul S&P NAREIT
Centers 500 Equity
------------------------------------------
<S> <C> <C> <C>
Dec-1993 100.000 100.000 100.000
Jan-1994 100.078 103.350 102.910
Feb-1994 99.429 100.560 107.380
Mar-1994 96.831 96.190 103.400
Apr-1994 104.095 97.440 105.160
May-1994 98.251 99.020 107.500
Jun-1994 95.654 96.580 105.310
Jul-1994 95.168 99.770 104.790
Aug-1994 97.766 103.840 105.110
Sep-1994 93.870 101.330 103.150
Oct-1994 86.941 103.650 99.580
Nov-1994 83.694 99.850 96.150
Dec-1994 84.993 101.310 103.170
Jan-1995 93.706 103.940 100.920
Feb-1995 91.758 107.970 103.410
Mar-1995 96.303 111.170 103.000
Apr-1995 100.526 114.410 102.970
May-1995 92.085 118.920 107.350
Jun-1995 95.981 121.720 109.050
Jul-1995 97.012 125.770 110.930
Aug-1995 98.310 126.110 112.260
Sep-1995 95.713 131.400 114.190
Oct-1995 92.258 130.940 111.740
Nov-1995 89.660 136.700 112.760
Dec-1995 88.361 139.230 118.920
Jan-1996 96.012 143.970 120.880
Feb-1996 97.311 145.300 122.290
Mar-1996 96.661 146.700 121.630
Apr-1996 97.236 148.860 122.240
May-1996 93.340 152.700 125.400
Jun-1996 94.639 153.280 127.040
Jul-1996 92.687 146.510 128.000
Aug-1996 92.038 149.600 133.030
Sep-1996 95.285 158.020 135.350
Oct-1996 103.803 162.380 139.370
Nov-1996 107.050 174.650 145.720
Dec-1996 110.296 171.190 160.860
Jan-1997 116.291 181.890 162.660
Feb-1997 118.888 183.310 162.330
Mar-1997 111.096 175.780 161.980
Apr-1997 114.5595 186.28 157.52
May-1997 118.4556 197.62 162.16
Jun-1997 123.0011 206.47 170.04
Jul-1997 127.1866 222.9 175.29
Aug-1997 127.1866 210.42 174.87
Sep-1997 135.628 221.940 190.130
Oct-1997 130.789 214.530 184.990
Nov-1997 130.789 224.460 188.990
Dec-1997 133.711 228.320 193.450
Jan-1998 128.940 230.840 192.430
Feb-1998 133.485 247.490 189.160
Mar-1998 136.082 260.160 192.550
Apr-1998 138.526 262.800 186.280
May-1998 135.604 258.280 184.970
Jun-1998 135.280 268.770 183.720
Jul-1998 134.222 265.910 171.790
Aug-1998 132.923 227.460 155.580
Sep-1998 136.819 242.030 164.390
Oct-1998 134.215 261.710 161.350
Nov-1998 134.215 277.570 163.720
Dec-1998 132.266 293.570 159.590
</TABLE>
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 19, 1999,
concerning shares of Common Stock beneficially owned by all persons (if any)
known by the Company to own more than 5% of the Companys outstanding Common
Stock, by each director and nominee, by each executive officer named in
Executive Compensation above, and by all directors and executive officers as a
group, according to information provided to the Company by each such person.
Unless otherwise noted, each person named has sole voting and sole investment
power with respect to all shares beneficially owned by such person.
Aggregate
Number of
Shares Percent
Name of Beneficially of
Beneficial Owner Owned (1) Class (1)
- ---------------- ------------- ---------
B. Francis Saul II 2,784,570 (2) 21.2%
Philip D. Caraci 131,251 (3) 1.0%
Gilbert Grosvenor 10,151 *
Philip C. Jackson, Jr. 55,284 (4) *
Paul X. Kelley 3,000 *
Charles R. Longsworth 12,432 *
Patrick F. Noonan 12,902 (5) *
B. Francis Saul III 14,116 *
Mark Sullivan III 5,000 *
James W. Symington 2,609 *
John R. Whitmore 12,502 (6) *
Scott V. Schneider 25,426 (7) *
Christopher H. Netter 25,000 (8) *
Charles W. Sherren, Jr. 20,000 (9) *
All directors and officers as
a group (17 persons) 3,115,482 23.7%
* Less than 1 percent
(1) Beneficial ownership and percent of class are calculated pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Includes
57,750 shares earned by directors in the Deferred Compensation Plan.
(2) Includes 2,203,591 shares owned by the B. F. Saul Real Estate Investment
Trust, 145,999 shares owned by Franklin Property Co., 374,030 shares owned
by Westminster Investing Corporation, 70 shares owned by Van Ness Square
Corp., 18,736 shares owned by various family trusts and as custodian for a
child, and 39,968 shares owned by Mr. Saul II's spouse. Mr. Saul II
disclaims beneficial ownership of 39,968 shares owned by his spouse.
Pursuant to Rule 13d-3, the Common Stock described above is considered to
be beneficially owned by Mr. Saul II because he has or may be deemed to
have sole or shared voting and/or investment power in respect thereof.
Excludes 834,123 shares owned by the B. F. Saul Company Employees Profit
Sharing Retirement Trust, (the Employee Trust). Mr. Saul II is one of
five Trustees for the Employee Trust and has a pecuniary interest in the
Employee Trust as one of the participating employees.
(3) Includes 19,002 shares owned jointly by Mr. Caraci and his spouse, 3,175
shares owned by Mr. Caraci's spouse, and 100,000 shares subject to
currently exercisable options held by Mr. Caraci. Mr. Caraci disclaims
beneficial ownership of 3,175 shares owned by his spouse. Excludes 834,123
shares owned by the Employee Trust. Mr. Caraci is one of five Trustees for
the Employee Trust and has a pecuniary interest in the Employee Trust as
one of the participating employees.
(4) Mr. Jackson disclaims beneficial ownership of 2,500 shares owned by his
spouse.
(5) Mr. Noonan disclaims beneficial ownership of 2,500 shares owned by his
spouse.
(6) Mr. Whitmore disclaims beneficial ownership of 1,500 shares owned by a
trust, of which he serves as trustee, for the benefit of his mother.
(7) Includes 25,000 shares subject to currently exercisable options held by Mr.
Schneider and 426 shares owned by Mr. Schneider's children. Mr. Schneider
disclaims beneficial ownership of 426 shares owned by his children.
(8) Represents 25,000 shares subject to currently exercisable options held by
Mr. Netter.
(9) Represents 20,000 shares subject to currently exercisable options held by
Mr. Sherren.
12
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company began operations in August 1993. On August 26, 1993, The Saul
Organization transferred to Saul Holdings Limited Partnership, a Maryland
limited partnership (the "Operating Partnership") and two newly formed
subsidiary limited partnerships (the "Subsidiary Partnerships", and collectively
with the Operating Partnership, the "Partnerships"), 26 shopping center
properties, one office property, one research park and one office/retail
property (collectively, the "Portfolio Properties"), located primarily in the
Washington, D.C./Baltimore metropolitan area and the Mid-Atlantic region of the
United States, and the management functions related to the Portfolio Properties
(the "Management Functions").
Certain relationships exist among the Company and its subsidiaries, the
members of The Saul Organization and the Partnerships and are discussed below.
Management of the Current Portfolio Properties. The Company and its
subsidiaries share with The Saul Organization certain ancillary functions, such
as computer and payroll services, benefits administration and in-house legal
services. The Saul Organization also subleases office space to the Company. The
terms of all sharing arrangements, including payments related thereto, are
reviewed periodically by the independent directors of the Company, who
constitute six of the eleven members of the Board of Directors. Included in
general and administrative expenses for the year ended December 31, 1998 are
charges totalling $1,685,000 related to such shared services, of which
$1,480,000 was paid prior to December 31, 1998. The Company believes that the
amounts allocated to it for such shared services represent a fair allocation
between The Saul Organization and the Company and it subsidiaries. The Company
believes that sharing these expenses with The Saul Organization results in a
savings from the expenses that would be incurred if such services were obtained
from independent third parties.
Related Party Rents. Chevy Chase Bank leases space in several of the
shopping centers owned by the Company and its subsidiaries. The total rental
income from Chevy Chase Bank from January 1, 1998 through December 31, 1998 was
$1,192,000. The Company believes that all of the leases with Chevy Chase Bank
have comparable terms to leases that would have been obtained from unrelated
third parties.
Management Personnel. The Chairman and Chief Executive Officer as well as
the President and a Senior Vice President (Mr. Saul III) of the Company are
officers of various members of The Saul Organization, but devote a substantial
amount of time to the management of the Company. The annual compensation for
these officers is fixed by the Compensation Committee of the Board of Directors
each year.
Exclusivity Agreement and Right of First Refusal. The Company has entered
into an Exclusivity Agreement (the "Exclusivity Agreement") with, and has been
granted a right of first refusal (the "Right of First Refusal") by, The Saul
Organization. The purpose of these agreements is to minimize potential conflicts
of interest between The Saul Organization and the Company and it subsidiaries.
The Exclusivity Agreement and Right of First Refusal generally require The Saul
Organization to conduct its shopping center business exclusively through the
Company and its subsidiaries and to grant the Company a right of first refusal
to purchase commercial properties and development sites that become available to
The Saul Organization in the District of Columbia or adjacent suburban Maryland.
Reimbursement Agreement. Pursuant to a reimbursement agreement among the
partners in the Partnerships, The Saul Organization and those of its
subsidiaries that are partners in the Partnerships have agreed to reimburse the
Company and the other partners in the event the Partnerships fail to make
payments with respect to certain portions of the Partnerships debt obligations
and the Company or any such other partners personally make payments with respect
to such debt obligations. As of December 31, 1998, the maximum potential
obligation of The Saul Organization and its subsidiaries under the agreement was
$211.0 million. The Company believes that the Partnerships will be able to make
all payments due with respect to their debt obligations.
Property Acquisition. In April 1998, the Company purchased, through its
operating partnership, a 46,227 square foot office/flex property known as Avenel
IV. The $5,600,000 purchase price consisted of $3,657,000 in variable rate debt
assumption, with the balance paid through the issuance of 105,922 new units in
Saul Centers operating partnership. The seller was a member of The Saul
Organization.
13
<PAGE>
INDEPENDENT AUDITORS
Upon recommendation of and approval by the Audit Committee, Arthur Andersen
LLP has been selected to act as independent certified public accountants for the
Company during the current fiscal year.
A representative of Arthur Andersen LLP will be present at the annual
meeting and will be provided with the opportunity to make a statement if
desired. Such representative also will be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
annual meeting other than those stated above. If any other business should come
before the annual meeting, the persons named in the enclosed proxy will vote
thereon as they determine to be in the best interests of the Company.
PROPOSALS FOR NEXT ANNUAL MEETING
It is presently contemplated that the 2000 annual meeting of stockholders
will be held in mid-April 2000. Any stockholder proposal to be considered for
inclusion in the Company's proxy statement and form of proxy for the annual
meeting of stockholders to be held in 2000 must be received at the Company's
office at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, no later than
November 5, 1999.
14
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1998 accompanies this Proxy Statement.
By order of the Board of Directors
/s/ Scott V. Schneider
Scott V. Schneider
Chief Financial Officer and Secretary
March 12, 1999
Chevy Chase, Maryland
15
<PAGE>
SAUL CENTERS, INC.
A Proxy for Annual Meeting of Stockholders
April 23, 1999
This Proxy is solicited by the Board of Directors
The undersigned hereby appoints B. Francis Saul II and Philip D. Caraci, and
each of them, as proxies, with full power of substitution in each, to vote all
shares of the common stock of Saul Centers, Inc. (the "Company") which the
undersigned is entitled to vote, at the Annual Meeting of Stockholders of the
Company to be held on April 23, 1999, at 11:00 a.m. local time, and at any
adjournment thereof, on all matters set forth in the Notice of Meeting and Proxy
Statement, dated March 12, 1999, a copy of which has been received by the
undersigned as follows:
1. TO ELECT FOUR DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2002
[_] GRANT AUTHORITY to vote for all nominees listed below.
[_] WITHHOLD AUTHORITY to vote for all nominees listed below.
B. Francis Saul II; Mark Sullivan III; James W. Symington;
John R. Whitmore
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
(Please sign on reverse side)
<PAGE>
2. OTHER MATTERS.
GRANT AUTHORITY upon such other matters as may come before the meeting as
they determine to be in the best interest of the Company.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
THIS PROXY WILL BE VOTED AS
DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED "FOR"
THE MATTERS STATED.
Dated: , 1999
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Signature(s) of Stockholder(s)
IMPORTANT: Please mark this Proxy, date it, sign it exactly as your name(s)
appear(s) and return it in the enclosed postage paid envelope. Joint owners
should each sign personally. Trustees and others signing in a representative or
fiduciary capacity should indicate their full titles in such capacity.
