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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM	10-K

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File number 1-12254

SAUL CENTERS INC.
(Exact name of registrant as specified in its charter)		Maryland	52-1833074
---	---
(State or other jurisdiction of<br><br>incorporation or organization)	(I.R.S. Employer<br><br>Identification No.)

7501 Wisconsin Avenue, Suite 1500E, Bethesda, Maryland 20814-6522

(Address of principal executive offices) (Zip Code)

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

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

Title of each class	Name of each exchange on which registered	Trading symbol:
Common Stock, $0.01 Par Value	New York Stock Exchange	BFS
6.125% Series D Preferred Stock, $0.01 Par Value	New York Stock Exchange	BFS/PRD
6.000% Series E Preferred Stock, $0.01 Par Value	New York Stock Exchange	BFS/PRE

Securities registered pursuant to Section 12(g) of the Act: N/A

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes ☐ No ☒.

Indicate by check mark whether 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 requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

The number of shares of Common Stock, $0.01 par value, issued and outstanding as of February 20, 2020 was 23.2 million.

At June 30, 2019, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $723.3 million based upon the closing price of the registrant’s Common Stock on the New York Stock Exchange on June 28, 2019, the last business day of the registrant's most recently completed second fiscal quarter. The determination of affiliate status is solely for the purposes of this report and shall not be construed as an admission for the purposes of determining affiliate status.

DOCUMENTS INCORPORATED BY REFERENCE:

Registrant incorporates by reference into Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K portions of registrant’s definitive Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities Exchange Commission pursuant to Regulation 14A. The definitive Proxy Statement will be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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		Page Numbers
	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	31
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 8.	Financial Statements and Supplementary Data	50
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	50
Item 9A.	Controls and Procedures	50
Item 9B.	Other Information	52
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	53
Item 11.	Executive Compensation	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters	53
Item 13.	Certain Relationships and Related Transactions, and Director Independence	53
Item 14.	Principal Accountant Fees and Services	53
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	54
Item 16.	Form 10-K Summary	58
	FINANCIAL STATEMENT SCHEDULE
Schedule III.	Real Estate and Accumulated Depreciation	F-30

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PART I

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “plans,” “intends,” “estimates,” “anticipates,” “expects,” “believes” or similar expressions in this Form 10-K. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. Certain factors that could cause actual results or events to differ materially from those we anticipate are described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

•challenging domestic and global credit markets and their effect on discretionary spending;

•the ability of our tenants to pay rent;

•our reliance on shopping center “anchor” tenants and other significant tenants;

•our substantial relationships with members of The Saul Organization;

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

•our development activities;

•our access to additional capital;

•our ability to successfully complete additional acquisitions or redevelopments, or if they are consummated, whether such acquisitions or developments 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; and

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

In addition, we describe risks and uncertainties that could cause actual results and events to differ materially in “Risk Factors” (Part I, Item 1A of this Annual Report on Form 10-K), “Quantitative and Qualitative Disclosures about Market Risk” (Part II, Item 7A), and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” (Part II, Item 7).

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Item 1. Business

General

Saul Centers, Inc. (“Saul Centers”) was incorporated under the Maryland General Corporation Law on June 10, 1993. Saul Centers 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, Chief Executive Officer and President of Saul Centers.

The Company’s primary strategy is to continue to focus on diversification of its assets through development of transit-centric, residential mixed-use projects in the Washington, D.C. metropolitan area. The Company’s operating strategy also includes improvement of the operating performance and internal growth of its Shopping Centers and will supplement its development of residential mixed-used projects with selective redevelopment and renovations of its core Shopping 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 "Saul 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.

As of December 31, 2019, the Company’s properties (the “Current Portfolio Properties”) consisted of 50 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 four (non-operating) development properties.

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Organizational Structure

The Company conducts its business through the Operating Partnership and/or directly or indirectly owned subsidiaries. The following diagram depicts the Company’s organizational structure and beneficial ownership of the common and preferred stock of Saul Centers calculated pursuant to Rule 13d-3 of the Exchange Act as of December 31, 2019.

(1)

The Saul Organization’s ownership percentage in Saul Centers reported above does not include units of limited partnership interest of the Operating Partnership held by the Saul Organization. In general, most units are convertible into shares of the Company’s common stock on a one-for-one basis. However, not all of the units may be convertible into the Company’s common stock because (i) the articles of incorporation limit beneficial and constructive ownership (defined by reference to various Code provisions) to 39.9% in value of the Company’s issued and outstanding common and preferred equity securities, which comprise the ownership limit and (ii) the convertibility of some of the outstanding units is subject to approval of the Company’s stockholders.

Management of the Current Portfolio Properties

The Operating Partnership manages the Current Portfolio Properties and will manage any subsequently acquired or developed properties. The management of the properties includes performing property management, leasing, design, renovation, development and accounting duties for each property. The Operating Partnership provides each property with a fully integrated property management capability, with approximately 67 full-time equivalent employees at its headquarters office and 49 employees at its properties and with an extensive and mature

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network of relationships with tenants and potential tenants as well as with members of the brokerage and property owners’ communities. The Company currently does not, and does not intend to, retain third party managers or provide management services to third parties.

The Company augments its property management capabilities by sharing with the Saul Organization certain ancillary functions, at cost, such as information technology and payroll services, benefits administration and in-house legal services. The Company also shares insurance administration expenses on a pro rata basis with the Saul Organization. Management believes that these arrangements result in lower costs than could be obtained by contracting with third parties. These arrangements permit the Company to capture greater economies of scale in purchasing from third party vendors than would otherwise be available to the Company alone and to capture internal economies of scale by avoiding payments representing profits with respect to functions provided internally. The terms of all sharing arrangements with the Saul Organization, including payments related thereto, are specified in a written agreement and are reviewed annually by the Audit Committee of the Company’s Board of Directors.

The Company subleases its corporate headquarters space from the Saul Organization at the Company’s share of the cost. A discussion of the lease terms is provided in Note 7, Long Term Lease Obligations, of the Notes to Consolidated Financial Statements.

Principal Offices

The principal offices of the Company are located at 7501 Wisconsin Avenue, Suite 1500E, Bethesda, Maryland 20814-6522, and the Company’s telephone number is (301) 986-6200. The Company’s internet web address is www.saulcenters.com. Information contained on the Company’s website is not part of this report. The Company makes available free of charge on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). We intend to comply with the requirements of Item 5.05 of Form 8-K regarding amendments to and waivers under the code of business conduct and ethics applicable to our Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer by providing such information on our website within four days after effecting any amendment to, or granting any waiver under, that code, and we will maintain such information on our website for at least twelve months. Alternatively, you may access these reports at the SEC’s website: www.sec.gov.

Policies with Respect to Certain Activities

The following is a discussion of the Company’s operating strategy and certain of its investment, financing and other policies. These strategies and policies have been determined by the Board of Directors and, in general, may be amended or revised from time to time by the Board of Directors without a vote of the Company’s stockholders.

Operating Strategy

The Company’s primary strategy is to continue to focus on diversification of its assets through development of transit-centric, residential mixed-use projects in the Washington, D.C. metropolitan area. The Company’s operating strategy also includes improvement of the operating performance and internal growth of its Shopping Centers and will supplement its development of residential mixed-used projects with selective redevelopment and renovations of its core Shopping Centers.

The Company’s primary operating strategy is to focus on the management and development of (i) transit-centric, primarily residential mixed-use properties to achieve both cash flow growth and capital appreciation and (ii) community and neighborhood shopping center business. Community and neighborhood shopping centers typically provide reliable cash flow and steady long-term growth potential. Management actively manages its property portfolio by engaging in strategic leasing activities, tenant selection, lease negotiation and shopping center expansion and reconfiguration. The Company seeks to optimize its retail tenant mix by selecting tenants for its Shopping Centers and Mixed-Use Properties that provide a broad spectrum of goods and services, consistent with the role of community and neighborhood shopping centers as the source for day-to-day necessities.

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Management believes that such a synergistic tenanting approach results in increased cash flow from existing tenants by providing the Shopping Centers with consistent traffic and a desirable mix of shoppers, resulting in increased sales and, therefore, increased cash flows.

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, management selectively attempts to increase cash flow through a variety of means, or in connection with renovations or relocations, 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.

It is management’s intention to hold properties for long-term investment and to place strong emphasis on regular maintenance, periodic renovation and capital improvement. Management believes that characteristics such as cleanliness, lighting and security are particularly important in community and neighborhood shopping centers, which are frequently visited by shoppers during hours outside of the normal work-day. Management believes that the Shopping Centers and Mixed-Use Properties generally are attractive and well maintained. The Shopping Centers and Mixed-Use Properties will undergo expansion, renovation, reconfiguration and modernization from time to time when management believes that such action is warranted by opportunities or changes in the competitive environment of a property. The Company will continue its practice of expanding existing properties by undertaking new construction on outparcels suitable for development as free standing retail or office facilities.

Investment in Real Estate

The Company’s primary strategy is to continue to focus on diversification of its assets through development of transit-centric, residential mixed-use projects in the Washington, D.C. metropolitan area. Construction of The Waycroft, a project with 491 apartment units and 60,000 square feet of retail space, is nearing substantial completion on North Glebe Road, within two blocks of the Ballston Metro Station, in Arlington, Virginia. The Company also has a development pipeline of zoned sites, either in its portfolio (some of which are currently shopping center operating properties) or under contract, for development of up to 3,700 apartment units and 975,000 square feet of retail and office space. All such sites are located adjacent to red line Metro stations in Montgomery County, Maryland.

The Company’s operating strategy also includes improvement of the operating performance and internal growth of its Shopping Centers and will supplement its development of residential mixed-used projects with selective redevelopment and renovations of its core Shopping Centers. It intends to selectively add free-standing pad site buildings within its Shopping Center portfolio, and replace underperforming tenants with tenants that generate strong traffic, generally anchor stores such as supermarkets, drug stores and fitness centers, as evidenced by the coming additions of a 69,000 square foot Giant Food at Seven Corners and a 36,000 square foot LA Fitness at Broadlands Village. Exclusive of four pads under development within Ashbrook Marketplace, the Company currently has signed leases or leases under negotiation for 12 pad sites within its core portfolio. The pad sites are expected to be completed and operational by late 2021.

In recent years, there has been a limited amount of quality properties for sale and pricing of those properties has escalated. Accordingly, management believes acquisition opportunities for investment in existing and new shopping center and mixed-use properties in the near future is uncertain. Nevertheless, because of the Company’s conservative capital structure, including its cash and capacity under its revolving credit facility, management believes that the Company is positioned to take advantage of additional investment opportunities as attractive properties are identified and market conditions improve. (See “Item 1. Business - Capital Policies”.) It is management’s view that several of the sub-markets in which the Company operates have, or are expected to have in the future, attractive supply/demand characteristics. The Company will continue to evaluate acquisition, development and redevelopment as integral parts of its overall business plan.

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In evaluating a particular redevelopment, renovation, acquisition, or development, management will consider a variety of factors, including: (i) the location, size and accessibility of the property, with an emphasis on the Washington, D.C./Baltimore metropolitan area; (ii) the demographic characteristics of the community, as well as the local real estate market, including potential for growth and potential regulatory impediments to development; (iii) the purchase price; (iv) the non-financial terms of the transaction; (v) the “fit” of the property with the Company’s existing portfolio; (vi) the potential for, and current extent of, any environmental problems; (vii) the current and historical occupancy rates of the property or any comparable or competing properties in the same market; (viii) the quality of construction and design and the current physical condition of the property; (ix) the financial and other characteristics of existing tenants and the terms of existing leases; and (x) the potential for capital appreciation.

Although it is management’s present intention to concentrate future acquisition and development activities on transit-centric, primarily residential mixed-use properties in the Washington, D.C./Baltimore metropolitan area, the Company may, in the future, also acquire other types of real estate in other areas of the country as opportunities present themselves. The Company plans to continue to diversify in terms of property types, locations, size and market, and it does not set any limit on the amount or percentage of assets that may be invested in any one property or any one geographic area.

The Company intends to engage in such future investment and development activities in a manner that enables the Company to qualify and maintain its status as a REIT for federal income tax purposes and that will not cause the Company to be regulated as an investment company under the Investment Company Act of 1940, as amended. Equity investments in acquired properties may be subject to existing mortgage financings and other indebtedness or to new indebtedness which may be incurred in connection with acquiring or refinancing these investments.

Investments in Real Estate Mortgages

While the Company’s current portfolio and business objectives emphasize equity investments in transit centric, residential mixed-use properties, neighborhood shopping centers, and other mixed-use properties, the Company may, at the discretion of the Board of Directors, invest in mortgages, participating or convertible mortgages, deeds of trust and other types of real estate interests consistent with its qualification as a REIT. The Company does not presently invest, nor does it intend to invest, in real estate mortgages.

Investments in Securities of or Interests in Persons Engaged in Real Estate Activities and Other Issues

Subject to the requirements to maintain REIT qualification, the Company may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities. The Company does not presently invest, nor does it intend to invest, in any securities of other REITs.

Dispositions

The Company may elect to dispose of properties if, based upon management’s periodic review of the Company’s portfolio, the Board of Directors determines that such action would be in the best interest of the Company’s stockholders.

Capital Policies

The Company has established a debt capitalization policy relative to asset value, which is computed by reference to the aggregate annualized cash flow from the properties in the Company’s portfolio rather than relative to book value. The Company has used a measure tied to cash flow because it believes that the book value of its portfolio properties, which is the depreciated historical cost of the properties, does not accurately reflect the Company’s ability to incur indebtedness. Asset value, however, is somewhat more variable than book value, and may not at all times reflect the fair market value of the underlying properties. 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. Given the

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Company’s current debt level, it is management’s belief that the ratio of the Company’s debt to total asset value is below 50% as of December 31, 2019.

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

The Company intends to finance future acquisitions and developments and to make debt repayments by utilizing the sources of capital then deemed to be most advantageous. Such sources may include undistributed operating cash flow, secured or unsecured bank and institutional borrowings, proceeds from the Company’s Dividend Reinvestment and Stock Purchase Plan, proceeds from the sale of properties and private and public offerings of debt or equity securities. Borrowings may be at the Operating Partnership or Subsidiary Partnerships’ level and securities offerings may include (subject to certain limitations) the issuance of Operating Partnership interests convertible into common stock or other equity securities.

Other Policies

The Company has the authority to offer equity or debt securities in exchange for property and to repurchase or otherwise acquire its common stock or other securities in the open market or otherwise, and may engage in such activities in the future. The Company expects, but is not obligated, to issue common stock to holders of units of the Operating Partnership upon exercise of their redemption rights. The Company has not engaged in trading, underwriting or agency distribution or sale of securities of other issuers other than the Operating Partnership and does not intend to do so. The Company has not made any loans to third parties, although the Company may in the future make loans to third parties. In addition, the Company has policies relating to related party transactions discussed in “Item 1A. Risk Factors.”

Competition

As an owner of, or investor in, transit centric residential mixed-use properties, community and neighborhood shopping centers, and other mixed-use properties, the Company is subject to competition from an indeterminate number of companies in connection with the acquisition, development, ownership and leasing of similar properties. These investors include investors with access to significant capital, such as domestic and foreign corporations and financial institutions, publicly traded and privately held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds.

Competition may reduce the number of properties available for acquisition or development or increase the price for raw land or developed properties of the type in which the Company invests. The Company faces competition in providing leases to prospective tenants and in re-letting space to current tenants upon expiration of their respective leases. If tenants decide not to renew or extend their leases upon expiration, the Company may not be able to re-let the space. Even if the tenants do renew or the Company can re-let the space, the terms of renewal or re-letting, including the cost of required renovations, may be less favorable than current lease terms or than expectations for the space. This risk may be magnified if the properties owned by our competitors have lower occupancy rates than the Company’s properties. As a result, these competitors may be willing to make space available at lower prices than the space in the Current Portfolio Properties.

Management believes that success in the competition for ownership and leasing property is dependent in part upon the geographic location of the property, the tenant mix, the performance of property managers, the amount of new construction in the area and the maintenance and appearance of the property. Additional competitive factors impacting the Company’s properties include the ease of access to the properties, the adequacy of related facilities

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such as parking, and the demographic characteristics in the markets in which the properties compete. Overall economic circumstances and trends and new properties in the vicinity of each of the Current Portfolio Properties are also competitive factors.

Finally, retailers at our Shopping Centers face increasing competition from outlet stores, online retailers, discount shopping clubs and other forms of marketing goods, such as direct mail, internet marketing and telemarketing. This competition may reduce percentage rents payable to us and may contribute to lease defaults or insolvency of tenants.

Environmental Matters

The Current Portfolio Properties are subject to various laws and regulations relating to environmental and pollution controls. The impact upon the Company from the application of such laws and regulations either prospectively or retrospectively is not expected to have a materially adverse effect on the Company’s property operations. As a matter of policy, the Company requires an environmental study be performed with respect to a property that may be subject to possible environmental hazards prior to its acquisition to ascertain that there are no material environmental hazards associated with such property.

Recent Developments

J. Page Lansdale tendered his resignation as President and Chief Operating Officer of the Company effective September 30, 2019. Mr. Lansdale remains a member of the Company’s Board of Directors and a consultant to the Company. Mr. Lansdale’s resignation was not in connection with any disagreements with the Company about any matter. On October 1, 2019, the Board of Directors appointed B. Francis Saul II as President, effective immediately. In addition, the Company promoted each of Christopher H. Netter, Scott V. Schneider and D. Todd Pearson to the position of Executive Vice President.

From 2014 through 2016, in separate transactions, the Company purchased four adjacent properties on North Glebe Road in Arlington, Virginia, for an aggregate $54.0 million. The Company is developing The Waycroft, a project with 491 apartment units and 60,000 square feet of retail space on 2.8 acres of land. Exterior and below grade construction is substantially complete. Public area finishes and approximately 50% of the apartment units are expected to be completed in April 2020, with apartment occupancy projected during the second quarter of 2020. The remaining units are expected to be approved for occupancy by mid-second quarter. The total cost of the project, including acquisition of land, is expected to be approximately $275.0 million, plus approximately $20.4 million of capitalized interest. A portion of the cost is being financed with a $157.0 million construction-to-permanent loan. Including approximately $17.1 million of capitalized interest and costs of $12.1 million which are accrued and unpaid, costs incurred through December 31, 2019 total approximately $255.4 million, of which $110.2 million has been financed by the loan. Leases have been executed for a 41,500 square foot Target and 12,600 square feet of retail shop space, resulting in approximately 90% of the planned retail space being leased. Target is scheduled to begin operating in July 2020.

Albertson's/Safeway is currently a tenant at seven of the Company's shopping centers, two locations of which are subleased to other grocers. In February 2017, the Company terminated the lease with Albertson's/Safeway at Broadlands Village. The Company executed a lease with Aldi Food Market for 20,000 square feet of this space, which opened in November 2017, and has executed a lease with LA Fitness for substantially all of the remaining space. The fitness center is finalizing construction and projected to open for business by March 2020.

In the fourth quarter of 2018, the Company substantially completed construction of the shell of a 16,000 square foot small shop expansion at Burtonsville Town Square and construction of interior improvements is underway. Delivery of the first leased tenant spaces occurred in late 2018, and tenant openings began in the first quarter of 2019. The total development cost is expected to be approximately $5.7 million. Leases have been executed for approximately 79% of the space and the Company has prospects for the remaining portion. In addition, a lease has been executed with Taco Bell who commenced construction in January 2020 of a free-standing building on a pad site within the property.

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In May 2018, the Company acquired from the Saul Trust, in exchange for 176,680 limited partnership units, approximately 13.7 acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Ashburn, Virginia. The Company has substantially completed construction of Ashbrook Marketplace, an approximately 86,000 square foot neighborhood shopping center. A 29,000 square foot Lidl grocery store opened in November 2019, and the shopping center is 100% leased as of February 2020. Small shops are scheduled to begin opening for business by April 2020, with additional tenants opening throughout 2020. Upon stabilization in 2021, the Company may be obligated to issue additional limited partnership units to the Saul Trust.

In September 2018, the Company purchased for $35.5 million, plus $0.7 million of acquisition costs, an office building and the underlying ground located at 7316 Wisconsin Avenue in Bethesda, Maryland. In December 2018, the Company purchased for $4.5 million, including acquisition costs, an interest in an adjacent parcel of land and retail building. The purchase price was funded through the Company's revolving credit facility. The Company has completed development plans for the combined property for the development of up to 366 apartment units and 10,300 square feet of retail space. In July 2019, the Montgomery County Planning Commission unanimously approved the Company's site plan. Design and construction documents are being prepared and a site plan amendment has been submitted incorporating final design parameters. Additional approvals from the Washington Metropolitan Area Transit Authority and the Maryland Transit Administration are in process and are expected to be received by the fourth quarter of 2020. The Company has executed lease termination agreements with the final office tenants and, effective September 1, 2019, the asset was removed from service and transferred to construction in progress.

On November 5, 2019, the Company entered into an agreement (the "Contribution Agreement") to acquire from the Saul Trust, approximately 6.8 acres of land and its leasehold interest in approximately 1.3 acres of contiguous land, together in each case with the improvements located thereon, located at the Twinbrook Metro Station in Rockville, Maryland (the “Contributed Property”). In exchange for the Contributed Property, the Company will issue to the Saul Trust 1,416,071 limited partnership units in the Operating Partnership (“OP Units”) at an agreed upon value of $56.00 per OP Unit, representing an aggregate value of $79.3 million for the Contributed Property. Deed to the Contributed Property and the OP Units have been placed in escrow until certain conditions of the Contribution Agreement are satisfied. The Contribution Agreement is attached hereto as Exhibit 10.(w).

The Company, as contract purchaser, has filed with the City of Rockville a site plan for Phase I of the Twinbrook Quarter development and is conducting community hearings and awaiting design review committee comments on its plan. The plan includes an 80,000 square foot Wegmans grocery store, 29,000 square feet of retail shop space, 460 residential units and 237,000 square feet of office space. The phasing of these improvements and the timing of construction will depend on removal of contingencies, final site plan approval, building permit approval and market conditions. The total development potential of this 8.1 acre site, when combined with the Company’s adjacent 10.3 acre site, totals 1,865 residential units, 473,000 square feet of retail space, and 431,000 square feet of office space.

Item 1A. Risk Factors

RISK FACTORS

Carefully consider the following risks and all of the other information set forth in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto. If any of the events or developments described below were actually to occur, the Company’s business, financial condition or results of operations could be adversely affected.

In this section, unless the context indicates otherwise, the terms “Company,” “we,” “us” and “our” refer to Saul Centers, Inc., and its subsidiaries, including the Operating Partnership.

Financial and economic conditions may have an adverse impact on us, our tenants’ businesses and our results of operations.

Our business may be affected by market and economic challenges experienced by the U.S. economy or real estate industry as a whole, by the local economic conditions in the markets in which our properties are located, including

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the impact of high unemployment, volatility in the public equity and debt markets, and international economic conditions. A prolonged deterioration of economic and other market conditions, could adversely affect our business, financial condition, results of operations or real estate values, as well as the financial condition of our tenants and lenders, which may expose us to increased risks of default by these parties.

Potential consequences of a prolonged deterioration of economic and other market conditions include:

•	the financial condition of our tenants, many of which operate in the retail industry, may be adversely affected, which may result in tenant defaults under their leases due to bankruptcy, lack of liquidity, operational failures or for other reasons;
•	the ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from acquisition and development activities and increase our future interest expense;
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•	reduced values of our properties may limit our ability to dispose of assets at attractive prices and may reduce the ability to refinance loans; and
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•	one or more lenders under our credit facility could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
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Revenue from our properties may be reduced or limited if the retail operations of our tenants are not successful.

Adverse changes in consumer spending or consumer preferences for particular goods, services or store based retailing could severely impact our tenants’ ability to pay rent. Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent due under their leases on a timely basis. The amount of rent we receive from our tenants generally will depend in part on the success of our tenants’ retail operations, making us vulnerable to general economic downturns and other conditions affecting the retail industry. Some tenants may terminate their occupancy due to an inability to operate profitably for an extended period of time, impacting the Company’s ability to maintain occupancy levels.

Any reduction in our tenants’ ability to pay base rent or percentage rent may adversely affect our financial condition and results of operations. Small business tenants and anchor retailers which lease space in the Company’s properties may experience a deterioration in their sales or other revenue, or experience a constraint on the availability of credit necessary to fund operations, which in turn may adversely impact those tenants’ ability to pay contractual base rents and operating expense recoveries. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants. Decreasing sales revenue by retail tenants could adversely impact the Company’s receipt of percentage rents required to be paid by tenants under certain leases.

We may be unable to collect balances due from tenants that file for bankruptcy protection.

If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-petition amounts owed by that party. In addition, a tenant that files for bankruptcy protection may terminate our lease in which event we would have a general unsecured claim that would likely be for less than the full amount owed to us for the remainder of the lease term, which could adversely affect our financial condition and results of operations.

Our ability to increase our net income depends on the success and continued presence of our shopping center “anchor” tenants and other significant tenants.

Our net income could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant. Our largest shopping center anchor tenant is Giant Food, which accounted for 4.7% of our total revenue for the year ended December 31, 2019. The closing of one or more anchor stores prior to the expiration of the lease of that store or the termination of a lease by one or more of a property’s anchor tenants could adversely affect that property and result in lease terminations by, or reductions in rent from, other tenants whose leases may permit termination or rent reduction in those circumstances or whose own operations may suffer as a result. This could reduce our net income.

We may experience difficulty or delay in renewing leases or leasing vacant space.

We derive most of our revenue directly or indirectly from rent received from our tenants. We are subject to the risks that, upon expiration, leases for space in our properties may not be renewed, the space and other vacant space may not be re-leased, or the terms of renewal or re-lease, including the cost of required renovations or concessions to

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tenants, may be less favorable than previous lease terms. Constraints on the availability of credit to office and retail tenants, necessary to purchase and install improvements, fixtures and equipment, and fund start-up business expenses, could impact the Company’s ability to procure new tenants for spaces currently vacant in existing operating properties or properties under development. As a result, our results of operations and our net income could be reduced.

We have substantial relationships with members of the Saul Organization whose interests could conflict with the interests of other stockholders.

Influence of Officers, Directors and Significant Stockholders.

Three of our executive officers, Mr. B. F. Saul II, our Executive Vice President of Real Estate, Todd Pearson, and our Executive Vice President-Chief Legal and Administrative Officer, Christine Nicolaides Kearns, are members of the Saul Organization, and persons associated with the Saul Organization constitute five of the eleven members of our Board of Directors. In addition, as of December 31, 2019, Mr. B. F. Saul II had the potential to exercise control over 10,135,509 shares of our common stock representing 43.8% of our issued and outstanding shares of common stock. Mr. B. F. Saul II also beneficially owned, as of December 31, 2019, 7,886,916 units of the Operating Partnership. In general, these units are convertible into shares of our common stock on a one-for-one basis. The ownership limitation set forth in our articles of incorporation is 39.9% in value of our issued and outstanding equity securities (which includes both common and preferred stock). As of December 31, 2019, Mr. B. F. Saul II and members of the Saul Organization owned common stock representing approximately 37.8% in value of all our issued and outstanding equity securities. Members of the Saul Organization are permitted under our articles of incorporation to convert Operating Partnership units into shares of common stock or acquire additional shares of common stock until the Saul Organization’s actual ownership of common stock reaches 39.9% in value of our equity securities. As of December 31, 2019, approximately 925,000 of the 7,886,916 units of the Operating Partnership would have been permitted to convert into additional shares of common stock, and would have resulted in Mr. B. F. Saul II and members of the Saul Organization owning common stock representing approximately 39.9% in value of all our issued and outstanding equity securities.

As a result of these relationships, members of the Saul Organization will be in a position to exercise significant influence over our affairs, which influence might not be consistent with the interests of some, or a majority, of our stockholders. Except as discussed below, we do not have any written policies or procedures for the review, approval or ratification of transactions with related persons.

Management Time.

Our Chief Executive Officer and President, Executive Vice President of Real Estate, Executive Vice President-Chief Legal and Administrative Officer and Senior Vice President-Chief Accounting Officer are also officers of various entities of the Saul Organization. Although we believe that these officers spend sufficient management time to meet their responsibilities as our officers, the amount of management time devoted to us will depend on our specific circumstances at any given point in time. As a result, in a given period, these officers may spend less than a majority of their management time on our matters. Over extended periods of time, we believe that our Chief Executive Officer and President will spend less than a majority of his management time on Company matters, while our Executive Vice President of Real Estate, Executive Vice President-Chief Legal and Administrative Officer and Senior Vice President-Chief Accounting Officer may or may not spend less than a majority of their time on our matters.

Exclusivity and Right of First Refusal Agreements.

We will acquire, develop, own and manage shopping center properties and will own and manage other commercial properties, and, subject to certain exclusivity agreements and rights of first refusal to which we are a party, the Saul Organization will continue to develop, acquire, own and manage commercial properties and own land suitable for development as, among other things, shopping centers and other commercial properties. Therefore, conflicts could develop in the allocation of acquisition and development opportunities with respect to commercial properties other than shopping centers and with respect to development sites, as well as potential tenants and other matters, between us and the Saul Organization. The agreement relating to exclusivity and the right of first refusal between us and the Saul Organization generally requires the Saul Organization to conduct its shopping center business exclusively through us and to grant us a right of first refusal to purchase commercial properties and development sites in certain market areas that become available to the Saul Organization. The Saul Organization has granted the right of first refusal to us, acting through our independent directors, in order to minimize potential conflicts with respect to commercial properties and development sites. We and the Saul Organization have entered into this agreement in order to minimize conflicts with respect to shopping centers and certain of our commercial properties.

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We own real estate assets in the Twinbrook area of Rockville, Maryland, which are adjacent to real estate assets owned by the Saul Trust, a member of the Saul Organization. We have entered into an agreement with the Saul Trust, which originally expired on December 31, 2015, and which was extended to December 31, 2016, to share, on a pro rata basis, third-party predevelopment costs related to the planning of the future development of the adjacent sites. On December 8, 2016, we entered into a replacement agreement with the Saul Trust which extended the expiration date to December 31, 2017 and provides for automatic twelve month renewals unless either party provides notice of termination. Conflicts with respect to payments and allocations of costs may arise under the agreement.

On November 5, 2019, the Company entered into the Contribution Agreement to acquire from the Saul Trust, the Contributed Property. In exchange for the Contributed Property, the Company will issue to the Saul Trust 1,416,071 OP Units at an agreed upon value of $56.00 per OP Unit, representing an aggregate value of $79.3 million for the Contributed Property. Deed to the Contributed Property and the OP Units have been placed in escrow until certain conditions of the Contribution Agreement are satisfied.

Shared Services.

We share with the Saul Organization certain ancillary functions, such as computer and payroll services, benefits administration and in-house legal services. The terms of all sharing arrangements, including payments related thereto, are reviewed periodically by our Audit Committee, which is comprised solely of independent directors. Included in our general and administrative expenses or capitalized to specific development projects, for the year ended December 31, 2019, are charges totaling $8.4 million, net, related to such shared services, which included rental payments for the Company’s headquarters lease, which were billed by the Saul Organization. Although we believe that the amounts allocated to us for such shared services represent a fair allocation between us and the Saul Organization, we have not obtained a third party appraisal of the value of these services.

The B. F. Saul Insurance Agency of Maryland, Inc., a subsidiary of the B. F. Saul Company and a member of the Saul Organization, is a general insurance agency that receives commissions and counter-signature fees in connection with our insurance program. Such commissions and fees amounted to approximately $399,600 for the year ended December 31, 2019.

Related Party Rents.

We sublease space for our corporate headquarters from a member of the Saul Organization, the building of which is owned by another member of the Saul Organization. The lease commenced in March 2002 and expires in February 2022. The Company and the Saul Organization entered into a Shared Services Agreement whereby each party pays a portion of the total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company’s rent expense for the year ended December 31, 2019 was $806,500. Although the Company believes that this lease has terms comparable to what would have been obtained from a third party landlord, it did not seek bid proposals from any independent third parties when entering into its new corporate headquarters lease.

Conflicts Based on Individual Tax Considerations.

The tax basis of members of the Saul Organization in our portfolio properties which were contributed to certain partnerships at the time of our initial public offering in 1993 was substantially less than the fair market value thereof at the time of their contribution. In the event of our disposition of such properties, a disproportionately large share of the gain for federal income tax purposes would be allocated to members of the Saul Organization. In addition, future reductions of the level of our debt, or future releases of the guarantees or indemnities with respect thereto by members of the Saul Organization, would cause members of the Saul Organization to be considered, for federal income tax purposes, to have received constructive distributions. Depending on the overall level of debt and other factors, these distributions could be in excess of the Saul Organization’s bases in their Partnership units, in which case such excess constructive distributions would be taxable.

Consequently, it is in the interests of the Saul Organization that we continue to hold the contributed portfolio properties, that a portion of our debt remains outstanding or is refinanced and that the Saul Organization guarantees and indemnities remain in place, in order to defer the taxable gain to members of the Saul Organization. Therefore, the Saul Organization may seek to cause us to retain the contributed portfolio properties, and to refrain from reducing our debt or releasing the Saul Organization guarantees and indemnities, even when such action may not be in the interests of some, or a majority, of our stockholders. In order to minimize these conflicts, decisions as to sales of the portfolio properties, or any refinancing, repayment or release of guarantees and indemnities with respect to our debt, will be made by the independent directors.

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Ability to Block Certain Actions.

Under applicable law and the limited partnership agreement of the Operating Partnership, consent of the limited partners is required to permit certain actions, including the sale of all or substantially all of the Operating Partnership’s assets. Therefore, members of the Saul Organization, through their status as limited partners in the Operating Partnership, could prevent the taking of any such actions, even if they were in the interests of some, or a majority, of our stockholders.

Loss of our key management could adversely affect performance and the value of our common shares.

We are dependent on the efforts of our key management. Although we believe qualified replacements could be found for any departures of key executives, the loss of their services could adversely affect our performance and the value of our common stock.

The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial condition.

As of December 31, 2019, we had approximately $1.1 billion of debt outstanding, $938.4 million of which was long-term fixed-rate debt secured by 34 of our properties and $162.5 million of which was variable-rate debt due under our credit facility.

We currently have a general policy of limiting our borrowings to 50 percent of asset value, i.e., the value of our portfolio, as determined by our Board of Directors by reference to the aggregate annualized cash flow from our portfolio. Our organizational documents contain no limitation on the amount or percentage of indebtedness which we may incur. Therefore, the Board of Directors could alter or eliminate the current limitation on borrowing at any time. If our debt capitalization policy were changed, we could increase our leverage, resulting in an increase in debt service that could adversely affect our operating cash flow and our ability to make expected distributions to stockholders, and in an increased risk of default on our obligations.

We have established our debt capitalization policy relative to asset value, which is computed by reference to the aggregate annualized cash flow from the properties in our portfolio rather than relative to book value. We have used a measure tied to cash flow because we believe that the book value of our portfolio properties, which is the depreciated historical cost of the properties, does not accurately reflect our ability to borrow. Asset value, however, is somewhat more variable than book value, and may not at all times reflect the fair market value of the underlying properties.

The amount of our debt outstanding from time to time could have important consequences to our stockholders. For example, it could:

•	require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, property acquisitions and other appropriate business opportunities that may arise in the future;
•	limit our ability to obtain any additional financing we may need in the future for working capital, debt refinancing, capital expenditures, acquisitions, development or other general corporate purposes;
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•	make it difficult to satisfy our debt service requirements;
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•	limit our ability to make distributions on our outstanding common and preferred stock;
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•	require us to dedicate increased amounts of our cash flow from operations to payments on our variable rate, unhedged debt if interest rates rise;
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•	limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms; and
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•	limit our ability to obtain any additional financing we may need in the future for working capital, debt refinancing, capital expenditures, acquisitions, development or other general corporate purposes.
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Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance, our indebtedness will depend primarily on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors described in this section. If we are unable to generate sufficient cash flow from our business in the future to service our debt or meet our other cash needs, we may be required to refinance all or a portion of our

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existing debt, sell assets or obtain additional financing to meet our debt obligations and other cash needs. Our ability to refinance, sell assets or obtain additional financing may not be possible on terms that we would find acceptable.

We are obligated to comply with financial and other covenants in our debt that could restrict our operating activities, and the failure to comply could result in defaults that accelerate the payment under our debt.

Our secured debt generally contains customary covenants, including, among others, provisions:

•	relating to the maintenance of the property securing the debt;
•	restricting our ability to assign or further encumber the properties securing the debt; and
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•	restricting our ability to enter into certain new leases or to amend or modify certain existing leases without obtaining consent of the lenders.
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Our unsecured debt generally contains various restrictive covenants. The covenants in our unsecured debt include, among others, provisions restricting our ability to:

•	incur additional unsecured debt;
•	guarantee additional debt;
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•	make certain distributions, investments and other restricted payments, including distribution payments on our outstanding stock;
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•	create certain liens;
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•	increase our overall secured and unsecured borrowing beyond certain levels; and
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•	consolidate, merge or sell all or substantially all of our assets.
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Our ability to meet some of the covenants in our debt, including covenants related to the condition of the property or payment of real estate taxes, may be dependent on the performance by our tenants under their leases.

In addition, our credit facility requires us and our subsidiaries to satisfy financial covenants. The material financial covenants require us, on a consolidated basis, to:

•	limit the amount of debt as a percentage of gross asset value, as defined in the loan agreement, to less than 60% (leverage ratio);
•	limit the amount of debt so that interest coverage will exceed 2.0x on a trailing four-quarter basis (interest expense coverage); and
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•	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).
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As of December 31, 2019, we were in compliance with all such covenants. If we were to breach any of our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Some of our debt arrangements are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a covenant under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.

The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.

As with other publicly traded securities, the market price of our debt and equity securities depends on various factors, which may change from time to time and/or may be unrelated to our financial condition, operating performance or prospects that may cause significant fluctuations or volatility in such prices. These factors include, among others:

•general economic and financial market conditions;

•level and trend of interest rates;

•our ability to access the capital markets to raise additional capital;

•the issuance of additional equity or debt securities;

•changes in our funds from operations (“FFO”) or earnings estimates;

•changes in our credit or analyst ratings;

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•our financial condition and performance;

•market perception of our business compared to other REITs; and

•market perception of REITs, in general, compared to other investment alternatives.

The phase-out of LIBOR could affect interest rates under our variable rate debt and interest rate swap arrangements.

LIBOR is used as a reference rate for our revolving credit facility, certain mortgage payables, and in our interest rate swap arrangements. On July 27, 2017, the United Kingdom's Financial Conduct Authority announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is unclear if LIBOR will cease to exist at that time, if a new method of calculating LIBOR will be established, or if an alternative reference rate will be established. The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to U.S. dollar LIBOR in derivatives and other financial contracts. We are not able to predict when LIBOR will cease to be available or if SOFR, or another alternative rate reference rate, attains market traction as a LIBOR replacement. If LIBOR ceases to exist, we will need to agree upon a benchmark replacement index with the bank, and as such the interest rate on our revolving credit facility and certain mortgage payables may change. The new rate may not be as favorable as those in effect prior to any LIBOR phase-out. Furthermore, the transition process may result in delays in funding, higher interest expense, additional expenses, and increased volatility in markets for instruments that currently rely on LIBOR, all of which could negatively impact our cash flow.

Our development activities are inherently risky.

The ground-up development of improvements on real property, which is different from the renovation and redevelopment of existing improvements, presents substantial risks. In addition to the risks associated with real estate investment in general as described elsewhere, the risks associated with our remaining development activities include:

•	significant time lag between commencement and completion subjects us to greater risks due to fluctuation in the general economy;
•	failure or inability to obtain construction or permanent financing on favorable terms;
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•	expenditure of money and time on projects that may never be completed;
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•	inability to achieve projected rental rates or anticipated pace of lease-up;
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•	higher-than-estimated construction costs, including labor and material costs; and
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•	possible delay in completion of the project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, or acts of God (such as fires, earthquakes or floods).
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Developments, redevelopments and acquisitions may fail to perform as expected.

Our investment strategy includes the redevelopment and acquisition of community and neighborhood shopping centers that are anchored by supermarkets, drugstores or high volume, value-oriented retailers that provide consumer necessities. The redevelopment and acquisition of properties entails risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:

•	our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, and, as a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time;
•	we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
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•	we may not be able to integrate new developments or acquisitions into our existing operations successfully;
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•	properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project at the time we make the decision to invest, which may result in the properties’ failure to achieve the returns we projected;
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•	our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition costs; and
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•	our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.

Our ability to grow will be limited if we cannot obtain additional capital.

Our growth strategy includes the redevelopment of properties we already own and the acquisition of additional properties. Because we are required to distribute to our stockholders at least 90% of our taxable income each year to continue to qualify as a real estate investment trust, or REIT, for federal income tax purposes, in addition to our undistributed operating cash flow, we rely upon the availability of debt or equity capital to fund our growth, which financing may or may not be available on favorable terms or at all. The debt could include mortgage loans from third parties or the sale of debt securities. Equity capital could include our common stock or preferred stock. Additional financing, refinancing or other capital may not be available in the amounts we desire or on favorable terms. Our access to debt or equity capital depends on a number of factors, including the general state of the capital markets, the market’s perception of our growth potential, our ability to pay dividends, and our current and potential future earnings. Depending on the outcome of these factors, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.

Our performance and value are subject to general risks associated with the real estate industry.

Our economic performance and the value of our real estate assets, and, consequently, the value of our investments, are subject to the risk that if our properties do not generate revenue sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our stockholders will be adversely affected. As a real estate company, we are susceptible to the following real estate industry risks:

•	economic downturns in the areas where our properties are located;
•	adverse changes in local real estate market conditions, such as oversupply or reduction in demand;
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•	changes in tenant preferences that reduce the attractiveness of our properties to tenants;
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•	zoning or regulatory restrictions;
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•	decreases in market rental rates;
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•	weather conditions that may increase energy costs and other operating expenses;
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•	costs associated with the need to periodically repair, renovate and re-lease space; and
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•	increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more properties, which may occur even when circumstances such as market factors and competition cause a reduction in revenue from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenue.
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Geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.

Approximately 85% of our property operating income is generated by properties in the metropolitan Washington, DC/Baltimore area. As a result, our financial condition, operating results and ability to make distributions could be materially and adversely impacted by significant adverse economic changes affecting the real estate markets in that area. In turn, our common stock is subject to greater risk vis-a-vis other enterprises whose portfolio contains greater geographic diversity.

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Adverse trends in the retail and office real estate sectors.

Tenants at our retail properties face continual competition in attracting customers from Internet shopping, retailers at other shopping centers, catalogue companies, online merchants, television shopping networks, warehouse stores, large discounters, outlet malls, wholesale clubs, direct mail and telemarketers. Such competition could have a material adverse effect on our ability to lease space in our retail properties and on the rents we can charge or the concessions we can grant. This in turn could materially and adversely affect our results of operations and cash flows, and could affect the realizable value of our assets upon sale. Further, as new technologies emerge, the relationships among customers, retailers, and shopping centers are evolving rapidly and it is critical we adapt to such new technologies and relationships on a timely basis. We may be unable to adapt quickly and effectively, which could adversely impact our financial performance.

Some businesses are rapidly evolving to make employee telecommuting, flexible work schedules, open workplaces and teleconferencing increasingly common. These practices enable businesses to reduce their space requirements. A continuation of the movement towards these practices could over time erode the overall demand for office space and, in turn, place downward pressure on occupancy, rental rates and property valuations, each of which could have an adverse effect on our financial position, results of operations, cash flows and ability to make distributions to our stockholders.

Many real estate costs are fixed, even if income from our properties decreases.

Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the investment. As a result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without delays, and may incur substantial legal costs. Additionally, new properties that we may acquire or develop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is fully leased.

Competition may limit our ability to purchase new properties and generate sufficient income from tenants.

Numerous commercial developers and real estate companies compete with us in seeking tenants for properties and properties for acquisition. This competition may:

•	reduce properties available for acquisition;
•	increase the cost of properties available for acquisition;
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•	reduce rents payable to us;
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•	interfere with our ability to attract and retain tenants;
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•	lead to increased vacancy rates at our properties; and
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•	adversely affect our ability to minimize expenses of operation.
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Retailers at our shopping center properties also face increasing competition from outlet stores, discount shopping clubs, and other forms of marketing of goods, such as direct mail, internet marketing and telemarketing. This competition may reduce percentage rents payable to us and may contribute to lease defaults and insolvency of tenants. If we are unable to continue to attract appropriate retail tenants to our properties, or to purchase new properties in our geographic markets, it could materially affect our ability to generate net income, service our debt and make distributions to our stockholders.

We may be unable to sell properties when appropriate because real estate investments are illiquid.

Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our stockholders.

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Our insurance coverage on our properties may be inadequate.

We carry comprehensive insurance on all of our properties, including insurance for liability, earthquake, fire, flood, terrorism and rental loss. These policies contain coverage limitations. We believe this coverage is of the type and amount customarily obtained for or by an owner of real property assets. We intend to obtain similar insurance coverage on subsequently acquired properties.

As a consequence of the September 11, 2001 terrorist attacks and other significant losses incurred by the insurance industry, the availability of insurance coverage has decreased and the prices for insurance have increased. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our stockholders.

Environmental laws and regulations could reduce the value or profitability of our properties.

All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to hazardous materials, environmental protection and human health and safety. Under various federal, state and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or toxic substances released on or in properties we own or operate, and also may be required to pay other costs relating to hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the release of these types of substances or were responsible for their release. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. We are not aware of any environmental condition with respect to any of our properties that management believes would have a material adverse effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior to our acquisition of the property and the building materials used at the property are among the property-specific factors that will affect how the environmental laws are applied to our properties. If we are subject to any material environmental liabilities, the liabilities could adversely affect our results of operations and our ability to meet our obligations.

We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental problems. Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect their potential profitability. Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a tenant fails to or cannot comply, we could be forced to pay these costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent payments.

Natural disasters and climate change could have an adverse impact on our cash flow and operating results.

Climate change may add to the unpredictability and frequency of natural disasters and severe weather conditions and create additional uncertainty as to future trends and exposures. Certain of our operations are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, droughts, snow storms, floods and fires. The impact of climate change or the occurrence of natural disasters can delay new development projects, increase investment costs to repair or replace damaged properties, increase operating costs, create additional investment costs to make improvements to existing properties to comply with climate change regulations, increase future property insurance costs, and negatively impact the tenant demand for space. If insurance is unavailable to us or is unavailable on

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acceptable terms, or if our insurance is not adequate to cover business interruption or losses from these events, our earnings, liquidity or capital resources could be adversely affected.

The Americans with Disabilities Act of 1990 (the “ADA”) could require us to take remedial steps with respect to newly acquired properties.

The properties, as commercial facilities, are required to comply with Title III of the ADA. Investigation of a property may reveal non-compliance with the ADA. The requirements of the ADA, or of other federal, state or local laws, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with the ADA may require expensive changes to the properties.

The revenue generated by our tenants could be negatively affected by various federal, state and local laws to which they are subject.

We and our tenants are subject to a wide range of federal, state and local laws and regulations, such as local licensing requirements, consumer protection laws and state and local fire, life-safety and similar requirements that affect the use of the properties. The leases typically require that each tenant comply with all regulations. Failure to comply could result in fines by governmental authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on such properties. Non-compliance of this sort could reduce our revenue from a tenant, could require us to pay penalties or fines relating to any non-compliance, and could adversely affect our ability to sell or lease a property.

Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation, which would substantially reduce funds available for payment of distributions.

We believe that we are organized and qualified as a REIT, and currently intend to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes under the Code. However, the IRS could successfully assert that we are not qualified as such. In addition, we may not remain qualified as a REIT in the future. Qualification as a REIT involves the application of highly technical and complex Code provisions. The complexity of these provisions and of the applicable income tax regulations that have been issued under the Code by the United States Department of Treasury is greater in the case of a REIT that holds its assets in partnership form. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying rents and other income. Satisfying this requirement could be difficult, for example, if defaults by tenants were to reduce the amount of income from qualifying rents. Also, we must make annual distributions to stockholders of at least 90% of our net taxable income (excluding capital gains). In addition, new legislation, new regulations, new administrative interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. If we fail to qualify as a REIT:

•	we would not be allowed a deduction for dividend distributions to stockholders in computing taxable income;
•	we would be subject to federal income tax at regular corporate rates;
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•	unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified;
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•	we could be required to pay significant income taxes, which would substantially reduce the funds available for investment and for distribution to our stockholders for each year in which we failed to qualify; and
---	---
•	we would no longer be required by law to make any distributions to our stockholders.
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We believe that the Operating Partnership is treated as a partnership, and not as a corporation, for federal income tax purposes. If the IRS were to challenge successfully the status of the Operating Partnership as a partnership for federal income tax purposes:

•	the Operating Partnership would be taxed as a corporation;
•	we would cease to qualify as a REIT for federal income tax purposes; and
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•	the amount of cash available for distribution to our stockholders would be substantially reduced.
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We may be required to incur additional debt to qualify as a REIT.

As a REIT, we must make annual distributions to stockholders of at least 90% of our REIT taxable income. We are subject to income tax on amounts of undistributed REIT taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to stockholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:

•	our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
•	non-deductible capital expenditures or debt service requirements may reduce available cash but not taxable income.
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In these circumstances, we might have to borrow funds on unfavorable terms and even if our management believes the market conditions make borrowing financially unattractive.

U.S. federal tax reform legislation now and in the future could affect REITs, both positively and negatively, in ways that are difficult to anticipate.

The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), signed into law on December 22, 2017, represents sweeping tax reform legislation that makes significant changes to corporate and individual tax rates and the calculation of taxes. While we currently do not expect the 2017 Tax Act will have a significant direct impact on us, it may impact us indirectly as our tenants and the jurisdictions in which we do business, as well as the overall investment thesis for REITs, may be impacted both positively and negatively in ways that are difficult to predict. Additionally, the overall impact of the 2017 Tax Act depends on future interpretations and regulations that may be issued by federal tax authorities, as well as changes in state and local taxation in response to the 2017 Tax Act, and it is possible that such future interpretations, regulations and other changes could adversely impact us.

To maintain our status as a REIT, we limit the amount of shares any one stockholder can own.

The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code). To protect our REIT status, our articles of incorporation restrict beneficial and constructive ownership (defined by reference to various Code provisions) to no more than 2.5% in value of our issued and outstanding equity securities by any single stockholder with the exception of members of the Saul Organization, who are restricted to beneficial and constructive ownership of no more than 39.9% in value of our issued and outstanding equity securities.

The constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or entities. As a result, the acquisition of less than 2.5% or 39.9% in value of our issued and outstanding equity securities, by an individual or entity could cause that individual or entity (or another) to own constructively more than 2.5% or 39.9% in value of the outstanding stock. If that happened, either the transfer or ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the respective ownership limit.

As of December 31, 2019, Mr. B. F. Saul II and members of the Saul Organization owned common stock representing approximately 37.8% in value of all our issued and outstanding equity securities. In addition, members of the Saul Organization beneficially owned Operating Partnership units that are, in general, convertible into our common stock on a one-for-one basis. Members of the Saul Organization are permitted under our articles of incorporation to convert Operating Partnership units into shares of common stock or acquire additional shares of common stock until the Saul Organization’s actual ownership of common stock reaches 39.9% in value of our equity securities.

The Board of Directors may waive these restrictions on a case-by-case basis. The Board has authorized the Company to grant waivers to look-through entities, such as mutual funds, in which shares of equity stock owned by the entity are treated as owned proportionally by individuals who are the beneficial owners of the entity. Even though these entities may own stock in excess of the 2.5% ownership limit, no individual beneficially or constructively would own more than 2.5%. The Board of Directors has agreed to waive the ownership limit with respect to certain mutual funds and similar investors. In addition, the Board of Directors has agreed to waive the ownership limit with respect to certain bank

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pledgees of shares of our common stock and units issued by the Operating Partnership and held by members of the Saul Organization.

The ownership restrictions may delay, defer or prevent a transaction or a change of our control that might involve a premium price for our equity stock or otherwise be in the stockholders’ best interest.

We cannot assure you we will continue to pay dividends at historical rates.

Our ability to continue to pay dividends on our common stock at historical rates or to increase our common stock dividend rate will depend on a number of factors, including, among others, the following:

•	our financial condition and results of future operations;
•	the performance of lease terms by tenants;
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•	the terms of our loan covenants; and
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•	our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
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If we do not maintain or increase the dividend rate on our common stock, it could have an adverse effect on the market price of our common stock and other securities. Payment of dividends on our common stock may be subject to payment in full of the dividends on any preferred stock or depositary shares and payment of interest on any debt securities we may offer.

Certain tax and anti-takeover provisions of our articles of incorporation and bylaws may inhibit a change of our control.

Certain provisions contained in our articles of incorporation and bylaws and the Maryland General Corporation Law may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or prevent the stockholders from receiving a premium for their stock over then-prevailing market prices. These provisions include:

•	the REIT ownership limit described above;
•	authorization of the issuance of our preferred stock with powers, preferences or rights to be determined by the Board of Directors;
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•	a staggered, fixed-size Board of Directors consisting of three classes of directors;
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•	special meetings of our stockholders may be called only by the Chairman of the Board, the president, by a majority of the directors or by stockholders possessing no less than 25% of all the votes entitled to be cast at the meeting;
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•	the Board of Directors, without a stockholder vote, can classify or reclassify unissued shares of preferred stock;
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•	a member of the Board of Directors may be removed only for cause upon the affirmative vote of 75% of the Board of Directors or 75% of the then-outstanding capital stock;
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•	advance notice requirements for proposals to be presented at stockholder meetings; and
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•	the terms of our articles of incorporation regarding business combinations and control share acquisitions.
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Cybersecurity risks and cyber incidents could adversely affect our business, disrupt operations and expose us to liabilities to tenants, employees, capital providers and other third parties.

We use information technology and other computer resources to carry out important operational activities and to maintain our business records. As part of our normal business activities, we collect and store certain personal identifying and confidential information relating to our tenants, employees, vendors and suppliers, and maintain operational and financial information related to our business. We have implemented systems and processes intended to address ongoing and evolving cybersecurity risks, secure our information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data. Although we and our service providers employ what we believe are adequate security, disaster recovery and other preventative and corrective measures, our security measures, taken as a whole, may not be sufficient for all possible situations and may be vulnerable to, among other things, hacking, employee error, system error, and faulty password management.

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Our ability to conduct our business may be impaired if our information technology resources, including our websites or e-mail systems, are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption or failure or error or poor product or vendor/developer selection (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions, or lost connectivity to our networked resources. A significant and extended disruption could damage our reputation and cause us to lose tenants and revenues; result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information; and require us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues. The release of confidential information may also lead to litigation or other proceedings against us by affected individuals, business partners and/or regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings and cause us reputational harm, could have a material and adverse effect on our business and consolidated financial statements. In addition, the costs of maintaining adequate protection against data security threats, based on considerations of their evolution, increasing sophistication, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to our consolidated financial statements in a particular period or over various periods.

We may amend or revise our business policies without your approval.

Our Board of Directors may amend or revise our operating policies without stockholder approval. Our investment, financing and borrowing policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are determined by the Board of Directors or those committees or officers to whom the Board of Directors has delegated that authority. The Board of Directors may amend or revise these policies at any time and from time to time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the market price of our securities.

Item 1B. Unresolved Staff Comments

We have received no written comments from the Securities and Exchange Commission staff regarding our periodic or current reports in the 180 days preceding December 31, 2019 that remain unresolved.

Item 2. Properties

Overview

As of December 31, 2019, the Company is the owner, developer and operator of a real estate portfolio composed of 56 operating properties, totaling approximately 9.3 million square feet of gross leasable area (“GLA”), and four development parcels. The properties are located primarily in the Washington, D.C./Baltimore, Maryland metropolitan area. The operating property portfolio is composed of 50 neighborhood and community Shopping Centers, and six predominantly Mixed-Use Properties totaling approximately 7.8 million and 1.5 million square feet of GLA, respectively. No single property accounted for more than 6.5% of the total gross leasable area. A majority of the Shopping Centers are anchored by several major tenants and offer primarily day-to-day necessities and services. Thirty-three of the Shopping Centers were anchored by a grocery store. One tenant, Giant Food (4.7%), a tenant at ten Shopping Centers, individually accounted for 2.5% or more of the Company’s total revenue for the year ended December 31, 2019.

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

	Year ended December 31,
	2019		2018		2017		2016		2015
Base rent	$	19.91	$	20.13	$	19.49	$	18.73	$	18.52
Effective rent	$	18.08	$	18.20	$	17.67	$	16.95	$	16.81

The Company expects to hold its properties as long-term investments and it has no maximum period for retention of any investment. It plans to selectively acquire additional income-producing properties and to expand, renovate, and improve its properties when circumstances warrant. See “Item 1. Business—Operating Strategies” and “Business—Capital Policies.”

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The Shopping Centers

Community and neighborhood shopping centers typically are anchored by one or more grocery stores, discount department stores or drug stores. These anchors offer day-to-day necessities rather than apparel and luxury goods and, therefore, generate consistent local traffic. By contrast, regional malls generally are larger and typically are anchored by one or more full-service department stores.

In general, the Shopping Centers are seasoned community and neighborhood shopping centers located in well established, highly developed, densely populated, middle and upper income areas. The 2019 average estimated population within a one- and three-mile radius of the Shopping Centers is approximately 15,800 and 97,400, respectively. The 2019 average household income within a one- and three-mile radius of the Shopping Centers is approximately $125,500 and $129,400, respectively, compared to a national average of $87,400. Because the Shopping Centers generally are located in highly developed areas, management believes that there is little likelihood that significant numbers of competing centers will be developed in the future.

The Shopping Center properties range in size from approximately 19,000 to 573,500 square feet of GLA, with six in excess of 300,000 square feet, and average approximately 157,100 square feet. A majority of the Shopping Centers are anchored by several major tenants and other tenants offering primarily day-to-day necessities and services. Thirty-three of the Shopping Centers are anchored by a grocery store.

Lease Expirations of Shopping Center Properties

The following table sets forth, by year of expiration, the aggregate amount of base rent and leasable area for leases in place at the Shopping Centers that the Company owned as of December 31, 2019, for each of the next ten years beginning with 2020, assuming that none of the tenants exercise renewal options and excluding an aggregate of 351,862 square feet of unleased space, which represented 4.5% of the GLA of the Shopping Centers as of December 31, 2019.

Lease Expirations of Shopping Center Properties

Year of Lease Expiration	Leasable<br><br>Area<br><br>Represented<br><br>by Expiring<br><br>Leases		Percentage of Leasable Area Represented by Expiring Leases		Annual Base<br>Rent Under<br>Expiring<br>Leases (1)		Percentage<br><br>of Annual<br><br>Base Rent<br><br>Under<br><br>Expiring<br><br>Leases		Annual Base Rent per Square Foot
2020	658,363	sf	8.4	%	$	13,431,264	10.3	%	$	20.40
2021	1,048,427		13.3	%	18,188,189		13.9	%	17.35
2022	1,077,150		13.7	%	20,236,770		15.5	%	18.79
2023	1,080,850		13.8	%	20,193,110		15.4	%	18.68
2024	899,959		11.5	%	17,800,364		13.6	%	19.78
2025	646,164		8.2	%	11,146,965		8.5	%	17.25
2026	273,577		3.5	%	5,371,679		4.1	%	19.63
2027	167,489		2.1	%	4,544,327		3.5	%	27.13
2028	468,915		6.0	%	3,743,445		2.9	%	7.98
2029	584,466		7.4	%	8,555,187		6.5	%	14.64
Thereafter	598,053		7.6	%	7,662,500		5.8	%	12.81
Total	7,503,413	sf	95.5	%	$	130,873,800	100.0	%	17.44
(1)	Calculated using annualized contractual base rent payable as of December 31, 2019 for the expiring GLA, excluding expenses payable by or reimbursable from tenants.
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The Mixed-Use Properties

All of the Mixed-Use Properties are located in the Washington, D.C. metropolitan area and contain an aggregate GLA of approximately 1.5 million square feet, comprised of 1.0 million and 0.1 million square feet of office and retail space, respectively, and 515 apartments. The Mixed-Use Properties represent three distinct styles of facilities, are located in differing commercial environments with distinctive demographic characteristics, and are geographically removed from one another. Accordingly, management believes that the Washington, D.C. area Mixed-Use Properties compete for tenants in different commercial and geographic sub-markets of the metropolitan Washington, D.C. market and do not compete with one another.

Lease Expirations of Mixed-Use Properties

The following table sets forth, by year of expiration, the aggregate amount of base rent and leasable area for commercial leases in place at the Mixed-Use Properties that the Company owned as of December 31, 2019, for each of the next ten years beginning with 2020, assuming that none of the tenants exercise renewal options and excluding an aggregate of 90,485 square feet of unleased office and retail space, which represented 8.4% of the GLA of the commercial space within the Mixed-Use Properties as of December 31, 2019.

Commercial Lease Expirations of Mixed-Use Properties

Year of Lease Expiration	Leasable<br><br>Area<br><br>Represented<br><br>by Expiring<br><br>Leases		Percentage of Leasable Area Represented by Expiring Leases		Annual Base<br><br>Rent Under<br><br>Expiring<br><br>Leases (1)		Percentage of Annual Base Rent Under Expiring Leases		Annual Base Rent per Square Foot
2020	87,871	sf	8.2	%	$	3,205,093	8.5	%	$	36.47
2021	117,340		10.9	%	5,127,167		13.5	%	43.69
2022	113,991		10.6	%	4,449,065		11.7	%	39.03
2023	162,931		15.1	%	7,763,419		20.5	%	47.65
2024	119,440		11.1	%	6,325,203		16.7	%	52.96
2025	43,257		4.0	%	1,090,029		2.9	%	25.20
2026	65,923		6.1	%	4,476,682		11.8	%	67.91
2027	49,746		4.6	%	1,413,128		3.7	%	28.41
2028	35,374		3.3	%	1,405,071		3.7	%	39.72
2029	47,644		4.4	%	997,287		2.6	%	20.93
Thereafter	142,835		13.3	%	1,686,488		4.4	%	11.81
Total	986,352	sf	91.6	%	$	37,938,632	100.0	%	38.46
(1)	Calculated using annualized contractual base rent payable as of December 31, 2019, for the expiring GLA, excluding expenses payable by or reimbursable from tenants.
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As of December 31, 2019, the Company had 496 apartment leases, 402 of which will expire in 2020 and 94 of which will expire in 2021. Annual base rent due under these leases is $10.3 million and $1.0 million for the years ending December 31, 2020 and 2021, respectively.

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Current Portfolio Properties

The following table sets forth, at the dates indicated, certain information regarding the Current Portfolio Properties:

Property	Location	Leasable Area (Square Feet)		Year Acquired or Developed (Renovated)	Land<br>Area<br>(Acres)	Percentage Leased^^as of December 31, ^(1)^
			2019				2018		2017		2016		2015		Anchor / Significant Tenants
Shopping Centers
Ashbrook Marketplace	Ashburn, VA	78,453		2018 (2019)	13.7	92	%	N/A		N/A		N/A		N/A		Lidl, Planet Fitness, Starbucks, Dunkin Donuts, Valvoline, Cafe Rio, McAllisters Deli
Ashburn Village	Ashburn, VA	221,596		1994-2006	26.4	97	%	97	%	94	%	91	%	95	%	Giant Food, Hallmark, McDonald's, Burger King, Dunkin Donuts, Kinder Care, Blue Ridge Grill
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	356,971		1972 (1993/99/07)	32.3	100	%	100	%	100	%	100	%	100	%	Lowe's Home Improvement Center, Giant Food, Home Goods, Outback Steakhouse, Marshalls, Party Depot, Panera Bread, TGI Fridays, Starbucks, Famous Dave's, Chipotle, Capital One Bank
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	99	%	96	%	95	%	95	%	100	%	Publix, Wells Fargo, Palm Beach Fitness, Anthony's Clothing
Boulevard	Fairfax, VA	49,140		1994 (1999/09)	5.0	100	%	100	%	100	%	100	%	100	%	Panera Bread, Party City, Petco, Capital One Bank
Briggs Chaney MarketPlace	Silver Spring, MD	194,258		2004	18.2	96	%	92	%	100	%	98	%	99	%	Global Food, Ross Dress For Less, Advance Auto Parts, McDonald's, Dunkin Donuts, Enterprise Rent-A-Car, Dollar Tree, Dollar General, Salon Plaza
Broadlands Village	Ashburn, VA	174,438		2003-2006	24.0	98	%	98	%	77	%	100	%	98	%	Aldi Grocery, The All American Steakhouse, Bonefish Grill, Dollar Tree, Starbucks, Minnieland Day Care, Capital One Bank, LA Fitness
Burtonsville Town Square	Burtonsville, MD	138,021		2017	26.3	98	%	100	%	100	%	N/A		N/A		Giant Food, Petco, Starbucks, Greene Turtle, Capital One Bank, CVS Pharmacy, Roy Rogers, Mr. Tire, Taco Bell
Countryside Marketplace	Sterling, VA	138,804		2004	16.0	95	%	96	%	94	%	94	%	93	%	Safeway, CVS Pharmacy, Starbucks, McDonald's, 7-Eleven
Cranberry Square	Westminster, MD	141,450		2011	18.9	96	%	97	%	100	%	100	%	97	%	Giant Food, Staples, Party City, Pier 1 Imports, Jos. A. Bank, Wendy's, Giant Gas Station
Cruse MarketPlace	Cumming, GA	78,686		2004	10.6	94	%	96	%	87	%	92	%	92	%	Publix, Subway, Orange Theory, Anytime Fitness
Flagship Center	Rockville, MD	21,500		1972, 1989	0.5	100	%	100	%	100	%	100	%	100	%	Chase Bank, Bank of America
French Market	Oklahoma City, OK	246,148		1974 (1984/98)	13.8	97	%	96	%	97	%	98	%	98	%	Burlington Coat Factory, Bed Bath & Beyond, Staples, Petco, The Tile Shop, Lakeshore Learning Center, Dollar Tree, Verizon, Raising Cane's
Germantown	Germantown, MD	18,982		1992	2.7	100	%	100	%	100	%	100	%	100	%	CVS Pharmacy, Jiffy Lube
The Glen	Woodbridge, VA	136,440		1994 (2005)	14.7	97	%	96	%	96	%	97	%	95	%	Safeway, The All American Steakhouse, Panera Bread, Five Guys, Chipotle
Great Falls Center	Great Falls, VA	91,666		2008	11.0	98	%	100	%	100	%	98	%	100	%	Safeway, CVS Pharmacy, Capital One Bank, Starbucks, Subway, Long & Foster
Hampshire Langley	Takoma Park, MD	131,700		1972 (1979)	9.9	100	%	100	%	100	%	100	%	100	%	Mega Mart, Starbucks, Chuck E. Cheese's, Sardi's Chicken, Capital One Bank, Kool Smiles, Wells Fargo

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Property	Location	Leasable Area (Square Feet)		Year Acquired or Developed (Renovated)	Land<br>Area<br>(Acres)	Percentage Leased^^as of December 31, ^(1)^
			2019				2018		2017		2016		2015		Anchor / Significant Tenants
Shopping Centers (Continued)
Hunt Club Corners	Apopka, FL	107,103		2006	13.9	100	%	97	%	93	%	97	%	94	%	Publix, Pet Supermarket, Sprint
Jamestown Place	Altamonte Springs, FL	96,201		2005	10.9	100	%	100	%	93	%	95	%	90	%	Publix, Carrabas Italian Grill, Orlando Health
Kentlands Square I	Gaithersburg, MD	114,381		2002	11.5	100	%	98	%	98	%	98	%	100	%	Lowe's Home Improvement Center, Chipotle
Kentlands Square II	Gaithersburg, MD	253,052		2011, 2013	23.4	99	%	99	%	57	%	100	%	100	%	Giant Food, At Home, Party City, Panera Bread, Not Your Average Joe's, Hallmark, Chick-Fil-A, Coal Fire Pizza, Cava Mezza Grill, Zengo Cycle, Fleet Feet
Kentlands Place	Gaithersburg, MD	40,697		2005	3.4	93	%	93	%	93	%	100	%	96	%	Mynd Spa, Bonefish Grill
Lansdowne Town Center	Leesburg, VA	189,422		2006	23.4	90	%	96	%	93	%	88	%	89	%	Harris Teeter, CVS Pharmacy, Panera Bread, Starbucks, Capital One Bank, Ford's Oyster House, Fusion Learning, Chick-Fil-A
Leesburg Pike Plaza	Baileys Crossroads, VA	97,752		1966 (1982/95)	9.4	90	%	100	%	95	%	95	%	100	%	CVS Pharmacy, Party Depot, FedEx Office, Capital One Bank, Five Guys
Lumberton Plaza	Lumberton, NJ	192,718		1975 (1992/96)	23.3	68	%	70	%	84	%	91	%	90	%	Aldi, Rite Aid, Family Dollar, Retro Fitness, Big Lots, Pet Valu, Burger King
Metro Pike Center	Rockville, MD	67,488		2010	4.6	65	%	69	%	67	%	69	%	89	%	McDonald's, Dunkin Donuts, 7-Eleven, Palm Beach Tan, Mattress Warehouse, Salvation Army
Shops at Monocacy	Frederick, MD	111,316		2004	13.0	99	%	99	%	99	%	100	%	100	%	Giant Food, Giant Gas Station, Panera Bread, Five Guys, California Tortilla, Firehouse Subs, Comcast
Northrock	Warrenton, VA	100,032		2009	15.4	100	%	100	%	99	%	99	%	92	%	Harris Teeter, Longhorn Steakhouse, Ledo's Pizza, Capital One Bank, Jos. A. Bank, Novant Health
Olde Forte Village	Ft. Washington, MD	143,577		2003	16.0	96	%	96	%	99	%	97	%	97	%	Safeway, Advance Auto Parts, Dollar Tree, McDonald's, Wendy's, Ledo's Pizza
Olney	Olney, MD	53,765		1975 (1990)	3.7	93	%	94	%	92	%	90	%	97	%	Walgreens, Olney Grill, Ledo's Pizza, Popeye's, Sardi's Fusion
Orchard Park	Dunwoody, GA	87,365		2007	10.5	99	%	100	%	98	%	97	%	98	%	Kroger, Subway, Jett Ferry Dental
Palm Springs Center	Altamonte Springs, FL	126,446		2005	12.0	100	%	100	%	94	%	100	%	98	%	Publix, Duffy's Sports Grill, Toojay's Deli, The Tile Shop, Rockler Tools, Humana Health, Sola Salons
Ravenwood	Baltimore, MD	93,328		1972 (2006)	8.0	97	%	92	%	100	%	100	%	99	%	Giant Food, Dominos, Bank of America
11503 Rockville Pike/5541 Nicholson Lane	Rockville, MD	40,249		2010/2012	3.0	61	%	61	%	61	%	63	%	63	%	Dr. Boyd's Pet Resort, Metropolitan Emergency Animal Clinic
1500/1580/1582/ 1584 Rockville Pike	Rockville, MD	110,128		2012/2014	10.3	97	%	93	%	96	%	87	%	90	%	Party City, CVS Pharmacy, Sheffield Furniture
Seabreeze Plaza	Palm Harbor, FL	146,673		2005	18.4	99	%	99	%	98	%	98	%	95	%	Publix, Earth Origins Health Food, Petco, Planet Fitness, Vision Works
Marketplace at Sea Colony	Bethany Beach, DE	21,677		2008	5.1	100	%	100	%	100	%	94	%	95	%	Resort Quest, Armand's Pizza, Candy Kitchen, Summer Salts, Fin's Alehouse
Seven Corners	Falls Church, VA	573,481		1973 (1994)	31.6	99	%	100	%	100	%	100	%	100	%	The Home Depot, Giant Food, Michaels Arts & Crafts, Barnes & Noble, Ross Dress For Less, Ski Chalet, Off-Broadway Shoes, JoAnn Fabrics, Starbucks, Dogfishhead Ale House, Red Robin Gourmet Burgers, Chipotle, Wendy's, Burlington Coat Factory, Mattress Warehouse, <br>J. P. Morgan Chase

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Property	Location		Leasable Area (Square Feet)		Year Acquired or Developed (Renovated)	Land<br>Area<br>(Acres)	Percentage Leased^^as of December 31, ^(1)^
				2019				2018		2017		2016		2015		Anchor / Significant Tenants
Shopping Centers (Continued)
Severna Park Marketplace	Severna Park, MD		254,011		2011	20.6	100	%	100	%	100	%	98	%	100	%	Giant Food, Kohl's, Office Depot, A.C. Moore, Goodyear, Chipotle, McDonald's, Jos. A. Bank, Sprint, Five Guys, Unleashed (Petco), Mod Pizza, Jersey Mike's, Bath & Body Works, Wells Fargo
Shops at Fairfax	Fairfax, VA		68,762		1975 (1993/99)	6.7	98	%	100	%	97	%	97	%	100	%	99 Ranch
Smallwood Village Center	Waldorf, MD		173,341		2006	25.1	77	%	79	%	83	%	80	%	69	%	Safeway, CVS Pharmacy, Family Dollar
Southdale	Glen Burnie, MD		485,628		1972 (1986)	39.8	97	%	100	%	99	%	98	%	95	%	The Home Depot, Michaels Arts & Crafts, Marshalls, PetSmart, Value City Furniture, Athletic Warehouse, Starbucks, Gallo Clothing, Office Depot, The Tile Shop, Mercy Health Care, Massage Envy, Potbelly, Capital One Bank, Chipotle, Banfield Pet Hospital, Glory Days Grill, Bank of America
Southside Plaza	Richmond, VA		371,761		1972	32.8	92	%	89	%	91	%	91	%	98	%	Super Fresh, Maxway, Citi Trends, City of Richmond, McDonald's, Burger King, Kool Smiles
South Dekalb Plaza	Atlanta, GA		163,418		1976	14.6	87	%	93	%	89	%	88	%	91	%	Big Lots, Emory Clinic, Roses, Deal $
Thruway	Winston-Salem, NC		365,816		1972 (1997)	31.5	95	%	96	%	95	%	98	%	96	%	Harris Teeter, Trader Joe's, Stein Mart, Talbots, Hanes Brands, Jos. A. Bank, Bonefish Grill, Chico's, Loft, FedEx Office, Plow & Hearth, New Balance, Aveda Salon, Carter's Kids, McDonald's, Chick-Fil-A, Wells Fargo Bank, Francesca's Collections, Great Outdoor Provision Company, White House / Black Market, Soma, J. Crew, Chop't, Lululemon, Orange Theory, Athleta
Village Center	Centreville, VA		145,651		1990	17.2	98	%	98	%	98	%	95	%	94	%	Giant Food, Tuesday Morning, Starbucks, McDonald's, Pet Supplies Plus, Bikram Yoga, Capital One Bank, BB&T Bank
Westview Village	Frederick, MD		101,058		2009	11.6	97	%	99	%	95	%	100	%	100	%	Silver Diner, Sleepy's, Music & Arts, Firehouse Subs, CiCi's Pizza, Café Rio, Five Guys, Regus, Krispy Kreme, Wendy's
White Oak	Silver Spring, MD		480,676		1972 (1993)	27.9	100	%	99	%	100	%	100	%	99	%	Giant Food, Sears, Walgreens, Boston Market, Sarku Japan
Total Shopping Centers		(3)	7,855,275			766.9	95.5	%	96.0	%	94.3	%	96.1	%	96.2	%
Mixed-Use Properties
Avenel Business Park	Gaithersburg, MD		390,683		1981-2000	37.1	91	%	90	%	88	%	83	%	84	%	General Services Administration, Gene Dx, Inc., American Type Culture Collection, Inc.
Clarendon Center-North Block	Arlington, VA		108,386		2010	0.6	86	%	100	%	100	%	99	%	96	%	AT&T Mobility, Dunkin Donuts, Airline Reporting Corporation
Clarendon Center-South Block	Arlington, VA		104,894		2010	1.3	97	%	97	%	100	%	100	%	100	%	Trader Joe's, Circa, Burke & Herbert Bank, Bracket Room, South Block Blends, Winston Partners, Keppler Speakers Bureau, ECG Management Co., Leadership Institute, Capital One Bank, Massage Envy

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Property	Location		Leasable Area (Square Feet)		Year Acquired or Developed (Renovated)	Land<br>Area<br>(Acres)	Percentage Leased^^as of December 31, ^(1)^
				2019				2018			2017			2016			2015			Anchor / Significant Tenants
Mixed-Use Properties (Continued)
Clarendon Center Residential-South Block (244 units)			188,671		2010		95	%		100	%		96	%		97	%		99	%
Park Van Ness-Residential (271 units)	Washington, DC		214,600		2016	1.4	97	%		97	%		96	%		73	%		N/A
Park Van Ness-Retail	Washington, DC		8,847		2016		100	%		100	%		100	%		100	%		N/A			Uptown Market, Sfoglina Pasta House
601 Pennsylvania Ave.	Washington, DC		227,651		1973 (1986)	1.0	94	%		98	%		100	%		98	%		98	%		National Gallery of Art, American Assn. of Health Plans, Credit Union National Assn., Southern Company, HQ Global, Capital Grille, Michael Best & Friedrich LLP
Washington Square	Alexandria, VA		236,376		1975 (2000)	2.0	90	%		91	%		94	%		89	%		95	%		Freeman Expositions, Academy of Managed Care Pharmacy, Cooper Carry, National PACE Association, Marketing General, Alexandria Economic Development, Trader Joe's, FedEx Office, Talbots, Virginia ABC
Total Mixed Use Properties		(3)	1,480,108			43.4	91.6	%	(2)	93.6	%	(2)	94.5	%	(2)	91.0	%	(2)	92.2	%	(2)
Total Portfolio		(3)	9,335,383			810.3	95.0	%	(2)	95.7	%	(2)	94.3	%	(2)	95.5	%	(2)	95.7	%	(2)
Land and Development Parcels
7316 Wisconsin Avenue	Bethesda, MD				2018	0.6				Planned development of a mixed-use building with up to 366 apartment units and 10,300 square feet of retail space. Demolition of existing improvements is expected to begin in 2020, pending issuance of permits.
Ashland Square Phase II	Manassas, VA				2004	17.3				Marketing to grocers and other retail businesses, with a development timetable yet to be finalized.
The Waycroft	Arlington, VA				2014-2016	2.8				Construction of a 491-unit residential project with 60,000 square feet of retail space 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						56.2
(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 December 31, 2019. As such, prior year totals do not agree to prior year tables.
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(2)	Total percentage leased is for commercial space only.
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(3)	Prior year leased percentages for Total Shopping Centers, Total Mixed-Use Properties and Total Portfolio have been recalculated to exclude the impact of properties sold or removed from service and, therefore, the percentages reported in this table may be different than the percentages previously reported.
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Item 3. Legal Proceedings

In the normal course of business, the Company is involved in litigation, including litigation arising out of the collection of rents, the enforcement or defense of the priority of its security interests, and the continued development and marketing of certain of its real estate properties. In the opinion of management, litigation that is currently pending should not have a material adverse impact on the financial condition or future operations of the Company.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Shares of Saul Centers common stock are listed on the New York Stock Exchange under the symbol “BFS.”

Holders

The approximate number of holders of record of the common stock was 128 as of February 20, 2020. Many of our shares of common stock are held by brokers and institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Dividends and Distributions

Under the Code, REITs are subject to numerous organizational and operating requirements, including the requirement to distribute at least 90% of REIT taxable income. The Company distributed more than the required amount in 2019 and 2018. See Notes to Consolidated Financial Statements, No. 13, “Distributions.” The Company may or may not elect to distribute in excess of 90% of REIT taxable income in future years.

The Company’s estimate of cash flow available for distributions is believed to be based on reasonable assumptions and represents a reasonable basis for setting distributions. However, the actual results of operations of the Company will be affected by a variety of factors, including but not limited to actual rental revenue, operating expenses of the Company, interest expense, general economic conditions, federal, state and local taxes (if any), unanticipated capital expenditures, the adequacy of reserves and preferred dividends. While the Company intends to continue paying regular quarterly distributions, any future payments will be determined solely by the Board of Directors and will depend on a number of factors, including cash flow of the Company, its financial condition and capital requirements, the annual distribution amounts required to maintain its status as a REIT under the Code, and such other factors as the Board of Directors deems relevant. We are obligated to pay regular quarterly distributions to holders of depositary shares, prior to distributions on the common stock.

Acquisition of Equity Securities by the Saul Organization

Through participation in the Company’s Dividend Reinvestment Plan, during the quarter ended December 31, 2019, (a) B. Francis Saul II, the Company’s Chairman of the Board, Chief Executive Officer, and President (b) his spouse, (c) the Saul Trust and B. F. Saul Company, for each of which Mr. B. F. Saul II serves as either President or Chairman, and (d) B. F. Saul Property Company, Avenel Executive Park Phase II, LLC, SHLP Unit Acquisition Corp. and Dearborn, LLC, which are wholly-owned subsidiaries of either B. F. Saul Company or the Saul Trust, acquired an aggregate of 65,293 shares of common stock and 13,747 limited partnership units at an average price of $53.00 per share/unit, in respect of the October 31, 2019 dividend distribution. Such limited partnership units were issued in reliance on Section 4(a)(2) of the Securities Act of 1933.

No shares were acquired pursuant to a publicly announced plan or program.

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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 following graph compares the cumulative total stockholder return of the Company’s common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the Financial Times Stock Exchange Group National Association of Real Estate Investment Trust Equity Index (“FTSE NAREIT Equity”), the S&P 500 Index (“S&P 500”) and the Russell 2000 Index (“Russell 2000”). The graph assumes the investment of $100 on December 31, 2014.

	Period Ended
Index	12/31/2014
Saul Centers, Inc. ^1^		100.00	92.51	124.16	118.92	94.56	$110.00
S&P 500 ^2^		100.00	101.38	113.51	138.29	132.23	$173.34
Russell 2000 ^3^		100.00	95.59	115.95	132.94	118.30	$148.49
FTSE NAREIT Equity ^4^		100.00	103.20	111.99	117.84	112.39	$141.61
^1^Source: S&P Capital I.Q.
^2^Source: Bloomberg
^3^Source: FTSE Russell
^4^Source: FTSE National Association of Real Estate Investment Trusts

All values are in US Dollars.

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Item 6. Selected Financial Data

The selected financial data of the Company contained herein has been derived from the consolidated financial statements of the Company. The data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related footnotes included elsewhere in this Annual Report on Form 10-K.

SELECTED FINANCIAL DATA
	Years Ended December 31,
(In thousands, except per share data)	2019			2018			2017			2016			2015
Operating Data:
Total revenue	$	231,525		$	227,219		$	226,299		$	215,524		$	208,111
Total expenses	(166,893		)	(164,666		)	(165,701		)	(159,811		)	(155,181		)
Change in fair value of derivatives	(436		)	(3		)	70			(6		)	(10		)
Gains on sales of properties	—			509			—			1,013			11
Net income	64,196			63,059			60,668			56,720			52,931
Income attributable to noncontrolling interests	(12,473		)	(12,505		)	(12,411		)	(11,441		)	(10,463		)
Net income attributable to Saul Centers, Inc.	51,723			50,554			48,257			45,279			42,468
Preferred stock dividends	(12,235		)	(12,262		)	(12,375		)	(12,375		)	(12,375		)
Extinguishment of issuance costs upon redemption of preferred shares	(3,235		)	(2,328		)	—			—			—
Net income available to common stockholders	$	36,253		$	35,964		$	35,882		$	32,904		$	30,093
Per Share Data (diluted):
Net income available to common stockholders	$	1.57		$	1.60		$	1.63		$	1.52		$	1.42
Basic and Diluted Shares Outstanding:
Weighted average common shares - basic	23,009			22,383			21,901			21,505			21,127
Effect of dilutive options	44			42			107			110			69
Weighted average common shares - diluted	23,053			22,425			22,008			21,615			21,196
Weighted average convertible limited partnership units	7,860			7,731			7,503			7,375			7,253
Weighted average common shares and fully converted limited partnership units - diluted	30,913			30,156			29,511			28,990			28,449
Dividends Paid:
Cash dividends to common stockholders (1)	$	48,568		$	46,306		$	44,576		$	39,472		$	35,645
Cash dividends per share	$	2.12		$	2.08		$	2.04		$	1.84		$	1.69
Balance Sheet Data:
Real estate investments (net of accumulated depreciation)	$	1,518,123		$	1,422,647		$	1,315,034		$	1,242,534		$	1,197,340
Total assets	1,618,340			1,527,489			1,422,452			1,343,025			1,295,408
Total debt, including accrued interest	1,094,715			1,025,255			962,162			903,709			869,652
Preferred stock	185,000			180,000			180,000			180,000			180,000
Total equity	443,356			425,220			393,103			373,249			353,727

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SELECTED FINANCIAL DATA
	Years Ended December 31,
(In thousands, except per share data)	2019			2018			2017			2016			2015
Other Data
Cash flow provided by (used in):
Operating activities	$	115,383		$	110,339		$	103,450		$	89,090		$	88,896
Investing activities	$	(135,663	)	$	(128,650	)	$	(113,306	)	$	(86,274	)	$	(69,587	)
Financing activities	$	19,607		$	21,981		$	12,442		$	(4,497	)	$	(21,434	)
Funds from operations (2):
Net income	$	64,196		$	63,059		$	60,668		$	56,720		$	52,931
Real property depreciation and amortization	46,333			45,861			45,694			44,417			43,270
Gain on sale of property	—			(509		)	—			(1,013		)	(11		)
Funds from operations	110,529			108,411			106,362			100,124			96,190
Preferred stock dividends	(12,235		)	(12,262		)	(12,375		)	(12,375		)	(12,375		)
Extinguishment of issuance costs upon redemption of preferred shares	(3,235		)	(2,328		)	—			—			—
Funds from operations available to common stockholders and noncontrolling interests	$	95,059		$	93,821		$	93,987		$	87,749		$	83,815
1)	During 2019, 2018, 2017, 2016, and 2015, shareholders reinvested $22.5 million, $28.8 million,
---	---

$15.8 million, $10.3 million and $10.6 million, respectively, in newly issued common stock through the Company’s dividend reinvestment plan.

2)	Funds from operations (FFO) is a non-GAAP financial measure and is defined in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Funds From Operations.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) begins with the Company’s primary business strategy to give the reader an overview of the goals of the Company’s business. This is followed by a discussion of the critical accounting policies that the Company believes are important to understanding the assumptions and judgments incorporated in the Company’s reported financial results. The next section, beginning on page 37, discusses the Company’s results of operations for the past two years. Beginning on page 42, the Company provides an analysis of its liquidity and capital resources, including discussions of its cash flows, debt arrangements, sources of capital and financial commitments. Finally, on page 46, the Company discusses funds from operations, or FFO, which is a non-GAAP financial measure of performance of an equity REIT used by the REIT industry.

The following discussion and analysis should be read in conjunction with "Item 6. Selected Financial Data," and the Consolidated Financial Statements and related footnotes included elsewhere in this Annual Report on Form 10-K. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled "Forward-Looking Statements." Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see "Item 1A. Risk Factors."

Overview

The Company’s primary strategy is to continue to focus on diversification of its assets through development of transit-centric, residential mixed-use projects in the Washington, D.C. metropolitan area. The Company’s operating strategy also includes improvement of the operating performance and internal growth of its Shopping Centers and will supplement its development of residential mixed-used projects with selective redevelopment and renovations of its core Shopping Centers.

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The Company’s primary strategy is to continue to focus on diversification of its assets through development of transit-centric, residential mixed-use projects in the Washington, D.C. metropolitan area. Construction of The Waycroft, a project with 491 apartment units and 60,000 square feet of retail space, is nearing substantial completion on North Glebe Road, within two blocks of the Ballston Metro Station, in Arlington, Virginia. The Company also has a development pipeline of zoned sites, either in its portfolio (some of which are currently shopping center operating properties) or under contract, for development of up to 3,700 apartment units and 975,000 square feet of retail and office space. All such sites are located adjacent to red line Metro stations in Montgomery County, Maryland.

Economic conditions within the local Washington, DC metropolitan area have remained relatively stable. Issues facing the Federal government relating to taxation, spending and interest rate policy will likely continue to impact the office, retail and residential real estate markets over the coming years. Because the majority of the Company’s property operating income is produced by our Shopping Centers, we continually monitor the implications of government policy changes, as well as shifts in consumer demand between on-line and in-store shopping, on future shopping center construction and retailer store expansion plans. Based on our observations, we continue to adapt our marketing and merchandising strategies in a way to maximize our future performance. The Company's commercial leasing percentage, on a comparable property basis, which excludes the impact of properties not in operation for the entirety of the comparable periods, decreased to 95.1% at December 31, 2019, from 95.7% at December 31, 2018.

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 December 31, 2019, amortizing fixed-rate mortgage debt with staggered maturities from 2020 to 2035 represented approximately 85.2% of the Company’s notes payable, thus minimizing refinancing risk. The Company’s variable-rate debt consists of $162.5 million outstanding under the credit facility. As of December 31, 2019, the Company has loan availability of approximately $237.3 million under its $325.0 million revolving credit facility.

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Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which requires management to make certain estimates and assumptions that affect the reporting of financial position and results of operations. See Note 2 to the Consolidated Financial Statements in this report. The Company has identified the following policies that, due to estimates and assumptions inherent in those policies, involve a relatively high degree of judgment and complexity.

Real Estate Investments

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

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

Legal Contingencies

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, which are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, the Company believes the final outcome of current matters will not have a material adverse effect on its financial position or the results of operations. Upon determination that a loss is probable to occur, the estimated amount of the loss is recorded in the financial statements. Both the amount of the loss and the point at which its occurrence is considered probable can be difficult to determine.

Results of Operations

The following is a discussion of the components of revenue and expense for the entire Company. This section generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed on February 26, 2019.

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Revenue
(Dollars in thousands)	Year ended December 31,						Percentage Change
	2019		2018		2017		2019 from<br><br>2018		2018 from<br><br>2017
Base rent							0.6	%	2.0	%
Expense recoveries	36,521		35,537		35,347		2.8	%	0.5	%
Percentage rent	910		994		1,458		(8.5	)%	(31.8	)%
Other property revenue	1,423		1,204		1,145		18.2	%	5.2	%
Credit losses on operating lease receivables	(1,226	)	(685	)	(906	)	79.0	%	(24.4	)%
Rental revenue	223,352		221,734		218,185		0.7	%	1.6	%
Other revenue	8,173		5,485		8,114		49.0	%	(32.4	)%
Total revenue	231,525		227,219		226,299		1.9	%	0.4	%

All values are in US Dollars.

Base rent includes $(1.4) million and $(0.9) million, for the years 2019 and 2018, respectively, to recognize base rent on a straight-line basis. In addition, base rent includes $1.4 million and $1.5 million for the years 2019 and 2018, respectively, to recognize income from the amortization of in-place leases.

Total revenue increased 1.9% in 2019 compared to 2018 as described below.

Base rent

The $1.0 million increase in base rent in 2019 compared to 2018 was attributable to (a) a 110,187 square foot increase in leased space ($2.2 million) and (b) higher residential base rent ($0.7 million), partially offset by (c) a $0.22 per square foot decrease in base rent ($1.8 million).

Expense recoveries

Expense recovery income increased $1.0 million in 2019 compared to 2018 primarily due to an increase in recoverable property operating expenses, largely repairs and maintenance and snow removal.

Credit losses on operating lease receivables

Credit losses increased $0.5 million in 2019 compared to 2018 primarily due to two office tenants.

Other revenue

Other revenue increased $2.7 million in 2019 compared to 2018 primarily due to higher lease termination fees.

Operating expenses
(Dollars in thousands)	Year ended December 31,						Percentage Change
	2019		2018		2017		2019 from<br><br>2018		2018 from<br><br>2017
Property operating expenses	$	29,946	$	28,202	$	27,689	6.2	%	1.9	%
Real estate taxes	27,987		27,376		26,997		2.2	%	1.4	%
Interest expense, net and amortization of deferred debt costs	41,834		44,768		47,145		(6.6	)%	(5.0	)%
Depreciation and amortization of deferred leasing costs	46,333		45,861		45,694		1.0	%	0.4	%
General and administrative	20,793		18,459		18,176		12.6	%	1.6	%
Total expenses	$	166,893	$	164,666	$	165,701	1.4	%	(0.6	)%

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Total expenses increased 1.4% in 2019 compared to 2018 as described below.

Property operating expenses

Property operating expenses increased $1.7 million in 2019 compared to 2018 primarily due to (a) higher repairs and maintenance expenses throughout the portfolio ($0.3 million), (b) higher snow removal costs ($0.3 million), and (c) initial direct costs related to leasing activities that, in accordance with ASU 2016-02, are no longer capitalized ($0.7 million).

Real estate taxes

Real estate taxes increased $0.6 million in 2019 compared to 2018 primarily due to increased tax assessments at 601 Pennsylvania Avenue and Clarendon Center ($0.4 million).

Interest expense, net and amortization of deferred debt costs

Interest expense and amortization of deferred debt costs decreased by $2.9 million in 2019 compared to 2018 primarily due to increased capitalized interest ($5.3 million), partially offset by higher interest incurred due to higher outstanding debt balances ($2.4 million).

Depreciation and amortization

Depreciation and amortization of deferred leasing costs increased by $0.5 million in 2019 compared to 2018 primarily due to the write off of the remaining assets at 7316 Wisconsin Avenue when the property was moved to development ($0.6 million).

General and administrative

General and administrative costs increased $2.3 million in 2019 compared to 2018 primarily due to higher compensation and benefits expense related to leasing activities that, in accordance with ASU 2016-02, are no longer capitalized ($1.5 million).

Same property revenue and same property operating income

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

We define same property revenue as total revenue minus the revenue of properties not in operation for the entirety of the comparable reporting periods, and we define same property operating income as net income plus (a) interest expense, net and amortization of deferred debt costs, (b) depreciation and amortization of deferred leasing costs, (c) general and administrative expenses, and (d) change in fair value of derivatives, minus (e) gains on sale of property and (f) the operating income of properties which were not in operation for the entirety of the comparable periods.

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

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Same property revenue and same property operating income are used by management to evaluate and compare the operating performance of our properties, and to determine trends in earnings, because these measures are not affected by the cost of our funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of our properties. We believe the exclusion of these items from 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 property revenue and property operating income under GAAP to same property revenue and same property operating income for the indicated periods. The same property results include 49 Shopping Centers and six Mixed-Use properties for each period.

Same property revenue

(in thousands)	Year ended December 31,
	2019			2018
Total revenue	$	231,525		$	227,219
Less: Acquisitions, dispositions and development properties	(1,209		)	(973		)
Total same property revenue	$	230,316		$	226,246
Shopping centers	$	167,834		$	164,344
Mixed-Use properties	62,482			61,902
Total same property revenue	$	230,316		$	226,246
Total Shopping Center revenue	$	167,888		$	164,344
Less: Shopping Center acquisitions, dispositions and development properties	(54		)	—
Total same Shopping Center revenue	$	167,834		$	164,344
Total Mixed-Use property revenue	$	63,637		$	62,875
Less: Mixed-Use acquisitions, dispositions and development properties	(1,155		)	(973		)
Total same Mixed-Use revenue	$	62,482		$	61,902

The $4.1 million increase in same property revenue for 2019 compared to 2018 was primarily due to (a) higher other revenue ($2.4 million), (b) a 63,023 square foot increase in leased space ($1.3 million), and (c) higher expense recovery income ($1.0 million), partially offset by (d) an $0.11 per square foot decrease in base rent ($0.9 million).

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Same property operating income

	Year Ended December 31,
(In thousands)	2019			2018
Net income	64,196			63,059
Add: Interest expense, net and amortization of deferred debt costs	41,834			44,768
Add: Depreciation and amortization of deferred leasing costs	46,333			45,861
Add: General and administrative	20,793			18,459
Add: Change in fair value of derivatives	436			3
Less: Gain on sale of property	—			(509		)
Property operating income	173,592			171,641
Add (Less): Acquisitions, dispositions and development properties	(568		)	(727		)
Total same property operating income	$	173,024		$	170,914
Shopping Centers	$	131,720		$	129,701
Mixed-Use properties	41,304			41,213
Total same property operating income	$	173,024		$	170,914
Shopping Center operating income	$	131,769		$	129,701
Less: Shopping Center acquisitions, dispositions and development properties	(49		)	—
Total same Shopping Center operating income	$	131,720		$	129,701
Mixed-Use property operating income	$	41,823		$	41,940
Add (Less): Mixed-Use acquisitions, dispositions and development properties	(519		)	(727		)
Total same Mixed-Use property operating income	$	41,304		$	41,213

Same property operating income increased $2.1 million for 2019 compared to 2018 due primarily to

(a) higher other revenue ($2.4 million) and (b) a 63,023 square foot increase in leased space ($1.3 million), partially offset by (c) an $0.11 per square foot decrease in base rent ($0.9 million) and (d) initial direct costs related to leasing activities that, in accordance with ASU 2016-02, are no longer capitalized ($0.7 million).

Impact of Inflation

Inflation has remained relatively low during 2019 and 2018. The impact of rising operating expenses due to inflation on the operating performance of the Company’s portfolio would have been mitigated by terms in substantially all of the Company’s leases, which contain provisions designed to increase revenues to offset the adverse impact of inflation on the Company’s results of operations. These provisions include upward periodic adjustments in base rent due from tenants, usually based on a stipulated increase, and, to a lesser extent, on the change in the consumer price index, commonly referred to as the CPI.

In addition, substantially all of the Company’s properties are leased to tenants under long-term leases, which provide for reimbursement of operating expenses by tenants. These leases tend to reduce the Company’s exposure to rising property expenses due to inflation. Inflation and increased costs may have an adverse impact on the Company’s tenants if increases in their operating expenses exceed increases in their revenue.

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Liquidity and Capital Resources

Cash and cash equivalents were $13.9 million and $14.6 million at December 31, 2019 and 2018, respectively. The changes in cash and cash equivalents during the years ended December 31, 2019 and 2018 were attributable to operating, investing and financing activities, as described below.

(in thousands)	Year Ended December 31,
	2019			2018
Net cash provided by operating activities	$	115,383		$	110,339
Net cash used in investing activities	(135,663		)	(128,650		)
Net cash provided by financing activities	19,607			21,981
Increase (decrease) in cash and cash equivalents	$	(673	)	$	3,670

Operating Activities

Net cash provided by operating activities represents cash received primarily from rental revenue, plus other revenue, less property operating expenses, leasing costs, normal recurring general and administrative expenses and interest payments on debt outstanding.

Investing Activities

Net cash used in investing activities includes property acquisitions, developments, redevelopments, tenant improvements and other property capital expenditures. The $7.0 million increase in cash used in investing activities is primarily due to (a) development expenditures, primarily related to The Waycroft ($37.5 million) and (b) increased additions to real estate investments throughout the portfolio ($9.0 million) partially offset by (c) lower acquisitions of real estate investments ($40.8 million).

Financing Activities

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

Liquidity Requirements

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

Long-term liquidity requirements consist primarily of obligations under our long-term debt and dividends paid to our preferred shareholders. We anticipate that long-term liquidity requirements will also include amounts required for property acquisitions and developments. The Company is developing a primarily residential project with street-level retail at 750 N. Glebe Road in Arlington, Virginia. The total cost of the project, including acquisition of land, is expected to be approximately $275.0 million. The Company had incurred costs totaling $255.4 million as of December 31, 2019. The remaining cost will be funded by a $157.0 million construction-to-permanent loan. 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.

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

Management believes that the Company’s capital resources, which at December 31, 2019 included cash balances of approximately $13.9 million and borrowing availability of approximately $237.3 million on its unsecured revolving credit facility, will be sufficient to meet its liquidity needs for the foreseeable future.

Contractual Payment Obligations

As of December 31, 2019, the Company had unfunded contractual payment obligations of approximately $116.1 million, excluding operating obligations, due within the next 12 months. The table below shows the total contractual payment obligations as of December 31, 2019.

	Payments Due By Period
(Dollars in thousands)	One Year or<br><br>Less		More Than 1 and up to 3 Years		More Than 3 and up to 5 Years		After 5<br><br>Years		Total
Notes Payable:
Interest	$	46,166	$	85,156	$	72,305	$	162,323	$	365,950
Scheduled Principal	28,421		58,670		58,762		125,809		271,662
Balloon Payments	16,074		135,014		150,874		527,297		829,259
Subtotal	90,661		278,840		281,941		815,429		1,466,871
Corporate Headquarters Lease (1)	901		1,883		—		—		2,784
Development and Predevelopment Obligations	14,785		1,973		—		—		16,758
Tenant Improvements	9,729		4,513		—		—		14,242
Total Contractual Obligations	$	116,076	$	287,209	$	281,941	$	815,429	$	1,500,655
(1)	See Note 7 to Consolidated Financial Statements. Corporate Headquarters Lease amounts represent an allocation to the Company based upon employees’ time dedicated to the Company’s business as specified in the Shared Services Agreement. Future amounts are subject to change as the number of employees employed by each of the parties to the lease fluctuates.
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Dividend Reinvestments

In December 1995, the Company established a Dividend Reinvestment Plan (the “Plan”) to allow its common stockholders and holders of limited partnership interests an opportunity to buy additional shares of common stock by reinvesting all or a portion of their dividends or distributions. The Plan provides for investing in newly issued shares of common stock at a 3% discount from market price without payment of any brokerage commissions, service charges or other expenses. All expenses of the Plan are paid by the Company. The Company issued 425,956 and 566,435 shares under the Plan at a weighted average discounted price of $52.27 and $50.31 per share during the years ended December 31, 2019 and 2018, respectively. The Company issued 60,936 and 107,433 limited partnership units under the Plan at a weighted average price of $52.99 and $50.56 per unit during the years ended December 31, 2019 and 2018, respectively. The Company also credited 4,506 and 6,493 shares to directors pursuant to the reinvestment of dividends specified by the Directors’ Deferred Compensation Plan at a weighted average discounted price of $52.28 and $50.28 per share, during the years ended December 31, 2019 and 2018, respectively.

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Capital Strategy and Financing Activity

As a general policy, the Company intends to maintain a ratio of its total debt to total asset value of 50% or less and to actively manage the Company’s leverage and debt expense on an ongoing basis in order to maintain prudent coverage of fixed charges. Asset value is the aggregate fair market value of the Current Portfolio Properties and any subsequently acquired properties as reasonably determined by management by reference to the properties’ aggregate cash flow. Given the Company’s current debt level, it is management’s belief that the ratio of the Company’s debt to total asset value was below 50% as of December 31, 2019.

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

The Company's financing activity is described within note 5 to the Consolidated Financial Statements. The following is a summary of notes payable as of December 31, 2019 and 2018.

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Notes Payable	Year Ended December 31,				Interest		Scheduled
(Dollars in thousands)	2019		2018		Rate*		Maturity*
Fixed rate mortgages:
Olde Forte Village	$	—	$	9,159	5.76	%	May-2019
Countryside Marketplace	—		12,676		5.62	%	Jul-2019
Briggs Chaney Marketplace	—		12,714		5.79	%	Sep-2019
Shops at Monocacy	—		11,295		5.22	%	Jan-2020
Boca Valley Plaza	9,234		9,601		5.60	%	May-2020
Palm Springs Center	7,262		7,766		5.30	%	Jun-2020
Thruway	—		36,711		5.83	%	Jul-2020
Jamestown Place	6,539		6,943		5.81	%	Feb-2021
Hunt Club Corners	5,300		5,480		6.01	%	Aug-2021
Lansdowne Town Center	30,719		31,723		5.62	%	Jun-2022
Orchard Park	9,441		9,728		6.08	%	Sep-2022
BJ's Wholesale Club	10,323		10,609		6.43	%	Apr-2023
Great Falls Center	10,774		11,702		6.28	%	Feb-2024
Leesburg Pike Center	14,414		14,952		7.35	%	Jun-2024
Village Center	12,555		13,013		7.60	%	Jun-2024
White Oak	22,475		23,198		7.45	%	Jul-2024
Avenel Business Park	26,260		27,222		7.02	%	Jul-2024
Ashburn Village	26,245		27,168		7.30	%	Jan-2025
Ravenwood	13,606		14,086		6.18	%	Jan-2026
Clarendon Center	98,611		102,310		5.31	%	Apr-2026
Severna Park Marketplace	29,710		30,888		4.30	%	Oct-2026
Kentlands Square II	33,952		35,258		4.53	%	Nov-2026
Cranberry Square	15,917		16,515		4.70	%	Dec-2026
Seven Corners	60,677		62,630		5.84	%	May-2027
Hampshire-Langley	14,810		15,345		4.04	%	Apr-2028
Beacon Center	36,206		38,120		3.51	%	Jun-2028
Seabreeze Plaza	15,019		15,547		3.99	%	Sep-2028
Shops at Fairfax / Boulevard	26,205		27,060		3.69	%	Mar-2030
Northrock	14,085		14,526		3.99	%	Apr-2030
Burtonsville Town Square	36,975		38,076		3.39	%	Feb-2032
Park Van Ness	68,095		69,691		4.88	%	Sep-2032
Washington Square	56,990		58,523		3.75	%	Dec-2032
Broadlands Village	31,221		31,941		4.41	%	Nov-2033
The Glen	22,448		22,900		4.69	%	Jan-2034
Olde Forte Village	21,702		—		4.65	%	Feb-2034
Olney	11,952		11,781		8.00	%	Apr-2034
Shops at Monocacy	28,500		—		4.14	%	Dec-2034
The Waycroft	110,199		23,332		4.67	%	Sep-2035
Total fixed rate	938,421		910,189		5.04	%	9.3 Years
Variable rate loans:
Revolving credit facility	87,500		47,000		LIBOR + 1.35	%	Jan-2022
Term loan facility	75,000		75,000		LIBOR + 1.30	%	Jan-2023
Total variable rate	162,500		122,000		3.09	%	2.5 Years
Total notes payable	$	1,100,921	$	1,032,189	4.75	%	8.3 Years
*	Interest rate and scheduled maturity data presented as of December 31, 2019. Totals computed using weighted averages.
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At December 31, 2019, the Company had a $400.0 million credit facility comprised of a $325.0 million revolving facility and a $75.0 million term loan. As of December 31, 2019, the applicable spread for borrowings is 135 basis points under the revolving credit facility and 130 basis points under the term loan. Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the credit facility. Letters of credit may be issued under the revolving credit facility. As of December 31, 2019, based on the value of the Company’s unencumbered properties, approximately $237.3 million was available under the revolving credit facility, $87.5 million was outstanding and approximately $185,000 was committed for letters of credit.

The Company’s credit facility requires the Company and its subsidiaries to maintain certain financial covenants, which are summarized below. As of December 31, 2019, the Company was in compliance with all such covenants:

•	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
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•	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).
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As of December 31, 2019, the Company was in compliance with all such covenants.

On September 17, 2019, Saul Centers sold, in an underwritten public offering, 4.0 million depositary shares, each representing 1/100th of a share of 6.000% Series E Cumulative Redeemable Preferred Stock (the “Series E Stock”), providing net cash proceeds of approximately $96.8 million. The depositary shares may be redeemed in whole or in part, on or after September 17, 2024, at the $25.00 liquidation preference, plus accrued but unpaid dividends to but not including the redemption date. The depositary shares pay an annual dividend of $1.50 per share, equivalent to 6.000% of the $25.00 liquidation preference. The Series E Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events. On September 23, 2019, Saul Centers sold, as a result of the exercise by the underwriters of their over-allotment option, an additional 0.4 million depositary shares of Series E Stock, providing net cash proceeds of approximately $9.5 million. On October 17, 2019, the Company used the proceeds from the Series E Stock offering to redeem the outstanding 4.2 million depositary shares of its Series C Stock, including all accumulated and unpaid distributions to, but not including the redemption date. In the fourth quarter, approximately $3.2 million of costs associated with the redemption were charged against Net income available to common stockholders.

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.

Funds From Operations

In 2019, the Company reported Funds From Operations ("FFO")^1^ available to common stockholders and noncontrolling interests of $95.1 million, a 1.3% increase from 2018 FFO available to common stockholders and noncontrolling interests of $93.8 million. The following table presents a reconciliation from net income to FFO available to common stockholders and noncontrolling interests for the periods indicated:

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	Year ended December 31,
(Dollars in thousands)	2019			2018			2017			2016			2015
Net income	$	64,196		$	63,059		$	60,668		$	56,720		$	52,931
Subtract:
Gains on sales of properties	—			(509		)	—			(1,013		)	(11		)
Add:
Real estate depreciation and amortization	46,333			45,861			45,694			44,417			43,270
FFO	110,529			108,411			106,362			100,124			96,190
Subtract:
Preferred stock dividends	(12,235		)	(12,262		)	(12,375		)	(12,375		)	(12,375		)
Extinguishment of issuance costs upon redemption of preferred shares	(3,235		)	(2,328		)	—			—			—
FFO available to common stockholders and noncontrolling interests	$	95,059		$	93,821		$	93,987		$	87,749		$	83,815
Average shares and units used to compute FFO per share	30,913			30,156			29,511			28,990			28,449
FFO per share	$	3.08		$	3.11		$	3.18		$	3.03		$	2.95

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

Acquisitions and Redevelopments

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

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.

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2018, the Company purchased for $4.5 million, including acquisition costs, an interest in an adjacent parcel of land and retail building. The purchase price was funded through the Company's revolving credit facility. The Company has completed development plans for the combined property for the development of up to 366 apartment units and 10,300 square feet of retail space. In July 2019, the Montgomery County Planning Commission unanimously approved the Company's site plan. Design and construction documents are being prepared and a site plan amendment has been submitted incorporating final design parameters. Additional approvals from the Washington Metropolitan Area Transit Authority and the Maryland Transit Administration are in process and are expected to be received by the fourth quarter of 2020. The Company has executed lease termination agreements with the final office tenants and, effective September 1, 2019, the asset was removed from service and transferred to construction in progress.

Portfolio Leasing Status

The following chart sets forth certain information regarding commercial leases at our properties for the periods indicated. This section generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed on February 26, 2019.

	Total Properties		Total Square Footage		Percentage Leased
As of December 31,	Shopping<br><br>Centers	Mixed-Use	Shopping<br><br>Centers	Mixed-Use	Shopping<br><br>Centers		Mixed-Use
2019	50	6	7,855,275	1,076,837	95.5	%	91.6	%
2018	49	7	7,750,271	1,146,438	96.0	%	92.3	%

The residential components of Clarendon Center and Park Van Ness were 95.5% and 97.0% leased, respectively, at December 31, 2019. The residential components of Clarendon Center and Park Van Ness were 99.6% and 97.0% leased, respectively, at December 31, 2018. On a same property basis, which excludes the impact of properties not in operation for the entirety of the comparable periods, the Shopping Center leasing percentage decreased to 95.6% from 96.0% and the Mixed-Use leasing percentage decreased to 91.6% from 93.6%. The overall portfolio leasing percentage, on a comparative same property basis, decreased to 95.1% at December 31, 2019 from 95.7% at December 31, 2018.

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.

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			Base Rent per Square Foot
Year ended December 31,	Square Feet	Number<br><br>of Leases	New/Renewed<br><br>Leases		Expiring<br><br>Leases
2019	1,471,429	255	$	18.24	$	18.39
2018	1,555,620	281	19.52		19.26

Certain of the Company’s operating properties are planned for redevelopment, including its properties at Twinbrook and White Flint. Prior to the commencement of redevelopment, the Company continues to operate the properties. However, in order to provide the greatest amount of flexibility, the Company generally enters into leases with shorter terms at these “pre-development” properties. The shorter-term leases require less capital, but also yield lower rents. The impact of these leases with shorter terms and lower rents can impact the averages shown for all leasing activity. During 2019, the Company entered into six new or renewed leases, for 53,400 square feet of retail space, at pre-development properties that have shorter terms and lower rents than typical market conditions would suggest. Excluding these leases, the base rent on the 249 new or renewed leases on a same space basis would have been $18.26 per square foot compared to $18.10 per square foot for expiring leases.

Additional information about commercial leasing activity during the three months ended December 31, 2019, is set forth below. The below information includes leases for space which had not been previously leased during the period of the Company's ownership, either as a result of acquisition or development.

	New<br><br>Leases			First Generation/Development Leases			Renewed<br><br>Leases
Number of leases	13			6			53
Square feet	54,300			11,381			430,858
Per square foot average annualized:
Base rent	$	32.01		$	43.12		$	12.84
Tenant improvements	(4.82		)	(9.70		)	(1.19		)
Leasing costs	(0.38		)	(1.60		)	(0.10		)
Rent concessions	(0.63		)	(0.31		)	(0.30		)
Effective rents	$	26.18		$	31.51		$	11.25

During 2019, the Company entered into 431 new or renewed apartment leases. The monthly rent per square foot for these leases increased to $3.53 from $3.45. During 2018, the Company entered into 465 new or renewed apartment leases. The monthly rent per square foot for these leases was unchanged at $3.44.

As of December 31, 2019, 746,234 square feet of Commercial space was subject to leases scheduled to expire in 2020. Below is information about existing and estimated market base rents per square foot for that space.

Expiring Leases:	Total
Square feet	746,234
Average base rent per square foot	$	22.29
Estimated market base rent per square foot	$	22.35

Item 7A. 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.

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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 mortgage debt. The swap agreement was terminated on November 21, 2019, and the Company incurred a $0.4 million charge to change in fair value of derivatives.

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 December 31, 2019, the Company had variable rate indebtedness totaling $162.5 million. If the interest rates on the Company’s variable rate debt instruments outstanding at December 31, 2019 had been one percent higher, our annual interest expense relating to these debt instruments would have increased by $1.6 million, based on those balances. As of December 31, 2019, the Company had fixed-rate indebtedness totaling $938.4 million with a weighted average interest rate of 5.04%. If interest rates on the Company’s fixed-rate debt instruments at December 31, 2019 had been one percent higher, the fair value of those debt instruments on that date would have decreased by approximately $51.7 million.

Item 8. Financial Statements and Supplementary Data

The financial statements of the Company and its consolidated subsidiaries are included in this report on the pages indicated, and are incorporated herein by reference:

Page
F-1	(a) Reports of Independent Registered Public Accounting Firm – Deloitte & Touche LLP.
F-3	(b) Report of Previous Independent Registered Public Accounting Firm – Ernst & Young LLP.
F-5	(c) Consolidated Balance Sheets - December 31, 2019 and 2018.
F-6	(d) Consolidated Statements of Operations - Years ended December 31, 2019, 2018, and 2017.
F-7	(e) Consolidated Statements of Comprehensive Income – Years ended December 31, 2019, 2018, and 2017.
F-8	(f) Consolidated Statements of Equity - Years ended December 31, 2019, 2018, and 2017.
F-9	(g) Consolidated Statements of Cash Flows - Years ended December 31, 2019, 2018, and 2017.
F-10	(h) Notes to Consolidated Financial Statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Quarterly Assessment.

The Company carried out an assessment as of December 31, 2019 of the effectiveness of the design and operation of its disclosure controls and procedures and its internal control over financial reporting. This assessment was done under the supervision and with the participation of management, including the Company’s Chairman, Chief Executive Officer, and President, its Executive Vice President-Chief Financial Officer and Treasurer, and its Senior Vice President-Chief Accounting Officer as appropriate. Rules adopted by the SEC require that the Company present the conclusions of the Company’s Chairman, Chief Executive Officer, and President, and its Executive Vice President-Chief Financial Officer and Treasurer about the effectiveness of the Company’s disclosure controls and procedures and the conclusions of the Company’s management about the effectiveness of its internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K.

CEO and CFO Certifications.

Included as Exhibits 31 to this Annual Report on Form 10-K are forms of “Certification” of the Company’s Chairman, Chief Executive Officer and President, and its Executive Vice President-Chief Financial

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Officer and Treasurer. The forms of Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section of the Annual Report on Form 10-K that you are currently reading is the information concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics presented.

Disclosure Controls and Procedures and Internal Control over Financial Reporting.

Management is responsible for establishing and maintaining adequate disclosure controls and procedures and internal control over financial reporting. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including the Company’s Chairman, Chief Executive Officer and President, its Executive Vice President-Chief Financial Officer and Treasurer, and its Senior Vice President-Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal control over financial reporting is a process designed by, or under the supervision of the Company’s Chairman, Chief Executive Officer and President, its Executive Vice President-Chief Financial Officer and Treasurer, and its Senior Vice President-Chief Accounting Officer, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U. S. GAAP and includes those policies and procedures that:

•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;
•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U. S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management or the Company’s Board of Directors; and
---	---
•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material adverse effect on the Company’s financial statements.
---	---

Limitations on the Effectiveness of Controls.

Management, including the Company’s Chairman, Chief Executive Officer and President, its Executive Vice President-Chief Financial Officer and Treasurer, and its Senior Vice President-Chief Accounting Officer, does not expect that the Company’s disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no assessment of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Scope of the Assessments.

The assessment by the Company’s Chairman, Chief Executive Officer and President, its Executive Vice President-Chief Financial Officer and Treasurer, and its Senior Vice President-Chief Accounting Officer of the Company’s disclosure controls and procedures and the assessment by the Company’s management of the Company’s internal control over financial reporting included a review of procedures and discussions with the Company’s Disclosure Committee and others in the Company. In the course of the assessments, management sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken. Management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013 Framework) to assess the effectiveness of the Company’s internal control over financial reporting. The evaluation of the Company’s disclosure controls and procedures and internal control over financial reporting is done on a quarterly basis so that the conclusions concerning the effectiveness of disclosure controls can be reported in the Company’s Quarterly Reports on Form 10-Q and Annual Report on Form 10-K.

The Company’s internal control over financial reporting is also evaluated on an ongoing basis by management, other personnel in the Company’s accounting department and the Company’s internal audit function. The effectiveness of the Company’s internal control over financial reporting is audited by the Company’s independent registered public accounting firm. We consider the results of these various assessment activities as we monitor the Company’s disclosure controls and procedures and internal control over financial reporting and when deciding to make modifications as necessary. Management’s intent in this regard is that the disclosure controls and procedures and the internal control over financial reporting will be maintained and updated (including improvements and corrections) as conditions warrant.

Assessment of Effectiveness of Disclosure Controls and Procedures

Based upon the assessments, the Company’s Chairman, Chief Executive Officer and President, its Executive Vice President-Chief Financial Officer and Treasurer, and its Senior Vice President-Chief Accounting Officer have concluded that, as of December 31, 2019, the Company’s disclosure controls and procedures were effective.

Assessment of Effectiveness of Internal Control Over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013 Framework) to assess the effectiveness of the Company’s internal control over financial reporting. Based upon the assessments, the Company’s management has concluded that, as of December 31, 2019, the Company’s internal control over financial reporting was effective. The Company’s independent registered public accounting firm has issued a report on the effectiveness of the Company’s internal control over financial reporting, which appears on page F-2 of this Annual Report on Form 10‑K.

Changes in Internal Control Over Financial Reporting.

During the three months ended December 31, 2019, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information this Item requires is incorporated by reference to the information under the captions “The Board of Directors,” “Corporate Governance – Ethical Conduct Policy and Senior Financial Officer Code of Ethics,” “Delinquent Section 16(a) Reports,” “Corporate Governance – Nominating and Corporate Governance Committee – Selection of Director Nominees,” and “Corporate Governance – Audit Committee” of the Company’s Proxy Statement to be filed with the SEC for its annual stockholders’ meeting to be held on April 24, 2020 (the “Proxy Statement”).

Item 11. Executive Compensation

The information this Item requires is incorporated by reference to the information under the captions “Corporate Governance – Compensation of Directors,” “Report of the Compensation Committee,” and “Executive Compensation” of the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information this Item requires is incorporated by reference to the information under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” of the Proxy Statement.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information this Item requires is incorporated by reference to the information under the captions “Certain Relationships and Transactions” and “Corporate Governance – Board of Directors” of the Proxy Statement.

Item 14. Principal Accountant Fees and Services

The information this Item requires is incorporated by reference to the information contained in the Proxy Statement under the caption “Audit Committee Report – 2019 and 2018 Independent Registered Public Accounting Firm Fee Summary” of the Proxy Statement.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	The following documents are filed as part of this report:
1.		Financial Statements
		The following financial statements of the Company and their consolidated subsidiaries are incorporated by reference in Part II, Item 8.
	(a)	Reports of Independent Registered Public Accounting Firm – Deloitte & Touche LLP
	(b)	Report of Previous Independent Registered Public Account Firm - Ernst & Young LLP
	(c)	Consolidated Balance Sheets - December 31, 2019 and 2018
	(d)	Consolidated Statements of Operations - Years ended December 31, 2019, 2018, and 2017.
	(e)	Consolidated Statements of Comprehensive Income – Years ended December 31, 2019, 2018, and 2017.
	(f)	Consolidated Statements of Equity - Years ended December 31, 2019, 2018, and 2017.
	(g)	Consolidated Statements of Cash Flows - Years ended December 31, 2019, 2018, and 2017.
	(h)	Notes to Consolidated Financial Statements
2.		Financial Statement Schedule and Supplementary Data
	(a)	Selected Quarterly Financial Data for the Company are incorporated by reference in Part II, Item 8
	(b)	Schedule of the Company:
		Schedule III - Real Estate and Accumulated Depreciation
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

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		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 State 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 Restated 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.
	(f)	Articles Supplementary to First Amended and Restated Articles of Incorporation of the Company, dated November 10, 2014, filed as Exhibit 3.2 of the Company's Current Report on Form 8-K, dated November 12, 2014, is hereby incorporated by reference.
	(g)	Articles Supplementary to First Amended and Restated Articles of Incorporation of the Company, dated January 19, 2018, filed as Exhibit 3.3 of the Company’s Registration Statement on Form 8-A filed January 23, 2018 is hereby incorporated by reference.
	(h)	Articles Supplementary to First Amended and Restated Articles of Incorporation of the Company, dated September 12, 2019, filed as Exhibit 3.2 of the Company’s Registration Statement on Form 8-A filed September 17, 2019 is hereby incorporated by reference.
4.	(a)	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.
	(b)	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 4.2 to Saul Centers’ Registration Statement on Form 8-A on February 7, 2013 is hereby incorporated by reference.
	(c)	First Amendment to Deposit Agreement, dated November 12, 2014, 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 4.2 to of the Company's Current Report on Form 8-K, dated November 12, 2014, is hereby incorporated by reference.
	(d)	Deposit Agreement, dated January 23, 2018, among the Company, Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, filed as Exhibit 4.2 of the Registrant’s Registration Statement on Form 8-A filed January 23, 2018 is hereby incorporated by reference.

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	(e)	Specimen certificate representing the 6.125% Series D Cumulative Redeemable Preferred Stock, par value $0.01 per share, of the Company, filed as Exhibit 4.4 of the Company’s Registration Statement on Form 8-A filed January 23, 2018 is hereby incorporated by reference.
	(f)	Deposit Agreement, dated September 17, 2019, among the Company, Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, filed as Exhibit 4.1 of the Registrant’s Registration Statement on Form 8-A filed September 17, 2019 is hereby incorporated by reference.
	(g)	Specimen certificate representing the 6.000% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share, of the Company, filed as Exhibit 4.2 of the Company’s Registration Statement on Form 8-A filed September 17, 2019 is hereby incorporated by reference.
	(h)	Description of Registrant's Securities
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. The Thirteenth 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 November 12, 2014, is hereby incorporated by reference. The Fourteenth Amendment to the First Amended and Restated Agreement of Limited Partnership of the Saul Holdings Limited Partnership, filed as Exhibit 10.1 of the Current Report of the Company on Form 8-K dated January 23, 2018, is hereby incorporated by reference. The Fifteenth Amendment to the First Amended and Restated Agreement of Limited Partnership of the Saul Holdings Limited Partnership, filed as Exhibit 10.1 of the Current Report of the Company on Form 8-K dated May 14, 2018, is hereby incorporated by reference. The Sixteenth Amendment to the First Amended and Restated Agreement of Limited Partnership of the Saul Holdings Limited Partnership, filed as Exhibit 10.1 of the Current Report of the Company on Form 8-K dated September 17, 2019, 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.

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(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 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 is hereby incorporated by reference. The Fifth Amendment to our First Amended and Restated Agreement of Limited Partnership of Saul Subsidiary II Limited Partnership filed as Exhibit 10.(c) of the September 30, 2016 Quarterly Report of the Company is 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 25, 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 25, 2014, is hereby incorporated by reference.
(l)	Credit Agreement dated January 26, 2018, by and among: the Saul Holdings Limited Partnership, as Borrower; Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent; Capital One, National Association (“Capital One”), as Syndication Agent; TD Bank, N.A. (“TD Bank”) and U.S. Bank National Association (“U.S. Bank”), as Documentation Agents; and Wells Fargo, Capital One, TD Bank, U.S. Bank, Regions Bank and Associated Bank, National Association (“Associated Bank”), as Lenders (the “Agreement”) and filed as Exhibit 10.1 of the Current Report of the Company on Form 8‑K dated January 26, 2018, is hereby incorporated by reference.
(m)	Guaranty dated January 26, 2018, by and between: Saul Centers, Inc.; Saul Subsidiary I Limited Partnership; Saul Subsidiary II Limited Partnership; Briggs Chaney Plaza, LLC; Kentlands Lot 1, LLC; 11503 Rockville Pike LLC; Rockville Pike Holdings LLC; 1500 Rockville Pike LLC; Smallwood Village Center LLC; Westview Village Center LLC; Avenel VI, Inc.; Metro Pike Center LLC; and Washington Square Center, LLC, as Guarantors; in favor of Wells Fargo Bank, National Association, as Administrative Agent for the lenders from time to time party to that certain Credit Agreement dated January 26, 2018 and filed as Exhibit 10.2 of the Current Report of the Company on Form 8 K dated January 26, 2018, is hereby incorporated by reference.
(n)	The Saul Centers, Inc. 2004 Stock Plan, as amended on April 25, 2008 and May 10, 2013 and filed as Exhibit 10.(a) of the Company's Current Report on Form 8-K filed on May 14, 2013, is hereby incorporated by reference.*
(o)	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.*

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	(p)	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.*
	(q)	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.
	(r)	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.
	(s)	Shared Services Agreement dated as of January 1, 2018, between B. F. Saul Company and Saul Centers, Inc., filed as Exhibit 10.(s) of the 2017 Annual Report of the Company on Form 10-K is hereby incorporated by reference.
	(t)	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.
	(u)	Promissory Note, dated as of August 14, 2017, by 750 North Glebe LLC to The Northwestern Mutual Life Insurance Company as filed as Exhibit 10.(a) of the September 30, 2017 Quarterly Report of the Company is hereby incorporated by reference.
	(v)	Deed of Trust and Security Agreement, dated as of August 14, 2017, by 750 North Glebe LLC to Eric J. Ekeroth as trustee for the benefit of The Northwestern Mutual Life Insurance Company, as beneficiary, as filed as Exhibit 10.(b) of the September 30, 2017 Quarterly Report of the Company is hereby incorporated by reference.
	(w)	Contribution Agreement, dated as of November 5, 2019, by and between Saul Holdings Limited Partnership and 1592 Rockville Pike LLC is filed herewith as Exhibit 10.(w).
21.		Subsidiaries of Saul Centers, Inc. is filed herewith.
23.1		Consent of Independent Registered Public Accounting Firm is filed herewith.
23.2		Consent of Independent Registered Public Accounting Firm is filed herewith.
24.		Power of Attorney (included on signature page).
31.		Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer and Chief Financial Officer are filed herewith.**
32.		Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer are filed herewith.**
101.		The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, 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.
104.1.		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

* - Management Contract of Compensatory Plan or Agreement

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

Item 16. Form 10-K Summary

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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:	February 27, 2020	/s/ B. Francis Saul II
		B. Francis Saul II
		Chairman of the Board of Directors, Chief Executive Officer and President<br><br>(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons in the capacities indicated. Each person whose signature appears below hereby constitutes and appoints each of B. Francis Saul II and Scott V. Schneider as his attorney-in-fact and agent, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments to this Report and to file same, with exhibits thereto and other documents in connection therewith, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his substitutes may do or cause to be done by virtue hereof.

Date:	February 27, 2020	/s/ Philip D. Caraci
		Philip D. Caraci, Vice Chairman
Date:	February 27, 2020	/s/ Scott V. Schneider
		Scott V. Schneider, Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Date:	February 27, 2020	/s/ Joel A. Friedman
		Joel A. Friedman, Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
Date:	February 27, 2020	/s/ John E. Chapoton
		John E. Chapoton, Director
Date:	February 27, 2020	/s/ G. Patrick Clancy, Jr.
		G. Patrick Clancy, Jr., Director
Date:	February 27, 2020	/s/ J. Page Lansdale
		J. Page Lansdale, Director

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Date:	February 27, 2020	/s/ Willoughby B. Laycock
		Willoughby B. Laycock, Director
Date:	February 27, 2020	/s/ H. Gregory Platts
		H. Gregory Platts, Director
Date:	February 27, 2020	/s/ Earl A. Powell III
		Earl A. Powell III, Director
Date:	February 27, 2020	/s/ Andrew M. Saul II
		Andrew M. Saul II Director
Date:	February 27, 2020	/s/ Mark Sullivan III
		Mark Sullivan III, Director
Date:	February 27, 2020	/s/ John R. Whitmore
		John R. Whitmore, Director

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Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Saul Centers, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Saul Centers, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, equity and cash flows for the years ended December 31, 2019 and 2018, and the related notes and the schedule listed in the Index at Item 15(a)2(b) (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Deloitte & Touche LLP

McLean, Virginia

February 27, 2020

We have served as the Company's auditor since 2018.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Saul Centers, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Saul Centers, Inc. and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company has maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019, of the Company and our report dated February 27, 2020, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Assessment of Effectiveness of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

McLean, Virginia

February 27, 2020

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Saul Centers, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, equity and cash flows of Saul Centers, Inc. (the Company) for the year ended December 31, 2017, and the related notes and financial statement schedule for the year ended December 31, 2017 listed in the Index at Item 15(a)2(b) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated results of the Company at December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2002 to 2018.

Tysons, Virginia

February 27, 2018

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Saul Centers, Inc.

CONSOLIDATED BALANCE SHEETS

	December 31,
(Dollars in thousands, except per share amounts)	2019			2018
Assets
Real estate investments
Land	$	453,322		$	488,918
Buildings and equipment	1,292,631			1,273,275
Construction in progress	335,644			185,972
	2,081,597			1,948,165
Accumulated depreciation	(563,474		)	(525,518		)
	1,518,123			1,422,647
Cash and cash equivalents	13,905			14,578
Accounts receivable and accrued income, net	52,311			53,876
Deferred leasing costs, net	24,083			28,083
Prepaid expenses, net	5,363			5,175
Other assets	4,555			3,130
Total assets	$	1,618,340		$	1,527,489
Liabilities
Mortgage notes payable	$	821,503		$	880,271
Term loan facility payable	74,691			74,591
Revolving credit facility payable	86,371			45,329
Construction loan payable	108,623			21,655
Dividends and distributions payable	19,291			19,153
Accounts payable, accrued expenses and other liabilities	35,199			32,419
Deferred income	29,306			28,851
Total liabilities	1,174,984			1,102,269
Equity
Preferred stock, 1,000,000 shares authorized:
Series C Cumulative Redeemable, 0 and 42,000 shares issued and outstanding, respectively	—			105,000
Series D Cumulative Redeemable, 30,000 shares issued and outstanding	75,000			75,000
Series E Cumulative Redeemable, 44,000 and 0 shares issued and outstanding, respectively	110,000			—
Common stock, $0.01 par value, 40,000,000 shares authorized, 23,231,240 and 22,739,207 shares issued and outstanding, respectively	232			227
Additional paid-in capital	410,926			384,533
Distributions in excess of accumulated earnings	(221,177		)	(208,593		)
Accumulated other comprehensive loss	—			(255		)
Total Saul Centers, Inc. equity	374,981			355,912
Noncontrolling interests	68,375			69,308
Total equity	443,356			425,220
Total liabilities and equity	$	1,618,340		$	1,527,489

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For The Year Ended December 31,
(Dollars in thousands, except per share amounts)	2019			2018			2017
Revenue
Rental revenue	$	223,352		$	221,734		$	218,185
Other	8,173			5,485			8,114
Total revenue	231,525			227,219			226,299
Expenses
Property operating expenses	29,946			28,202			27,689
Real estate taxes	27,987			27,376			26,997
Interest expense, net and amortization of deferred debt costs	41,834			44,768			47,145
Depreciation and amortization of deferred leasing costs	46,333			45,861			45,694
General and administrative	20,793			18,459			18,176
Total expenses	166,893			164,666			165,701
Change in fair value of derivatives	(436		)	(3		)	70
Gains on sale of property	—			509			—
Net Income	64,196			63,059			60,668
Noncontrolling interests
Income attributable to noncontrolling interests	(12,473		)	(12,505		)	(12,411		)
Net income attributable to Saul Centers, Inc.	51,723			50,554			48,257
Preferred stock dividends	(12,235		)	(12,262		)	(12,375		)
Extinguishment of issuance costs upon redemption of preferred shares	(3,235		)	(2,328		)	—
Net income available to common stockholders	$	36,253		$	35,964		$	35,882
Per share net income available to common stockholders
Basic	$	1.58		$	1.61		$	1.64
Diluted	$	1.57		$	1.60		$	1.63

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For The Year Ended December 31,
(Dollars in thousands)	2019			2018			2017
Net income	$	64,196		$	63,059		$	60,668
Other comprehensive income
Unrealized gain on cash flow hedge	93			594			812
Total comprehensive income	64,289			63,653			61,480
Comprehensive income attributable to noncontrolling interests	(12,561		)	(12,658		)	(12,620		)
Total comprehensive income attributable to Saul Centers, Inc.	51,728			50,995			48,860
Preferred stock dividends	(12,235		)	(12,262		)	(12,375		)
Extinguishment of issuance costs upon redemption of preferred shares	(3,235		)	(2,328		)	—
Total comprehensive income available to common stockholders	$	36,258		$	36,405		$	36,485

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

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CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share amounts)	Preferred<br><br>Stock			Common<br><br>Stock		Additional<br><br>Paid-in<br><br>Capital			Distributions in Excess of Accumulated Earnings			Accumulated<br><br>Other<br><br>Comprehensive<br><br>(Loss)			Total Saul<br><br>Centers,<br><br>Inc.			Noncontrolling<br><br>Interests			Total
Balance, December 31, 2016	$	180,000		$	217	$	328,171		$	(188,584	)	$	(1,299	)	$	318,505		$	54,744		$	373,249
Issuance of common stock:
266,011 shares pursuant to dividend reinvestment plan	—			2		15,748			—			—			15,750			—			15,750
152,758 shares due to exercise of employee stock options and issuance of directors' deferred stock	—			2		8,671			—			—			8,673			—			8,673
Issuance of 111,351 partnership units pursuant to dividend reinvestment plan	—			—		—			—			—			—			6,735			6,735
Net income	—			—		—			48,257			—			48,257			12,411			60,668
Change in unrealized loss on cash flow hedge	—			—		—			—			603			603			209			812
Series C preferred stock distributions	—			—		—			(9,282		)	—			(9,282		)	—			(9,282		)
Common stock distributions	—			—		—			(33,490		)	—			(33,490		)	(11,479		)	(44,969		)
Distributions payable on Series C preferred stock, $42.97 per share	—			—		—			(3,093		)	—			(3,093		)	—			(3,093		)
Distributions payable common stock ($0.52/share) and partnership units ($0.52/unit)	—			—		—			(11,518		)	—			(11,518		)	(3,922		)	(15,440		)
Balance, December 31, 2017	180,000			221		352,590			(197,710		)	(696		)	334,405			58,698			393,103
Issuance of 30,000 shares of Series D Cumulative preferred stock	75,000			—		(2,633		)	—			—			72,367			—			72,367
Redemption of 30,000 shares of Series C Cumulative preferred stock	(75,000		)	—		2,311			(2,328		)	—			(75,017		)	—			(75,017		)
Issuance of common stock:
572,928 shares pursuant to dividend reinvestment plan	—			6		28,817			—			—			28,823			—			28,823
43,150 shares due to exercise of employee stock options and issuance of directors' deferred stock	—			—		3,448			—			—			3,448			—			3,448
Issuance of 284,113 partnership units	—			—		—			—			—			—			14,159			14,159
Net income	—			—		—			50,554			—			50,554			12,505			63,059
Change in unrealized loss on cash flow hedge	—			—		—			—			441			441			153			594
Preferred stock distributions:
Series C	—			—		—			(6,145		)	—			(6,145		)	—			(6,145		)
Series D									(3,164		)				(3,164		)				(3,164		)
Common stock distributions	—			—		—			(34,841		)	—			(34,841		)	(12,059		)	(46,900		)
Distributions payable on Series C preferred stock, $42.97 per share	—			—		—			(1,805		)	—			(1,805		)	—			(1,805		)
Distributions payable on Series D preferred stock, $38.28 per share	—			—		—			(1,148		)	—			(1,148		)	—			(1,148		)
Distributions payable common stock ($0.53/share) and partnership units ($0.53/unit)	—			—		—			(12,006		)	—			(12,006		)	(4,148		)	(16,154		)
Balance, December 31, 2018	180,000			227		384,533			(208,593		)	(255		)	355,912			69,308			425,220
CONSOLIDATED STATEMENTS OF EQUITY (continued)
(Dollars in thousands, except per share amounts)	Preferred<br><br>Stock			Common<br><br>Stock		Additional<br><br>Paid-in<br><br>Capital			Distributions in Excess of Accumulated Earnings			Accumulated<br><br>Other<br><br>Comprehensive<br><br>(Loss)			Total Saul<br><br>Centers,<br><br>Inc.			Noncontrolling<br><br>Interests			Total
Issuance of 44,000 shares of Series E Cumulative preferred stock	110,000			—		(3,735		)	—			—			106,265			—			106,265
Redemption of 42,000 shares of Series C Cumulative preferred stock	(105,000		)	—		3,235			(3,235		)	—			(105,000		)	—			(105,000		)
Issuance of common stock:
430,462 shares pursuant to dividend reinvestment plan	—			4		22,494			—			—			22,498			—			22,498
61,571 shares due to exercise of employee stock options and issuance of directors' deferred stock	—			1		4,399			—			—			4,400			—			4,400
Issuance of 60,936 partnership units	—			—		—			—			—			—			3,180			3,180
Net income	—			—		—			51,723			—			51,723			12,473			64,196
Change in unrealized loss on cash flow hedge	—			—		—			—			255			255			88			343
Preferred stock distributions:
Series C	—			—		—			(5,736		)	—			(5,736		)	—			(5,736		)
Series D	—			—		—			(3,444		)	—			(3,444		)	—			(3,444		)
Series E	—			—		—			(257		)	—			—			—			(257		)
Common stock distributions	—			—		—			(36,562		)	—			(36,562		)	(12,494		)	(49,056		)
Distributions payable on Series D preferred stock, $38.28 per share	—			—		—			(1,148		)	—			(1,148		)	—			(1,148		)
Distributions payable on Series E preferred stock, $37.50 per share	—			—		—			(1,650		)	—			(1,650		)	—			(1,650		)
Distributions payable common stock ($0.53/share) and partnership units ($0.53/unit)	—			—		—			(12,275		)	—			(12,275		)	(4,180		)	(16,455		)
Balance, December 31, 2019	$	185,000		$	232	$	410,926		$	(221,177	)	$	—		$	374,981		$	68,375		$	443,356

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

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Saul Centers, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
	For The Year Ended December 31,
(Dollars in thousands)	2019			2018			2017
Cash flows from operating activities:
Net income	$	64,196		$	63,059		$	60,668
Adjustments to reconcile net income to net cash provided by operating activities:
Change in fair value of derivatives	436			3			(70		)
Gain on sale of property	—			(509		)	—
Depreciation and amortization of deferred leasing costs	46,333			45,861			45,694
Amortization of deferred debt costs	1,518			1,610			1,392
Non cash compensation costs of stock grants and options	1,859			1,766			1,672
Provision for credit losses	1,226			685			906
(Increase) decrease in accounts receivable and accrued income	339			(336		)	(1,643		)
Additions to deferred leasing costs	(1,843		)	(6,034		)	(4,615		)
(Increase) decrease in prepaid expenses	(188		)	73			(294		)
Decrease in other assets	894			3,681			1,374
Increase in accounts payable, accrued expenses and other liabilities	158			225			1,125
Increase (decrease) in deferred income	455			255			(2,759		)
Net cash provided by operating activities	115,383			110,339			103,450
Cash flows from investing activities:
Acquisitions of real estate investments (1)	—			(40,836		)	(79,499		)
Additions to real estate investments	(21,891		)	(12,883		)	(17,653		)
Additions to development and redevelopment projects	(113,772		)	(76,257		)	(22,842		)
Proceeds from sale of property (2)	—			1,326			6,688
Net cash used in investing activities	(135,663		)	(128,650		)	(113,306		)
Cash flows from financing activities:
Proceeds from mortgage notes payable	50,600			54,900			100,000
Repayments on mortgage notes payable	(109,235		)	(72,572		)	(55,679		)
Proceeds from term loan facility	—			75,000			—
Proceeds from revolving credit facility	152,500			102,000			63,000
Repayments on revolving credit facility	(112,000		)	(116,000		)	(51,000		)
Proceeds from construction loans payable	86,868			23,332			1,437
Additions to deferred debt costs	(1,010		)	(3,233		)	(2,583		)
Proceeds from the issuance of:
Common stock	25,039			30,503			22,751
Partnership units (1)	3,180			5,383			6,735
Series D preferred stock	—			72,369			—
Series E preferred stock	106,265			—			—
Series C preferred stock redemption	(105,000		)	(75,000		)	—
Preferred stock redemption costs	—			(12		)	—
Distributions to:
Series C preferred stockholders	(7,541		)	(9,238		)	(12,375		)
Series D preferred stockholders	(4,592		)	(3,164		)	—
Series E preferred stockholders	(257		)	—			—
Common stockholders	(48,568		)	(46,306		)	(44,576		)
Noncontrolling interests	(16,642		)	(15,981		)	(15,268		)
Net cash provided by financing activities	19,607			21,981			12,442
Net increase (decrease) in cash and cash equivalents	(673		)	3,670			2,586
Cash and cash equivalents, beginning of year	14,578			10,908			8,322
Cash and cash equivalents, end of year	$	13,905		$	14,578		$	10,908
Supplemental disclosure of cash flow information:
Cash paid for interest	$	40,434		$	43,561		$	45,713
Increase (decrease) in accrued real estate investments and development costs	$	303		$	9,663		$	2,097

(1) The 2018 acquisition of real estate and proceeds from the issuance of partnership units each excludes

$8,776

in connection with the acquisition of Ashbrook Marketplace in exchange for limited partnership units.

(2) Proceeds from sale of property in 2017 excludes

$1,275

of seller financing in connection with the sale of the Company's Great Eastern property, which were received in 2018 plus accrued interest of

$51

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

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

1.	ORGANIZATION, BASIS OF PRESENTATION

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, Chief Executive Officer and President 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 "Saul 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 Centers and Mixed-Used Properties, and the management functions related to the transferred properties. Since its formation, the Company has developed and purchased additional properties.

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-used properties, primarily in the Washington, DC/Baltimore metropolitan area.

Because the properties are located primarily in the Washington, DC/Baltimore metropolitan area, a disproportionate economic downturn in the local economy would have a greater negative impact on our overall financial performance than on the overall financial performance of a company with a portfolio that is more geographically diverse. A majority of the Shopping Centers are anchored by several major tenants. As of December 31, 2019, 33 of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. One retail tenant, Giant Food (

4.7%

), a tenant at ten Shopping Centers, individually accounted for

2.5%

or more of the Company’s total revenue for the year ended December 31, 2019.

As of December 31, 2019, the Current Portfolio Properties consisted of 50 Shopping Centers, six Mixed-Use Properties, and four (non-operating) development properties.

The accompanying consolidated financial statements of the Company include the accounts of Saul Centers and its subsidiaries, including the Operating Partnership and Subsidiary Partnerships, which are majority owned by Saul Centers. Substantially all assets and liabilities of the Company as of December 31, 2019 and December 31, 2018, are comprised of the assets and liabilities of the Operating Partnership. The debt arrangements which are subject to recourse are described in Note 5. All significant intercompany balances and transactions have been eliminated in consolidation.

The Operating Partnership is a variable interest entity ("VIE") of the Company because the limited partners do not have substantive kick-out or participating rights. The Company is the primary beneficiary of the Operating Partnership because it has the power to direct the activities of the Operating Partnership and the rights to absorb

74.6%

of the net income of the Operating Partnership. Because the Operating Partnership was already consolidated into the financial statements of the Company, the identification of it as a VIE has no impact on the consolidated financial statements of the Company.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Real Estate Investment Properties

If there is an event or change in circumstance that indicates a potential impairment in the value of a real estate investment property, the Company prepares an analysis to determine whether the carrying value of the real estate investment property exceeds its estimated fair value. The Company considers both quantitative and qualitative factors 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. The Company did not recognize an impairment loss on any of its real estate in 2019, 2018, or 2017.

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 improvements 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 improvement, using the straight-line method. Depreciation expense, which is included in Depreciation and amortization of deferred leasing costs in the Consolidated Statements of Operations, for the years ended December 31, 2019, 2018, and 2017, was $40.5 million, $39.8 million, and $40.2 million, respectively. Repairs and maintenance expense totaled $12.5 million, $11.9 million, and $11.6 million for 2019, 2018, and 2017, respectively, and is included in property operating expenses in the accompanying consolidated financial statements.

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;
---	---

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

•	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 December 31, 2019 and 2018, the Company had no assets designated as held for sale.

Revenue Recognition

Rental and interest income are accrued as earned. 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 stepped increases, income is recognized on a straight-line basis. Expense recoveries represent a portion of property operating expenses billed to the 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 (“percentage rent”) is accrued when a tenant reports sales that exceed a specified breakpoint, pursuant to the terms of their respective leases.

Accounts Receivable, Accrued Income, and Allowance for Doubtful Accounts

Accounts receivable primarily represent amounts currently due from tenants in accordance with the terms of their respective leases. Lease related receivables are reduced for credit losses. Such losses are recognized as a reduction of rental revenue in the consolidated statements of operations.

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 consolidated financial statements are shown net of an allowance for doubtful accounts of $0.4 million and $0.6 million, at December 31, 2019 and 2018, respectively.

In addition to rents due currently, accounts receivable also includes $42.1 million and $43.3 million, at December 31, 2019 and 2018, respectively, net of allowance for doubtful accounts totaling

$30,000

and

$58,500

, respectively, representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of their respective 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 and are amortized, using the straight-line method, over the term of the lease or the remaining term of an acquired lease. 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. Collectively, deferred leasing costs totaled $24.1 million and $28.1 million, net of accumulated amortization of approximately $41.6 million and $37.7 million, as of December 31, 2019 and 2018, respectively. Amortization expense, which is included in Depreciation and amortization of deferred leasing costs in the Consolidated Statements of Operations, totaled approximately $5.8 million, $6.1 million, and $5.5 million, for the years ended December 31, 2019, 2018, and 2017, respectively.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

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. Substantially all of the Company’s cash balances at December 31, 2019 are held in non-interest bearing accounts at various banks. From time to time the Company may maintain deposits with financial institutions in amounts in excess of federally insured limits. The Company has not experienced any losses on such deposits and believes it is not exposed to any significant credit risk on those deposits.

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.

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, the Company may designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge. Derivative instruments that are designated as a hedge are evaluated to ensure they continue to qualify for hedge accounting. The effective portion of any 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 meet the criteria for hedge accounting, or that qualify and are not designated, changes in fair value are immediately recognized in earnings.

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 complies with certain other requirements. Therefore, no provision has been made for federal income taxes in the accompanying consolidated financial statements.

As of December 31, 2019, the Company had no material unrecognized tax benefits and there exist no potentially significant unrecognized tax benefits which are reasonably expected to occur within the next twelve months. The Company recognizes penalties and interest accrued related to unrecognized tax benefits, if any, as general and administrative expense. No penalties and interest have been accrued in years 2019, 2018, and 2017. The tax basis of the Company’s real estate investments was approximately $1.33 billion and $1.35 billion as of December 31, 2019 and 2018, respectively. With few exceptions, the Company is no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years before 2016.

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. 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.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) 2016-02, ‘‘Leases’’ (“ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, interim periods within those years, and requires a modified retrospective transition approach for all leases existing at the date of initial application, with an option to use certain practical expedients for those existing leases. Upon adoption of ASU 2016-02 effective January 1, 2019, we elected the practical expedient for all leases with respect to lease identification, lease classification, and initial direct costs. We made a policy election not to separate lease and nonlease components and have accounted for each lease component and the related nonlease components together as a single component. There have been no significant changes to our lessor accounting for operating leases as a result of ASU 2016-02.

We lease Shopping Centers and Mixed-Use Properties to lessees in exchange for monthly payments that cover rent, and where applicable, reimbursement for property taxes, insurance, and certain property operating expenses. Our leases were determined to be operating leases and generally range in term from one to 15 years.

Some of our leases have termination options and/or extension options. Termination options allow the lessee to terminate the lease prior to the end of the lease term, provided certain conditions are met. Termination options generally require advance notification from the lessee and payment of a termination fee. Termination fees are recognized as revenue over the modified lease term. Extension options are subject to terms and conditions stated in the lease.

On January 1, 2019, a right of use asset and corresponding lease liability related to our headquarters lease were recorded in other assets and other liabilities, respectively. The lease expires on February 28, 2022, with one option to renew for an additional five years. The right of use asset and corresponding lease liability totaled $1.6 million and $1.6 million, respectively, at December 31, 2019.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses" ("ASU 2016-13"). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of information to support credit loss estimates. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those years. Management has determined that the adoption of ASU 2016-13 will not have a material impact on our consolidated financial statements and related disclosures because the vast majority of the Company's receivables relate to operating leases which are accounted for under ASC 842.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging” (“ASU 2017-12”). ASU 2017-12 amends financial reporting for hedging activities to better align that reporting with risk management activities. ASU 2017-12 expands and refines hedge accounting for both financial and nonfinancial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Effective with the adoption of ASU 2017-12 on January 1, 2019, changes in the fair value of the Company’s interest rate swap related to changes in the cash flow of the hedged item are reported as a component of interest expense and amortization of deferred debt costs in the Statements of Operations.

Reclassifications

Certain reclassifications have been made to prior years to conform to the presentation used for year ended December 31, 2019.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

3.	REAL ESTATE

Construction in Progress

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

	December 31,
(in thousands)	2019		2018
The Waycroft	$	255,443	$	162,176
7316 Wisconsin Avenue	44,638		—
Ashbrook Marketplace	19,128		11,124
Other	16,435		12,672
Total	$	335,644	$	185,972

Acquisitions

Burtonsville Town Square

In January 2017, the Company purchased for $76.4 million, including acquisition costs, Burtonsville Town Square located in Burtonsville, Maryland.

Olney Shopping Center

In March 2017, the Company purchased for $3.1 million, including acquisition costs, the land underlying Olney Shopping Center. The land was previously leased by the Company with an annual rent of approximately

$56,000

. The purchase price was funded by the revolving credit facility.

Ashbrook Marketplace

In May 2018, the Company acquired from the Saul Trust, in exchange for

176,680

limited partnership units, approximately

13.7

acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Loudoun County, Virginia. Based on the closing price of the Company's common stock, the land and the limited partnership units were recorded at a value of $8.8 million. Acquisition costs related to the transaction totaled approximately $0.2 million.

7316 Wisconsin Avenue

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

Allocation of Purchase Price of Real Estate Acquired

The Company allocates the purchase price of real estate investment properties to various components, such as land, buildings and intangibles related to in-place leases and customer relationships, based on their relative fair values.

During 2018, the Company acquired properties that had an aggregate cost of $49.5 million, including acquisition costs. The purchase price was allocated to assets acquired and liabilities assumed based on their relative fair values as shown in the following table.

(in thousands)	Ashbrook Marketplace		7316 Wisconsin Avenue			Total
Land	$	8,776	$	38,662		$	47,438
Buildings	—		979			979
In-place Leases	—		886			886
Above Market Rent	—		168			168
Below Market Rent	—		(21		)	(21		)
Total Purchase Price	$	8,776	$	40,674		$	49,450

During 2017, the Company purchased one property, Burtonsville Town Square, at a cost of $76.4 million, including acquisition costs. Of the total acquisition cost, $28.4 million was allocated to land, $45.8 million was allocated to buildings, $2.2 million was allocated to in-place leases, $0.6 million was allocated to above-market rent, and $(0.6) million was allocated to below-market rent, based on their relative fair values.

The gross carrying amount of lease intangible assets included in deferred leasing costs as of December 31, 2019 and 2018 was $11.7 million and $12.5 million, respectively, and accumulated amortization was $8.5 million and $8.1 million, respectively. Amortization expense totaled $0.9 million, $1.3 million and $1.1 million, for the years ended December 31, 2019, 2018, and 2017, respectively. The gross carrying amount of below market lease intangible liabilities included in deferred income as of December 31, 2019 and 2018 was $24.1 million and $24.8 million, respectively, and accumulated amortization was $13.9 million and $13.1 million, respectively. Accretion income totaled $1.5 million, $1.7 million, and $1.7 million, for the years ended December 31, 2019, 2018, and 2017, respectively. The gross carrying amount of above market lease intangible assets included in accounts receivable as of December 31, 2019 and 2018 was $0.6 million and $0.8 million, respectively, and accumulated amortization was

$108,300

and

$143,900

, respectively. Amortization expense totaled

$109,600

$110,500

and

$31,600

, for the years ended December 31, 2019, 2018 and 2017, respectively. The remaining weighted-average amortization period as of December 31, 2019 is

4.5

years,

7.6

years, and

5.3

years for lease acquisition costs, above market leases and below market leases, respectively.

As of December 31, 2019, scheduled amortization of intangible assets and deferred income related to in place leases is as follows:

(In thousands)	Lease acquisition costs		Above market leases		Below market leases
2020	$	708	$	43	$	1,434
2021	535		33		1,409
2022	383		33		1,306
2023	317		33		1,297
2024	198		33		878
Thereafter	996		343		3,853
Total	$	3,137	$	518	$	10,177

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

4.	NONCONTROLLING INTERESTS - HOLDERS OF CONVERTIBLE LIMITED PARTNERSHIP UNITS IN THE OPERATING PARTNERSHIP

Saul Centers is the sole general partner of the Operating Partnership, owning a

74.6%

common interest as of December 31, 2019. 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 held by the Saul Organization.

The Saul Organization holds a

25.4%

limited partnership interest in the Operating Partnership represented by

7,886,916

limited partnership units, as of December 31, 2019. The 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 December 31, 2019, approximately

925,000

units were eligible for conversion.

The impact of the Saul Organization’s

25.4%

limited partnership interest in the Operating Partnership is reflected as Noncontrolling Interests in the accompanying consolidated financial statements. Fully converted partnership units and diluted weighted average shares outstanding for the years ended December 31, 2019, 2018, and 2017, were 30.9 million, 30.2 million, and 29.5 million, respectively.

5.	MORTGAGE NOTES PAYABLE, REVOLVING CREDIT FACILITY, INTEREST EXPENSE AND AMORTIZATION OF DEFERRED DEBT COSTS

At December 31, 2019, the principal amount of outstanding debt totaled $1.1 billion, of which $938.4 million was fixed rate debt and $162.5 million was variable rate debt. The principal amount of the Company’s outstanding debt totaled $1.0 billion at December 31, 2018, of which $910.2 million was fixed rate debt and $122.0 million was variable rate debt.

At December 31, 2019, the Company had a $400.0 million unsecured credit facility, which can be used for working capital, property acquisitions or development projects, of which $325.0 million is a revolving credit facility and $75.0 million is a term loan. The revolving credit facility matures on January 26, 2022, and may be extended by the Company for one additional year subject to the Company’s satisfaction of certain conditions. The term loan matures on January 26, 2023, and may not be extended. Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the credit facility. Letters of credit may be issued under the revolving credit facility. On December 31, 2019, based on the value of the Company's unencumbered properties, approximately $237.3 million was available under the revolving credit facility, $87.5 million was outstanding and approximately

$185,000

was committed for letters of credit. Interest at a rate equal to the sum of one-month LIBOR and a margin that is based on the Company’s leverage ratio and which can range from 135 basis points to 195 basis points under the revolving facility and from 130 basis points to 190 basis points under the term loan. As of December 31, 2019, the margin was 135 basis points under the revolving facility and 130 basis points under the term loan.

Saul Centers is a guarantor of the credit facility, of which the Operating Partnership is the borrower. The Operating Partnership is the guarantor of (a) a portion of the Park Van Ness mortgage (approximately $6.7 million of the $68.1 million outstanding balance at December 31, 2019, which guarantee will be reduced to (i) $3.3 million on October 1, 2020 and (ii) zero on October 1, 2021), (b) a portion of the Kentlands Square II mortgage (approximately $8.5 million of the $34.0 million outstanding balance at December 31, 2019), (c) a portion of the Broadlands mortgage (approximately $3.9 million of the $31.2 million outstanding balance at December 31, 2019), and (d) a portion of the Avenel Business Park mortgage (approximately $6.3 million of the $26.3 million outstanding balance at December 31, 2019). All other notes payable are non-recourse.

On January 18, 2017, the Company closed on a 15-year, non-recourse $40.0 million mortgage loan secured by Burtonsville Town Square. The loan matures in 2032, bears interest at a fixed rate of

3.39%

, requires

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

monthly principal and interest payments of

$197,900

based on a 25-year amortization schedule and requires a final payment of $20.3 million at maturity.

On August 14, 2017, the Company closed on a $157.0 million construction-to-permanent loan, the proceeds of which will be used to partially fund The Waycroft development project. The loan matures in 2035, bears interest at a fixed rate of

4.67%

, requires interest only payments, which will be funded by the loan, until conversion to permanent. The conversion is expected in the fourth quarter of 2021, and thereafter, monthly principal and interest payments of

$887,900

based on a 25-year amortization schedule will be required.

Effective September 1, 2017, the Company's $71.6 million construction-to-permanent loan, which is fully drawn and secured by Park Van Ness, converted to permanent financing. The loan matures in 2032, bears interest at a fixed rate of

4.88%

, requires monthly principal and interest payments of

$413,460

based on a 25-year amortization schedule and requires a final payment of $39.6 million at maturity.

On November 20, 2017, the Company closed on a 15-year, non-recourse $60.0 million mortgage loan secured by Washington Square. The loan matures in 2032, bears interest at a fixed rate of

3.75%

, requires monthly principal and interest payments of

$308,500

based on a 25-year amortization schedule and requires a final payment of $31.1 million. Proceeds were used to repay the remaining balance of approximately $28.1 million on the existing mortgage and reduce the outstanding balance of the revolving credit facility.

On October 3, 2018, the Company closed on a 15-year , non-recourse $32.0 million mortgage loan secured by Broadlands Village. The loan matures in 2033, bears interest at a fixed-rate of

4.41%

, requires monthly principal and interest payments of

$176,200

based on a 25-year amortization schedule and requires a final payment of $17.3 million at maturity. Proceeds were used to repay the remaining principal balance of approximately $15.2 million on the existing mortgage, the remaining balance of approximately $7.3 million on the existing mortgage collateralized by the Glen, the remaining balance of approximately $6.1 million on the existing mortgage collateralized by Kentlands Square I, and reduce the outstanding balance of the revolving credit facility.

On December 18, 2018, the Company closed on a 15-year, non-recourse $22.9 million mortgage loan secured by The Glen. The loan matures in 2034, bears interest at a fixed-rate of

4.69%

, requires monthly principal and interest payments of

$129,800

based on a 25-year amortization schedule and requires a final payment of $12.5 million at maturity.

On January 4, 2019, the Company repaid in full the remaining principal balance of $12.7 million of the mortgage loan secured by Countryside Marketplace, which was scheduled to mature in July 2019.

On January 10, 2019, the Company closed on a 15-year, non-recourse $22.1 million mortgage loan secured by Olde Forte Village. The loan matures in 2034, bears interest at a fixed-rate of

4.65%

, requires monthly principal and interest payments of

$124,700

based on a 25-year amortization schedule and requires a final payment of $12.1 million. Proceeds were partially used to repay in full the existing mortgage secured by Olde Forte Village, which was scheduled to mature in May 2019.

On June 3, 2019, the Company repaid in full the remaining principal balance of $12.4 million of the mortgage loan secured by Briggs Chaney Marketplace, which was scheduled to mature in September 2019.

On November 12, 2019, the Company closed on a 15-year, non-recourse $28.5 million mortgage loan secured by Shops at Monocacy. The loan matures in 2034, bears interest at a fixed-rate of

4.14%

, requires monthly principal and interest payments of

$152,600

based on a 25-year amortization schedule and requires a final payment of $15.1 million. Proceeds were partially used to repay in full the existing mortgage secured by Shops at Monocacy, which was scheduled to mature in January 2020.

On November 21, 2019, the Company repaid in full the remaining principal balance of $35.6 million of the mortgage loan secured by Thruway, which was scheduled to mature in July 2020. The Company’s corresponding swap agreement was terminated on the same day.

The carrying value of the properties collateralizing the mortgage notes payable totaled $1.1 billion and $1.1 billion, as of December 31, 2019 and 2018, respectively. The Company’s credit facility requires the Company

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

and its subsidiaries to maintain certain financial covenants, which are summarized below. The Company was in compliance as of December 31, 2019.

•	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 2.0 x 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 at December 31, 2019 and 2018, totaling $41.0 million and $51.0 million, respectively, are guaranteed by members of the Saul Organization. As of December 31, 2019, the scheduled maturities of all debt including scheduled principal amortization for years ended December 31 are as follows:

(in thousands)	Balloon<br><br>Payments			Scheduled<br><br>Principal<br><br>Amortization		Total
2020	$	16,074		$	28,421	$	44,495
2021	11,012			29,025		40,037
2022	124,002		(a)	29,645		153,647
2023	84,225			30,065		114,290
2024	66,649			28,697		95,346
Thereafter	527,297			125,809		653,106
Principal amount	$	829,259		$	271,662	1,100,921
Unamortized deferred debt costs						9,733
Net						$	1,091,188

(a) Includes $87.5 million outstanding under the revolving facility.

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 $9.7 million and $10.3 million, net of accumulated amortization of $7.5 million and $7.3 million at December 31, 2019 and 2018, 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.

(in thousands)	Year ended December 31,
	2019			2018			2017
Interest incurred	$	52,044		$	49,652		$	49,322
Amortization of deferred debt costs	1,518			1,610			1,392
Capitalized interest	(11,480		)	(6,222		)	(3,489		)
Interest expense	42,082			45,040			47,225
Less: Interest income	248			272			80
Interest expense, net and amortization of deferred debt costs	$	41,834		$	44,768		$	47,145

Deferred debt costs capitalized during the years ending December 31, 2019, 2018 and 2017 totaled $1.0 million, $3.2 million and $2.6 million, respectively.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

6.	LEASE AGREEMENTS

Lease income includes primarily base rent arising from noncancelable leases. Base rent (including straight-line rent) for the years ended December 31, 2019, 2018, and 2017, amounted to $185.7 million, $184.7 million, and $181.1 million, respectively. Future contractual payments under noncancelable leases for years ended December 31 (which exclude the effect of straight-line rents), are as follows:

(in thousands)
2020	$	166,227
2021	149,949
2022	126,101
2023	104,489
2024	75,172
Thereafter	260,141
	$	882,079

The majority of the leases provide for rental increases based on fixed annual increases or increases in the Consumer Price Index and expense recoveries based on increases in operating expenses. The expense recoveries generally are payable in equal installments throughout the year based on estimates, with adjustments made in the succeeding year. Expense recoveries for the years ended December 31, 2019, 2018, and 2017, amounted to $36.5 million, $35.5 million, and $35.3 million, respectively. In addition, certain retail leases provide for percentage rent based on sales in excess of the minimum specified in the tenant’s lease. Percentage rent amounted to $0.9 million, $1.0 million, and $1.5 million, for the years ended December 31, 2019, 2018, and 2017, respectively.

7.	LONG-TERM LEASE OBLIGATIONS

At December 31, 2018 and 2019, no properties are subject to noncancelable long-term leases which apply to underlying land.

Flagship Center consists of two developed out parcels that are part of a larger adjacent community shopping center formerly owned by the Saul Organization and sold to an affiliate of a tenant in 1991. The Company has a 90-year ground leasehold interest which commenced in September 1991 with a minimum rent of one dollar per year. Countryside shopping center was acquired in February 2004. Because of certain land use considerations, approximately

3.4%

of the underlying land is held under a 99-year ground lease. The lease requires the Company to pay minimum rent of one dollar per year as well as its pro-rata share of the real estate taxes.

The Company’s corporate headquarters space is leased by a member of the Saul Organization. The lease commenced in March 2002, and expires in February 2022. The Company and the Saul Organization entered into a Shared Services Agreement whereby each party pays an allocation of total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company’s rent expense for the years ended December 31, 2019, 2018, and 2017 was

$806,500

$779,800

, and

$774,700

, respectively. Expenses arising from the lease are included in general and administrative expense (see Note 9 – Related Party Transactions).

8.	EQUITY AND NONCONTROLLING INTEREST

The Consolidated Statements of Operations for the years ended December 31, 2019, 2018, and 2017 reflect noncontrolling interest of $12.5 million, $12.5 million, and $12.4 million, respectively, representing the Saul Organization’s share of the net income for the year.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

At December 31, 2019, the Company had outstanding 3.0 million depositary shares, each representing 1/100th of a share of

6.125%

Series D Cumulative Redeemable Preferred Stock (the "Series D Stock"). The depositary shares may be redeemed at the Company’s option, in whole or in part, on or after January 23, 2023, at the

$25.00

liquidation preference, plus accrued but unpaid dividends to but not including the redemption date. The depositary shares pay an annual dividend of

$1.53125

per share, equivalent to

6.125%

of the

$25.00

liquidation preference. The Series D Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

On September 17, 2019, Saul Centers sold, in an underwritten public offering, 4.0 million depositary shares, each representing 1/100th of a share of

6.000%

Series E Cumulative Redeemable Preferred Stock (the “Series E Stock”), providing net cash proceeds of approximately $96.8 million. The depositary shares may be redeemed in whole or in part, on or after September 17, 2024, at the

$25.00

liquidation preference, plus accrued but unpaid dividends to but not including the redemption date. The depositary shares pay an annual dividend of

$1.50

per share, equivalent to

6.000%

of the

$25.00

liquidation preference. The Series E Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events. On September 23, 2019, Saul Centers sold, as a result of the exercise by the underwriters of their over-allotment option, an additional 0.4 million depositary shares of Series E Stock, providing net cash proceeds of approximately $9.5 million.

At December 31, 2018, the Company had outstanding 4.2 million depositary shares, each representing 1/100th of a share of

6.875%

Series C Cumulative Redeemable Preferred Stock (the “Series C Stock”). The depositary shares are redeemable 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 Series C 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. In September 2019, the Company announced the redemption of all outstanding depositary shares representing interests in its Series C Stock. The depositary shares were redeemed on October 17, 2019 at

$25.00

per depositary share, plus all accrued and unpaid dividends to, but not including, the redemption date, for an aggregate redemption price of

$25.07638

per depositary share. In the fourth quarter, costs associated with the redemption were charged against Net income available to common stockholders. After the redemption date, dividends on the depositary shares representing interests in the Series C Stock ceased to accrue.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

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 anti-dilutive. The treasury stock method was used to measure the effect of the dilution.

	December 31,
(Shares in thousands)	2019		2018		2017
Weighted average common shares outstanding - Basic	23,009		22,383		21,901
Effect of dilutive options	44		42		107
Weighted average common shares outstanding - Diluted	23,053		22,425		22,008
Average share price	$	53.41	$	52.50	$	61.63
Non-dilutive options	633		492		—
Years non-dilutive options were issued	2016, 2017 and 2019		2015, 2016 and 2017
9.	RELATED PARTY TRANSACTIONS
---	---

The Chairman, Chief Executive Officer and President, the Executive Vice President of Real Estate, 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

$322,200

$345,900

, and

$349,500

, for 2019, 2018, and 2017, respectively. All amounts deferred by employees and contributed by 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 years ended December 31, 2019, 2018, and 2017, the Company contributed three times the amount deferred by employees. The Company’s expense, included in general and administrative expense, totaled

$345,200

$282,500

, and

$228,500

, for the years ended December 31, 2019, 2018, and 2017, respectively. All amounts deferred by employees and the Company are fully vested. The cumulative unfunded liability under this plan was $3.1 million and $2.7 million, at December 31, 2019 and 2018, 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. Senior management has determined that the final allocations of shared costs are reasonable. The terms of the Agreement and the payments made thereunder are reviewed annually by the Audit Committee of the Board of Directors, which consists entirely of independent directors. Net billings by the Saul Organization for the Company’s share of these ancillary costs and expenses for the years ended December 31, 2019, 2018, and 2017, which included rental expense for the Company’s headquarters lease (see Note 7. Long Term Lease Obligations), totaled $8.4 million, $8.4 million, and $8.1 million, respectively. The amounts are expensed

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

when incurred and are primarily reported as general and administrative expenses or capitalized to specific development projects in these consolidated financial statements. As of December 31, 2019 and 2018, accounts payable, accrued expenses and other liabilities included

$918,700

and

$933,400

, respectively, representing billings due to the Saul Organization for the Company’s share of these ancillary costs and expenses.

The Company has entered into a shared third-party predevelopment cost agreement with the Saul Trust (the “Predevelopment Agreement”). The Predevelopment Agreement, which expired on December 31, 2015 and was extended to December 31, 2016, relates to the sharing of third-party predevelopment costs incurred in connection with the planning of the future redevelopment of certain adjacent real estate assets in the Twinbrook area of Rockville, Maryland. On December 8, 2016, the Company entered into a replacement agreement with the Saul Trust which extended the expiration date to December 31, 2017 and provides for automatic twelve month renewals unless either party provides notice of termination. The costs will be shared on a pro rata basis based on the acreage owned by each entity and neither party is obligated to advance funds to the other.

On November 5, 2019, the Company entered into an agreement (the "Contribution Agreement") to acquire from the Saul Trust, approximately

6.8

acres of land and its leasehold interest in approximately

1.3

acres of contiguous land, together in each case with the improvements located thereon, located at the Twinbrook Metro Station in Rockville, Maryland (the “Contributed Property”). In exchange for the Contributed Property, the Company will issue to the Saul Trust

1,416,071

limited partnership units in the Operating Partnership (“OP Units”) at an agreed upon value of

$56.00

per OP Unit, representing an aggregate value of $79.3 million for the Contributed Property. Deed to the Contributed Property and the OP Units have been placed in escrow until certain conditions of the Contribution Agreement are satisfied.

The B. F. Saul Insurance Agency of Maryland, Inc., a subsidiary of the B. F. Saul Company and a member of the Saul Organization, is a general insurance agency that receives commissions and counter-signature fees in connection with the Company’s insurance program. Such commissions and fees amounted to approximately

$399,600

$407,900

, and

$288,400

, for the years ended December 31, 2019, 2018, and 2017, respectively.

In August 2016, the Company entered into an agreement to acquire from the Saul Trust, approximately

13.7

acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Ashburn, Virginia. The transaction closed on May 9, 2018, and the Company issued

176,680

limited partnership units to the Saul Trust. The Company intends to construct a shopping center and, upon stabilization, may be obligated to issue additional limited partnership units to the Saul Trust.

10.	STOCK OPTION PLAN

Stock Based Employee Compensation, Deferred Compensation and Stock Plan for Directors

In 2004, the Company established a stock incentive plan (the "Plan"), as amended. Under the Plan, 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 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 expense in general and administrative expenses.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

Pursuant to the Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of the Company’s directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. Annually, directors are given the ability to make an election to defer all or part of their fees and have the option to have their fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If a director elects to their 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. During the twelve months ended December 31, 2019,

6,822

shares were credited to director's deferred fee accounts and

7,058

shares were issued. As of December 31, 2019, the director's deferred fee accounts comprise

114,408

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.

At the annual meeting of the Company’s stockholders in 2004, the stockholders approved the adoption of the 2004 stock plan for the purpose of attracting and retaining executive officers, directors and other key personnel. The 2004 stock plan was subsequently amended by the Company’s stockholders at the 2008 Annual Meeting, further amended at the 2013 Annual Meeting, and further amended at the 2019 Annual Meeting (the “Amended 2004 Plan”). The Amended 2004 Plan, which terminates in 2029, provides for grants of options to purchase up to

3,400,000

shares of common stock. The Amended 2004 Plan authorizes the Compensation Committee of the Board of Directors to grant options at an exercise price which may not be less than the market value of the common stock on the date the option is granted.

Effective May 5, 2017, the Compensation Committee granted options to purchase

232,500

shares (

21,492

incentive stock options and

211,008

nonqualified stock options) to 20 Company officers and 11 Company Directors (the “2017 options”), which expire on May 4, 2027. The officers’ 2017 Options vest

25%

per year over four years and are subject to early expiration upon termination of employment. The directors’ 2017 Options were immediately exercisable. The exercise price of

$59.41

per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2017 Options to be $1.4 million, of which $1.2 million and

$165,600

were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire

$165,600

was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

Effective May 11, 2018, the Compensation Committee granted options to purchase

245,000

shares (

25,914

incentive stock options and

219,086

nonqualified stock options) to 22 Company officers and 11 Company Directors (the “2018 options”), which expire on May 10, 2028. The officers’ 2018 Options vest

25%

per year over four years and are subject to early expiration upon termination of employment. The directors’ 2018 Options were immediately exercisable. The exercise price of

$49.46

per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2018 Options to be $1.4 million, of which $1.2 million and

$169,400

were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire

$169,400

was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

Effective May 3, 2019, the Compensation Committee granted options to purchase

260,000

shares (

34,651

incentive stock options and

225,349

nonqualified stock options) to 23 Company officers and 11 Company Directors (the “2019 options”), which expire on May 2, 2029. The officers’ 2019 Options vest

25%

per year over four years and are subject to early expiration upon termination of employment. The directors’ 2018 Options were immediately exercisable. The exercise price of

$55.71

per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2019 Options to be $1.9 million, of which $1.7 million and

$226,600

were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire

$226,600

was expensed

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

The following table summarizes the assumptions used in the valuation of the 2017, 2018, and 2019 option grants. During the twelve months ended December 31, 2019, stock option expense totaling $1.6 million was included in general and administrative expense in the Consolidated Statements of Operations. As of December 31, 2019, the estimated future expense related to unvested stock options was $2.6 million.

	Directors									Officers
Grant date	May 5, 2017			May 11, 2018			May 3, 2019			May 5, 2017			May 11, 2018			May 3, 2019
Exercise price	$	59.41		$	49.46		$	55.71		$	59.41		$	49.46		$	55.71
Volatility	0.173			0.192			0.236			0.170			0.177			0.206
Expected life (years)	5.0			5.0			5.0			7.0			7.0			7.0
Assumed yield	3.45		%	3.70		%	3.75		%	3.50		%	3.75		%	3.80		%
Risk-free rate	1.89		%	2.84		%	2.33		%	2.17		%	2.94		%	2.43		%

The table below summarizes the option activity for the years 2019, 2018, and 2017:

	2019				2018				2017
	Shares		Weighted<br>Average<br>Exercise<br>Price		Shares		Weighted<br>Average<br>Exercise<br>Price		Shares		Weighted<br>Average<br>Exercise<br>Price
Outstanding at January 1	1,114,169		$	52.40	913,320		$	52.80	833,630		$	49.92
Granted	260,000		55.71		245,000		49.46		232,500		59.41
Exercised	(57,055	)	44.53		(39,151	)	42.98		(149,060	)	46.97
Expired/Forfeited	(7,500	)	56.07		(5,000	)	54.78		(3,750	)	53.73
Outstanding December 31	1,309,614		53.38		1,114,169		52.40		913,320		52.80
Exercisable at December 31	763,614		52.43		600,919		50.93		430,945		48.94

The intrinsic value of options exercised in 2019, 2018, and 2017, was $0.6 million, $0.5 million and $2.2 million, respectively. The intrinsic value of options outstanding and exercisable at year end 2019 was $2.5 million and $2.0 million, respectively. The intrinsic value measures the 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 date of exercise was the measurement date for shares exercised during the period. At December 31, 2019, the final trading day of calendar 2019, the closing price of

$52.78

per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. The weighted average remaining contractual life of the Company’s exercisable and outstanding options at December 31, 2019 are

5.9

and

7.0

years, respectively.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and floating rate debt 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

3.55%

and

4.40%

, would be approximately $957.4 million and $927.0 million as of December 31, 2019 and 2018, respectively, compared to the

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

principal balance of $938.4 million and $910.2 million at December 31, 2019 and 2018, respectively. A change in any of the significant inputs may lead to a change in the Company’s fair value measurement of its debt.

Effective June 30, 2011, the Company determined that one of its interest-rate swap arrangements was a highly effective hedge of the cash flows under one of its variable-rate mortgage loans and designated the swap as a cash flow hedge of that mortgage. The swap was carried at fair value with changes in fair value recognized either in income or comprehensive income depending on the effectiveness of the swap. The swap was terminated on November 21, 2019.

12. 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.

13. DISTRIBUTIONS

In December 1995, the Company established a Dividend Reinvestment and Stock Purchase Plan (the “Plan”), to allow its stockholders and holders of limited partnership interests an opportunity to buy additional shares of common stock by reinvesting all or a portion of their dividends or distributions. The Plan provides for investing in newly issued shares of common stock at a 3% discount from market price without payment of any brokerage commissions, service charges or other expenses. All expenses of the Plan are paid by the Company. The Operating Partnership also maintains a similar dividend reinvestment plan that mirrors the Plan, which allows holders of limited partnership interests the opportunity to buy either additional limited partnership units or common stock shares of the Company.

The Company paid common stock distributions of

$2.12

per share in 2019,

$2.08

per share in 2018, and

$2.04

per share in 2017, Series C preferred stock dividends of

$1.80

$1.72

, and

$1.72

, respectively, per depositary share during each of 2019, 2018, and 2017, Series D preferred stock dividends of

$1.53

and

$1.05

, respectively, per depositary share in 2019 and 2018, and Series E preferred stock dividends of

$0.06

per depositary share in 2019. Of the common stock dividends paid,

$2.00

per share,

$1.61

per share, and

$1.70

per share, represented ordinary dividend income in 2019, 2018, and 2017, respectively, and

$0.12

per share,

$0.47

per share, and

$0.34

per share represented return of capital to the shareholders in 2019, 2018, and 2017, respectively. All of the preferred stock dividends paid were considered ordinary dividend income.

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SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

The following summarizes distributions paid during the years ended December 31, 2019, 2018, and 2017, and includes activity in the Plan as well as limited partnership units issued from the reinvestment of unit distributions:

	Total Distributions to						Dividend Reinvestments
(Dollars in thousands, except per share amounts)	Preferred<br>Stockholders		Common<br>Stockholders		Limited<br>Partnership<br>Unitholders		Common<br>Stock Shares<br>Issued	Discounted<br>Share Price		Limited Partnership Units Issued	Average Unit Price
Distributions during 2019
4th Quarter	$	3,531	$	12,251	$	4,173	104,558	$	52.84	13,747	$	53.73
3rd Quarter	2,953		12,195		4,166		105,753	53.66		13,406	54.56
2nd Quarter	2,953		12,116		4,155		99,804	51.38		20,041	51.99
1st Quarter	2,953		12,006		4,148		120,347	51.28		13,742	52.16
Total 2019	$	12,390	$	48,568	$	16,642	430,462			60,936
Distributions during 2018
4th Quarter	$	2,953	$	11,706	$	4,062	216,476	$	49.34	13,867	$	50.20
3rd Quarter	2,953		11,590		4,055		201,500	51.68		13,107	52.60
2nd Quarter	2,672		11,545		3,942		85,202	47.54		42,422	47.83
1st Quarter	3,824		11,465		3,922		69,750	52.71		38,037	53.03
Total 2018	$	12,402	$	46,306	$	15,981	572,928			107,433
Distributions during 2017
4th Quarter	$	3,094	$	11,221	$	3,838	82,991	$	59.33	15,596	$	60.08
3rd Quarter	3,094		11,160		3,830		85,731	57.40		16,021	58.13
2nd Quarter	3,094		11,119		3,810		51,003	59.64		40,623	59.96
1st Quarter	3,093		11,076		3,790		46,286	61.85		39,111	62.15
Total 2017	$	12,375	$	44,576	$	15,268	266,011			111,351

In December 2019, the Board of Directors of the Company authorized a distribution of

$0.53

per common share payable in January 2020 to holders of record on January 17, 2020. As a result, $12.3 million was paid to common shareholders on January 31, 2020. Also, $4.2 million was paid to limited partnership unitholders on January 31, 2020 (

$0.53

per Operating Partnership unit). The Board of Directors authorized preferred stock dividends of (a)

$0.3750

per Series E depositary share and (b)

$0.3828

per Series D depositary share to holders of record on January 2, 2020. As a result, $2.8 million was paid to preferred shareholders on January 15, 2020. These amounts are reflected as a reduction of stockholders’ equity in the case of common stock and preferred stock dividends and noncontrolling interests deductions in the case of limited partner distributions and are included in dividends and distributions payable in the accompanying consolidated financial statements.

14.	INTERIM RESULTS (Unaudited)

The following summary presents the results of operations of the Company for the quarterly periods of calendar years 2019 and 2018.

(In thousands, except per share amounts)	2019
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Total revenue	$	59,750	$	58,141	$	57,052	$	56,582
Net Income	17,077		16,750		15,328		15,041
Net income attributable to Saul Centers, Inc.	13,447		13,232		12,226		12,818
Net income available to common stockholders	10,494		10,279		9,016		6,464
Net income available to common stockholders per diluted share	0.46		0.45		0.39		0.27

F-27

Table of Contents

SAUL CENTERS, INC.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)	2018
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Total revenue	$	56,109	$	56,081	$	56,910	$	58,119
Net Income	14,946		15,902		16,702		15,509
Net income attributable to Saul Centers, Inc.	12,587		12,543		13,155		12,269
Net income available to common stockholders	6,856		9,590		10,202		9,316
Net income available to common stockholders per diluted share	0.31		0.43		0.45		0.41
15.	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 for 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 2019 presentation.

F-28

SAUL CENTERS, INC.<br><br>Notes to Consolidated Financial Statements
(In thousands)	Shopping			Mixed-Use			Corporate			Consolidated
As of or for the year ended December 31, 2019	Centers			Properties			and Other			Totals
Real estate rental operations:
Revenue	$	167,888		$	63,637		$	—		$	231,525
Expenses	(36,119		)	(21,814		)	—			(57,933		)
Income from real estate	131,769			41,823			—			173,592
Interest expense, net and amortization of deferred debt costs	—			—			(41,834		)	(41,834		)
General and administrative	—			—			(20,793		)	(20,793		)
Depreciation and amortization of deferred leasing costs	(29,112		)	(17,221		)	—			(46,333		)
Change in fair value of derivatives	—			—			(436		)	(436		)
Net income (loss)	$	102,657		$	24,602		$	(63,063	)	$	64,196
Capital investment	$	33,968		$	101,695		$	—		$	135,663
Total assets	$	980,096		$	625,183		$	13,061		$	1,618,340
As of or for the year ended December 31, 2018
Real estate rental operations:
Revenue	$	164,344		$	62,875		$	—		$	227,219
Expenses	(34,643		)	(20,935		)	—			(55,578		)
Income from real estate	129,701			41,940			—			171,641
Interest expense, net and amortization of deferred debt costs	—			—			(44,768		)	(44,768		)
General and administrative	—			—			(18,459		)	(18,459		)
Depreciation and amortization of deferred leasing costs	(29,251		)	(16,610		)	—			(45,861		)
Change in fair value of derivatives	—			—			(3		)	(3		)
Gain on sale of property	509			—			—			509
Net income (loss)	$	100,959		$	25,330		$	(63,230	)	$	63,059
Capital investment	$	13,485		$	115,165		$	—		$	128,650
Total assets	$	971,321		$	537,500		$	18,668		$	1,527,489
As of or for the year ended December 31, 2017
Real estate rental operations:
Revenue	$	165,232		$	61,067		$	—		$	226,299
Expenses	(34,054		)	(20,632		)	—			(54,686		)
Income from real estate	131,178			40,435			—			171,613
Interest expense, net and amortization of deferred debt costs	—			—			(47,145		)	(47,145		)
General and administrative	—			—			(18,176		)	(18,176		)
Depreciation and amortization of deferred leasing costs	(29,977		)	(15,717		)	—			(45,694		)
Change in fair value of derivatives	—			—			70			70
Net income (loss)	$	101,201		$	24,718		$	(65,251	)	$	60,668
Capital investment	$	90,896		$	29,098		$	—		$	119,994
Total assets	$	974,061		$	438,283		$	10,108		$	1,422,452
16.	Subsequent Events
---	---

The Company has reviewed operating activities for the period subsequent to December 31, 2019 and prior to the date that financial statements are issued, February 27, 2020, and determined there are no subsequent events that are required to be disclosed.

F-29

Schedule III

SAUL CENTERS, INC.<br><br>Real Estate and Accumulated Depreciation<br><br>December 31, 2019<br><br>(Dollars in Thousands)
			Costs																		Buildings
			Capitalized		Basis at Close of Period																and
	Initial<br><br>Basis		Subsequent<br><br>to<br><br>Acquisition		Land		Buildings<br><br>and<br><br>Improvements		Construction in Progress		Total		Accumulated<br><br>Depreciation		Book<br><br>Value		Related<br><br>Debt		Date of<br><br>Construction	Date<br><br>Acquired	Improvements<br><br>Depreciable<br><br>Lives in Years
Shopping Centers
Ashbrook Marketplace, Ashburn, VA	$	8,938	$	16,261	$	3,066	$	3,005	$	19,128	$	25,199	$	8	$	25,191	$	—	2019	5/18	40
Ashburn Village, Ashburn, VA	11,431		20,514		6,764		25,077		104		31,945		14,234		17,711		26,245		1994 & 2000-6	3/94	40
Ashland Square Phase I, Dumfries, VA	1,178		7,508		1,178		5,298		2,210		8,686		2,215		6,471		—		2007, 2013	12/04	20 & 50
Beacon Center, Alexandria, VA	24,161		18,477		22,674		19,946		18		42,638		15,335		27,303		36,206		1960 & 1974	1/72, 11/16	40 & 50
BJ’s Wholesale Club, Alexandria, VA	22,623		—		22,623		—		—		22,623		—		22,623		10,323			3/08	—
Boca Valley Plaza, Boca Raton, FL	16,720		2,064		5,735		13,049		—		18,784		5,252		13,532		9,234			2/04	40
Boulevard, Fairfax, VA	4,883		4,709		3,687		5,905		—		9,592		3,243		6,349		15,723		1969, 1999 & 2009	4/94	40
Briggs Chaney MarketPlace, Silver Spring, MD	27,037		4,703		9,789		21,951		—		31,740		9,333		22,407		—			4/04	40
Broadlands Village, Ashburn, VA	5,316		34,586		5,300		34,589		13		39,902		12,872		27,030		31,221		2003, 2004 & 2006	3/02	40 & 50
Burtonsville Town Square, Burtonsville, MD	74,212		5,612		28,401		50,915		508		79,824		3,728		76,096		36,975		2010	1/17	20 & 45
Countryside Marketplace, Sterling, VA	28,912		4,143		7,666		25,389		—		33,055		10,518		22,537		—			2/04	40
Cranberry Square, Westminster, MD	31,578		739		6,700		25,617		—		32,317		5,497		26,820		15,917			9/11	40
Cruse MarketPlace, Cumming, GA	12,226		689		3,901		9,014		—		12,915		3,626		9,289		—			3/04	40
Flagship Center, Rockville, MD	160		9		169		—		—		169		—		169		—		1972	1/72	—
French Market, Oklahoma City, OK	5,781		14,269		1,118		18,929		3		20,050		12,490		7,560		—		1972 & 1998	3/74	50
Germantown, Germantown, MD	2,034		567		2,034		567		—		2,601		409		2,192		—		1990	8/93	40
The Glen, Woodbridge, VA	12,918		8,351		5,300		15,942		27		21,269		10,138		11,131		22,448		1993 & 2005	6/94	40
Great Falls Center, Great Falls, VA	41,750		3,203		14,766		30,187		—		44,953		9,497		35,456		10,774			3/08	40
Hampshire Langley, Takoma, MD	3,159		3,549		1,856		4,635		217		6,708		3,908		2,800		14,810		1960	1/72	40
Hunt Club Corners, Apopka, FL	12,584		4,409		4,822		12,171		—		16,993		4,788		12,205		5,300			6/06, 12/12	40
Jamestown Place, Altamonte Springs, FL	14,055		1,950		4,455		11,550		—		16,005		4,291		11,714		6,539			11/05	40
Kentlands Square I, Gaithersburg, MD	14,379		840		5,006		9,711		502		15,219		4,220		10,999		—		2002	9/02	40
Kentlands Square II, Gaithersburg, MD	76,723		2,733		22,800		56,270		386		79,456		12,147		67,309		33,952			9/11, 9/13	40
Kentlands Place, Gaithersburg, MD	1,425		7,373		1,425		7,373		—		8,798		4,241		4,557		—		2005	1/04	50
Lansdowne Town Center, Leesburg, VA	6,545		43,003		6,546		37,843		5,159		49,548		16,291		33,257		30,719		2006	11/02	50
Leesburg Pike Plaza, Baileys Crossroads, VA	2,418		6,292		1,132		7,578		—		8,710		6,159		2,551		14,414		1965	2/66	40
Lumberton Plaza, Lumberton, NJ	4,400		11,612		950		15,041		21		16,012		13,379		2,633		—		1975	12/75	40
Metro Pike Center, Rockville, MD	33,123		4,605		26,064		7,729		3,935		37,728		1,822		35,906		—			12/10	40
Shops at Monocacy, Frederick, MD	9,541		13,994		9,260		14,275		—		23,535		6,338		17,197		28,500		2004	11/03	50
Northrock, Warrenton, VA	12,686		15,429		12,686		15,423		6		28,115		4,907		23,208		14,085		2009	01/08	50
Olde Forte Village, Ft. Washington, MD	15,933		6,721		5,409		17,245		—		22,654		8,180		14,474		21,702		2004	07/03	40
Olney, Olney, MD	4,963		2,550		3,079		4,434		—		7,513		3,358		4,155		11,952		1972	11/75	40
Orchard Park, Dunwoody, GA	19,377		1,461		7,751		13,087		—		20,838		4,053		16,785		9,441			7/07	40
Palm Springs Center, Altamonte Springs, FL	18,365		2,007		5,739		14,633		—		20,372		5,593		14,779		7,262			3/05	40
Ravenwood, Baltimore, MD	1,245		4,256		703		4,798		—		5,501		3,308		2,193		13,606		1959 & 2006	1/72	40
11503 Rockville Pike/5541 Nicholson Lane, Rockville, MD	26,561		24		22,113		4,472		—		26,585		1,032		25,553		—			10/10<br>12/12	40
1500/1580/1582/1584 Rockville Pike, Rockville, MD	51,149		2,714		43,863		7,490		2,510		53,863		6,439		47,424		—			12/12, 1/14, 4/14, 12/14	5, 10, 5, 4
Seabreeze Plaza, Palm Harbor, FL	24,526		2,502		8,665		18,363		—		27,028		6,746		20,282		15,019			11/05	40
Market Place at Sea Colony, Bethany Beach, DE	2,920		246		1,147		2,019		—		3,166		615		2,551		—			3/08	40
Seven Corners, Falls Church, VA	4,848		44,612		4,913		44,522		25		49,460		30,937		18,523		60,677		1956 & 1997	7/73	40
Severna Park Marketplace, Severna Park, MD	63,254		526		12,700		51,080		—		63,780		10,544		53,236		29,710			9/11	40
Shops at Fairfax, Fairfax, VA	2,708		9,971		992		11,687		—		12,679		8,676		4,003		10,482		1975 & 1999	6/75	50
Smallwood Village Center, Waldorf, MD	17,819		8,332		6,402		19,743		6		26,151		8,903		17,248		—			1/06	40
Southdale, Glen Burnie, MD	18,895		25,100		15,254		28,740		1		43,995		22,440		21,555		—		1962 & 1986	1/72	40
Southside Plaza, Richmond, VA	6,728		11,338		1,878		16,188		—		18,066		12,798		5,268		—		1958	1/72	40
South Dekalb Plaza, Atlanta, GA	2,474		4,449		703		6,220		—		6,923		5,088		1,835		—		1970	2/76	40
Thruway, Winston-Salem, NC	7,848		26,336		7,693		26,447		44		34,184		18,682		15,502		—		1955 & 1965	5/72	40
Village Center, Centreville, VA	16,502		2,636		7,851		11,287		—		19,138		7,380		11,758		12,555		1990	8/93	40
Westview Village, Frederick, MD	6,047		25,225		6,047		25,216		9		31,272		9,483		21,789		—		2009	11/07, 02/15	50
White Oak, Silver Spring, MD	6,277		5,771		4,649		7,212		187		12,048		6,169		5,879		22,475		1958 & 1967	1/72	40
Other Buildings / Improvements	—		182		—		182		—		182		72		110		—
Total Shopping Centers	841,335		449,152		415,424		840,044		35,019		1,290,487		381,382		909,105		578,266
Mixed-Use Properties
Avenel Business Park, Gaithersburg, MD	21,459		32,976		3,756		50,679		—		54,435		39,261		15,174		26,260		1981-2000	12/84	35 & 40
Clarendon Center, Arlington, VA (1)	12,753		186,210		16,287		182,676		—		198,963		46,856		152,107		98,611		2010	7/73, 1/96 & 4/02	50
Park Van Ness, Washington, DC	2,242		91,699		2,242		91,699		—		93,941		10,757		83,184		68,095		2016	7/73 & 2/11	50
601 Pennsylvania Ave., Washington, DC	5,479		69,129		5,667		68,941		—		74,608		57,038		17,570		—		1986	7/73	35
Washington Square, Alexandria, VA	2,034		57,102		544		58,592		—		59,136		28,180		30,956		56,990		2000	7/73	50
Total Mixed-Use Properties	43,967		437,116		28,496		452,587		—		481,083		182,092		298,991		249,956
Development Land
Ashland Square Phase II, Manassas, VA	5,292		2,280		7,028		—		544		7,572		—		7,572		—			12/04
New Market, New Market, MD	2,088		286		2,374		—		—		2,374		—		2,374		—			9/05
The Waycroft, Arlington, VA	52,067		203,376		—		—		255,443		255,443		—		255,443		110,199		—	8/14-8/16
7316 Wisconsin Avenue, Bethesda, MD	39,641		4,997		—		—		44,638		44,638		—		44,638		—		1969	9/18 & 12/18
Total Development Land	99,088		210,939		9,402		—		300,625		310,027		—		310,027		110,199
Total	$	984,390	$	1,097,207	$	453,322	$	1,292,631	$	335,644	$	2,081,597	$	563,474	$	1,518,123	$	938,421
(1)	Includes the North and South Blocks and Residential
---	---

F-30

Schedule III

SAUL CENTERS, INC.

Real Estate and Accumulated Depreciation

December 31, 2019

Depreciation and amortization related to the real estate investments reflected in the statements of operations is calculated over the estimated useful lives of the assets as follows:

Base building	Generally 35 - 50 years or a shorter period if management determines that
	the building has a shorter useful life.
Building components	Up to 20 years
Tenant improvements	The shorter of the term of the lease or the useful life
	of the improvements

The aggregate remaining net basis of the real estate investments for federal income tax purposes was approximately $1.33 billion at December 31, 2019. Depreciation and amortization are provided on the declining balance and straight-line methods over the estimated useful lives of the assets.

The changes in total real estate investments and related accumulated depreciation for each of the years in the three year period ended December 31, 2019 are summarized as follows:

(In thousands)	2019			2018			2017
Total real estate investments:
Balance, beginning of year	$	1,948,165		$	1,803,200		$	1,700,813
Acquisitions	—			48,579			77,258
Improvements	135,966			98,917			42,640
Retirements	(2,534		)	(2,531		)	(17,511		)
Balance, end of year	$	2,081,597		$	1,948,165		$	1,803,200
Total accumulated depreciation:
Balance, beginning of year	$	525,518		$	488,166		$	458,279
Depreciation expense	40,490			39,768			40,197
Retirements	(2,534		)	(2,416		)	(10,310		)
Balance, end of year	$	563,474		$	525,518		$	488,166

F-31

		Exhibit

Exhibit 4.(h)

Description of the Registrant’s Securities

Registered Pursuant to Section 12 of the

Securities Exchange Act of 1934

The following description sets forth certain material terms and provisions of our securities that are registered under Section 12 of the Securities Exchange Act of 1934. This description also contains summaries of relevant portions of the laws of the State of Maryland, including the Maryland General Corporation Law, our declaration of trust, our bylaws, the articles supplementary with respect to our Series D preferred stock (as defined below) and the articles supplementary with respect to our Series E preferred stock (as defined below). The following summary of the material terms, rights and preferences of our securities does not purport to be complete and is subject to and qualified in its entirety by reference to our declaration of trust, bylaws, the articles supplementary establishing the Series D preferred stock and the articles supplementary establishing the Series E preferred stock, copies of which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this exhibit is a part, as well as the laws of the State of Maryland, including the Maryland General Corporation Law. We encourage you to read the laws of the State of Maryland, including Maryland General Corporation Law, our declaration of trust, bylaws, the articles supplementary establishing the Series D preferred stock and the articles supplementary establishing the Series E preferred stock for additional information.

In this exhibit, references to “we,” “us,” “our” or “ours” refer to Saul Centers, Inc.

DESCRIPTION OF COMMON STOCK

General

The holders of our common stock elect all directors and are entitled to one vote per share on all matters submitted to a vote of the stockholders. The right to vote is subject to the provisions of the Articles of Incorporation regarding the restriction of the transfer of shares of common stock, which we describe under “- Restrictions on Ownership and Transfer” below. Common stockholders are entitled to receive dividends when, as and if declared by our Board of Directors out of funds legally available for that purpose. The right of holders of common stock to receive those dividends may be affected, however, by the preferential rights of the Series D preferred stock, the Series E preferred stock and any other class or series of preferred stock and the provisions of the Articles of Incorporation regarding restrictions on the transfer of stock. Upon our liquidation, dissolution or winding up, holders of common stock are entitled to share pro rata in any remaining assets after payment or provision for all of our debts and other liabilities and preferential amounts owing in respect of the Series D preferred stock, the Series E preferred stock and any other preferred stock having a priority over the common stock in the event of our liquidation, dissolution or winding up. Holders of common stock have no preemptive, subscription or conversion rights.

Stock Exchange Listing

Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol “BFS.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Continental Stock Transfer & Trust Company.

The following is a summary of the material terms and provisions of the Series D Preferred Stock and depositary shares. The statements below describing the Series D Preferred Stock are in all respects subject to and qualified in their entirety by reference to our Articles of Incorporation establishing the Series D Preferred Stock, and our Bylaws.

DESCRIPTIONS OF SERIES D PREFERRED STOCK

General

Each depositary share represents a 1/100^th^ fractional interest in a share of Series D preferred stock. The Series D preferred stock underlying the depositary shares are deposited with Continental Stock Transfer & Trust Company, as depositary, under a deposit agreement among us, the depositary and the holders from time to time of the depositary receipts issued by the depositary under the deposit agreement. The depositary shares are evidenced by depositary receipts issued pursuant to the deposit agreement. Subject to the terms of the deposit agreement, each record holder

Exhibit 4.(h)

of depositary receipts evidencing depositary shares is entitled, proportionately, to all the rights and preferences of, and subject to all of the limitations of, the interest in the Series D preferred stock underlying the depositary shares (including dividend, voting, redemption and liquidation rights and preferences).

Ranking

The Series D preferred stock represented by the depositary shares are, as to dividend rights and rights upon our liquidation, dissolution or winding-up, rank:| (1) | senior to all classes or series of our common stock and to all other equity securities issued by us other than equity securities referred to in clause (2) and (3) below; | | --- | --- || (2) | on a parity with the Series E preferred stock and any equity securities authorized or designated by us in the future, the terms of which specifically provide that such equity securities rank on a parity with the Series D preferred stock with respect to dividend rights or rights upon our liquidation, dissolution or winding up; | | --- | --- || (3) | junior to any class or series of equity securities authorized or designated by us in the future which specifically provides that such class or series ranks senior to the Series D preferred stock with respect to dividend rights or rights upon our liquidation, dissolution or winding up; and | | --- | --- || (4) | effectively junior to all our existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) and to the indebtedness of our existing or future subsidiaries. | | --- | --- |The term “equity securities” does not include convertible debt securities, which will rank senior to the Series D preferred stock prior to conversion.

Dividends

Holders of depositary shares representing interests in the Series D preferred stock will be entitled to receive, when and as declared by our Board of Directors, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 6.125% of the $2,500.00 liquidation preference ($25.00 per depositary share) per year (equivalent to $153.125 per year or $1.53125 per year per depositary share). Dividends on the Series D preferred stock accumulate and be cumulative from, and including, the date of original issue by us of the Series D preferred stock. Dividends are payable quarterly in arrears on January 15, April 15, July 15 and October 15; provided that if any dividend payment date is not a business day, then the dividend which would otherwise have been payable on that dividend payment date may be paid on the next succeeding business day and no interest, additional dividends or other sums will accumulate on the amounts so payable for the period from and after that dividend payment date to that next succeeding business day. Whenever we pay dividends on the Series D preferred stock held by the depositary, the depositary pays dividends on the same date on the depositary shares. We refer to each such date as a Dividend Payment Date.

Any dividend, including any dividend payable on the Series D preferred stock for any partial dividend period, is computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends are payable to holders of record of depositary shares as they appear in the depositary’s records at the close of business on the applicable record date, which will be the date that our Board of Directors designates for the payment of a dividend that is not more than 30 nor less than 10 days prior to the Dividend Payment Date, which we refer to as a Dividend Payment Record Date.

Our Board of Directors will not authorize, pay or set apart for payment by us any dividend on the Series D preferred stock at any time that:| • | the terms and provisions of any of our agreements, including any agreement relating to our indebtedness, prohibits such authorization, payment or setting apart for payment; | | --- | --- || • | the terms and provisions of any of our agreements, including any agreement relating to our indebtedness, provides that such authorization, payment or setting apart for payment thereof would constitute a breach of, or a default under, such agreement; or | | --- | --- || • | the law restricts or prohibits the authorization or payment. | | --- | --- |

Exhibit 4.(h)

Notwithstanding the foregoing, dividends on the Series D preferred stock accumulate whether or not:| • | the terms and provisions of any of our agreements relating to our indebtedness prohibit such authorization, payment or setting apart for payment; | | --- | --- || • | we have earnings; | | --- | --- || • | there are funds legally available for the payment of the dividends; and | | --- | --- || • | the dividends are authorized. | | --- | --- |No interest, or sums in lieu of interest, will be payable in respect of any dividend payment or payments on the Series D preferred stock, which may be in arrears, and holders of the Series D preferred stock will not be entitled to any dividends in excess of the full cumulative dividends described above. Any dividend payment made on the Series D preferred stock shall first be credited against the earliest accumulated but unpaid dividends due with respect to those shares.

If, for any taxable year, we elect to designate as “capital gain dividends” (as defined in Section 857 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code) a portion, which we refer to as the Capital Gains Amount, of the dividends not in excess of our earning and profits that are paid or made available for the year to the holders of all classes of shares, or the Total Dividends, then the portion of the Capital Gains Amount that will be allocable to the holders of depositary shares will be the Capital Gains Amount multiplied by a fraction, the numerator of which will be the total dividends (within the meaning of the Code) paid or made available to the holders of depositary shares for the year and the denominator of which will be the Total Dividends.

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of shares of Series D preferred stock are entitled to be paid out of our assets legally available for distribution to our shareholders a liquidation preference of $2,500.00 per share (or $25.00 per depositary share), plus an amount equal to any accumulated and unpaid dividends to the date of payment (whether or not declared), before any distribution or payment may be made to holders of shares of common stock or any other class or series of our equity stock ranking, as to liquidation rights, junior to the Series D preferred stock.

If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series D preferred stock and the corresponding amounts payable on all shares of each other class or series of capital stock ranking, as to liquidation rights, on a parity with the Series D preferred stock, such as our Series E preferred stock, then the holders of the Series D preferred stock and each such other class or series of capital stock ranking, as to liquidation rights, on a parity with the Series D preferred stock will share ratably in any distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Holders of Series D preferred stock will be entitled to written notice of any liquidation no fewer than 30 days and no more than 60 days prior to the payment date. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series D preferred stock and depositary shares will have no right or claim to any of our remaining assets.

Our consolidation or merger with or into any other entity or the sale, lease, transfer or conveyance of all or substantially all of our property or business will not be deemed to constitute our liquidation, dissolution or winding up. The Series D preferred stock will rank senior to the common stock as to priority for receiving liquidating distributions and on a parity with any existing and future equity securities which, by their terms, rank on a parity with the Series D preferred stock, such as our Series E preferred stock.

Optional Redemption

The Series D preferred stock is not redeemable prior to January 23, 2023, except under the circumstances described below. On and after January 23, 2023, the Series D preferred stock may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $2,500.00 per share ($25.00 per depositary share), plus all dividends accumulated and unpaid (whether or not declared) on the Series D preferred stock up to the date of such redemption, upon the giving of notice, as provided below. Whenever we redeem shares of our Series D preferred stock held by

Exhibit 4.(h)

the depositary, the depositary will redeem as of the same redemption date a number of depositary shares representing the shares so redeemed and the depositary receipts evidencing such depositary shares.

If fewer than all of the outstanding shares of Series D preferred stock are to be redeemed, the shares to be redeemed will be determined pro rata or by lot. In the event that the redemption is to be by lot, and if as a result of the redemption any holder of Series D preferred stock would own, or be deemed by virtue of certain attribution provisions of the Code to own, in excess of 2.5% in value of our issued and outstanding equity securities (which includes the depositary shares), with the exception of B. Francis Saul II, our Chairman, Chief Executive Officer and President, family members of Mr. Saul, entities controlled by Mr. Saul and other affiliates of Mr. Saul, whom we collectively refer to as “The Saul Organization,”, who are currently restricted to 39.9% in value of our issued and outstanding equity securities, then, except in certain instances, we will redeem the requisite number of shares of Series D preferred stock of that shareholder such that the shareholder will not own or be deemed by virtue of certain attribution provisions of the Code to own, subsequent to the redemption, in excess of 2.5% in value of our issued and outstanding equity securities (which includes the depositary shares), with the exception of members of The Saul Organization, who are currently restricted to 39.9% in value of our issued and outstanding equity securities.

We shall give the depositary not less than 30 nor more than 60 days prior written notice of redemption of the deposited Series D preferred stock. A similar notice of redemption will be mailed by the depositary not less than 30 nor more than 60 days prior to the date fixed for redemption to each holder of record of depositary shares that is to be redeemed. The notice will notify the holder of the election to redeem the shares and will state at least the following:| • | the date fixed for redemption thereof, which we refer to as the Redemption Date; | | --- | --- || • | the redemption price; | | --- | --- || • | the number of shares of Series D preferred stock and depositary shares to be redeemed (and, if fewer than all the shares are to be redeemed, the number of shares to be redeemed from such holder); | | --- | --- || • | the place(s) where the depositary receipts evidencing the depositary shares are to be surrendered for payment; and | | --- | --- || • | that dividends on the depositary shares will cease to accumulate on the Redemption Date. | | --- | --- |On or after the Redemption Date, each holder of depositary shares to be redeemed must present and surrender the depositary receipts evidencing the depositary shares to the depositary at the place designated in the notice of redemption. The redemption price of the shares will then be paid to or on the order of the person whose name appears on such depositary receipts as the owner thereof. Each surrendered depositary receipt will be canceled. In the event that fewer than all the depositary receipts are to be redeemed, a new depositary receipt will be issued representing the unredeemed depositary shares.

From and after the Redemption Date (unless we default in payment of the redemption price):| • | all dividends on the shares designated for redemption in the notice will cease to accumulate; | | --- | --- || • | all rights of the holders of the shares, except the right to receive the redemption price thereof (including all accumulated and unpaid dividends up to the Redemption Date), will cease and terminate; | | --- | --- || • | the shares will not thereafter be transferred (except with our consent) on the depositary’s books; and | | --- | --- || • | the shares will not be deemed to be outstanding for any purpose whatsoever. | | --- | --- |Notwithstanding the foregoing, unless full cumulative dividends on all outstanding shares of Series D preferred stock have been paid or declared and a sum sufficient for the payment of the dividends has been set apart for payment for all past dividend periods, no Series D preferred stock will be redeemed unless all outstanding shares of Series D preferred stock are simultaneously redeemed. This requirement will not prevent the purchase or acquisition of Series D preferred stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series D preferred stock. Unless full cumulative dividends on all outstanding shares of Series

Exhibit 4.(h)

D preferred stock have been paid or declared and a sum sufficient for the payment of the dividends has been set apart for payment for all past dividend periods, we will not purchase or otherwise acquire directly or indirectly any shares of Series D preferred stock (except by exchange for our equity securities ranking junior to the Series D preferred stock as to dividend rights and liquidation preference).

Notwithstanding any other provision relating to redemption of the Series D preferred stock, we may redeem any or all shares of Series D preferred stock at any time, whether or not prior to January 23, 2023, if our Board of Directors determines that the redemption is necessary or advisable to preserve our status as a Real Estate Investment Trust ("REIT").

Special Optional Redemption

During any period of time (whether before or after January 23, 2023) that both (i) the Series D preferred stock (or the depositary shares) are no longer listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ, and (ii) we are not subject to the reporting requirements of the Exchange Act, but any Series D preferred stock is still outstanding (which we refer to collectively as a “Delisting Event”), we may, at our option, redeem the Series D preferred stock, in whole or in part and within 90 days after the date of the Delisting Event, by paying $2,500.00 per share (equivalent to $25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the date of redemption.

Upon the occurrence of a Change of Control (defined below), we may, at our option, redeem the Series D preferred stock, in whole or in part and within 120 days after the first date on which such Change of Control occurred, by paying $2,500.00 per share (equivalent to $25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the date of redemption.

If, prior to the applicable conversion date, we have provided or provide notice of redemption with respect to the Series D preferred stock (whether pursuant to our optional redemption right described above or this special optional redemption right following a Change of Control or Delisting Event), the holders of depositary shares representing interests in the Series D preferred stock will not be permitted to exercise the conversion right described below under “Conversion” in respect of their shares called for redemption.

The depositary will mail to you, if you are a record holder of the depositary shares representing interests in the Series D preferred stock, a notice of redemption, furnished by us, no fewer than 30 days nor more than 60 days before the redemption date. The depositary will send the notice to your address shown on the records of the depositary. No failure to give the notice or any defect in the notice or in the mailing of the notice will affect the validity of the proceedings for the redemption of any depositary shares or shares of our Series D preferred stock except as to a holder to whom notice was defective or not given. Each notice will state the following:| • | the redemption date; | | --- | --- || • | the redemption price; | | --- | --- || • | the number of depositary shares representing interests in the Series D preferred stock to be redeemed; | | --- | --- || • | the place(s) where the depositary receipts (or Series D preferred stock certificates, if no longer held in depositary form) are to be surrendered for payment; | | --- | --- || • | that the Series D preferred stock is being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control or Delisting Event and a brief description of the transaction or transactions or circumstances constituting such Change of Control or Delisting Event; | | --- | --- || • | that the holders of depositary shares representing interests in the Series D preferred stock to which the notice relates will not be able to convert such shares of Series D preferred stock in connection with the Change of Control or Delisting Event and each share of Series D preferred stock tendered for conversion that is selected, prior to the applicable conversion date, for redemption will be redeemed on the related date of redemption instead of converted; and | | --- | --- |

Exhibit 4.(h)

| • | that dividends on the Series D preferred stock to be redeemed will cease to accumulate on the redemption date. | | --- | --- |If we redeem fewer than all of the outstanding shares of Series D preferred stock, the notice of redemption mailed to each record holder of depositary shares will also specify the number of shares of Series D preferred stock that we will redeem from such record holder. In this case, we will determine the number of shares of Series D preferred stock to be redeemed on a pro rata basis or by lot.

If we have given a notice of redemption and have irrevocably set aside sufficient funds for the redemption for the benefit of the holders of the depositary shares representing interests in the Series D preferred stock called for redemption, then from and after the redemption date, those depositary shares will be treated as no longer being outstanding, no further dividends will accumulate on the underlying Series D preferred stock and all other rights of the holders of those depositary shares will terminate. If any redemption date is not a business day, then the redemption price and accumulated and unpaid dividends, if any, payable upon redemption may be paid on the next business day and no interest, additional dividends or other sums will accumulate on the amount payable for the period from and after that redemption date to that next business day. The holders of those depositary shares will retain their right to receive the redemption price for their underlying shares of Series D preferred stock (including any accumulated and unpaid dividends to but excluding the redemption date).

The holders of depositary shares representing interests in the Series D preferred stock at the close of business on a dividend record date will be entitled to receive the dividend payable with respect to the Series D preferred stock on the corresponding payment date notwithstanding the redemption of the Series D preferred stock between such record date and the corresponding payment date or our default in the payment of the dividend due. Except as provided above, we will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series D preferred stock to be redeemed.

Unless full cumulative dividends on all shares of Series D preferred stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment for all past dividend periods, no shares of Series D preferred stock shall be redeemed unless all outstanding shares of Series D preferred stock are simultaneously redeemed and we shall not purchase or otherwise acquire directly or indirectly any shares of Series D preferred stock (except by exchanging it for our capital stock ranking junior to the Series D preferred stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase or acquisition by us of shares of Series D preferred stock to preserve our REIT status for federal income tax purposes or pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series D preferred stock.

A “Change of Control” is when, after the original issuance of the Series D preferred stock, the following have occurred and are continuing:| • | the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of our company entitling that person to exercise more than 50% of the total voting power of all shares of our company entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and | | --- | --- || • | following the closing of any transaction referred to in the bullet point above, neither we nor any acquiring or surviving entity has a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ. | | --- | --- |Conversion

Upon the occurrence of a Change of Control or Delisting Event, each holder of depositary shares representing interests in the Series D preferred stock will have the right (unless, prior to the applicable conversion date, we have provided or provide notice of our election to redeem the depositary shares or the Series D preferred stock as described above under “Optional Redemption” or “Special Optional Redemption”) to direct the depositary, on such holder’s behalf, to convert some or all of the shares of Series D preferred stock underlying the depositary shares held

Exhibit 4.(h)

by such holder (the “Conversion Right”) on the applicable conversion date into a number of shares of our common stock (or equivalent value of alternative consideration) per depositary share, or the “Common Stock Conversion Consideration”, equal to the lesser of:| • | the quotient obtained by dividing (1) the sum of the $25.00 per depositary share liquidation preference plus the amount of any accumulated and unpaid dividends to, but not including, the applicable conversion date (unless the applicable conversion date is after a record date for a Series D preferred stock dividend payment and prior to the corresponding Series D preferred stock dividend payment date, in which case no additional amount for such accumulated and then remaining unpaid dividend will be included in this sum) by (2) the Common Stock Price (such quotient, the Conversion Rate); and | | --- | --- || • | 0.85266 (i.e., the Share Cap), subject to certain adjustments described below. | | --- | --- |The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of shares of our common stock to existing holders of common stock), subdivisions or combinations (in each case, a “Share Split”) with respect to our common stock as follows: the adjusted Share Cap as the result of a Share Split will be the number of shares of our common stock that is equivalent to the product obtained by multiplying (1) the Share Cap in effect immediately prior to such Share Split by (2) a fraction, the numerator of which is the number of shares of our common stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of our common stock outstanding immediately prior to such Share Split.

For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of our common stock (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable in connection with the exercise of the Conversion Right and in respect of the depositary shares currently outstanding will not exceed 2,557,981 shares of common stock (or equivalent Alternative Conversion Consideration, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap and is subject to increase in the event that additional shares of Series D preferred stock or depositary shares are issued in the future.

In the case of a Change of Control or Delisting Event pursuant to, or in connection with, which our common stock will be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Conversion Consideration”), a holder of depositary shares representing interests in Series D preferred stock will receive upon conversion of such Series D preferred stock the kind and amount of Alternative Conversion Consideration which such holder would have owned or been entitled to receive upon the Change of Control or Delisting Event had such holder held a number of shares of our common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control or Delisting Event (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control or Delisting Event, is referred to as the “Conversion Consideration”).

If the holders of our common stock have the opportunity to elect the form of consideration to be received in, or in connection with, the Change of Control or Delisting Event, the consideration that the holders of the depositary shares representing interests in the Series D preferred stock will receive will be the form and proportion of the aggregate consideration elected by the holders of our common stock who participate in the determination (based on the weighted average of elections) and will be subject to any limitations to which all holders of our common stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in, or in connection with, the Change of Control or Delisting Event.

We will not issue fractional shares of common stock upon the conversion of the Series D preferred stock. Instead, we will pay the cash value of such fractional shares in lieu of such fractional shares. Because each depositary share represents a 1/100^th^ interest in a share of the Series D preferred stock, the number of shares of common stock ultimately received for each depositary share will be equal to the number of shares of common stock received upon conversion of each share of Series D preferred stock divided by 100. In the event that the conversion would result in the issuance of fractional shares of common stock, we will pay the holder of depositary shares the cash value of such fractional shares in lieu of such fractional shares.

Exhibit 4.(h)

Within 15 days following the occurrence of a Change of Control or Delisting Event, we will provide to holders of the depositary shares representing interests in the Series D preferred stock a notice of occurrence of the Change of Control or Delisting Event that describes the resulting Conversion Right. This notice will state the following:| • | the events constituting the Change of Control or Delisting Event; | | --- | --- || • | the date of the Change of Control or Delisting Event; | | --- | --- || • | the last date on which the holders of the depositary shares representing interests in the Series D preferred stock may exercise their Conversion Right; | | --- | --- || • | the method and period for calculating the Common Stock Price; | | --- | --- || • | the date fixed for conversion in connection with the Change of Control or Delisting Event, which we refer to as the conversion date, which will be a business day fixed by our Board of Directors that is not fewer than 20 and not more than 35 days following the date of the notice; | | --- | --- || • | that if, prior to the applicable conversion date, we have provided or provide notice of our election to redeem all or any portion of the Series D preferred stock, holders will not be able to convert the Series D preferred stock and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Conversion Right; | | --- | --- || • | if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series D preferred stock; | | --- | --- || • | the name and address of the paying agent and the conversion agent; | | --- | --- || • | the procedures that the holders of the depositary shares representing interests in the Series D preferred stock must follow to exercise the Conversion Right; and | | --- | --- || • | the last date on which holders of the depositary shares representing interests in the Series D preferred stock may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal. | | --- | --- |We will issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of the depositary shares representing interests in the Series D preferred stock.

To exercise the Conversion Right, each holder of depositary shares representing interests in the Series D preferred stock will be required to deliver, on or before the close of business on the applicable conversion date, the depositary receipts or certificates, if any, evidencing the interests in Series D preferred stock to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the depositary. The conversion notice must state:| • | the relevant conversion date; | | --- | --- || • | the number of depositary shares representing interests in the shares of Series D preferred stock to be converted; and | | --- | --- || • | that the depositary shares are to be converted pursuant to the applicable provisions of the Series D preferred stock. | | --- | --- |The “Common Stock Price” for any Change of Control will be: (1) if the consideration to be received in the Change of Control by the holders of our common stock is solely cash, the amount of cash consideration per share of common stock; and (2) if the consideration to be received in the Change of Control by holders of our common stock is other than solely cash (x) the average of the closing prices for our common stock on the principal U.S. securities

Exhibit 4.(h)

exchange on which our common stock is then traded (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by Pink OTC Markets Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if our common stock is not then listed for trading on a U.S. securities exchange.

The “Common Stock Price” for any Delisting Event will be the average of the closing prices for our common stock on the principal U.S. securities exchange on which our common stock is then traded (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Delisting Event occurred.

Holders of the depositary shares representing interests in the Series D preferred stock may withdraw any notice of exercise of a Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the depositary prior to the close of business on the business day prior to the applicable conversion date. The notice of withdrawal must state:| • | the number of withdrawn depositary shares; | | --- | --- || • | if certificated depositary shares have been issued, the receipt or certificate numbers of the withdrawn depositary shares; and | | --- | --- || • | the number of depositary shares, if any, which remain subject to the conversion notice. | | --- | --- |Notwithstanding the foregoing, if the Series D preferred stock is held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of The Depository Trust Company or a similar depositary, and the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures, if any, of the applicable depositary.

Shares of Series D preferred stock as to which the Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Conversion Right on the applicable conversion date, unless prior to the applicable conversion date we have provided or provide notice of our election to redeem such shares of Series D preferred stock, whether pursuant to our optional redemption right or our special optional redemption right. If we elect to redeem shares of Series D preferred stock that would otherwise be converted into the applicable Conversion Consideration on a conversion date, such shares of Series D preferred stock will not be so converted and the holders of such shares will be entitled to receive on the applicable redemption date $2,500.00 per share (or $25.00 per depositary share), plus any accumulated and unpaid dividends thereon to, but not including, the redemption date. See “Optional Redemption” and “Special Optional Redemption.”

We will deliver all securities, cash and other property owing upon conversion no later than the third business day following the applicable conversion date. Notwithstanding the foregoing, the persons entitled to receive any shares of our common stock or other securities delivered on conversion will be deemed to have become the holders of record thereof as of the applicable conversion date.

In connection with the exercise of any Conversion Right, we will comply with all applicable federal and state securities laws and stock exchange rules in connection with any conversion of Series D preferred stock into our common stock. Notwithstanding any other provision of the Series D preferred stock, no holder of Series D preferred stock or depositary shares will be entitled to convert such shares into our common stock to the extent that receipt of such common stock would cause such holder (or any other person) to exceed the share ownership limits contained in our articles of incorporation and the articles supplementary setting forth the terms of the Series D preferred stock, unless we provide an exemption from this limitation for such holder. See “Ownership Limits and Restrictions on Transfer,” below.

Exhibit 4.(h)

The Conversion Right may make it more difficult for a third party to acquire us or discourage a party from acquiring us. See “Risk Factors—The conversion feature may not adequately compensate you, and the conversion and redemption features of the Series D preferred stock and the depositary shares may make it more difficult for a party to take over our company and may discourage a party from taking over our company.”

Neither the Series D preferred stock nor the depositary shares are convertible into or exchangeable for any other securities or property, except as provided above and except that the shares of Series D preferred stock and depositary shares may be exchanged for “excess stock” in order to ensure that we remain qualified as a REIT for federal income tax purposes.

Voting Rights

Except as described below, holders of depositary shares generally have no voting rights. In any matter in which the Series D preferred stock may vote (as expressly provided herein, or as may be required by law), each share of Series D preferred stock shall be entitled to one vote. As a result, each depositary share will be entitled to 1/100^th^ of a vote.

If dividends on the Series D preferred stock are in arrears, whether or not declared, for six or more quarterly periods, whether or not these quarterly periods are consecutive, holders of Series D preferred stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable, including the Series E preferred stock) will be entitled to vote, at a special meeting called by the holders of record of at least 10% of any series of preferred stock as to which dividends are so in arrears or at the next annual meeting of shareholders, for the election of two additional directors to serve on our Board of Directors until all dividend arrearages have been paid.

Any amendment, alteration, repeal or other change to any provision of our articles of incorporation, including the articles supplementary establishing the Series D preferred stock, whether by merger, consolidation or otherwise, in any manner that would materially and adversely affect the rights, preferences, powers or privileges of the Series D preferred stock cannot be made without the affirmative vote of holders of at least 66^2^/3% of the outstanding shares of Series D preferred stock, voting separately as a class. In addition, the creation, issuance or increase in the authorized number of shares of any class or series of stock having a preference as to dividends or distributions, whether upon liquidation, dissolution, or otherwise, that is senior to the shares of Series D preferred stock requires the affirmative vote of holders of at least 66^2^/3% of the outstanding shares of Series D preferred stock, voting separately as a class.

The following actions are not deemed to materially and adversely affect the rights, preferences, powers or privileges of the Series D preferred stock:| • | any increase in the amount of our authorized common stock or preferred stock or the creation or issuance of equity securities of any class or series ranking, as to dividends or liquidation preference, on a parity with, or junior to, the Series D preferred stock; or | | --- | --- || • | the amendment, alteration or repeal or change of any provision of our articles of incorporation, including the articles supplementary establishing the Series D preferred stock, as a result of a merger, consolidation, reorganization or other business combination, if the Series D preferred stock (or shares into which the Series D preferred stock have been converted in any successor entity to us) remain outstanding with the terms thereof materially unchanged. | | --- | --- |Information Rights

During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any shares of Series D preferred stock are outstanding, we will use our best efforts to (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of the depositary shares representing interests in the Series D preferred stock, as their names and addresses appear on our record books and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any holders of the depositary shares representing interests in the Series D preferred stock or prospective holders of depositary shares representing interests in the Series D preferred stock. Under the circumstances described above, we will use our best efforts to mail (or otherwise provide) the information to the holders of depositary shares representing interests in the Series D

Exhibit 4.(h)

preferred stock within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC, if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.

Maturity

The Series D preferred stock has no stated maturity date and will not be subject to any sinking fund or mandatory redemption provisions.

Ownership Limits and Restrictions on Transfer

In order to maintain our qualification as a REIT for federal income tax purposes, ownership by any person of our outstanding equity securities (which includes the depositary shares) is restricted in our articles of incorporation.

Surrender of Depositary Shares for Shares of Series D Preferred Stock

Under certain circumstances, holders may be required to surrender depositary receipts to the depositary or us. In the event of such a surrender of depositary shares, the holder will be entitled to receive the number of whole or fractional shares of Series D preferred stock represented by the depositary shares.

Depositary Share Listing

Our Series D Preferred Stock is traded on the NYSE under symbol “BFS-PD.” The registrar, transfer agent and distributions disbursing agent for the Series D preferred stock is Continental Stock Transfer & Trust Company.

DESCRIPTION OF SERIES E PREFERRED STOCK

General

Each depositary share represents a 1/100^th^ fractional interest in a share of Series E preferred stock. The Series E preferred stock underlying the depositary shares are deposited with Continental Stock Transfer & Trust Company, as depositary, under a deposit agreement among us, the depositary and the holders from time to time of the depositary receipts issued by the depositary under the deposit agreement. The depositary shares are evidenced by depositary receipts issued pursuant to the deposit agreement. Subject to the terms of the deposit agreement, each record holder of depositary receipts evidencing depositary shares are entitled, proportionately, to all the rights and preferences of, and subject to all of the limitations of, the interest in the Series E preferred stock underlying the depositary shares (including dividend, voting, redemption and liquidation rights and preferences).

Ranking

The Series E preferred stock, with respect to dividend rights and rights upon our liquidation, dissolution or winding-up, ranks:| (1) | senior to all classes or series of our common stock and to all other equity securities issued by us other than equity securities referred to in clause (2) and (3) below; | | --- | --- || (2) | on a parity with our Series D preferred stock and any equity securities authorized or designated by us in the future, the terms of which specifically provide that such equity securities rank on a parity with the Series E preferred stock with respect to dividend rights or rights upon our liquidation, dissolution or winding up; | | --- | --- || (3) | junior to any class or series of equity securities authorized or designated by us in the future which specifically provides that such class or series ranks senior to the Series E preferred stock with respect to dividend rights or rights upon our liquidation, dissolution or winding up. | | --- | --- |

Exhibit 4.(h)

(4)	effectively junior to all our existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) and to the indebtedness of our existing or future subsidiaries.

The term “equity securities” does not include convertible debt securities, which will rank senior to the Series E preferred stock prior to conversion.

Dividends

Holders of depositary shares representing interests in the Series E preferred stock are entitled to receive, when and as declared by our Board of Directors, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 6.000% of the $2,500.00 liquidation preference ($25.00 per depositary share) per year (equivalent to $150 per year or $1.50 per year per depositary share). Dividends on the Series E preferred stock accumulate and be cumulative from, and including, the date of original issue by us of the Series E preferred stock. Dividends are payable quarterly in arrears on January 15, April 15, July 15 and October 15; provided that if any dividend payment date is not a business day, then the dividend which would otherwise have been payable on that dividend payment date will be paid on the next succeeding business day and no interest, additional dividends or other sums will accumulate on the amounts so payable for the period from and after that dividend payment date to that next succeeding business day. Whenever we pay dividends on the Series E preferred stock held by the depositary, the depositary will pay dividends on the same date on the depositary shares. We refer to each such date as a Dividend Payment Date.

Any dividend, including any dividend payable on the Series E preferred stock for any partial dividend period, is computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends are payable to holders of record of depositary shares as they appear in the depositary’s records at the close of business on the applicable record date, which will be the date that our Board of Directors designates for the payment of a dividend that is not more than 30 nor less than 10 days prior to the Dividend Payment Date, which we refer to as a Dividend Payment Record Date.

Our Board of Directors will not authorize, pay or set apart for payment by us any dividend on the Series E preferred stock at any time that:| • | the terms and provisions of any of our agreements, including any agreement relating to our indebtedness, prohibits such authorization, payment or setting apart for payment; | | --- | --- || • | the terms and provisions of any of our agreements, including any agreement relating to our indebtedness, provides that such authorization, payment or setting apart for payment thereof would constitute a breach of, or a default under, such agreement; or | | --- | --- || • | the law restricts or prohibits the authorization or payment. | | --- | --- |Notwithstanding the foregoing, dividends on the Series E preferred stock accumulate whether or not:| • | the terms and provisions of any of our agreements relating to our indebtedness prohibit such authorization, payment or setting apart for payment; | | --- | --- || • | we have earnings; | | --- | --- || • | there are funds legally available for the payment of the dividends; and | | --- | --- || • | the dividends are authorized. | | --- | --- |No interest, or sums in lieu of interest, will be payable in respect of any dividend payment or payments on the Series E preferred stock, which may be in arrears, and holders of the Series E preferred stock will not be entitled to any dividends in excess of the full cumulative dividends described above. Any dividend payment made on the Series E preferred stock is first to be credited against the earliest accumulated but unpaid dividends due with respect to those shares.

Exhibit 4.(h)

Liquidation Preference

Upon the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of shares of Series E preferred stock are entitled to be paid out of our assets legally available for distribution to our shareholders a liquidation preference of $2,500.00 per share (or $25.00 per depositary share), plus an amount equal to any accumulated and unpaid dividends to the date of payment (whether or not declared), before any distribution or payment may be made to holders of shares of common stock or any other class or series of our equity stock ranking, as to liquidation rights, junior to the Series E preferred stock.

If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series E preferred stock and the corresponding amounts payable on all shares of each other class or series of capital stock ranking, as to liquidation rights, on a parity with the Series E preferred stock, such as our Series D preferred stock, then the holders of the Series E preferred stock and each such other class or series of capital stock ranking, as to liquidation rights, on a parity with the Series E preferred stock will share ratably in any distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Holders of Series E preferred stock will be entitled to written notice of any liquidation no fewer than 30 days and no more than 60 days prior to the payment date. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series E preferred stock and depositary shares will have no right or claim to any of our remaining assets.

Our consolidation or merger with or into any other entity or the sale, lease, transfer or conveyance of all or substantially all of our property or business will not be deemed to constitute our liquidation, dissolution or winding up. The Series E preferred stock will rank senior to the common stock as to priority for receiving liquidating distributions and on a parity with any existing and future equity securities which, by their terms, rank on a parity with the Series E preferred stock.

Optional Redemption

The Series E preferred stock is not redeemable prior to September 17, 2024, except under the circumstances described below. On and after September 17, 2024, the Series E preferred stock may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $2,500.00 per share ($25.00 per depositary share), plus all dividends accumulated and unpaid (whether or not declared) on the Series E preferred stock up to the date of such redemption, upon the giving of notice, as provided below. Whenever we redeem shares of our Series E preferred stock held by the depositary, the depositary will redeem as of the same redemption date a number of depositary shares representing the shares so redeemed and the depositary receipts evidencing such depositary shares.

If fewer than all of the outstanding shares of Series E preferred stock are to be redeemed, the shares to be redeemed will be determined pro rata or by lot. In the event that the redemption is to be by lot, and if as a result of the redemption any holder of Series E preferred stock would own, or be deemed by virtue of certain attribution provisions of the Code to own, in excess of 2.5% in value of our issued and outstanding equity securities (which includes the depositary shares), with the exception of members of The Saul Organization, who are currently restricted to 39.9% in value of our issued and outstanding equity securities, then, except in certain instances, we will redeem the requisite number of shares of Series E preferred stock of that shareholder such that the shareholder will not own or be deemed by virtue of certain attribution provisions of the Code to own, subsequent to the redemption, in excess of 2.5% in value of our issued and outstanding equity securities (which includes the depositary shares), with the exception of members of The Saul Organization, who are currently restricted to 39.9% in value of our issued and outstanding equity securities.

We shall give the depositary not less than 30 nor more than 60 days prior written notice of redemption of the deposited Series E preferred stock. A similar notice of redemption will be mailed by the depositary not less than 30

Exhibit 4.(h)

nor more than 60 days prior to the date fixed for redemption to each holder of record of depositary shares that is to be redeemed. The notice will notify the holder of the election to redeem the shares and will state at least the following:| • | the date fixed for redemption thereof, which we refer to as the Redemption Date; | | --- | --- || • | the redemption price; | | --- | --- || • | the number of shares of Series E preferred stock and depositary shares to be redeemed (and, if fewer than all the shares are to be redeemed, the number of shares to be redeemed from such holder); | | --- | --- || • | the place(s) where the depositary receipts evidencing the depositary shares are to be surrendered for payment; and | | --- | --- || • | that dividends on the depositary shares will cease to accumulate on the Redemption Date. | | --- | --- |On or after the Redemption Date, each holder of depositary shares to be redeemed must present and surrender the depositary receipts evidencing the depositary shares to the depositary at the place designated in the notice of redemption. The redemption price of the shares will then be paid to or on the order of the person whose name appears on such depositary receipts as the owner thereof. Each surrendered depositary receipt will be canceled. In the event that fewer than all the depositary receipts are to be redeemed, a new depositary receipt will be issued representing the unredeemed depositary shares.

From and after the Redemption Date (unless we default in payment of the redemption price):| • | all dividends on the shares designated for redemption in the notice will cease to accumulate; | | --- | --- || • | all rights of the holders of the shares, except the right to receive the redemption price thereof (including all accumulated and unpaid dividends up to the Redemption Date), will cease and terminate; | | --- | --- || • | the shares will not thereafter be transferred (except with our consent) on the depositary’s books; and | | --- | --- || • | the shares will not be deemed to be outstanding for any purpose whatsoever. | | --- | --- |Notwithstanding the foregoing, unless full cumulative dividends on all outstanding shares of Series E preferred stock have been paid or declared and a sum sufficient for the payment of the dividends has been set apart for payment for all past dividend periods, no Series E preferred stock will be redeemed unless all outstanding shares of Series E preferred stock are simultaneously redeemed. This requirement will not prevent the purchase or acquisition of Series E preferred stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series E preferred stock. Unless full cumulative dividends on all outstanding shares of Series E preferred stock have been paid or declared and a sum sufficient for the payment of the dividends has been set apart for payment for all past dividend periods, we will not purchase or otherwise acquire directly or indirectly any shares of Series E preferred stock (except by exchange for our equity securities ranking junior to the Series E preferred stock as to dividend rights and liquidation preference).

Notwithstanding any other provision relating to redemption of the Series E preferred stock, we may redeem any or all shares of Series E preferred stock at any time, whether or not prior to September 17, 2024, if our Board of Directors determines that the redemption is necessary or advisable to preserve our status as a REIT.

Special Optional Redemption

During any period of time (whether before or after September 17, 2024) that both (i) the Series E preferred stock (or the depositary shares) are no longer listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ, and (ii) we are not subject to the reporting requirements of the Exchange Act, but any Series E preferred stock is still outstanding (which we refer to collectively as a “Delisting Event”), we may, at our option, redeem the Series E preferred stock, in whole or in part and within 90 days after the date of the Delisting Event, by paying $2,500.00 per share

Exhibit 4.(h)

(equivalent to $25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the date of redemption.

Upon the occurrence of a Change of Control (defined below), we may, at our option, redeem the Series E preferred stock, in whole or in part and within 120 days after the first date on which such Change of Control occurred, by paying $2,500.00 per share (equivalent to $25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the date of redemption.

If, prior to the applicable conversion date, we have provided or provide notice of redemption with respect to the Series E preferred stock (whether pursuant to our optional redemption right described above or this special optional redemption right following a Change of Control or Delisting Event), the holders of depositary shares representing interests in the Series E preferred stock will not be permitted to exercise the conversion right described below under “Conversion” in respect of their shares called for redemption.

The depositary will mail to you, if you are a record holder of the depositary shares representing interests in the Series E preferred stock, a notice of redemption, furnished by us, no fewer than 30 days nor more than 60 days before the redemption date. The depositary will send the notice to your address shown on the records of the depositary. No failure to give the notice or any defect in the notice or in the mailing of the notice will affect the validity of the proceedings for the redemption of any depositary shares or shares of our Series E preferred stock except as to a holder to whom notice was defective or not given. Each notice will state the following:| • | the redemption date; | | --- | --- || • | the redemption price; | | --- | --- || • | the number of depositary shares representing interests in the Series E preferred stock to be redeemed; | | --- | --- || • | the place(s) where the depositary receipts (or Series E preferred stock certificates, if no longer held in depositary form) are to be surrendered for payment; | | --- | --- || • | that the Series E preferred stock is being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control or Delisting Event and a brief description of the transaction or transactions or circumstances constituting such Change of Control or Delisting Event; | | --- | --- || • | that the holders of depositary shares representing interests in the Series E preferred stock to which the notice relates will not be able to convert such shares of Series E preferred stock in connection with the Change of Control or Delisting Event and each share of Series E preferred stock tendered for conversion that is selected, prior to the applicable conversion date, for redemption will be redeemed on the related date of redemption instead of converted; and | | --- | --- || • | that dividends on the Series E preferred stock to be redeemed will cease to accumulate on the redemption date. | | --- | --- |If we redeem fewer than all of the outstanding shares of Series E preferred stock, the notice of redemption mailed to each record holder of depositary shares will also specify the number of shares of Series E preferred stock that we will redeem from such record holder. In this case, we will determine the number of shares of Series E preferred stock to be redeemed on a pro rata basis or by lot.

If we have given a notice of redemption and have irrevocably set aside sufficient funds for the redemption for the benefit of the holders of the depositary shares representing interests in the Series E preferred stock called for redemption, then from and after the redemption date, those depositary shares will be treated as no longer being outstanding, no further dividends will accumulate on the underlying Series E preferred stock and all other rights of the holders of those depositary shares will terminate. If any redemption date is not a business day, then the redemption price and accumulated and unpaid dividends, if any, payable upon redemption may be paid on the next business day and no interest, additional dividends or other sums will accumulate on the amount payable for the period from and after that redemption date to that next business day. The holders of those depositary shares will retain their right to receive the redemption price for their underlying shares of Series E preferred stock (including any accumulated and unpaid dividends to but excluding the redemption date).

Exhibit 4.(h)

The holders of depositary shares representing interests in the Series E preferred stock at the close of business on a dividend record date will be entitled to receive the dividend payable with respect to the Series E preferred stock on the corresponding payment date notwithstanding the redemption of the Series E preferred stock between such record date and the corresponding payment date or our default in the payment of the dividend due. Except as provided above, we will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series E preferred stock to be redeemed.

Unless full cumulative dividends on all shares of Series E preferred stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment for all past dividend periods, no shares of Series E preferred stock shall be redeemed unless all outstanding shares of Series E preferred stock are simultaneously redeemed and we shall not purchase or otherwise acquire directly or indirectly any shares of Series E preferred stock (except by exchanging it for our capital stock ranking junior to the Series E preferred stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase or acquisition by us of shares of Series E preferred stock to preserve our REIT status for federal income tax purposes or pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series E preferred stock.

A “Change of Control” is when, after the original issuance of the Series E preferred stock, the following have occurred and are continuing:

| • | the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of our company entitling that person to exercise more than 50% of the total voting power of all shares of our company entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and | | --- | --- || • | following the closing of any transaction referred to in the bullet point above, neither we nor any acquiring or surviving entity has a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ. | | --- | --- |Conversion

Upon the occurrence of a Change of Control or Delisting Event, each holder of depositary shares representing interests in the Series E preferred stock will have the right (unless, prior to the applicable conversion date, we have provided or provide notice of our election to redeem the depositary shares or the Series E preferred stock as described above under “Optional Redemption” or “Special Optional Redemption”) to direct the depositary, on such holder’s behalf, to convert some or all of the shares of Series E preferred stock underlying the depositary shares held by such holder (the “Conversion Right”) on the applicable conversion date into a number of shares of our common stock (or equivalent value of alternative consideration) per depositary share, or the “Common Stock Conversion Consideration,” equal to the lesser of:| • | the quotient obtained by dividing (1) the sum of the $25.00 per depositary share liquidation preference plus the amount of any accumulated and unpaid dividends to, but not including, the applicable conversion date (unless the applicable conversion date is after a record date for a Series E preferred stock dividend payment and prior to the corresponding Series E preferred stock dividend payment date, in which case no additional amount for such accumulated and then remaining unpaid dividend will be included in this sum) by (2) the Common Stock Price (such quotient, the Conversion Rate); and | | --- | --- || • | 0.9617 (i.e., the Share Cap), subject to certain adjustments described below. | | --- | --- |The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of shares of our common stock to existing holders of common stock), subdivisions or combinations (in each case, a “Share Split”) with respect to our common stock as follows: the adjusted Share Cap as the result of a Share Split will be the number of shares of our common stock that is equivalent to the product obtained by multiplying (1) the Share Cap in effect immediately prior to such Share Split by (2) a fraction, the numerator of

Exhibit 4.(h)

which is the number of shares of our common stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of our common stock outstanding immediately prior to such Share Split.

For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of our common stock (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable in connection with the exercise of the Conversion Right and in respect of the depositary shares currently outstanding will not exceed 4,231,480 shares of common stock in the aggregate (or equivalent Alternative Conversion Consideration, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap and is subject to increase in the event that additional shares of Series E preferred stock or depositary shares are issued in the future.

In the case of a Change of Control or Delisting Event pursuant to, or in connection with, which our common stock will be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Conversion Consideration”), a holder of depositary shares representing interests in Series E preferred stock will receive upon conversion of such Series E preferred stock the kind and amount of Alternative Conversion Consideration which such holder would have owned or been entitled to receive upon the Change of Control or Delisting Event had such holder held a number of shares of our common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control or Delisting Event (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control or Delisting Event, is referred to as the “Conversion Consideration”).

If the holders of our common stock have the opportunity to elect the form of consideration to be received in, or in connection with, the Change of Control or Delisting Event, the consideration that the holders of the depositary shares representing interests in the Series E preferred stock will receive will be the form and proportion of the aggregate consideration elected by the holders of our common stock who participate in the determination (based on the weighted average of elections) and will be subject to any limitations to which all holders of our common stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in, or in connection with, the Change of Control or Delisting Event.

We will not issue fractional shares of common stock upon the conversion of the Series E preferred stock. Instead, we will pay the cash value of such fractional shares in lieu of such fractional shares. Because each depositary share represents a 1/100^th^ interest in a share of the Series E preferred stock, the number of shares of common stock ultimately received for each depositary share will be equal to the number of shares of common stock received upon conversion of each share of Series E preferred stock divided by 100. In the event that the conversion would result in the issuance of fractional shares of common stock, we will pay the holder of depositary shares the cash value of such fractional shares in lieu of such fractional shares.

Within 15 days following the occurrence of a Change of Control or Delisting Event, we will provide to holders of the depositary shares representing interests in the Series E preferred stock a notice of occurrence of the Change of Control or Delisting Event that describes the resulting Conversion Right. This notice will state the following:| • | the events constituting the Change of Control or Delisting Event; | | --- | --- || • | the date of the Change of Control or Delisting Event; | | --- | --- || • | the last date on which the holders of the depositary shares representing interests in the Series E preferred stock may exercise their Conversion Right; | | --- | --- || • | the method and period for calculating the Common Stock Price; | | --- | --- || • | the date fixed for conversion in connection with the Change of Control or Delisting Event, which we refer to as the conversion date, which will be a business day fixed by our Board of Directors that is not fewer than 20 and not more than 35 days following the date of the notice; | | --- | --- |

Exhibit 4.(h)

| • | that if, prior to the applicable conversion date, we have provided or provide notice of our election to redeem all or any portion of the Series E preferred stock, holders will not be able to convert the Series E preferred stock and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Conversion Right; | | --- | --- || • | if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series E preferred stock; | | --- | --- || • | the name and address of the paying agent and the conversion agent; | | --- | --- || • | the procedures that the holders of the depositary shares representing interests in the Series E preferred stock must follow to exercise the Conversion Right; and | | --- | --- || • | the last date on which holders of the depositary shares representing interests in the Series E preferred stock may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal. | | --- | --- |We will issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of the depositary shares representing interests in the Series E preferred stock.

To exercise the Conversion Right, each holder of depositary shares representing interests in the Series E preferred stock will be required to deliver, on or before the close of business on the applicable conversion date, the depositary receipts or certificates, if any, evidencing the interests in Series E preferred stock to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the depositary. The conversion notice must state:| • | the relevant conversion date; | | --- | --- || • | the number of depositary shares representing interests in the shares of Series E preferred stock to be converted; and | | --- | --- || • | that the depositary shares are to be converted pursuant to the applicable provisions of the Series E preferred stock. | | --- | --- |The “Common Stock Price” for any Change of Control will be: (1) if the consideration to be received in the Change of Control by the holders of our common stock is solely cash, the amount of cash consideration per share of common stock; and (2) if the consideration to be received in the Change of Control by holders of our common stock is other than solely cash (x) the average of the closing prices for our common stock on the principal U.S. securities exchange on which our common stock is then traded (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by OTC Markets Group Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if our common stock is not then listed for trading on a U.S. securities exchange.

Holders of the depositary shares representing interests in the Series E preferred stock may withdraw any notice of exercise of a Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the depositary

Exhibit 4.(h)

prior to the close of business on the business day prior to the applicable conversion date. The notice of withdrawal must state:| • | the number of withdrawn depositary shares; | | --- | --- || • | if certificated depositary shares have been issued, the receipt or certificate numbers of the withdrawn depositary shares; and | | --- | --- || • | the number of depositary shares, if any, which remain subject to the conversion notice. | | --- | --- |Notwithstanding the foregoing, if the Series E preferred stock is held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of The Depository Trust Company or a similar depositary, and the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures, if any, of the applicable depositary.

Shares of Series E preferred stock as to which the Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Conversion Right on the applicable conversion date, unless prior to the applicable conversion date we have provided or provide notice of our election to redeem such shares of Series E preferred stock, whether pursuant to our optional redemption right or our special optional redemption right. If we elect to redeem shares of Series E preferred stock that would otherwise be converted into the applicable Conversion Consideration on a conversion date, such shares of Series E preferred stock will not be so converted and the holders of such shares will be entitled to receive on the applicable redemption date $2,500.00 per share (or $25.00 per depositary share), plus any accumulated and unpaid dividends thereon to, but not including, the redemption date. See “Optional Redemption” and “Special Optional Redemption.”

In connection with the exercise of any Conversion Right, we will comply with all applicable federal and state securities laws and stock exchange rules in connection with any conversion of Series E preferred stock into our common stock. Notwithstanding any other provision of the Series E preferred stock, no holder of Series E preferred stock or depositary shares will be entitled to convert such shares into our common stock to the extent that receipt of such common stock would cause such holder (or any other person) to exceed the share ownership limits contained in our articles of incorporation and the articles supplementary setting forth the terms of the Series E preferred stock, unless we provide an exemption from this limitation for such holder. See “—Ownership Limits and Restrictions on Transfer,” below.

Neither the Series E preferred stock nor the depositary shares are convertible into or exchangeable for any other securities or property, except as provided above and except that the shares of Series E preferred stock and depositary shares may be exchanged for “excess stock” in order to ensure that we remain qualified as a REIT for federal income tax purposes.

Voting Rights

Except as described below, holders of depositary shares will generally have no voting rights. In any matter in which the Series E preferred stock may vote (as expressly provided herein, or as may be required by law), each share of Series E preferred stock shall be entitled to one vote. As a result, each depositary share will be entitled to 1/100^th^ of a vote.

If dividends on the Series E preferred stock are in arrears, whether or not declared, for six or more quarterly periods, whether or not these quarterly periods are consecutive, holders of Series E preferred stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable, including our Series D preferred stock) will be entitled to vote, at a special meeting called by the holders of record of at least 10% of any series of preferred stock as to which dividends are so in arrears or at the next

Exhibit 4.(h)

annual meeting of shareholders, for the election of two additional directors to serve on our Board of Directors until all dividend arrearages have been paid.

Any amendment, alteration, repeal or other change to any provision of our articles of incorporation, including the articles supplementary establishing the Series E preferred stock, whether by merger, consolidation or otherwise, in any manner that would materially and adversely affect the rights, preferences, powers or privileges of the Series E preferred stock cannot be made without the affirmative vote of holders of at least 66^2^/3% of the outstanding shares of Series E preferred stock, voting separately as a class. In addition, the creation, issuance or increase in the authorized number of shares of any class or series of stock having a preference as to dividends or distributions, whether upon liquidation, dissolution, or otherwise, that is senior to the shares of Series E preferred stock requires the affirmative vote of holders of at least 66^2^/3% of the outstanding shares of Series E preferred stock, voting separately as a class.

The following actions are not deemed to materially and adversely affect the rights, preferences, powers or privileges of the Series E preferred stock:

| • | any increase in the amount of our authorized common stock or preferred stock or the creation or issuance of equity securities of any class or series ranking, as to dividends or liquidation preference, on a parity with, or junior to, the Series E preferred stock; or | | --- | --- || • | the amendment, alteration or repeal or change of any provision of our articles of incorporation, including the articles supplementary establishing the Series E preferred stock, as a result of a merger, consolidation, reorganization or other business combination, if the Series E preferred stock (or shares into which the Series E preferred stock have been converted in any successor entity to us) remain outstanding with the terms thereof materially unchanged. | | --- | --- |Information Rights

During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any shares of Series E preferred stock are outstanding, we will use our best efforts to (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of the depositary shares representing interests in the Series E preferred stock, as their names and addresses appear on our record books and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any holders of the depositary shares representing interests in the Series E preferred stock or prospective holders of depositary shares representing interests in the Series E preferred stock. Under the circumstances described above, we will use our best efforts to mail (or otherwise provide) the information to the holders of depositary shares representing interests in the Series E preferred stock within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC, if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.

Maturity

The Series E preferred stock has no stated maturity date and will not be subject to any sinking fund or mandatory redemption provisions.

Ownership Limits and Restrictions on Transfer

Surrender of Depositary Shares for Shares of Series E Preferred Stock

Under certain circumstances, holders may be required to surrender depositary receipts to the depositary or us. In the event of such a surrender of depositary shares, the holder will be entitled to receive the number of whole or fractional shares of Series E preferred stock represented by the depositary shares.

Exhibit 4.(h)

Depositary Share Listing

Our Series E Preferred Stock is traded on the NYSE under symbol “BFS-PE.” The registrar, transfer agent and distributions disbursing agent for the Series E preferred stock is Continental Stock Transfer & Trust Company.

Certain provisions of Maryland laws and our articles of incorporation and bylaws

The following summary of certain provisions of the Maryland General Corporation Law and our articles of incorporation and bylaws is not complete. You should read the Maryland General Corporation Law and our articles of incorporation and bylaws for more complete information. The business combination provisions and the control share acquisition provisions of Maryland law, both of which are discussed below, could have the effect of delaying or preventing a change in our control. Also, the removal of directors provisions and the advance notice provisions of the bylaws could have the effect of delaying or preventing a transaction or a change in our control. These provisions could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offer, even if the offer contains a premium price for holders of our equity stock or otherwise benefits stockholders.

Restrictions on Ownership and Transfer

Restrictions on ownership and transfer of shares are important to ensure that we meet certain conditions under the U.S. Internal Revenue Code of 1986, as amended ("The Code") to qualify as a REIT. For example, the Code contains the following requirements.| • | No more than 50% in value of a REIT’s stock may be owned, actually or constructively (based on attribution rules in the Code), by five or fewer individuals during the last half of a taxable year or a proportionate part of a shorter taxable year. Under the Code, individuals include certain tax-exempt entities, except that qualified domestic pension funds are not generally treated as individuals. | | --- | --- || • | If a REIT, or an owner of 10% or more of a REIT, is treated as owning 10% or more of a tenant of the REIT’s property, the rent received by the REIT from the tenant will not be “qualifying income” for purposes of the REIT gross income tests of the Code. | | --- | --- || • | A REIT’s stock or beneficial interests must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. | | --- | --- |In order to maintain our qualification as a REIT, our articles of incorporation, subject to certain exceptions described below, provides that no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 2.5% in value of our issued and outstanding equity securities with the exception of members of The Saul Organization, who are restricted to 39.9% in value of our issued and outstanding equity securities. The term “ownership limitation” is used to describe this provision of our articles of incorporation.

Any transfer of shares will be null and void, and the intended transferee will acquire no rights in such shares if the transfer:| • | results in any person owning, directly or indirectly, shares in excess of the ownership limitation; | | --- | --- || • | results in the shares being owned by fewer than 100 persons (determined without reference to any rules of attribution); | | --- | --- || • | results in our being “closely held” (within the meaning of Section 856(h) of the Code); or | | --- | --- || • | otherwise results in our failure to qualify as a REIT. | | --- | --- |If a stockholder owns more than 1.9% of the value of our outstanding equity stock, then the stockholder must notify us of its share ownership by January 31 of each year.

The ownership limitation generally does not apply to the acquisition of stock by an underwriter that participates in a public offering of such stock. In addition, the Board of Directors may waive these restrictions on a case-by-case basis. The Board has authorized the Company to grant waivers to look-through entities, such as mutual funds, in which shares of equity stock owned by the entity are treated as owned proportionally by individuals who are the beneficial owners of the entity. Even though these entities may own stock in excess of the 2.5% ownership limit, no

Exhibit 4.(h)

individual beneficially or constructively would own more than 2.5%. The Board of Directors has agreed to waive the ownership limit with respect to certain mutual funds and similar investors. In addition, the Board of Directors has agreed to waive the ownership limit with respect to certain bank pledgees of shares of our common stock and units issued by the Operating Partnership and held by members of The Saul Organization.

The ownership limitation could have the effect of delaying, deferring or preventing a transaction or a change in our control that might involve a premium price for our stock or otherwise be in the best interest of our stockholders. All certificates representing shares of stock will bear a legend referring to the restrictions described above.

Automatic Transfer of Stock to Trust

With certain exceptions described below, if any purported transfer of shares would violate any of the restrictions described in the immediately preceding paragraph, then the transfer will be null and void, and those shares will be designated as “excess stock” and transferred automatically to a trust. The transfer to the trust is effective as of the end of the business day next preceding the date of the purported transfer of such shares. The record holder of the shares that are designated as excess stock must deliver those shares to us for registration in the name of the trust. We will act as trustee of the trust. The beneficiary of the trust will be the persons to whom an interest in the excess stock is eventually transferred as provided below.

Any shares of excess stock remain issued and outstanding shares of stock. From and after the purported transfer resulting in excess stock, the record holder shall not be entitled to any dividends or distributions (except upon liquidation) or voting right, except as required by law, but shall be entitled to the right to payment of the purchase price of the shares. Any dividend or distribution paid to a record holder on excess stock shall be repaid to us upon demand. Subject to the ownership limitation, the excess stock may be retransferred by the record holder to any person if the excess stock will not be excess stock in the hands of the person at a price not to exceed:

| • | the price paid by the record holder; or | | --- | --- || • | if no consideration was paid, fair market value, at which point the excess stock will automatically be exchanged for the equity stock to which the excess stock was attributable. | | --- | --- |In addition, the excess stock will be subject to repurchase by us at our election for a period of 90 days after the date of the purported transfer which resulted in such excess stock at a price per share equal to the lesser of (1) the price per share in the transaction that created the excess stock or (2) the fair market value of such shares on the date that we, or our designee, determine to exercise the repurchase right.

Any person who acquires or attempts to acquire common stock or preferred stock which would be null and void under the restrictions described above, or any person who owned shares of common stock or preferred stock that were transferred to a trust, must (1) give us immediate written notice of such event and (2) provide us such other information as requested in order to determine the effect, if any, of such transfer on our status as a REIT.

Business Combinations

The Maryland General Corporation Law prohibits us from entering into “business combinations” and other corporate transactions unless special actions are taken. The business combinations that require these special actions include a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance of equity securities when the combination is between us and an “interested stockholder” (as defined below). An interested stockholder is:| • | any person who beneficially owns 10% or more of the voting power of our shares; or | | --- | --- || • | any of our affiliates which beneficially owned 10% or more of the voting power of our shares within two years prior to the date in question. | | --- | --- |We may not engage in a business combination with an interested stockholder or any of its affiliates for five years after the interested stockholder becomes an interested stockholder. We may engage in business combinations with an interested stockholder if at least five years have passed since the person became an interested stockholder, but only if the transaction is:

Exhibit 4.(h)

| • | recommended by our Board of Directors; and | | --- | --- || • | approved by at least | | --- | --- || • | 80% of our outstanding shares entitled to vote; and | | --- | --- || • | two-thirds of our outstanding shares entitled to vote that are not held by the interested stockholder. | | --- | --- |Stockholder approval will not be required if our stockholders receive a minimum price (as defined in the statute) for their shares and our stockholders receive cash or the same form of consideration as the interested stockholder paid for its shares.

This prohibition does not apply to business combinations involving us that are exempted by the Board of Directors before the interested stockholder becomes an interested stockholder. Our articles of incorporation have exempted from this provision any business combination with a member of The Saul Organization.

Control Share Acquisitions

The Maryland General Corporation Law provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights unless two-thirds of the stockholders (excluding shares owned by the acquirer, and by the officers and directors who are employees of the Maryland corporation) approve their voting rights.

“Control Shares” are shares that, if added with all other shares previously acquired, would entitle that person to vote, in electing the directors| • | 10% or more but less than one-third of such shares; | | --- | --- || • | one-third or more but less than a majority of such shares; or | | --- | --- || • | a majority of the outstanding shares. | | --- | --- |Control shares do not include shares the acquiring person is entitled to vote with stockholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.

If this provision becomes applicable to us, a person who has made or proposes to make a control share acquisition could, under certain circumstances, compel our Board of Directors to call a special meeting of stockholders to consider the voting rights of the control shares. We could also present the question at any stockholders’ meeting on our own.

If this provision becomes applicable to us, subject to certain conditions and limitations, we would be able to redeem any or all control shares. If voting rights for control shares were approved at a stockholders meeting and the acquirer were entitled to vote a majority of the shares entitled to vote, all other stockholders could exercise appraisal rights and exchange their shares for a fair value as defined by statute.

Our articles of incorporation state that the Maryland “control share acquisition” law will not apply to any acquisition of our capital stock by the following persons:| • | members of The Saul Organization; | | --- | --- || • | directors, officers and employees of us and the Partnership; and | | --- | --- || • | any other persons authorized by the Board of Directors. | | --- | --- |Limitation of Liability of Directors and Officers

Our articles of incorporation provide that, to the fullest extent that limitations on the liability of directors and officers are permitted by the Maryland General Corporation Law, no director or officer shall be liable to us or our stockholders for money damages. The Maryland General Corporation Law provides that we may restrict or limit the liability of directors or officers for money damages except

Exhibit 4.(h)

| • | to the extent anyone actually received an improper benefit or profit in money property or services; or | | --- | --- || • | a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding that the person’s action was material to the cause of action adjudicated and the action or failure to act was the result of bad faith or active and deliberate dishonesty. | | --- | --- |Indemnification of Directors and Officers

Our articles and bylaws require us to indemnify to the fullest extent permitted by and under the applicable provisions of Maryland General Corporation Law any person who is or was, or who agrees to become, one of our directors or officers or, while one of our directors, is or was serving or agrees to serve, as a director, officer, partner, joint venturer, employee or trustee of another entity, who, by reason of his or her status or service as such was, or is threatened to be made a party, or otherwise involved in any proceeding. The indemnification extends to all losses suffered and all expenses actually and reasonably incurred in connection with any proceeding. The Maryland General Corporation Law provides that we may indemnify directors and officers unless| • | the director actually received an improper benefit or profit in money, property or services; | | --- | --- || • | the act or omission of the director was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; or | | --- | --- || • | in a criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. | | --- | --- |Our articles of incorporation and bylaws require, as a condition to advancing expenses, (1) a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by us and (2) a written affirmation to repay the amount paid by us if it is determined that the director or officer was not entitled to indemnification.

Our articles of incorporation and bylaws also provide that:| • | we may, but are not required to, provide indemnification, payment or reimbursement of expenses to any of our employees or agents in such capacity or any person who is or was serving at our request as a director, officer, partner, joint venturer, employee, trustee or agent of another corporation or entity; | | --- | --- || • | the Board of Directors may authorize management to act on our behalf in matters relating to indemnification, subject to any limitations that may be imposed by the Board of Directors and to the requirements of applicable law; | | --- | --- || • | indemnification and payment or reimbursement of advances as may be permitted or required pursuant to our bylaws shall be furnished in accordance with the procedures set forth in the Maryland General Corporation Law; and | | --- | --- || • | we may provide such other further indemnification or provision for the payment or advancement of expenses as may be permitted by the Maryland General Corporation Law for directors of Maryland corporations. | | --- | --- |Duties of Directors

Under Maryland law, there is a presumption that the act of a director satisfies the required standard of care. An act of a director relating to or affecting an acquisition or a potential acquisition of control is not subject under Maryland law to a higher duty or greater scrutiny than is applied to any other act of a director. This provision does not impose an enhanced level of scrutiny when a board implements anti-takeover measures in a change of control context, and shifts the burden of proof for demonstrating that the defensive mechanism adopted by a board is reasonable in relation to the threat posed to the board.

Number of Directors; Classified Board

The number of directors may be increased or decreased pursuant to the bylaws, provided that the total number of directors may not be less than 3 or more than 15. Under Maryland law and our articles of incorporation, directors,

Exhibit 4.(h)

subject to the rights of holders of any shares of preferred stock, are elected in three classes for staggered, three-year terms.

Removal of Directors

Under the articles of incorporation, and subject to the rights of any holders of preferred stock, our stockholders may remove a director only with cause upon the affirmative vote of 75% of the Board of Directors or 75% of the number of shares outstanding and entitled to vote on that matter.

Vacancies on the Board of Directors

The bylaws provide that, subject to the rights of any holders of preferred stock, any vacancy on the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled by vote of a majority of the remaining directors. Each director so elected shall serve for the unexpired term of the director he is replacing.

Meetings of Stockholders

Our bylaws provide for an annual meeting of stockholders, to be held in April, to elect individuals to the Board of Directors for that class of directors then standing for election and transact such other business as may properly be brought before the meeting. Special meetings of stockholders may be called by our Chairman of the Board, President or by a majority of the Board of Directors, and shall be called at the request in writing of the holders of 25% of all votes entitled to be cast at the meeting.

Our bylaws provide that any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting, if all of the shares entitled to vote on the matter consent to the action in writing, the written consents are filed with the records of the meetings of stockholders and each stockholder executed a written waiver of any right to dissent.

Advance Notice for Stockholder Nominations and Stockholder New Business Proposals

Our bylaws require advance written notice for stockholders to nominate a director or bring other business before a meeting of stockholders. For an annual meeting, to nominate a director or bring other business before a meeting of stockholders, a stockholder must deliver notice to our Secretary not later than the close of business on the 60th day nor earlier than the close of business on the 90^th^ day prior to the first anniversary of the preceding year’s annual meeting. If the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date, however, notice must be timely delivered not earlier than the close of business on the 90^th^ day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to the annual meeting or the 10^th^ day following the date on which public announcement is first made of the annual meeting.

For a special meeting, to nominate a director, a stockholder must deliver notice to our Secretary not earlier that the close of business on the 90^th^ day prior to the special meeting and not later than the close of business on the later of the 70th day prior to the special meeting or the 10^th^ day following the date on which public announcement is first made of the special meeting. Nominations for elections to the Board of Directors at a special meeting may be made by stockholders only if the Board of Directors has determined that directors shall be elected at the special meeting.

The postponement or adjournment of an annual or special meeting to a later date or time shall not commence any new time periods for the giving of notice as described above. Our bylaws contain detailed requirements for the contents of stockholder notices of director nominations and new business proposals.

		Exhibit

Exhibit 10.(w)

SAUL HOLDINGS LIMITED PARTNERSHIP

CONTRIBUTION AGREEMENT

TWINBROOK QUARTER

Dated: November 5, 2019

Exhibit 10.(w)

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS	4
ARTICLE 2	EXCHANGE VALUE	8
ARTICLE 3	NO STUDY PERIOD	9
ARTICLE 4	TITLE	9
ARTICLE 5	REPRESENTATIONS AND WARRANTIES	10
ARTICLE 6	COVENANTS AND ADDITIONAL OBLIGATIONS OF OWNER	14
ARTICLE 7	REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTNERSHIP	15
ARTICLE 8	CONDITIONS PRECEDENT	16
ARTICLE 9	CLOSING; ESCROW RELEASE	20
ARTICLE 10	CLOSING MATTERS; ESCROW RELEASE MATTERS	21
ARTICLE 11	PRORATIONS AND ADJUSTMENTS	23
ARTICLE 12	DEFAULT; OTHER TERMINATION	24
ARTICLE 13	INDEMNIFICATION	26
ARTICLE 14	CASUALTY, CONDEMNATION OR TAKING	27
ARTICLE 15	BROKERS	28
ARTICLE 16	MISCELLANEOUS	28
ARTICLE 17	CONFIDENTIALITY	31

Exhibit 10.(w)

EXHIBITS

Exhibit A Legal Description of Owned Property

Exhibit A-1 Legal Description of Leased Property

Exhibit 5.1(b)	Permitted Exceptions, Contracts and Leases as of the Effective <br> Date

Exhibit 5.1(m) Binding Undertakings

Exhibit 10.1(a) Form of Escrow Agreement

Exhibit 10.1(c) Form of Deed

Exhibit 10.1(d) Form of FIRPTA Certificate

Exhibit 10.1(e) Form of Partnership Agreement Amendment

Exhibit 10.1(f) Form of Owner’s Certificate re: Representations and Warranties

Exhibit 10.1(g) Form of Blanket Conveyance, Bill of Sale and Assignment

Exhibit 10.1(h) Form of Assignment of Ground Lease

Exhibit 10.1(i) Form of Assignment of Space Leases

Exhibit 10.2 Form of Partnership’s Certificate re: Representations and

Warranties

Exhibit 10.(w)

CONTRIBUTION AGREEMENT

PREAMBLE:

THIS CONTRIBUTION AGREEMENT (this “Agreement”) is made as of the 5^th^ day of November, 2019 (the “Effective Date”), by and between SAUL HOLDINGS LIMITED PARTNERSHIP, a Maryland limited partnership (the “Partnership”), and 1592 ROCKVILLE PIKE LLC, a Delaware limited liability company, which has qualified to do business in Maryland (“Owner”), as contributor of all of the fee simple interest of the Owned Property (hereinafter defined) and all of the leasehold estate in the Leased Property (hereinafter defined).

RECITALS:

A.Owner is the owner of the property (hereafter the “Owned Property”), as more particularly described in Exhibit A attached hereto, and the lessee of the property (hereafter the “Leased Property” and, together with the Owned Property, the “Property”), as more particularly described in Exhibit A-1 attached hereto, which term Property shall include all rights and appurtenances owned by Owner pertaining to such land, including, without limitation, all rights, titles and interests of Owner in and to: (i) all minerals, oil, gas, and other hydrocarbon substances thereon; (ii) all adjacent strips, streets, roads, avenues, alleys and rights-of-way, public or private, open or proposed, including any rights in vault space adjacent to or within the boundaries of such land; (iii) all easements, covenants, privileges, and hereditaments, whether or not of record; (iv) all access, air, water, riparian, development, utility, and solar rights; (v) all site plans, surveys and plans and relating to the Property; (vi) all bonds relating to the Property; (vii) all permits, licenses and other governmental approvals which relate to the Property; (viii) all improvements located on the Property; (ix) all other tangible personal property located in or on the Property; (x) all contracts relating to the Property or aforesaid personal property, (xi) any tradename relating to the Property; and (xii) all space leases, rental agreements, licenses, license agreements and other occupancy agreements with tenants occupying all or any portion of the Property.

B.The Partnership desires to acquire, and Owner desires to contribute, the Property, upon and subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1 DEFINITIONS

For purposes of this Agreement, unless the context otherwise requires, the following terms shall have the meanings hereinafter set forth (such meanings to be applicable to the singular and plural forms of such terms and the masculine and feminine forms of such terms):

Exhibit 10.(w)

Section 1.1 “Act” shall have the meaning set forth in Section 5.2(b) of this Agreement.

Section 1.2 “Agreement” shall have the meaning set forth in the preamble of this Agreement.

Section 1.3 “Aggregate Exchange Value” shall have the meaning set forth in Section 2.2 of this Agreement.

Section 1.4 “Binding Undertaking” shall mean any written or verbal commitment to any Governmental Authority, utility company, school board, church or other religious body, or any property owners’ association, or to any other organization, group, or individual, relating to the Property which would impose upon the owner of the Property from time to time an obligation to make any contribution or dedications of money or land or to construct, install, or maintain any improvements of a public or private nature on or off the Property.

Section 1.5 “Business Day” shall mean any day excluding Saturday, Sunday and any day which in the State of Maryland is a legal holiday or a day on which banking institutions are authorized by law or by other governmental actions to close.

Section 1.6 “Closing” shall have the meaning set forth in Section 9.1 of this Agreement.

Section 1.7 “Closing Date” shall mean November 5, 2019.

Section 1.8 “Company” shall mean Saul Centers, Inc., the general partner of the Partnership.

Section 1.9 “Contracts” shall have the meaning set forth in Section 5.1(b) of this Agreement.

Section 1.10 “Contribution Transaction” shall have the meaning set forth in Section 9.1 of this Agreement.

Section 1.11 “Current Proceeding” shall mean Samuel Shipkovitz vs Mayor and Council of the City of Rockville, Circuit Court for Montgomery County, Maryland, Case No. 467025-V.

Section 1.12 “Effective Date” shall have the meaning set forth in the preamble of this Agreement.

Section 1.13 “Entitlement Reimbursement” shall mean all costs, other than costs related to any Proceedings which shall be allocated pursuant to Section 11.2 hereof, that Owner shall have incurred during the period commencing on May 1, 2019, and expiring on the First Escrow Release Date relating to the site plan entitlements, permits and related costs (including engineers’, architects’ and other consultants’ fees) with respect to the Property, as reasonably determined by Owner subject to reasonable verification by the Partnership.

Section 1.14 “Environmental Law” shall mean any present and future law and any amendments (whether common law, statute, rule, order, regulation or otherwise), permits and other requirements or guidelines of governmental authorities applicable to the Property and relating to the environment and environmental conditions or to any Hazardous Material (including, without limitation, CERCLA, 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Clean Air Act,

Exhibit 10.(w)

33 U.S.C. § 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq., the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. § 1101 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., and any so-called “Super Fund” or “Super Lien” law, any law requiring the filing of reports and notices relating to Hazardous Materials, environmental laws administered by the Environmental Protection Agency, and any similar state and local laws, all amendments thereto and all regulations, orders, decisions, and decrees now or hereafter promulgated thereunder concerning the environment, industrial hygiene or public health or safety).

Section 1.15 “Environmental Reports” shall mean, collectively, that certain Phase I Environmental Site Assessment of Twinbrook Metroplace Shopping Center, 1592 Rockville Pike, Rockville, Maryland 20852 dated January 15, 2014, prepared by EMG, and that certain Phase I Environmental Site Assessment of 1616 Rockville Pike, Rockville, Maryland 20852 dated March 1, 2017, prepared by EMG.

Section 1.16 “Escrow Agreement” shall have the meaning set forth in Section 10.1(a) of this Agreement.

Section 1.17 “First Escrow Release” shall have the meaning set forth in Section 9.2 of this Agreement.

Section 1.18 “First Escrow Release Date” shall mean the later of (a) October 18, 2021, or (b) ten (10) days following the date on which there is a final, non-appealable resolution, in a manner favorable to Owner, of all Proceedings pending as of such date; provided, however, that if the date contemplated by clause (b) occurs prior to October 8, 2021, then, following the date on which there is a final, non-appealable resolution, in a manner favorable to Owner, of all Proceedings pending as of such date, Owner and the Partnership shall have the right, acting together, to designate the First Escrow Release Date, it being understood that the parties shall not designate a date that is later than October 18, 2021 for such purpose.

Section 1.19 “Governmental Authorities” shall mean any commission, department or body of any municipality, township, city, county, state or Federal governmental unit having jurisdiction over any of the Property or the ownership, management, operation, use or improvement thereof.

Section 1.20 “Hazardous Conditions” refers to the presence on, in or about any of the Property (including ground water) of Hazardous Materials, the concentration, condition, quantity, location or other characteristics of which fail to comply with applicable Environmental Laws.

Section 1.21 “Hazardous Materials” shall mean (a) any asbestos and any asbestos containing material, (b) any substance that is then defined or listed in, or otherwise classified pursuant to, any Environmental Law or any other applicable law as a “hazardous substance,” “hazardous material,” “hazardous waste,” “infectious waste,” “toxic substance,” “toxic pollutant” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or Toxicity Characteristic Leaching Procedure (TCLP) toxicity, (c) any petroleum and drilling fluids, produced waters, and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources, and (d) any petroleum product, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive material (including any source, special nuclear, or by-

Exhibit 10.(w)

product material), medical waste, chlorofluorocarbon, lead or lead-based product, and any other substance whose presence could be detrimental to the Property or hazardous to health or the environment.

Section 1.22 “Knowledge Party” shall have the meaning set forth in Section 5.3 of this Agreement.

Section 1.23 “Lease” shall mean any space lease, rental agreement, license, license agreement or other occupancy agreement covering all or any portion of the Property.

Section 1.24 “Leased Property” shall have the meaning set forth in the recitals to this Agreement.

Section 1.25 “Lock Up Period” shall have the meaning set forth in Section 5.2(c) of this Agreement.

Section 1.26 “Net Carrying Cost Reimbursement” shall mean the positive difference between (a) all costs that Owner shall have incurred with respect to the period commencing on the day following Closing, and expiring on the First Escrow Release Date relating to payments under the ground lease affecting the Leased Property and/or real estate taxes relating to the Property minus (b) the net revenues received by Owner from the Property with respect to the period commencing on the day following Closing, and expiring on the First Escrow Release Date, in both cases as reasonably determined by Owner subject to reasonable verification by the Partnership.

Section 1.27 “Owned Property” shall have the meaning set forth in the recitals to this Agreement.

Section 1.28 “Owner” shall have the meaning set forth in the preamble of this Agreement.

Section 1.29 “Owner Closing Documents” shall have the meaning set forth in Section 5.1(a) of this Agreement.

Section 1.30 “Partnership” shall have the meaning set forth in the preamble of this Agreement.

Section 1.31 “Partnership Agreement” shall mean the First Amended and Restated Agreement of Limited Partnership of the Partnership, as amended.

Section 1.32 “Partnership Agreement Amendment” shall have the meaning set forth in Section 10.1(e) of this Agreement.

Section 1.33 “Partnership Closing Documents” shall have the meaning set forth in Section 7.1(a) of this Agreement.

Section 1.34 “Permitted Exceptions” shall have the meaning set forth in Section 4.2 of this Agreement.

Section 1.35 “Proceedings” shall mean any and all petitions and appeals of the existing project plan relating to the Twinbrook Project, or the future site plan relating to the Property, by Samuel Shipkovitz, the individual who commenced the Current Proceeding. For the avoidance of doubt, such term does not include (a) any petitions, appeals or other proceedings by Samuel Shipkovitz relating to matters other than the project plan relating to the Twinbrook Project and/or the site plan relating to the Property or (b) any petitions or appeals of the project plan relating to

Exhibit 10.(w)

the Twinbrook Project and/or the site plan relating to the Property by any person or entity other than Samuel Shipkovitz.

Section 1.36 “Prorations” shall have the meaning set forth in Section 11.1 of this Agreement.

Section 1.37 “Property” shall have the meaning set forth in the recitals to this Agreement.

Section 1.38 “Second Escrow Release” shall have the meaning set forth in Section 9.3 of this Agreement.

Section 1.39 “Second Escrow Release Date” shall mean the later of (a) October 18, 2021, or (b) ten (10) days following the date on which there is a final, non-appealable resolution, in a manner favorable to Owner, of all Proceedings pending as of such date.

Section 1.40 “Shares” shall have the meaning set forth in Section 2.2 of this Agreement.

Section 1.41 “Third Escrow Release” shall have the meaning set forth in Section 9.4 of this Agreement.

Section 1.42 “Third Escrow Release Date” shall mean the second (2^nd^) anniversary of the Second Escrow Release Date.

Section 1.43 “Title Company” shall have the meaning set forth in Section 9.1 of this Agreement.

Section 1.44 “to Owner’s Knowledge” shall have the meaning set forth in Section 5.3 of this Agreement.

Section 1.45 “Transfer” shall have the meaning set forth in Section 5.2(b) of this Agreement.

Section 1.46 “Twinbrook Project” shall mean the proposed development of 18.4 acres of land located at the Twinbrook Metro Station in Rockville, Maryland, comprising the Property and 10.3 acres immediately north and adjacent to the Property in which a fee simple interest is owned by the Partnership.

Section 1.47 “Units” shall have the meaning set forth in Section 2.2 of this Agreement.

Section 1.48 “Wegman’s” shall mean Wegman’s Food Markets, Inc., a New York corporation, and its successors and assigns under the Wegman’s Lease.

Section 1.49 “Wegman’s Lease” shall mean that certain Agreement of Lease dated April 19, 2018, between Owner, as landlord, and Wegman’s, as tenant, with respect to a portion of the Property, as amended by that certain First Amendment to Lease dated April 19, 2018, and as the same may be further amended from time to time in a manner that does not result in a breach of or default under this Agreement.

ARTICLE 2 EXCHANGE VALUE

Section 2.1 Exchange Value. On the terms and subject to the conditions of this Agreement, Owner shall contribute, transfer, convey, assign, and deliver to the Partnership, and the

Exhibit 10.(w)

Partnership shall purchase and accept from Owner all the right, title, and interest of Owner in and to the Property for the Aggregate Exchange Value.

Section 2.2 Aggregate Exchange Value. Subject to the terms and conditions set forth herein (including, without limitation, the terms of Section 14.2(a)), Owner shall receive the Aggregate Exchange Value in “Partnership Units” (as defined in the Partnership Agreement) in the Partnership (“Units”). The “Aggregate Exchange Value” shall mean an amount equal to Seventy-Nine Million Three Hundred Thousand and NO/100 Dollars ($79,300,000.00). The number of Units to be issued to Owner on account of the Aggregate Exchange Value will be determined by the Partnership, in coordination with Owner, at the Closing, and will be based on the greater of (a) Fifty-Six and NO/100 Dollars ($56.00) and (b) the volume-weighted average of the closing sales prices of the Shares (as defined below) as reported on the New York Stock Exchange only for the twenty (20) trading days ending one (1) trading day immediately prior to the Closing. “Shares” means the common stock, par value $.01 per share, of the Company. The parties intend, to the extent permitted by law, that the issuance of Units to Owner in the Aggregate Exchange Value in exchange for the Property shall be treated as a contribution of property in accordance with the Internal Revenue Code Section 721.

Section 2.3 Subject to the Partnership Agreement. The Units issued pursuant to this Agreement shall be subject in all respects to the terms and provisions of the Partnership Agreement, a copy of which has been previously delivered to and accepted by Owner. Owner hereby acknowledges its acceptance of and agreement to be bound by all of the terms and conditions of the Partnership Agreement, including the Partnership Agreement Amendments executed in connection with the issuance of Units hereunder. Owner further acknowledges that its ability to exercise its Rights (as defined in the Partnership Agreement) and other rights and benefits appurtenant to Units under the Partnership Agreement in respect of Units issued hereunder shall be governed by the Partnership Agreement. The provisions of this Section 2.3 shall survive the Closing.

ARTICLE 3 NO STUDY PERIOD

Section 3.1 No Study Period. The Partnership acknowledges that, prior to the Effective Date, it had a fair and full opportunity to investigate the Property and all matters relating thereto.

ARTICLE 4 TITLE

Section 4.1 State of Title. At the Closing and the First Escrow Release, Owner shall own, beneficially and of record, (a) good, marketable and indefeasible fee simple title to the Owned Property, subject only to the Permitted Exceptions (as herein defined), and (b) leasehold title to the Leased Property, subject only to the Permitted Exceptions.

Section 4.2 Permitted Exceptions. The term “Permitted Exceptions” shall mean, and the Partnership shall be deemed to have approved, all matters affecting title that would have been disclosed by a commitment for an owner’s policy of title insurance covering the Property and/or a plat of survey of the Property, each with an effective date of the Effective Date (including the ground lease that created the leasehold estate in the Leased Property, the Wegman’s Lease, the other space

Exhibit 10.(w)

leases that exist as of the Effective Date and other space leases that are subsequently entered into without causing a breach of Section 6.1(d)); provided, that (a) in no event shall any lien or encumbrance of a monetary nature existing as of the Effective Date or thereafter created by, through or under Owner be considered a Permitted Exception, and (b) any title exceptions affecting the Property of any kind created by, through or under the Partnership, or consented to by the Partnership in writing, shall be deemed Permitted Exceptions hereunder for all purposes, regardless of whether the creation or continued existence of any such title exceptions constitutes a default by the Partnership under this Agreement.

Section 4.3 Owner’s Election. If (a) a defect in title or an intervening lien first materializes during the period commencing on the Effective Date and expiring at Closing, (b) a lien or encumbrance of a monetary nature is created by, through or under Owner during the period commencing on the day after Closing and expiring at the First Escrow Release or (c) a defect in title or another intervening lien first materializes during the period commencing on the day after Closing and expiring at the First Escrow Release and was caused by Owner, then the Partnership may require Owner to remove, correct and cure any such defects in title that the Partnership determines, in its reasonable discretion, are unacceptable. For the avoidance of doubt, the Partnership shall notify Owner within ten (10) Business Days after the Partnership discovers such defect in title and, subject to the foregoing limitations and provisions, within thirty (30) days of receiving such notice, but not later than the First Escrow Release as such First Escrow Release may be extended to allow for a full thirty (30) day period to cure the defects, Owner shall (i) as to any such exception or other matter of a non-monetary nature, use reasonable efforts to remove, correct and cure such defects or such other matters, or (ii) as to any such defect or other matter of a monetary nature, cause such lien (other than liens which are required to be released at the First Escrow Release) or encumbrance or other matter to be discharged and released on or before the First Escrow Release, in each case to the reasonable satisfaction of the Partnership.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

Section 5.1 Owner’s Representations. Owner represents and warrants to the Partnership that the representations and warranties set forth below are true and correct on and as of the Effective Date, and shall be true and correct in all material respects on and as of the date of the Closing:

(a) Due Execution; Authority. (i) Owner is duly formed, validly existing and in good standing as a limited liability company under the laws of the State of Delaware; (ii) this Agreement is, and all the documents to be delivered by Owner pursuant to this Agreement (the “Owner Closing Documents”) will be, when executed by Owner, binding on and enforceable against Owner in accordance with their respective terms; (iii) this Agreement, the Owner Closing Documents and the transactions contemplated hereby and thereby have been, or will have been prior to the Closing, approved by all necessary action of Owner; and (iv) the execution and delivery of the Owner Closing Documents do not and will not constitute a breach or default under any agreement by which Owner is bound, or by which any of Owner’s property is encumbered.

(b) Contracts. There are no contracts entered into by Owner or its agents relating to the ownership, management, leasing, parking, operation, maintenance or repair of the Property that are not cancelable without penalty by Owner upon notice of thirty (30) days or less, other than

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Exhibit 10.(w)

development contracts relating to the Property. (Any contracts affecting the Property, including contracts to which Owner is a party relating to the development of the existing project plan relating to the Twinbrook Project and the future site plan relating to the Property, together with all contracts entered into after the date hereof pursuant to Section 6.1, are hereinafter collectively referred to as the “Contracts”). To Owner’s Knowledge, Owner has performed all obligations required to be performed by the Contracts and is not in default under any of the Contracts. To Owner’s Knowledge, each of the Contracts is in full force and effect and constitutes the legal, valid and binding obligation of the respective parties thereto, enforceable in accordance with its terms, and has not been modified, amended or extended. To Owner’s Knowledge, there are no contracts for the sale, exchange or transfer of the Property or any portion thereof, or contracts or other material obligations currently in effect, other than the Permitted Exceptions, creating or imposing any burdens, obligations or restrictions on the use or operation of the Property and the businesses conducted thereon. Except for the Permitted Exceptions, the Contracts, and the Leases, there are no contracts, agreements, liabilities, claims or obligations of any kind or nature relating to the Property to which the Property or the Partnership will be bound following the Closing. Exhibit 5.1(b) attached hereto sets forth a true and correct description of all Permitted Exceptions existing as of the Effective Date, and a true and correct list of the Contracts and Leases in effect as of the Effective Date.

(c) Condemnation. To Owner’s Knowledge, there are no pending or contemplated condemnation proceedings affecting all or any part of the Property.

(d) Zoning/Violations. The Property is currently zoned with a classification of Mixed-Use Transit District Zone. To Owner’s Knowledge, there is not now pending nor is there any proposed or threatened proceeding for the further rezoning of the Property or any portion thereof. To Owner’s Knowledge, Owner has not received any written notice from any Governmental Authority that any zoning, subdivision, environmental, hazardous waste, building code, health, fire, safety or other law, order, ordinance or regulation is violated by the continued maintenance, operation or use of the Property.

(e) Permitted Exceptions. To Owner’s Knowledge, Owner has performed all obligations under and is not in default in complying with the terms and provisions of any of the covenants, conditions, restrictions, rights-of-way and easements constituting one or more of the Permitted Exceptions for the Property.

(f) Litigation. No dispute, proceeding, suit or litigation relating to the Property or any part thereof is pending or, to Owner’s Knowledge, threatened in any tribunal, other than the Current Proceeding.

(g) FIRPTA. Owner is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

(h) Indebtedness. There is no indebtedness which is secured by the Property. For the avoidance of doubt, as the remainder interest in the Leased Property does not constitute part of the Property, indebtedness secured by the remainder interest in the Leased Property shall not, in and of itself, cause the foregoing representation to be untrue or be required to be released pursuant to Section 8.5(a).

(i) Material Change. To Owner’s Knowledge, Owner has not received written notice from any Governmental Authority of any pending or contemplated change in any regulation,

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Exhibit 10.(w)

code, ordinance or law, or private restriction applicable to the Property, or any natural or artificial condition upon or affecting the Property, or any part thereof, which would result in any material change in the condition of the Property or any part thereof, or would in any way limit or impede the operation or development of the Property.

(j) Tax Matters. Owner has relied solely on its own legal, tax and accounting advisors for advice on any and all federal, state and local tax matters relating to this Agreement and the transactions contemplated herein and have not relied on any advice or representations of the Partnership, or its counsel with respect to any federal, state and local tax matters relating to this Agreement or the transactions contemplated herein.

(k) Bankruptcy. Owner has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by Owner’s creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of Owner’s assets, (iv) suffered the attachment, or other judicial seizure of all, or substantially all, of Owner’s assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or compromise to its creditors generally.

(l) Environmental Laws. To Owner’s Knowledge and except as disclosed in the Environmental Reports, (i) Owner is in compliance with all orders, directives, permits, certificates, approvals, licenses, and other authorizations from applicable Governmental Authorities, if any, relating to Environmental Laws with respect to the Property; and (ii) the Property is in compliance with all Environmental Laws. During Owner’s ownership of the Property, there have not been and there are not now pending or, to Owner’s Knowledge, threatened: (i) claims, complaints, notices, or requests for information received by Owner with respect to any alleged violation of any Environmental Law with respect to the Property; or (ii) claims, complaints, notices, or requests for information sent to Owner regarding potential or alleged liability under any Environmental Law with respect to the Property. To Owner’s Knowledge and except as disclosed in the Environmental Reports, no conditions exist at, on, or under the Property that, with the passage of time or the giving of notice or both, would constitute a Hazardous Condition or give rise to liability under any Environmental Law.

(m) No Binding Undertakings. Except as set forth on Exhibit 5.1(m), Owner has not made any Binding Undertakings.

(n) Wegman’s Lease. The Wegman’s Lease is in full force and effect on and as of the date of this Agreement and constitutes the legal, valid and binding obligation of the respective parties thereto, enforceable in accordance with its terms, and has not been modified, amended or extended. As of the Effective Date, Owner has performed its obligations under the Wegman’s Lease in all material respects and is not in default of its obligations thereunder in any material respect nor, to Owner’s Knowledge, is Wegman’s in default of its obligations thereunder in any material respect.

Section 5.2 Investment; Lock Up. Owner further represents and warrants to the Partnership that the representations and warranties set forth below are true and correct on and as of the Effective Date, and shall be true and correct in all material respects on and as of the date of the Closing:

(a) Owner is acquiring the Units issued hereunder for investment for its own account and not as an agent or nominee for any other person or entity.

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Exhibit 10.(w)

(b) Owner will not, directly or indirectly, offer, transfer, sell, assign or otherwise dispose of such Units (each such action, a “Transfer”) unless (i) such Transfer complies with the provisions of the Partnership Agreement, if applicable, and this Agreement, and (ii) either (A) the Transfer is pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Act”), or (B) Owner shall have furnished the Partnership with an opinion of counsel reasonably satisfactory to the Partnership to the effect that no such registration is required because of the availability of an exemption from registration under the Act, and (iii) such Transfer shall be in compliance with any applicable state or foreign securities and “blue sky” laws.

(c) Owner agrees that for a period equal to two (2) years following the date of issuance of such Units (the “Lock Up Period”), Owner may not in any way or to any extent, exchange, convert or redeem any or all of the Units issued to Owner pursuant to this Agreement into Shares.

(d) From and after the expiration of the Lock Up Period, Owner may sell any Shares obtained upon exchange, conversion or redemption of Units only in compliance with the applicable resale limitations of Rule 144 under the Securities Act of 1933, as amended.

(e) Owner has been advised by the Partnership that: (i) neither the offer nor sale of the Units have been registered under the Act or any state or foreign securities and “blue sky” laws; (ii) the Units are characterized as a “restricted security” under the Act inasmuch as they are being acquired from the Partnership in a transaction not involving a public offering; (iii) the Units must be held indefinitely and such Owner must continue to bear the economic risk of the investment in the Units, unless the offer and sale of such Units are subsequently registered under the Act or an exemption from such registration is available and all applicable state or foreign securities and “blue sky” laws are complied with; (iv) it is not anticipated that there will be any public market for the Units in the foreseeable future; (v) Rule 144 promulgated under the Act is not presently available with respect to offers or sales of the securities of the Partnership and the Partnership has not covenanted to make such Rule available nor has it made any covenants with respect to other rules by which offers or sales may be made; (vi) when and if the Units may be disposed of without registration under the Act in reliance on Rule 144, such disposition can be made only in limited amounts in accordance with the terms and conditions of such Rule; and (vii) if the Rule 144 exemption is not available, public offer or sale of the Units without registration will require the availability of another exemption under the Act.

(f) Owner is (i) an “accredited investor” as defined in the Act and (ii) has such knowledge, skill and experience in business, financial and investment matters so that it is capable of evaluating the merits, risks and consequences of an investment in the Units and is able to bear the economic risk of loss of this investment.

(g) Owner has been afforded (i) the opportunity to ask such questions as Owner has deemed necessary of, and to receive answers from, representatives of the Partnership concerning an investment in the Units and the merit and risks of investing in the Units and (ii) access to information about the Partnership’s financial condition, business, results of operations and prospects sufficient to enable Owner to evaluate an investment in the Units.

Section 5.3 Knowledge. For purposes of this Agreement, the phrase “to Owner’s Knowledge” or words of similar import, shall mean that the actual knowledge of the President of

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Exhibit 10.(w)

Owner (the “Knowledge Party”), after such Knowledge Party’s reasonable review of his own files and consultation with current employees of Owner in positions of responsibility on the subject and such review and consultation did not disclose any information contrary to the accuracy or veracity of any such representation or warranty.

Section 5.4 Supplemental Information. Owner shall provide written notice to the Partnership at any time and from time to time after the Effective Date through the Closing if it acquires any information that any of its representations or warranties made in this Agreement were inaccurate in any material respect as of the Effective Date or will be inaccurate in any material respect as of the Closing.

ARTICLE 6 COVENANTS AND ADDITIONAL OBLIGATIONS OF OWNER

Section 6.1 Covenants of Owner. Owner agrees that from the date of this Agreement to the First Escrow Release, it will:

(a) Contracts and Business Practice. Not become a party to any new licenses, equipment leases, contracts or agreements (other than service agreements and other contracts that are the subject of subsection (e) below) of any kind relating to the Property, except such contracts or agreements as will expire or be terminated at or prior to the First Escrow Release without cost or expense to the Partnership, without having obtained in each case the prior written consent of the Partnership, which consent shall not be unreasonably withheld or delayed, and any requests for consent shall be responded to within ten (10) Business Days of receipt of request therefor, with the Partnership’s failure to respond to Owner within such time period being deemed the Partnership’s consent to the same for all purposes hereunder.

(b) Compliance With Laws. Not knowingly take or fail to take any action that will cause the Property to fail to comply with any federal, state, municipal and other governmental laws, ordinances, requirements, rules, regulations, notices, codes and orders, or any agreements, covenants, conditions, easements and restrictions currently in effect relating to the Property.

(c) Notices. Promptly upon receipt, provide the Partnership with copies of all written notices delivered or received, correspondence received from neighboring property owners, any insurance company which carries insurance on the Property, from any Governmental Authorities or from any other person or entity with respect to the Property or any portion thereof.

(d) No Sale or Encumbrance. Not sell, mortgage, pledge, lease (nor modify any then-existing Lease; provided, however, that the extension of any Lease on a month-to-month basis shall not constitute a breach of this covenant, nor require the Partnership’s consent, so long as such Lease is terminated prior to the First Escrow Release), hypothecate or otherwise transfer or dispose of all, or any part of the Property or any interest therein, nor, except as contemplated herein, initiate, consent to, approve or otherwise take any action with respect to zoning or any other governmental rules or regulations presently applicable to all or any part of the Property, without having obtained in each case the prior written consent of the Partnership, which consent shall not be unreasonably withheld or delayed, and any requests for consent shall be responded to within ten (10) Business Days of receipt of request therefor, with the Partnership’s failure to respond to Owner within such time period being deemed the Partnership’s consent to the same for all purposes hereunder.

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Exhibit 10.(w)

(e) Contracts. Not modify, extend, amend or renew any Contract, or enter into any new service agreements or other contracts with respect to the Property, without having obtained in each case the prior written consent of the Partnership, which consent shall not be unreasonably withheld or delayed, and any requests for consent shall be responded to within ten (10) Business Days of receipt of request therefor, with the Partnership’s failure to respond to Owner within such time period being deemed the Partnership’s consent to the same for all purposes hereunder; provided, however, that the Partnership’s consent shall not be required if the applicable Contract (as modified, extended, amended or renewed), service agreement or other contract will expire or be terminated at or prior to the First Escrow Release without cost or expense to the Partnership.

(f) Environmental. Indemnify and hold the Partnership harmless from and against any loss, cost, liability or damage suffered or incurred by the Partnership as a result of Owner’s violation of any Environmental Laws relating to the Property.

(g) No Binding Undertakings. Not make any Binding Undertakings other than those on Exhibit 5.1(m), without the Partnership’s written consent, which may be withheld in its sole discretion.

(h) Wegman’s Lease. Without the prior written approval of the Partnership, not enter into any amendment or modification to the Wegman’s Lease.

(i) Reasonable Cooperation. Continue to cooperate reasonably with the Partnership in furtherance of the existing project plan relating to the Twinbrook Project and the future site plan relating to the Property and the management of the Proceedings, and afford the Partnership with such access to the Property as the Partnership may reasonably request from the Effective Date through the First Escrow Release Date.

ARTICLE 7

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTNERSHIP

Section 7.1 The Partnership’s Representations. The Partnership represents and warrants to Owner that the representations and warranties set forth below, are true and correct as of the Effective Date, and shall be true and correct in all material respects on and as of the date of the Closing, the Second Escrow Release and the Third Escrow Release:

(a) Due Execution; Authority. (i) the Partnership is duly formed, validly existing and in good standing as a limited partnership under the laws of the State of Maryland; (ii) this Agreement is, and all the documents to be delivered by the Partnership pursuant to this Agreement (the “Partnership Closing Documents”) will be, when executed by the Partnership, binding on and enforceable against the Partnership in accordance with their respective terms; (iii) this Agreement, the Partnership Closing Documents and the transactions contemplated hereby and thereby have been, or will have been prior to the Closing, approved by all necessary action of the Partnership; and (iv) the execution and delivery of the Partnership Closing Documents do not and will not constitute a breach or default under any agreement by which the Partnership is bound or by which any of the Partnership’s property is encumbered.

(b) Tax Matters. The Partnership has relied solely on its own legal, tax and accounting advisors for advice on any and all federal, state and local tax matters relating to this Agreement and the transactions contemplated herein and have not relied on any advice or

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Exhibit 10.(w)

representations of Owner or its counsel with respect to any federal, state and local tax matters relating to this Agreement or the transactions contemplated herein.

(c) Bankruptcy. The Partnership has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by the Partnership’s creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of the Partnership’s assets, (iv) suffered the attachment, or other judicial seizure of all, or substantially all, of the Partnership’s assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or compromise to its creditors generally.

(d) Units. The issuance of the Units has been authorized by all necessary partnership and other action on the part of the Partnership, and the Units, when issued to Owner as described herein, will (i) be validly issued in compliance with the Partnership Agreement in all respects; and (ii) entitle Owner as a limited partner of the Partnership to all of the Rights (as defined in the Partnership Agreement) and other rights and benefits appurtenant to Partnership Units under the Partnership Agreement; provided, however, that the exercise of any Rights shall in each case be subject to the limitations contained in the Partnership Agreement; and provided further that the Company’s obligation to issue Shares upon exercise of any Rights shall be subject to compliance with applicable federal and state securities laws and applicable rules of the New York Stock Exchange. At Owner’s request made at least thirty (30) days prior to the record date for an annual meeting which is prior to the expiration of the Lock Up Period with respect to the Units to be issued at the Second Escrow Release, the Partnership shall at such annual meeting seek shareholder approval of the conversion into Shares of all Units to be issued under this Agreement.

Section 7.2 Supplemental Information. The Partnership shall provide written notice to Owner at any time and from time to time after the Effective Date through the Closing if it acquires any information that any of its representations or warranties made in this Agreement were inaccurate in any material respect as of the Effective Date or will be inaccurate in any material respect as of the Closing.

Section 7.3 Partnership’s Partnership Agreement. The Partnership shall not terminate, modify or amend the Partnership’s Partnership Agreement in any material respect that adversely impacts the value or potential value of the Units to be received by Owner at the Second Escrow Release and/or the Third Escrow Release without the Owner’s prior written consent, which may be withheld in Owner’s sole discretion. Notwithstanding the foregoing, Owner agrees and acknowledges that the Partnership may amend the Partnership Agreement in respect of the issuance by the Partnership of additional Units of any class or series in the course of conducting its business, including in connection with the acquisition of property, and that any such amendment of the Partnership Agreement shall not be considered a breach of this Section 7.3 nor shall any consent of Owner be required for any such amendment.

ARTICLE 8 CONDITIONS PRECEDENT

Section 8.1 The Partnership’s Conditions Precedent - Closing. The Partnership’s obligation to perform the Partnership’s obligations hereunder at Closing shall be subject to the full

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Exhibit 10.(w)

and timely satisfaction of the following conditions (all or any of which may be waived, in whole or in part, by the Partnership in writing in its sole discretion) at or prior to the Closing Date:

(a) Representations and Warranties. The representations and warranties made by Owner in Section 5.1 and Section 5.2 shall be true and correct in all material respects as of the Closing with the same force and effect as though such representations and warranties had been made on and as of such date.

(b) Covenants; Closing Deliveries. Owner shall have performed all covenants and obligations and complied with all conditions, obligations and agreements required by this Agreement to be performed or complied with by it at or before the Closing, including delivery (into escrow with the Title Company, as applicable) of all of the Owner Closing Documents in accordance with this Agreement.

Section 8.2 Failure of the Partnership’s Conditions - Closing. If any condition described in Section 8.1 is not satisfied at the times required and to the satisfaction of the Partnership, in its sole and absolute discretion, then the Partnership may, at its sole option, (a) extend the Closing Date for one (1) additional period not to exceed ninety (90) days to allow for the satisfaction of such conditions or (b) terminate this Agreement by giving written notice to Owner at any time on or before the Closing. If the Partnership extends the Closing Date for the additional period and such conditions remain unsatisfied at the end of such extended period, then the Partnership shall have the option, in its sole discretion to either (i) terminate this Agreement, or (ii) proceed to the Closing. Upon termination of this Agreement under this Section 8.2, neither party shall have any further rights, obligations or liabilities under this Agreement (other than as set forth in Section 16.3 and except for those that expressly survive termination of this Agreement). The conditions set forth in Section 8.1 are for the Partnership’s sole benefit, and the Partnership may, in its sole discretion, waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof. Owner shall not take or authorize, directly or indirectly, any action that modifies or changes the circumstances upon which the conditions set forth in Section 8.1 were deemed satisfied or waived by the Partnership without the Partnership’s prior written consent, which may be withheld in the Partnership’s sole discretion.

Section 8.3 The Owner’s Conditions Precedent - Closing. Owner’s obligation to perform Owner’s obligations hereunder at Closing shall be subject to the full and timely satisfaction of the following conditions (all or any of which may be waived, in whole or in part, by Owner in writing in its sole discretion) at or prior to the Closing Date:

(a) Partnership Agreement. The Partnership shall not have terminated, modified or amended the Partnership’s Partnership Agreement in violation of Section 7.3 hereof.

(b) Representations and Warranties. The representations and warranties made by the Partnership in Section 7.1 of this Agreement shall be true and correct in all material respects as of the Closing with the same force and effect as though such representations and warranties had been made on and as of such date.

(c) Covenants; Closing Deliveries. The Partnership shall have performed all covenants and obligations and complied with all conditions, obligations and agreements required by this Agreement to be performed or complied with by it at or before the Closing, including delivery

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Exhibit 10.(w)

(into escrow with the Title Company, as applicable) of all of the Partnership Closing Documents in accordance with this Agreement.

Section 8.4 Failure of Owner’s Conditions Precedent - Closing. If any condition described in Section 8.3 is not satisfied at the times required and to the satisfaction of Owner, in its sole and absolute discretion, then Owner may, at its sole option, either (i) terminate this Agreement, or (ii) proceed to the Closing. Upon termination of this Agreement under this Section 8.4, neither party shall have any further rights, obligations or liabilities under this Agreement (other than as set forth in Section 16.3 and except for those that expressly survive termination of this Agreement). The conditions set forth in Section 8.3 are for Owner’s sole benefit, and Owner may, in its sole discretion, waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof. The Partnership shall not take or authorize, directly or indirectly, any action that modifies or changes the circumstances upon which the conditions set forth in Section 8.3 were deemed satisfied or waived by Owner without Owner’s prior written consent.

Section 8.5 The Partnership’s Conditions Precedent – First Escrow Release. The Partnership’s obligation to perform the Partnership’s obligations hereunder at the First Escrow Release shall be subject to the full and timely satisfaction of the following conditions (all or any of which may be waived, in whole or in part, by the Partnership in writing in its sole discretion) at or prior to the First Escrow Release Date:

(a) Title. The Partnership shall have received confirmation from the title insurer that there have been no changes in the state of title to the Property since the Effective Date, except for any changes (i) caused by Owner and consented to by the Partnership or (ii) not caused by Owner, and that the title insurer is committed to issue, at the First Escrow Release Date, an owner’s title policy, as required (reflecting the release of any indebtedness secured by the Property and bringing the title current to the date of the First Escrow Release Date) without exceptions other than the Permitted Exceptions and those exceptions (1) caused by Owner and consented to by the Partnership or (2) not caused by Owner.

(b) Representations and Warranties. The representations and warranties made by Owner in subsections (a), (e), (j) and (k) of Section 5.1, and in Section 5.2, shall be true and correct in all material respects as of the First Escrow Release Date with the same force and effect as though such representations and warranties had been made on and as of such date. Owner shall have performed all covenants and obligations and complied with all conditions, obligations and agreements required by this Agreement to be performed or complied with by it at or before the First Escrow Release Date.

(c) Proceedings. There is a final, non-appealable resolution, in a manner favorable to Owner, of all then-pending Proceedings.

(d) Covenants. Owner shall have materially complied with the covenants in Section 6.1.

Section 8.6 Failure of the Partnership’s Conditions - First Escrow Release. If any condition described in Section 8.5 is not satisfied at the times required and to the satisfaction of the Partnership, in its reasonable discretion, then the Partnership may, at its sole option, (a) extend the First Escrow Release Date for one (1) additional period not to exceed ninety (90) days to allow for the satisfaction of such conditions or (b) terminate this Agreement by giving written notice to Owner

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Exhibit 10.(w)

at any time on or before the First Escrow Release Date. If the Partnership extends the First Escrow Release Date for the additional period and such conditions remain unsatisfied at the end of such extended period, then the Partnership shall have the option, in its sole discretion to either (i) terminate this Agreement, or (ii) proceed to the First Escrow Release. Upon termination of this Agreement under this Section 8.2, neither party shall have any further rights, obligations or liabilities under this Agreement (other than as set forth in Section 16.3 and except for those that expressly survive termination of this Agreement). The conditions set forth in Section 8.5 are for the Partnership’s sole benefit, and the Partnership may, in its sole discretion, waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof. Owner shall not take or authorize, directly or indirectly, any action that modifies or changes the circumstances upon which the conditions set forth in Section 8.5 were deemed satisfied or waived by the Partnership without the Partnership’s prior written consent.

Section 8.7 The Owner’s Conditions Precedent - First Escrow Release. Owner’s obligation to perform Owner’s obligations hereunder at the First Escrow Release shall be subject to the full and timely satisfaction of the following conditions (all or any of which may be waived, in whole or in part, by Owner in writing in its sole discretion) at or prior to the First Escrow Release Date:

(a) Partnership Agreement. The Partnership shall not have terminated, modified or amended the Partnership’s Partnership Agreement in any material respect that adversely impacts the value or potential value of the Units to be received by Owner at the Second Escrow Release and/or the Third Escrow Release without the Owner’s prior written consent, which may be withheld in Owner’s sole discretion.

(b) Representations and Warranties. The representations and warranties made by the Partnership in Section 7.1 of this Agreement shall be true and correct in all material respects as of the First Escrow Release with the same force and effect as though such representations and warranties had been made on and as of such date.

(c) Covenants. The Partnership shall have performed all covenants and obligations and complied with all conditions, obligations and agreements required by this Agreement to be performed or complied with by it at or before the First Escrow Release.

Section 8.8 Failure of Owner’s Conditions Precedent - First Escrow Release. If any condition described in Section 8.7 is not satisfied at the times required and to the satisfaction of Owner, in its sole and absolute discretion, then Owner may, at its sole option, either (i) terminate this Agreement, or (ii) proceed to the First Escrow Release. Upon termination of this Agreement under this Section 8.8, neither party shall have any further rights, obligations or liabilities under this Agreement (other than as set forth in Section 16.3 and except for those that expressly survive termination of this Agreement). The conditions set forth in Section 8.7 are for Owner’s sole benefit, and Owner may, in its sole discretion, waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof. The Partnership shall not take or authorize, directly or indirectly, any action that modifies or changes the circumstances upon which the conditions set forth in Section 8.7 were deemed satisfied or waived by Owner without Owner’s prior written consent.

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Exhibit 10.(w)

Section 8.9 The Partnership’s Condition Precedent – Second Escrow Release. The Partnership’s obligation to perform the Partnership’s obligations hereunder at the Second Escrow Release shall be subject to the concurrent or prior occurrence of the First Escrow Release.

Section 8.10 Failure of the Partnership’s Condition - Second Escrow Release. If the condition described in Section 8.9 is not satisfied at the time required and to the satisfaction of the Partnership, in its reasonable discretion, then the Partnership may, at its sole option, terminate this Agreement by giving written notice to Owner at any time on or before the Second Escrow Release Date. Upon termination of this Agreement under this Section 8.10, neither party shall have any further rights, obligations or liabilities under this Agreement (other than as set forth in Section 16.3 and except for those that expressly survive termination of this Agreement). The condition set forth in Section 8.9 is for the Partnership’s sole benefit, and the Partnership may, in its sole discretion, waive (conditionally or absolutely) the fulfillment of such condition. Owner shall not take or authorize, directly or indirectly, any action that modifies or changes the circumstances upon which the condition set forth in Section 8.9 was deemed satisfied or waived by the Partnership without the Partnership’s prior written consent.

Section 8.11 The Owner’s Condition Precedent - Second Escrow Release. Owner’s obligation to perform Owner’s obligations hereunder at the Second Escrow Release shall be subject to the concurrent or prior occurrence of the First Escrow Release.

Section 8.12 Failure of Owner’s Condition Precedent - Second Escrow Release. If the condition described in Section 8.11 is not satisfied at the time required and to the satisfaction of Owner, in its reasonable discretion, then Owner may, at its sole option, either (i) terminate this Agreement, or (ii) proceed to the Second Escrow Release. Upon termination of this Agreement under this Section 8.12, neither party shall have any further rights, obligations or liabilities under this Agreement (other than as set forth in Section 16.3 and except for those that expressly survive termination of this Agreement). The condition set forth in Section 8.11 is for Owner’s sole benefit, and Owner may, in its sole discretion, waive (conditionally or absolutely) the fulfillment of such condition, or any part thereof. The Partnership shall not take or authorize, directly or indirectly, any action that modifies or changes the circumstances upon which the condition set forth in Section 8.11 was deemed satisfied or waived by Owner without Owner’s prior written consent.

ARTICLE 9

CLOSING; ESCROW RELEASE

Section 9.1 Closing. Closing into escrow (the “Closing”) of both Owner’s contribution of the Property to the Partnership and the Partnership’s delivery to Owner of the Aggregate Exchange Value, as contemplated by the Agreement (the “Contribution Transaction”), shall be held at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1200 Seventeenth Street, N.W., Washington, D.C. 20036 (unless the parties otherwise agree in writing), on or before the Closing Date, as such date may be extended by the Partnership pursuant to the terms of Section 8.2. If this Agreement is terminated following Closing but prior to the First Escrow Release, then each document deposited into escrow with Commonwealth Land Title Insurance Company (the “Title Company”) shall be released to the party that initially deposited it into such escrow.

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Exhibit 10.(w)

Section 9.2 First Escrow Release. Release from escrow of the documents set forth in Section 10.3 and Section 10.4 below (the “First Escrow Release”), shall be held at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1200 Seventeenth Street, N.W., Washington, D.C. 20036 (unless the parties otherwise agree in writing), on or before the First Escrow Release Date, as such date may be extended by the Partnership pursuant to the terms of Section 8.2.

Section 9.3 Second Escrow Release. Release from escrow of the documents set forth in Section 10.5 and Section 10.6 below (the “Second Escrow Release”), shall be held at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1200 Seventeenth Street, N.W., Washington, D.C. 20036 (unless the parties otherwise agree in writing), on or before the Second Escrow Release Date.

Section 9.4 Third Escrow Release. Release from escrow of the documents set forth in Section 10.7 below (the “Third Escrow Release”), shall be held at the offices of Pillsbury Winthrop Shaw Pittman LLP, 1200 Seventeenth Street, N.W., Washington, D.C. 20036 (unless the parties otherwise agree in writing), on or before the Third Escrow Release Date.

ARTICLE 10

CLOSING MATTERS; ESCROW RELEASE MATTERS

Section 10.1 Owner’s Obligations - Closing. At or before the Closing, Owner shall:

(a) Escrow Agreement. Execute and deliver, and cause the Title Company to execute and deliver, an escrow agreement substantially in the form attached hereto as Exhibit 10.1(a) (the “Escrow Agreement”).

(b) Affidavits; Indemnity Agreements. Execute and deliver to the Title Company such affidavits and indemnity agreements as may be reasonably required by the Title Company for issuance of the required title policy and the endorsements thereto for the Property.

(d) FIRPTA Certificate. Cause B. F. Saul Real Estate Investment Trust, as the sole member of Owner, to execute and deliver to the Title Company a FIRPTA Certificate substantially in the form attached hereto as Exhibit 10.1(d).

(e) Partnership Agreement Amendments. Execute and deliver to the Title Company two (2) amendments to the Partnership Agreement, each substantially in the form attached hereto as Exhibit 10.1(e) (each, a “Partnership Agreement Amendment”).

(f) Owner’s Certificate. Execute and deliver to the Title Company an Owner’s certificate substantially in the form attached hereto as Exhibit 10.1(f).

(g) Bill of Sale. Execute and deliver to the Title Company a bill of sale substantially in the form attached hereto as Exhibit 10.1(g) (the “Bill of Sale”).

(h) Assignment of Ground Lease. Execute and deliver to the Title Company an Assignment of Ground Lease substantially in the form attached hereto as Exhibit 10.1(h) (the “Assignment of Ground Lease”).

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Exhibit 10.(w)

(i) Assignment of Space Leases. Execute and deliver to the Title Company an Assignment of Space Leases substantially in the form attached hereto as Exhibit 10.1(i) (the “Assignment of Space Leases”).

(j) Further Assurances. Execute (as applicable) and deliver (or cause to be delivered) to the Title Company the Owner Closing Documents and shall deliver (or cause to be delivered) such other consideration, documents, affidavits and certificates as may be required by this Agreement.

Section 10.2 The Partnership’s Obligations - Closing. At the Closing, the Partnership shall:

(a) Escrow Agreement. Execute and deliver, and cause the Title Company to execute and deliver, the Escrow Agreement.

(b) Partnership Documents. Cause its general partner and the other limited partners to execute and deliver to the Title Company two (2) Partnership Agreement Amendments, execute (as applicable) and deliver (or cause to be delivered) to the Title Company the other Partnership Closing Documents, including two (2) executed certificates, each representing a number of Units equal to fifty percent (50%) of the Aggregate Exchange Value, and execute and deliver to the Title Company the Partnership’s certificate substantially in the form attached hereto as Exhibit 10.2.

(d) Assignment of Ground Lease. Execute and deliver to the Title Company the Assignment of Ground Lease.

(e) Assignment of Space Leases. Execute and deliver to the Title Company the Assignment of Space Leases.

(f) Further Assurances. Execute (as applicable) and deliver (or cause to be delivered) to the Title Company such other documents, affidavits and certificates as may be required by this Agreement.

Section 10.3 Owner’s Obligations – First Escrow Release.

(a) Release of Documents. At the First Escrow Release, Owner shall authorize and direct the Title Company to release from escrow the documents described in Section 10.1 (other than the Escrow Agreement (which was never placed in escrow) and the Partnership Agreement Amendments (which remain in escrow until the Second Escrow Release and the Third Escrow Release as provided herein)); provided, however, that prior to such release Owner shall have the right to modify such documents as is reasonably necessary to account for events and/or changes in conditions that have occurred subsequent to the Effective Date and do not constitute a breach of this Agreement by Owner.

(b) Possession. Give full possession of the Property to the Partnership, subject only to the Permitted Exceptions and those exceptions (i) caused by Owner and consented to by the Partnership or (ii) not caused by Owner.

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Exhibit 10.(w)

Section 10.4 The Partnership’s Obligations – First Escrow Release.

(a) Reimbursements. At or before the First Escrow Release, the Partnership shall deliver to the Title Company an amount equal to the sum of the Entitlement Reimbursement plus the Net Carrying Cost Reimbursement.

(b) Release of Documents. At the First Escrow Release, Owner shall authorize and direct the Title Company to release from escrow the Bill of Sale, Assignment of Ground Lease and the Assignment of Space Leases, as the same may have been modified by Owner pursuant to Section 10.3(a), and the funds contemplated by subsection (a) above. For the avoidance of doubt, no Units shall be released to Owner at the First Escrow Release unless the Second Escrow Release is occurring simultaneously.

Section 10.5 Owner’s Obligations – Second Escrow Release. At the Second Escrow Release, Owner shall authorize and direct the Title Company to release from escrow the first Partnership Agreement Amendment, which shall reflect the issuance of the Units issued to Owner at the Second Escrow Release.

Section 10.6 The Partnership’s Obligations – Second Escrow Release. At the Second Escrow Release, the Partnership shall authorize and direct the Title Company to release from escrow the first Partnership Agreement Amendment and such of the other documents remaining in escrow as are necessary to evidence the issuance to Owner of Units in the amount of fifty percent (50%) of the Aggregate Exchange Value, including one of the certificates representing Units that were delivered into escrow at the Closing. For the avoidance of doubt, the Units represented by the certificate released at the Second Escrow Release shall be deemed not to have been issued to Owner until such Second Escrow Release, notwithstanding the delivery of such certificate into escrow at Closing.

Section 10.7 Third Escrow Release. At the Third Escrow Release, the Partnership shall authorize and direct the Title Company to release from escrow all other documents remaining in escrow, including the second Partnership Agreement Amendment and the remaining certificate representing Units, notwithstanding any demand or instruction to the contrary, other than the joint instruction of Owner and the Partnership. For the avoidance of doubt, the Units represented by the certificate released at the Third Escrow Release shall be deemed not to have been issued to Owner until such Third Escrow Release, notwithstanding the delivery of such certificate into escrow at Closing.

ARTICLE 11

PRORATIONS AND ADJUSTMENTS

Section 11.1 Prorations and Adjustments. Except as otherwise expressly set forth herein, all costs and expenses to be prorated and adjusted hereunder (the “Prorations”) with respect to the Property, for the period up to and through the First Escrow Release Date, shall be the responsibility of or belong to Owner. Except as otherwise expressly set forth herein, all Prorations for the period after the First Escrow Release Date shall be the responsibility of or belong to the Partnership.

Section 11.2 Costs and Expenses. Except as otherwise provided in this Agreement, Owner shall be solely responsible for the following: (a) one-half (1/2) of the total costs of state,

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Exhibit 10.(w)

county, city, local, municipal and township recording and transfer taxes, and the like, with respect to the conveyance of the Property; (b) the cost of any endorsements obtained by Owner in order to remove any title defects if approved by the Partnership; (c) all costs associated with (i) repaying any indebtedness secured by the Property; and (ii) any gains taxes, income taxes or similar taxes owing by Owner as a result of the transactions contemplated hereby; and (d) 43.9% of all costs incurred relating to the Proceedings, insofar as such Proceedings relate to the project plan for the Twinbrook Project, and 100% of all costs incurred relating to the Proceedings, insofar as they relate to the site plan for the Property. The Partnership shall be solely responsible for the following: (a) one-half (1/2) of the total costs of state, county, city, local, municipal and township recording and transfer taxes, and the like, with respect to the conveyance of the Property; (b) all costs necessary for the Title Company to issue an owner’s title policy for the Property, including, without limitation, all expenses of examination of title, conducting settlement, escrow fees, title insurance commitments, endorsements (except for the cost of any endorsements obtained by Owner in order to remove any title defects if approved by the Partnership) and premiums; (c) the costs of due diligence including, without limitation, all costs of conducting all environmental tests and studies of the Property and all costs of preparation of the Survey; (d) all costs associated with financing of the property by the Partnership; and (e) 56.1% of all costs incurred relating to the Proceedings, insofar as such Proceedings relate to the project plan for the Twinbrook Project. The Partnership and Owner shall each pay their respective legal fees and expenses incurred in connection with the negotiation of this Agreement and all related documents, and in addressing each such party’s tax and securities issues.

ARTICLE 12 DEFAULT; OTHER TERMINATION

Section 12.1 Default by the Partnership.

(a) Contribution Transaction. If the Closing of the Contribution Transaction fails to occur as a result of a material default by the Partnership with respect to any of the terms of this Agreement, and such material default continues for a period of ten (10) days after Owner notifies the Partnership in writing of such default, Owner’s sole and exclusive remedy for such material default by the Partnership shall be the right to cancel and terminate this Agreement. Unless Owner waives the Partnership’s default in writing within five (5) days after the expiration of the 10-day period specified in the preceding sentence, or such default is cured within such 10-day period, this Agreement shall automatically terminate effective fifteen (15) days after the notice of default is given without the necessity of further notice being given. Upon such termination, each party shall be released from all duties or obligations contained herein, except for those that expressly survive termination as specifically set forth in Articles 11, 13 and 16, it being understood and agreed that, except as set forth in Section 12.1(b), Owner is hereby releasing and/or waiving any right it might have to either specifically enforce this Agreement or to sue for damages with respect to the Contribution Transaction.

(b) Subsequent Default. If the Closing of the Contribution Transaction occurs, but (i) any of the representations and warranties made by the Partnership in this Agreement are inaccurate or incorrect in any material respect on the date made or deemed made, or (ii) the Partnership fails to perform its material covenants, obligations or agreements under this Agreement on or before the

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Exhibit 10.(w)

Third Escrow Release and such failure is not cured on or before the earlier of fifteen (15) days after written notice by Owner to the Partnership or the day on which the applicable covenant, obligation or agreement is required to have been performed under this Agreement, Owner shall have the right, at its sole option, to: (x) terminate this Agreement, whereupon neither party shall have any further right or liability to the other under this Agreement, except for those that expressly survive termination as specifically set forth in Articles 11, 13 and 16; (y) waive the default or failure to perform and proceed with the First Escrow Release, the Second Escrow Release or the Third Escrow Release, as applicable; or (z) pursue any legal or equitable remedies to which Owner may be entitled on account of the foregoing, including, without limitation, injunctive relief or specific performance, against the Partnership in order to enforce the provisions of this Agreement; provided, however, that (i) the right of Owner to terminate this Agreement pursuant to this Section 12.1(b) may only be exercised prior to the First Escrow Release, and (ii) any action for injunctive relief, specific performance or other equitable relief hereunder must be initiated by Owner within sixty (60) days after the Partnership’s default or Owner shall be deemed to have irrevocably waived its right to such equitable remedies. Notwithstanding any other provision of this Agreement, the provisions of Section 12.1(b) shall survive the First Escrow Release Date, the Second Escrow Release Date or the Third Escrow Release Date, as applicable, for a period of one (1) year.

Section 12.2 Default by Owner. If any of the representations and warranties made by Owner in this Agreement are inaccurate or incorrect in any material respect on the date made or deemed made, or if Owner fails to perform its material covenants, obligations or agreements under this Agreement on or before Closing and such failure is not cured on or before the earlier of fifteen (15) days after written notice by the Partnership to Owner or the day on which the applicable covenant, obligation or agreement is required to have been performed under this Agreement, the Partnership shall have the right, at its sole option, to: (a) terminate this Agreement, whereupon neither party shall have any further right or liability to the other under this Agreement, except for those that expressly survive termination as specifically set forth in Articles 11, 13 and 16; (b) waive the default or failure to perform and proceed with the Closing, the First Escrow Release, the Second Escrow Release or the Third Escrow Release, as applicable; or (c) pursue any legal or equitable remedies to which the Partnership may be entitled on account of the foregoing, including, without limitation, injunctive relief or specific performance, against Owner in order to enforce the provisions of this Agreement; provided, however, that (x) the right of the Partnership to terminate this Agreement pursuant to this Section 12.2 may only be exercised prior to the First Escrow Release, and (y) any action for injunctive relief, specific performance or other equitable relief hereunder must be initiated by the Partnership within sixty (60) days after Owner’s default or the Partnership shall be deemed to have irrevocably waived its right to such equitable remedies. Notwithstanding any other provision of this Agreement, the provisions of Section 12.2 shall survive the Closing Deadline, the First Escrow Release Date, the Second Escrow Release Date or the Third Escrow Release Date, as applicable, for a period of one (1) year.

Section 12.3 Other Termination.

(a) Proceedings. If, prior to the First Escrow Release, there is a final, non-appealable resolution of any Proceedings in a manner favorable to Samuel Shipkovitz, then this Agreement shall automatically terminate, whereupon neither party shall have any further right or liability to the other under this Agreement, except for those that expressly survive termination as specifically set forth in Articles 11, 13 and 16.

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Exhibit 10.(w)

(b) Contribution Transaction. If, prior to the First Escrow Release, Wegman’s terminates the Wegman’s Lease pursuant to Section 1.3(b) thereof because the Proceedings prevent construction commencement by October 18, 2021 (or such later date as may be agreed to by the parties, each acting in its sole and absolute discretion), then this Agreement shall automatically terminate, whereupon neither party shall have any further right or liability to the other under this Agreement, except for those that expressly survive termination as specifically set forth in Articles 11, 13 and 16. For the avoidance of doubt, this Agreement shall not terminate pursuant to this Section 12.3(b) if (a) Wegman’s terminates the Wegman’s Lease pursuant to Section 1.3(b) thereof for any other reason or (b) Wegman’s terminates the Wegman’s Lease pursuant to any other provision of the Wegman’s Lease or pursuant to any right afforded by law or equity.

ARTICLE 13

INDEMNIFICATION

Section 13.1 Owner Indemnification. Owner hereby agrees to indemnify and hold the Partnership harmless from and against: (a) any loss, cost, liability or damage suffered or incurred by the Partnership because any representation or warranty by Owner shall be false or misleading in any material respect on the date made or deemed made; (b) any loss, cost, liability or damage suffered or incurred by the Partnership because of Owner’s failure to timely perform any of its covenants, obligations or agreements under this Agreement; (c) any and all liabilities, claims, demands, losses, suits and judgments of any kind or nature (except those items which under the terms of this Agreement specifically and expressly become obligations of the Partnership), brought by third parties and based on events occurring at or before the Closing and which are in any way related to Owner or its ownership, maintenance, condition or operation of the Property, and all expenses related thereto, including, but not limited to, court costs and reasonable attorneys’ fees; (d) to the extent caused by the negligence or willful misconduct of Owner, any and all liabilities, claims, demands, losses, suits and judgments of any kind or nature (except those items which under the terms of this Agreement specifically and expressly become obligations of the Partnership), brought by third parties and based on events occurring after Closing but at or before the First Escrow Release and which are in any way related to the ownership, maintenance, condition or operation of the Property, and all expenses related thereto, including, but not limited to, court costs and reasonable attorneys’ fees; and (e) all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by the Partnership in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against in this Section 13.1. As to any claim, action or other matter subject to the foregoing indemnity, Owner shall assume the defense thereof with counsel acceptable to the Partnership. Such claim, action or other matter shall not be settled without the reasonable approval of both the Partnership and Owner. Notwithstanding anything set forth herein to the contrary, the obligations set forth in this Section 13.1 shall survive the Third Escrow Release or the termination, for any reason, of this Agreement.

Section 13.2 The Partnership Indemnification. The Partnership hereby agrees to indemnify and hold Owner harmless from and against: (a) any loss, cost, liability or damage suffered or incurred by Owner because any representation or warranty by the Partnership shall be false or misleading in any material respect on the date made or deemed made; (b) any loss, cost, liability or damage suffered or incurred by Owner because of the Partnership’s failure to timely perform any of its covenants, obligations or agreements under this Agreement; (c) except to the extent caused

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Exhibit 10.(w)

by the negligence or willful misconduct of Owner, any and all liabilities, claims, demands, losses, suits and judgments of any kind or nature (except those items which under the terms of this Agreement specifically and expressly become obligations of Owner), brought by third parties and based on events occurring after Closing but before the First Escrow Release and which are in any way related to the ownership, maintenance, condition or operation of the Property, and all expenses related thereto, including, but not limited to, court costs and reasonable attorneys’ fees; (d) any and all liabilities, claims, demands, losses, suits and judgments of any kind or nature (except those items which under the terms of this Agreement specifically and expressly become obligations of Owner), brought by third parties and based on events occurring after the First Escrow Release and which are in any way related to the Partnership or its ownership, maintenance, condition or operation of the Property after Closing, and all expenses related thereto, including, but not limited to, court costs and reasonable attorneys’ fees; (e) any loss, cost, liability or damage to person at the Property suffered or incurred by Owner as a result of (i) the Partnership’s entry onto the Property, or any portion thereof, prior to the First Escrow Release, or (ii) the creation of any mechanics’ or materialmen’s liens on or against the Property, or any portion thereof, due to any action or omission by the Partnership or any party acting directly or indirectly by or on behalf of, or at the direction or the control of, the Partnership or any party, directly or indirectly, under contract with the Partnership, the Partnership’s general contractor(s) or any subcontractor(s) or materialmen thereunder; and (f) all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by Owner in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against in this Section 13.2. As to any claim, action or other matter subject to the foregoing indemnity, the Partnership shall assume the defense thereof with counsel acceptable to Owner. Such claim, action or other matter shall not be settled without the reasonable approval of both Owner and the Partnership. Notwithstanding anything set forth herein to the contrary, the obligations set forth in this Section 13.2 shall survive the Third Escrow Release or the termination, for any reason, of this Agreement.

ARTICLE 14 CASUALTY, CONDEMNATION OR TAKING

Section 14.1 Casualty. From and after the Effective Date, all risk of loss shall belong to the Partnership. If, prior to the First Escrow Release, the Property or any part thereof shall be destroyed or materially damaged by fire or other casualty, Owner shall not be under any obligation to repair such destruction or damage and shall be entitled to receive the proceeds of any insurance applicable thereto that may have been maintained by Owner, without adjustment of the Aggregate Exchange Value.

Section 14.2 Condemnation or Taking.

(a) Prior to Closing. If, prior to the Closing, the Property or any part thereof shall be condemned or taken and, in the Partnership’s reasonable judgment, such condemnation or taking materially interferes with the Partnership’s intended development and/or use of the Property, the Partnership may (a) terminate this Agreement, or (b) complete the transactions contemplated by this Agreement notwithstanding such condemnation. If the Partnership elects to complete the transactions contemplated hereby, the Partnership shall have the right, upon written notice to Owner, to participate in any condemnation proceedings. The Partnership’s consent shall not be required for

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Exhibit 10.(w)

any settlement of condemnation proceedings and Owner shall be entitled to receive any and all condemnation proceeds received prior to Closing, and the Aggregate Exchange Value shall be reduced at Closing by the amount of any such condemnation proceeds received by Owner. To the extent condemnation proceeds are received on or after the Closing, the Aggregate Exchange Value shall remain unchanged, the Partnership shall be entitled to receive such condemnation proceeds, and Owner shall, at the Closing and thereafter, execute and deliver to the Partnership all required assignments of claims and other similar items relating to any such outstanding, unpaid condemnation proceeds. If the Partnership elects to terminate this Agreement, then upon written notice to Owner and without further action of the parties, this Agreement shall become null and void and no party shall have any further rights or obligations under this Agreement, except for those that expressly survive termination of this Agreement.

(b) Following Closing. If, following Closing but prior to the First Escrow Release, the Property or any part thereof shall be condemned or taken, the Partnership shall complete the transactions contemplated by this Agreement notwithstanding such condemnation. In such event, the Partnership shall have the right, upon written notice to Owner, to participate in any condemnation proceedings. The Partnership’s consent shall not be required for any settlement of condemnation proceedings and Owner shall be entitled to receive any and all condemnation proceeds received prior to the First Escrow Release, and the Aggregate Exchange Value shall be reduced at the First Escrow Release by the amount of any such condemnation proceeds received by Owner. To the extent condemnation proceeds are received on or after the First Escrow Release Date, the Aggregate Exchange Value shall remain unchanged, the Partnership shall be entitled to receive such condemnation proceeds, and Owner shall, at the First Escrow Release and thereafter, execute and deliver to the Partnership all required assignments of claims and other similar items relating to any such outstanding, unpaid condemnation proceeds.

ARTICLE 15

BROKERS

Section 15.1 Brokers. Owner, on the one hand, and the Partnership, on the other, hereby represent and warrant each to the other that it has not authorized any broker, agent or finder to act on its behalf in connection with the transaction contemplated by this Agreement. Each party agrees that it shall indemnify, defend and save the other harmless from and against any cost, expense, claim, loss, liability or damages, including reasonable attorneys’ fees and court costs, resulting from a breach of the foregoing representation and warranty.

ARTICLE 16

MISCELLANEOUS

Section 16.1 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given/received: (a) on the date delivered if delivered personally; (b) on the date sent if sent by electronic mail, with a copy sent by one of the other methods of delivery described in this Section 16.1; (c) the next Business Day after deposit with a recognized overnight courier service when marked for delivery on the next Business Day; or (d) two (2) days after mailing if sent by registered or certified United States mail, properly

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Exhibit 10.(w)

addressed and postage pre-paid, and addressed to the party for whom it is intended at the address hereinafter set forth:

If to Owner:	with a copy to:
1592 Rockville Pike LLC <br>c/o B. F. Saul Real Estate Investment Trust<br><br>7501 Wisconsin Avenue, Suite 1500E<br><br>Bethesda, Maryland 20814<br><br>Attn: Bettina T. Guevara<br><br>Email: bettina.guevara@bfsaul.com	Pillsbury Winthrop Shaw Pittman LLP <br>1200 Seventeenth Street, N.W.<br><br>Washington, D.C. 20036<br><br>Attn: Christian A. Buerger <br>Email: christian.buerger@pillsburylaw.com
If to the Partnership:	with a copy to:
Saul Holdings Limited Partnership <br>7501 Wisconsin Avenue, Suite 1500E<br><br>Bethesda, Maryland 20814<br><br>Attn: Scott Schneider<br><br>Email: scott.schneider@saulcenters.com	Polsinelli <br>1401 Eye Street, N.W., Suite 800<br><br>Washington, D.C. 20005<br><br>Attn: Kevin L. Vold <br>Email: kvold@polsinelli.com

Either party may designate a change of address by written notice to the other in accordance with the provisions set forth above, which notice shall be given at least ten (10) days before such change of address is to become effective.

Section 16.2 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective personal representatives, heirs, successors and assigns of the parties. Owner shall not have any right to assign its rights or obligations under this Agreement without the prior written consent of the Partnership. The Partnership shall have no right to assign its rights or obligations under this Agreement without the prior written consent of Owner; provided, however, Owner’s consent shall not be required for the Partnership to designate a wholly owned subsidiary of the Partnership to take title to the Property on the terms and subject to the provisions of this Agreement so long as the Partnership provides notice of such designation at least five (5) Business Days prior to the First Escrow Release Date. Any assignment or attempted assignment of this Agreement or the rights and obligations hereunder other than strictly in accordance with the provisions of this Section 16.2 shall be null and void and of no force or effect. If executed by more than one owner entity, all such owners hereunder shall be jointly and severally liable for all obligations of Owner hereunder.

Section 16.3 Survival. The representations and warranties set forth in subsections (a), (e), (j) and (k) of Section 5.1, and in Section 5.2, and in Article 15 of this Agreement, and any indemnification related to any of the foregoing, shall survive the First Escrow Release indefinitely, subject to any applicable statute of limitations. The representations and warranties set forth in Section 7.1 of this Agreement, and any indemnification related to the foregoing, shall survive the Second Escrow Release and the Third Escrow Release indefinitely, subject to any applicable statute of limitations. Owner’s responsibility and liability pursuant to Article 17 shall survive the First Escrow Release for the period specified in such Section. Except as expressly provided in this Agreement, all other representations, warranties, covenants, agreements and indemnities set forth

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Exhibit 10.(w)

in or made pursuant to this Agreement, including any indemnification obligations of the parties under Article 13 hereof or otherwise, shall remain operative, and shall survive any termination of this Agreement and the First Escrow Release, the Second Escrow Release and the Third Escrow Release under this Agreement, but (a) with respect to Owner’s representations, warranties covenants, agreements and indemnities, only with respect to claims made in writing not later than two (2) years after the First Escrow Release Date, and (b) with respect to the Partnership’s representations, warranties, covenants, agreements and indemnities, only with respect to claims made in writing not later than two (2) years after the Third Escrow Release Date.

Section 16.4 Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Maryland, excluding conflicts of laws principles.

Section 16.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument; provided, however, in no event shall this Agreement be effective unless and until signed by all parties hereto.

Section 16.6 Further Assurances. Owner agrees that it will, at any time and from time to time after the First Escrow Release, upon request of the Partnership, do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be required for the better assigning, transferring, granting, assuring and confirming to the Partnership, or to its successors and assigns, or for aiding and assisting in collecting and reducing to possession, any or all of the assets or property being conveyed to the Partnership pursuant to this Agreement.

Section 16.7 Recitals; Exhibits. Each and all of the recitals set forth above and the exhibits attached hereto are hereby incorporated into this Agreement by reference.

Section 16.8 Rules of Construction. Section captions used in this Agreement are for convenience only and shall not affect the construction of the Agreement. All references to “Articles” and “Sections,” without reference to a document other than this Agreement are intended to designate articles and sections of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section, unless specifically designated otherwise. The use of the term “including” shall mean in all cases “including but not limited to,” unless specifically designated otherwise. No rules of construction against the drafter of this Agreement shall apply in any interpretation or enforcement of this Agreement, any documents or certificates executed pursuant hereto, or any provisions of any of the forgoing.

Section 16.9 Time of Essence. Time is important to all parties in the performance of this Agreement, and the parties have agreed that strict compliance is required as to any date set out in this Agreement.

Section 16.10 Entire Agreement. This Agreement and the exhibits attached hereto and thereto contain the entire agreement between the parties relating to the Property, all prior negotiations between the parties, including, without limitation, any letter of intent, access agreement and confidentiality agreement (including all amendments or modifications thereof), are merged in this Agreement, and there are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, between them other than as herein set forth; however, this Agreement is without prejudice to the parties’ rights and obligations under Section

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Exhibit 10.(w)

2(h) of that certain Exclusivity and Right of First Refusal Agreement dated as of August 26, 1993, to which affiliates of Owner and the Partnership are parties. No change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. No waiver of any of the provisions of this Agreement and other agreements referred to herein shall be valid unless in writing and signed by the party against whom it is sought to be enforced.

ARTICLE 17

CONFIDENTIALITY

Section 17.1 Public Announcements. Except as provided otherwise in this Section 17.1, Owner and the Partnership each hereby agrees that it will not release or cause or permit to be released to the public any press notices, publicity (oral or written) or advertising promotion relating to, or otherwise publicly announce or disclose or cause or permit to be publicly announced or disclosed, in any manner whatsoever, the terms, conditions or substance of this Agreement or the transactions contemplated herein, without first obtaining the consent of the other party hereto which shall not be unreasonably withheld. It is understood that the foregoing shall not preclude any party from discussing the substance or any relevant details of the transactions contemplated in this Agreement on a confidential basis with any of its attorneys, accountants, professional consultants, financial advisors, rating agencies, or potential lenders, as the case may be, or prevent it from complying with applicable laws, including, without limitation, governmental regulatory, disclosure, tax and reporting requirements.

[Signature Pages Follow]

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Exhibit 10.(w)

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written.

WITNESS:		OWNER:
		1592 ROCKVILLE PIKE LLC, <br>a Delaware limited liability company
		By:	/s/ B. Francis Saul II
By:	/s/ Yzza M. Ramos	Name:	B. Francis Saul II
Name:	Yzza M. Ramos	Title:	Chief Executive Officer
WITNESS:		PARTNERSHIP:
		SAUL HOLDINGS LIMITED PARTNERSHIP,<br><br>a Maryland limited partnership
		By:	Saul Centers, Inc., its general partner
By:	/s/ Yzza M. Ramos		By:	/s/ Scott V. Schneider
Name:	Yzza M. Ramos		Name:	Scott V. Schneider
			Title:	Executive Vice President

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Exhibit 10.(w)

EXHIBIT A

LEGAL DESCRIPTION OF OWNED PROPERTY

All that land being situated, lying and being in Montgomery County, Maryland, and more particularly described as follows:

Part A: Lot numbered Twenty-four (24) in Block lettered “A” in a subdivision known as “The Pike” per plat thereof recorded in Plat Book 174 at Plat No. 19548 among the Land Records of Montgomery County, Maryland,

Saving and exception therefrom, however, that portion (0.00788 acre, more or less) as described in the Deed of Exchange recorded in Liber 20543 at folio 274, as amended by Quitclaim Deed recorded in Liber 33786 at folio 495, and more particularly described as:

Part of Lot 24 as shown on Plat of Subdivision “Lot-24, Block A, The Pike”, dated June 22, 1994 and recorded October 28, 1994 in Plat Book 174 as Plat Number 19548 among the Land Records of Montgomery County, Maryland; said part of Lot 24 being also part of Halpine Avenue (Abandoned) as shown in Plat Book 42 as Plat Number 3043, and in Plat Book 84 as Plat Number 8835 and also in abovesaid Plat Book 174 as Plat Number 19548, said portion of Halpine Avenue abandoned by City of Rockville Ordinance 1-92, adopted January 13, 1992 and recorded October 18, 1994 among the aforesaid Land Records in Liber 13002 at folio 007; said part of Lot 24 and Halpine Avenue (Abandoned) being more particularly described, in the meridian of Plat Book 174 – Plat Number 19548, as follows:

Beginning for the same at a point on the centerline of Halpine Avenue (Abandoned), said point of beginning lying on the east end of the abandoned portion of Halpine Avenue and being also one of the southerly Lot corners of Lot 24, Block A as previously referenced, being the southeast end of line lettered “F” (South 33° 31’ 29” East, 18.38 feet) as shown in aforesaid Plat Book 174 as Plat Number 19548; and running thence with the centerline of Halpine Avenue (Abandoned), being line lettered “G” of the aforesaid plat

1) North 88° 13’ 00” West, 38.81 feet to a point; thence departing said centerline and line lettered “G” and running in, through over and across Lot 24 so as to include a portion thereof

2) North 56° 32’ 11” East 25.99 feet to a point on the north line of said Halpine Avenue (Abandoned); thence running with said line

3) South 88° 13’ 00” East, 6.96 feet to the aforesaid east end of Halpine Avenue (Abandoned), being the northwest end of line lettered “F” as referenced above; and thence running with said line lettered “F”

4) South 33° 31’ 29” East, 18.38 feet to the place of beginning, containing a computed area of 343 square feet or 0.00788 of an acre of land, more or less.

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Exhibit 10.(w)

Part B: A parcel of land consisting of 0.00476 acre, more or less, and more particularly described as:

Part of Halpine Avenue (Abandoned) as shown in Plat Book 42 as Plat Number 3043, and in Plat Book 84 as Plat Number 8835 and also in Plat Book 174 as Plat Number 19548 among the Land Records of Montgomery County, Maryland; said part of Halpine Avenue being a portion of that which was abandoned by City of Rockville Ordinance 1-92, adopted January 13, 1992 and recorded October 18, 1994 in Liber 13002 at folio 007 among said Land Records; said part of Halpine Avenue (Abandoned) being more particularly described as follows:

Beginning for the same at a point on line lettered “G” of Lot 24 as shown on Plat of Subdivision entitled “Lot 24, Block A, The Pike”, dated June 22, 1994 and recorded October 28, 1994 in Plat Book 174 as Plat Number 19548 among said Land Records, said point of beginning lying also on the centerline of Halpine Avenue (Abandoned) and distant North 88° 13’ 00” West, 38.81 feet from the east end of the abandoned portion thereof, being also the east end of line lettered “G” as referenced above; and thence departing said centerline and line lettered “G” and running in through, over and across said Halpine Avenue (Abandoned) so as to include a portion thereof

1) South 56° 32’ 11” West, 24.23 feet to a point; thence

2) North 33° 27’ 49 “ West, 17.12 feet to a point on the aforementioned centerline and line lettered “G”; and thence running with said line reversed

3) South 88° 13’ 00” East, 29.67 feet to the place of beginning, containing a computed area of 207 square feet or 0.00476, more or less, of an acre of land.

Together with a non-exclusive access easement from and to the Land, on and over adjacent land (part of Lot 4, Block A, The Pike) now or formerly owned by Washington Metropolitan Area Transit Authority, to and from Halpine Avenue, a public road, such easement being shown on Plat No. 19548 and being established in Deed recorded in Liber 5208 at folio 529.

Together with a Private Ingress, Egress and Access Easement from and to the Land, on and over: (i) land (part of Lots 10-12, Block 11, Halpine) now or formerly owned by The Mayor and Council of Rockville; and (ii) land (formerly part of Halpine Avenue, now abandoned) now or formerly owned by Walter Diener and Milton Diener, to and from Halpine Avenue, a public road, as shown on and as established by Plat No. 19548.

Together with a thirty (30) foot wide Private Ingress, Egress and Access Easement (former Mayor and Council of Rockville property) for the benefit of Lots 24 and 25, Block “A” of the subdivision “The Pike” as shown on Subdivision Plat No. 22661.

TOGETHER WITH the ingress/egress access easement created by Ingress/Egress Access Easement Agreement dated June 16, 2011 and recorded June 24, 2011 in Liber 41797 at folio 490.

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Exhibit 10.(w)

EXHIBIT A-1

LEGAL DESCRIPTION OF LEASED PROPERTY

All that land being situated, lying and being in Montgomery County, Maryland, and more particularly described as follows:

LOT NUMBERED TWENTY-FIVE (25) IN BLOCK LETTERED “A” IN THE SUBDIVISION KNOWN AS “THE PIKE” AS PER PLAT THEREOF RECORDED AS SUBDIVISION PLAT NO. 22661 AMONG THE LAND RECORDS OF MONTGOMERY COUNTY, MARYLAND.

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Exhibit 10.(w)

EXHIBIT 5.1(b)

PERMITTED EXCEPTIONS, CONTRACTS AND LEASES AS OF THE EFFECTIVE DATE

Permitted Exceptions

State, County and municipal real estate taxes and assessments, general and special, subsequent to the levy year ending June 30, 2020, a lien not yet due and payable.
Water charges, sanitary sewer service charges, stormwater management fees, and solid waste charges arising in connection with the Land subsequent to the original Date of Policy, a lien not yet due and payable.
Rights of tenants in possession under unrecorded leases.
Thirty foot easement for service drive for ingress and egress created by Owner’s Dedication on the plat recorded in Plat Book 84 at Plat No. 8835 (former Lot 4, Block A, The Pike), and shown and/or noted on the ALTA/NSPS Land Title Survey entitled, “Part of Lot 24 and All of Lot 25, Block A The Pike” by VIKA, dated December 29, 2017, and last revised January 17, 2018, designated as File No. VM1625 and consisting of one (1) sheet (the “Survey”).
Thirty foot easement for service drive for ingress and egress shown on the plats recorded in Plat Book 87 at Plat No. 9266 (former Lot 8, Block A, The Pike) and Plat Book 87 at Plat No. 9266 (former Lot 8, Block A, The Pike), and shown and/or noted on the Survey.
Minimum Building Restriction Lines, thirty foot wide Easement for Service Drive for Public Ingress and Egress, 10’, 15’ and 20’ Public Utility Easements subject to the terms and conditions of Liber 3834 at folio 457, Thirty foot Public Utility Easement and Private Ingress, Egress and Access Easement shown on the plat recorded in Plat Book 174 at Plat No. 19548 (Lot 24, Block A, The Pike), and shown and/or noted on the Survey.
The following matters shown on, or created by, plats recorded as Plat Book 174 at Plat No. 19548 and/or Subdivision Plat No. 22661, and shown on the Survey:

A. Seventy-Five (75) foot Rockville Pike restriction line;

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Exhibit 10.(w)

B. Thirty (30) foot wide Private Ingress, Egress and Access Easement;

C. Thirty (30) foot wide Private Ingress, Egress and Access Easement (former Halpine Avenue);

D. Thirty (30) foot wide Easement/Service Drive for Public Ingress, Egress and Access;

E. Fifteen (15) foot wide Public Utility Easement incorporating by reference the terms and provisions set forth in that Declaration recorded in Liber 3834 at folio 457 as the terms and provisions which apply to said Public Utility Easement.

Declaration and Agreement dated May 18, 1953 and recorded on May 25, 1953 in Liber 1798 at folio 20.
Agreement with the Mayor and Council of Rockville dated March 7, 1955 and recorded on March 16, 1955 in Liber 2034 at folio 161.
Snow fence easement granted the State of Maryland to the use of the State Roads Commission by Deed dated July 22, 1957 in Liber 2376 at folio 350, shown on the plat recorded as State Highway Plat Number 12969, and shown on the Survey.
Terms, provisions and easements as granted/reserved to the State of Maryland to the use of the State Highway Administration of the Department of Transportation by deed dated June 28, 1957 and recorded on October 11, 1957 in Liber 2392 at folio 432, to the extent shown on State Roads Commission of Maryland Plats No. 12968 and 12969, and denied access area shown on the Survey.
Limitation on vehicular access to Rockville Pike and easements granted the State of Maryland to the use of the State Roads Commission by Deed dated August 18, 1958 and recorded in Liber 2534 at folio 90, shown on the plat recorded as State Highway Plat Number 17856, and shown on the Survey.
Limitation on vehicular access and snow fence easement granted the State of Maryland to the use of the State Roads Commission by Deed dated July 16, 1957 and recorded in Liber 2385 at folio 537, shown on the plat recorded as State Highway Plat Number 12969, and shown on the Survey.

37 -

Exhibit 10.(w)

Right of the Grantee to relocate on Grantee’s property the non-exclusive access easement reserved by the Grantor in Deed to Washington Metropolitan Area Transit Authority dated September 18, 1978 and recorded in Liber 5208 at folio 529, and shown on the Survey.
Terms, conditions, permanent underground easement and utility easement granted Washington Metropolitan Area Transit Authority by Deed dated September 18, 1978 and recorded in Liber 5208 at folio 536, and shown on the Survey.
Terms, conditions and easements contained in Storm Water Management Easement, Stormwater Management Inspection and Maintenance Agreement with the Mayor and Council or Rockville, Maryland dated October 29, 1993 and recorded in Liber 12786 at folio 164, as amended by instrument dated February 23, 1995 and recorded in Liber 13270 at folio 23, and shown on the Survey.
Thirty (30) foot wide Public Utility Easement granted to the Potomac Electric Power Company, Potomac Edison Company, Baltimore Gas and Electric Company, Chesapeake and Potomac Telephone Company of Maryland, Washington Gas Light Company, Mayor and Council of Rockville, and Cable TV Montgomery by City Ordinance of Abandonment recorded on October 18, 1994 in Liber 13002 at folio 7 and by Owner's Dedications on Plat Book 174 at Plat No. 19548 and on Subdivision Plat No. 22661 and designated thereon as Public Utility Easement. Said Owner's Dedications incorporates by reference the terms and provisions set forth in that Declaration recorded in Liber 3834 at folio 457 as the terms and provisions which apply to said Public Utility Easement, and shown on the Survey.
Terms and conditions which burden the Land contained in Ingress/Egress Access Easement Agreement dated June 16, 2011 and recorded June 24, 2011 in Liber 41797 at folio 490, and shown on the Survey
Terms, conditions, and provisions of the ground lease affecting the Leased Property.
The following matters being shown on the Survey:

A. The one-story brick and block building bearing street number 1590 Rockville Pike violates the 75 foot building setback line by up to 1.2 feet;

B. The one-story brick and block building bearing street number 1586 Rockville Pike violates the 75 foot building setback line by up to 1.3 feet;

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Exhibit 10.(w)

C. Curbing, pavement and parking spaces in the southeast corner project into Outlot “A”, Block B;

D. Possible easement rights in favor of the owners of the overhead wires, underground water, gas, electric and telephone lines, underground electrical equipment, overhead wires, and other utility equipment located outside of recorded easement areas; and

E. The one-story stucco building bearing street numbers #1598B, #1600, #1610, #1614, #1616A Rockville Pike violates the 75 foot building setback line.

Terms, provisions, covenants, conditions, restrictions and easements as set forth in the Development Rights and Responsibilities Agreement by and between 1500 Rockville Pike LLC, Rockville Pike Holdings LLC, 1592 Rockville Pike LLC and Avissar-Diener, LLC, (collectively, the Developer), and the Mayor and Council of Rockville, dated October 8, 2019 and recorded on October 9, 2019 in Liber 58279 at folio 121.

Contracts

1.	Professional Services Agreement dated October 11, 2019, by and between 1592 Rockville Pike LLC and Hellmuth, Obata & Kassabaum.
2.	Professional Services Agreement dated August 21, 2019, by and between 1592 Rockville Pike LLC and Mahan Rykiel Associates Inc.
---	---
3.	Property Management Agreement dated February 19, 2014, by and between 1592 Rockville Pike LLC and Rappaport Management Company.
---	---
4.	Listing Agreement Property for Lease dated February 19, 2014, by and between 1592 Rockville Pike LLC and Jay Clogg Realty Group, Inc., as amended by that First Amendment dated February 20, 2014.
---	---
5.	Agreement re cleaning dated January 1, 2019, by and between 1592 Rockville Pike, LLC and Gettier Commercial Inc.
---	---
6.	Agreement re landscaping dated February 25, 2019, by and between Rappaport on behalf of 1592 Rockville Pike, LLC, and Level Green Landscaping, LLC.
---	---
7.	Agreement re lighting dated January 24 and/or 28, 2019, by and between Rappaport on behalf of 1592 Rockville Pike, LLC, and Commercial Mechanical & Industrial Lighting of Maryland, Inc.
---	---

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Exhibit 10.(w)

8.	Agreement re plumbing dated January 28, 2019, by and between Rappaport on behalf of 1592 Rockville Pike, LLC, and McDevitt & Sons Plumbing, Inc.
9.	Agreement re snow services dated November 7, 2018, by and between Rappaport on behalf of 1592 Rockville Pike, LLC, and Level Green Landscaping, LLC
---	---
10.	Agreement re miscellaneous repairs dated January 30, 2019, by and between Rappaport on behalf of 1592 Rockville Pike, LLC, and Kron Construction & Painting, LLC.
---	---
11.	Agreement re exterminating dated January 11, 2011, by and between Rappaport Management Company, on behalf of the Northwestern Mutual Life Insurance Company and JC Ehrlich Company, Inc.
---	---
12.	Agreement re roofing dated January 22, 2019, by and between Rappaport on behalf of 1592 Rockville Pike, LLC, and Reliance Roofing and Waterproofing, Inc.
---	---

Leases

1.	Lease Agreement dated June 27, 2006, by and between Rockville Pike Properties Limited Partnership LLLP and Jerald B. Hawk, D.D.S., PA. (“Tenant”); as amended by that certain First Lease Amendment and Extension of Lease dated July 1, 2011 between The Northwestern Mutual Life Insurance Company, predecessor-in-interest to 1592 Rockville Pike LLC (“Landlord”) and Tenant, for premises located at 1592C Rockville Pike, Rockville, Maryland.
2.	Lease Agreement dated February 16, 2017, by and between 1592 Rockville Pike LLC and The Salvation Army, for premises located at 1590 Rockville Pike, Rockville, Maryland.
---	---
3.	Lease Agreement dated August 19, 2015, by and between 1592 Rockville Pike LLC and Chotoo, LLC t/a Toosso, for premises located at 1596A Rockville Pike, Rockville, Maryland.
---	---
4.	Lease Agreement dated April 19, 2018, by and between 1592 Rockville Pike LLC and Crossfit Rebirth LLC t/a Crossfit Rebirth, for premises located at 1610 Rockville Pike, Rockville, Maryland.
---	---
5.	Lease Agreement dated May 8, 1998, by and between Rockville Pike Properties Limited Partnership LLLP and S.T. Restaurant, Inc.; as amended by that certain Assignment of Lease, Consent to Assignment, Estoppel Certificate and Amendment of Lease dated October 6, 2000 and that certain Second Lease Amendment and Extension of Lease dated July 23, 2013, both between The Northwestern Mutual Life Insurance Company, predecessor-in-
---	---

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Exhibit 10.(w)

interest to 1592 Rockville Pike LLC (“Landlord”) and Luby’s Fuddruckers Restaurants, LLC, successor-in-interest to S.T. Restaurant, Inc. and Fuddruckers, Inc. t/a Fuddruckers (“Tenant”); and that certain Third Amendment to Lease dated March 2, 2018, between Landlord and Tenant, for premises located at 1592A Rockville Pike, Rockville, Maryland.

6.	Lease Agreement dated January 11, 2016, by and between 1592 Rockville Pike LLC and Ali Rokhvand and Zahara Golkarfard (husband and wife) t/a Flooring District, for premises located at 1598C Rockville Pike, Rockville, Maryland.
7.	Lease Agreement dated April 27, 2016, by and between 1592 Rockville Pike LLC and Jem Nallen and Paraluman Nallen (husband and wife) t/a Lumi Fit, for premises located at 1592D Rockville Pike, Rockville, Maryland.
---	---
8.	Lease Agreement dated April 12, 2017, by and between 1592 Rockville Pike LLC and Persiano Rug, Inc. t/a Persiano Gallery, for premises located at 1598A Rockville Pike, Rockville, Maryland.
---	---
9.	Lease Agreement dated April 12, 2017, by and between 1592 Rockville Pike LLC and Persiano Rug, Inc. t/a Persiano Gallery, for premises located at 1598B Rockville Pike, Rockville, Maryland.
---	---
10.	Lease Agreement dated February 13, 2019, by and between 1592 Rockville Pike LLC and Persiano Rug, Inc. t/a Persiano Gallery, for premises located at 1600 Rockville Pike, Rockville, Maryland.
---	---
11.	Lease Agreement dated May 1, 2008, by and between Rockville Pike Properties Limited Partnership LLLP and Three Brothers Rockville, LLC; as amended by that certain Assignment and Assumption of Lease and Amendment of Lease dated April 5, 2011 between The Northwestern Mutual Life Insurance Company, predecessor-in-interest to 1592 Rockville Pike LLC (“Landlord”) and Pizza CS, LLC (“Tenant”); that certain Second Lease Amendment and Extension of Lease dated June 1, 2013; that certain Third Amendment to Lease dated January 1, 2016; that certain Fourth Amendment to Lease dated July 28, 2016; and that certain Fifth Amendment to Lease dated July 1, 2018, all between Landlord and Tenant, for premises located at 1596B Rockville Pike, Rockville, Maryland.
---	---
12.	Lease Agreement dated October 19, 2001, by and between Rockville Pike Properties Limited Partnership LLLP, predecessor-in-interest to 1592 Rockville Pike LLC (“Landlord”) and Leisure Fitness Equipment, LLC t/a Leisure Fitness, successor-in-interest to Leisure Fitness, Inc. (“Tenant”); as amended by that certain First Amendment to Lease dated February 27, 2007; that certain Second Amendment to Lease dated March 27, 2015; and that
---	---

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Exhibit 10.(w)

certain Third Amendment to Lease dated January 1, 2017, all between Landlord and Tenant, for premises located at 1614 Rockville Pike, Rockville, Maryland.

13.

Lease Agreement dated February 20, 1990, by and between Rockville Pike Properties Limited Partnership LLLP, predecessor-in-interest to 1592 Rockville Pike LLC (“Landlord”) and Duron, Inc.; as amended by that certain First Amendment and Supplement to Lease Agreement dated February 20, 1990 between Landlord and Duron, Inc.; that certain Second Amendment and Supplement to Lease Agreement dated February 20, 1990; that certain Third Lease Amendment Agreement dated April 10, 2015; that certain Fourth Lease Amendment Agreement dated August 4, 2016, all between Landlord and The Sherwin-Williams Company dba Duron Paints & Wallcoverings successor-in-interest to Duron, Inc. (“Tenant”); and that certain Fifth Lease Amendment Agreement dated June 5, 2019 between Landlord and Tenant, for premises located at 1594C Rockville Pike, Rockville, Maryland.

14.

Parking Lease dated September 21, 2019, by and between 1592 Rockville Pike LLC and SAI Rockville Imports, LLC, for 68 parking spaces.

---

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Exhibit 10.(w)

EXHIBIT 5.1(m)

BINDING UNDERTAKINGS

Development Rights and Responsibilities Agreement by and between 1500 Rockville Pike LLC, Rockville Pike Holdings LLC, Owner, Avissar-Diener, LLC, and the Mayor and Council of Rockville.

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Exhibit 10.(w)

EXHIBIT 10.1(a)

FORM OF ESCROW AGREEMENT

This Escrow Agreement (this “Agreement”) is made and entered into this 5^th^ day of November, 2019, among 1592 ROCKVILLE PIKE LLC, a Delaware limited liability company (“Owner”), and SAUL HOLDINGS LIMITED PARTNERSHIP, a Maryland limited partnership (the “Partnership”), and COMMONWEALTH LAND TITLE INSURANCE COMPANY (“Escrow Agent”). Reference is made to that certain Contribution Agreement dated as of November 5, 2019 (the “Contract”), between Owner and the Partnership. The defined terms used in this Agreement shall have the meanings set forth in the Contract.

The Partnership and Owner have agreed to select Escrow Agent to serve as escrow agent with respect to the escrow to be made by Owner and the Partnership at Closing pursuant to the Contract. The purpose of this Agreement is to prescribe instructions governing the services of Escrow Agent with respect to such escrow and the contents thereof.

1. Owner and the Partnership hereby engage Escrow Agent to serve as escrow agent with respect to the escrow to be made by Owner and the Partnership pursuant to the terms of the Contract, a copy of which has been delivered to and received by Escrow Agent. Escrow Agent hereby accepts such engagement.

2. Escrow Agent shall release the contents of the escrow in accordance with the terms and conditions of the Contract.

3. In the event that there is a dispute regarding the contents of the escrow, or in the event Escrow Agent shall receive conflicting written demands or instructions with respect thereto, then Escrow Agent shall withhold such disbursement or disposition until notified by both parties that such dispute is resolved or Escrow Agent may file a suit of interpleader at the cost and expense of Owner and the Partnership. Notwithstanding the foregoing to the contrary, if the Second Escrow Release has occurred, Escrow Agent shall release the remaining contents of the escrow on the Third Escrow Release Date notwithstanding any demand or instruction to the contrary, other than the joint instruction of Owner and the Partnership.

4. Escrow Agent shall not be liable for any damage, liability or loss arising out of or in connection with the services rendered by Escrow Agent pursuant to this Agreement unless the same results from the negligence, gross negligence, or willful misconduct of Escrow Agent.

5. Copies of all notices given by any party hereunder shall be delivered in person, mailed, postage prepaid, or sent by electronic mail, to all other parties hereto, to the following addresses:

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Exhibit 10.(w)

(a) If to the Partnership:	Saul Holdings Limited Partnership <br>7501 Wisconsin Avenue, Suite 1500E<br><br>Bethesda, Maryland 20814<br><br>Attn: Scott Schneider<br><br>Email: scott.schneider@saulcenters.com
with a copy to:	Polsinelli <br>1401 Eye Street, N.W., Suite 800<br><br>Washington, D.C. 20005<br><br>Attn: Kevin L. Vold <br>Email: kvold@polsinelli.com
(b) If to Owner:	1592 Rockville Pike LLC <br>c/o B. F. Saul Real Estate Investment Trust<br><br>7501 Wisconsin Avenue, Suite 1500E<br><br>Bethesda, MD 20814<br><br>Attn: Bettina T. Guevara<br><br>Email: bettina.guevara@bfsaul.com
with a copy to:	Pillsbury Winthrop Shaw Pittman LLP<br><br>1200 Seventeenth Street, N.W.<br><br>Washington, D.C. 20036<br><br>Attn: Christian A. Buerger<br><br>Email: christian.buerger@pillsburylaw.com
(c) If to Escrow Agent:	Commonwealth Land Title Insurance Company<br><br>1620 L Street, N.W., 4th Floor<br><br>Washington, D.C. 20036<br><br>Attn: David P. Nelson<br><br>Email: davidnelson@fnf.com

6. The instructions contained herein may not be modified, amended or altered in any way except by a writing (which may be in counterpart copies) signed by Owner, the Partnership and Escrow Agent.

7. The Partnership and Owner reserve the right, at any time and from time to time, to substitute a new escrow agent in place of Escrow Agent.

8. This Agreement is intended solely to supplement and implement the provisions of the Contract and is not intended to modify, amend or vary any of the rights or obligations of the Partnership or Owner under the Contract.

9. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument; provided, however, in no event shall this Agreement be effective unless and until signed by all parties hereto.

[Signature Pages Follow]

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Exhibit 10.(w)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first above written.

OWNER:
1592 ROCKVILLE PIKE LLC, <br>a Delaware limited liability company
By:	[SEAL]
Name:
Title:
PARTNERSHIP:
SAUL HOLDINGS LIMITED PARTNERSHIP,<br><br>a Maryland limited partnership
By:	Saul Centers, Inc., its general partner
	By: [SEAL]
	Name:
	Title:
ESCROW AGENT:
COMMONWEALTH LAND TITLE INSURANCE COMPANY
By:	[SEAL]
Name:
Title:

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Exhibit 10.(w)

EXHIBIT 10.1(c)

FORM OF DEED

RETURN TO:

____________________________

Tax Parcel I.D.: _______________

SPECIAL WARRANTY DEED

THIS SPECIAL WARRANTY DEED is made this ___ day of __________, 201__, by and between 1592 ROCKVILLE PIKE LLC, a Delaware limited liability company (“Grantor”), and ____________________, a ____________________ (“Grantee”).

WITNESSETH:

THAT, for and in consideration of the sum of __________ Dollars ($________.00), cash in hand paid, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor does hereby grant, bargain, sell and convey, with Special Warranty of Title, unto Grantee, all those certain parcels of land situate in Montgomery County, Maryland (the “Real Estate”), and being more particularly described as follows:

See Exhibit A attached hereto and incorporated herein.

This conveyance is made subject to all recorded covenants, restrictions, conditions, easements, reservations, agreements, and rights-of-way without serving to reimpose same, to the extent, but only to the extent, that the same are valid and subsisting and apply to the Real Estate or any part thereof.

TO HAVE AND TO HOLD the Real Estate, together with all rights, privileges, and advantages thereunto belonging or appertaining to Grantee, its successors and assigns, forever.

Grantor hereby certifies under the penalties of perjury that the actual consideration paid or to be paid for the aforegoing conveyance, including the amount of any mortgage or deed of trust assumed by the Grantee, is in the sum total of __________ Dollars ($________.00).

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Exhibit 10.(w)

IN WITNESS WHEREOF, Grantor has caused this Special Warranty Deed to be executed as of the date first above written.

1592 ROCKVILLE PIKE LLC,
a Delaware limited liability company

By:

Name:

Title:

______________________ )

) ss:

______________________ )

On this the ____ day of __________, 201__, before me, the undersigned officer, personally appeared ________________, who acknowledged himself/herself to be the _______________ of 1592 Rockville Pike LLC, a Delaware limited liability company, and that he/she, being authorized so to do, acknowledged before me that he/she executed the foregoing instrument for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal.

___________________________________[SEAL]Notary Public

My Commission Expires: ____________

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Exhibit 10.(w)

CERTIFICATION

I hereby certify that this instrument was prepared by or under the supervision of an attorney admitted to practice before the Court of Appeals of the State of Maryland.

________________________________

[Name]

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Exhibit 10.(w)

EXHIBIT A

[to be inserted]

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Exhibit 10.(w)

EXHIBIT 10.1(d)

FORM OF FIRPTA CERTIFICATE

Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person or entity. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. For U.S. tax purposes, 1592 Rockville Pike LLC, a Delaware limited liability company, is a disregarded entity.

To inform the transferee that withholding of tax is not required upon the disposition of a U.S. real property interest by 1592 Rockville Pike LLC, B. F. Saul Real Estate Investment Trust, a Maryland real estate investment trust (the “Company”), hereby certifies the following on behalf of the Company:

1. The Company is not a foreign person, foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder);

2. The Company’s U.S. Employer identification number is 52-6053341; and

3. The Company’s office address is 7501 Wisconsin Avenue, Suite 1500E, Bethesda, MD 20814.

The undersigned, as ______________ of the Company, understands that this certification may be disclosed to the Internal Revenue Service by the transferee and that any false statement contained herein could be punished by fine, imprisonment or both.

Under penalties of perjury, the undersigned, as _____________ of the Company, declares that the undersigned has examined this certification and that, to the best of the undersigned’s knowledge and belief, it is true, correct and complete, and the undersigned further declares that the undersigned has authority to sign this document on behalf of the Company.

B. F. SAUL REAL ESTATE INVESTMENT TRUST, a Maryland real estate investment trust, <br>the sole owner of 1592 Rockville Pike LLC
By:
Name:
Title:

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Exhibit 10.(w)

EXHIBIT 10.1(e)

FORM OF PARTNERSHIP AGREEMENT AMENDMENT

[SEVENTEENTH][EIGHTEENTH] AMENDMENT TO THE

FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP OF

SAUL HOLDINGS LIMITED PARTNERSHIP

THIS [SEVENTEENTH][EIGHTEENTH] AMENDMENT TO THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF SAUL HOLDINGS LIMITED PARTNERSHIP (this “Amendment”), dated as of ___________, 20__, is entered into by the undersigned parties.

W I T N E S S E T H:

WHEREAS, Saul Holdings Limited Partnership (the “Partnership”) was formed as a Maryland limited partnership pursuant to that certain Certificate of Limited Partnership dated June 16, 1993 and filed on June 16, 1993 among the partnership records of the Maryland State Department of Assessments and Taxation, and that certain Agreement of Limited Partnership dated June 16, 1993 (the “Original Agreement”);

WHEREAS, the Original Agreement was amended and restated in its entirety by that certain First Amended and Restated Agreement of Limited Partnership of the Partnership dated August 26, 1993, which was further amended by that certain First Amendment dated August 26, 1993, by that certain Second Amendment dated March 31, 1994, by that certain Third Amendment dated July 21, 1994, by that certain Fourth Amendment dated December 1, 1996, by that certain Fifth Amendment dated July 6, 2000, by that certain Sixth Amendment dated November 5, 2003, by that certain Seventh Amendment dated November 26, 2003 , by that certain Eighth Amendment dated December 31, 2007, by that certain Ninth Amendment dated March 27, 2008, by that Tenth Amendment dated April 4, 2008, by that certain Eleventh Amendment dated September 23, 2011, by that certain Twelfth Amendment dated February 12, 2013, by that certain Thirteenth Amendment dated November 12, 2014, by that certain Fourteenth Amendment dated January 23, 2018, by that certain Fifteenth Amendment dated May 9, 2018, [and] by that certain Sixteenth Amendment dated September 17, 2019[, and by that certain Seventeenth Amendment dated ________] (as amended, the “Agreement”);

WHEREAS, pursuant to a Contribution Agreement, dated November 5, 2019 (the “Contribution Agreement”), among the Partnership and 1592 Rockville Pike LLC, an affiliate of the Partnership (the “Company”), the Company agreed to contribute certain fee and leasehold interests in certain land and the improvements located thereon known as Twinbrook Quarter to the Partnership in exchange (at a time and on the terms and conditions set forth in the Contribution Agreement) for Partnership Units;

WHEREAS, the undersigned parties, constituting all of the Partners of the Partnership,

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Exhibit 10.(w)

desire to amend Exhibit A to the Agreement to reflect such additional Capital Contribution and to consent to the issuance of additional Partnership Units in accordance with the terms set forth in the Contribution Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the undersigned parties, intending legally to be bound, hereby agree as follows:

1.	The Exhibit A attached to the Agreement is hereby deleted in its entirety and replaced by the Exhibit A attached hereto.
2.	Notwithstanding anything in the Agreement to the contrary, the Partners hereby consent to the issuance of additional Partnership Units to the Company in accordance with the terms set forth in the Contribution Agreement, which Partnership Units shall carry the Rights set forth in the Agreement. Immediately following the issuance of such Partnership Units to the Company, the Company shall be a Limited Partner for all purposes under the Agreement.
---	---
3.	Except as the context may otherwise require, any terms used in this Amendment that are defined in the Agreement shall have the same meaning for purposes of this Amendment as in the Agreement.
---	---
4.	Except as specifically amended hereby, the terms, covenants, provisions and conditions of the Agreement shall remain and continue in full force and effect and, except as amended hereby, all of the terms, covenants, provisions and conditions of the Agreement are hereby ratified and confirmed in all respects.
---	---
5.	This Amendment may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Amendment immediately upon affixing its signature hereto.
---	---

[Signature Page Follows]

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Exhibit 10.(w)

IN WITNESS WHEREOF, the undersigned parties have executed this Amendment as of the date first written above.

GENERAL PARTNER

SAUL CENTERS, INC.,

a Maryland corporation