SAUL CENTERS, INC. (BFS) stock intrinsic value fair value estimate & owner earnings analysis

Saul Centers owns and operates roughly 60 grocery-anchored shopping centers and a growing set of mixed-use apartment/retail projects, almost all concentrated in the Washington, D.C. area — Northern Virginia and suburban Maryland, plus Baltimore. A small number of centers sit outside that core market, in Florida, Georgia and Oklahoma, but these are a minor share of the portfolio. This is one of the wealthiest, most supply-constrained retail markets in the country, and grocery-anchored centers have held up well against e-commerce; the mature shopping-center portfolio has run 95-96% occupied for years. Alongside the shopping centers, the company has built several large mixed-use projects on its own land — The Waycroft, Park Van Ness and Clarendon South (all stabilized), and two newer, larger ones: Twinbrook Quarter Phase I in Rockville, Maryland (anchored by a Wegmans supermarket) and Hampden House in downtown Bethesda, Maryland. These two explain the recent dip in earnings. Twinbrook Quarter's apartments opened in October 2024 and its Wegmans opened in June 2025; Hampden House's apartments opened in October 2025. Both began carrying a full load of depreciation and interest expense the moment they opened, while rent from new tenants took time to catch up — net income fell about 27% in 2025 as a direct, disclosed result. The encouraging news in the same filings: Twinbrook's apartments were 97.3% leased by February 2026 — essentially stabilized — and its retail is 95.7% leased. Hampden House is earlier in its climb (35.5% of apartments, 85% of retail leased as of February 2026), so it will keep weighing on earnings through 2026-2027, but the larger of the two drags is now largely behind the company. The first half of 2026 already shows revenue up about 9% and operating cash flow up about 5% from a year earlier, consistent with that turn. One correction matters a great deal here. We measure owner earnings as the cash the business generates after the real, recurring costs of keeping the existing centers in shape, but before the discretionary money spent building new projects. However, Saul Centers doesn't own its properties directly — they sit inside a subsidiary partnership in which Saul Centers itself holds about 69% of the economics; the remaining roughly 30% belongs to the company's founding family and other investors, who hold partnership units convertible into ordinary shares. On top of that, the company owes about $11.2 million a year in fixed dividends to preferred shareholders before anything is left for common shareholders and those partnership unitholders. Correcting for this properly lowers our estimate of the portfolio's normal owner earning power from roughly $3.85 to roughly $2.46 per share. Our base case (about $59/share) assumes Hampden House's lease-up follows a path similar to, if slower than, Twinbrook's — reaching something like 70% leased by 2028 and largely stabilizing by 2029-2030 — while Twinbrook's remaining retail space fills in during 2026 and the mature, 95%+ occupied shopping-center portfolio keeps growing slowly from contractual rent increases and periodic re-leasing. Owner earnings recover from about $1.55/share in 2025 to above the $2.46 normal level by around 2030, growing modestly thereafter. Our bear case (about $33/share) assumes a softer Washington-area economy — federal-workforce actions have been a live, filed concern for this specific region — that slows leasing at both Hampden House and the shopping centers, keeps Hampden stuck well below stabilization for years, and coincides with refinancing the company's roughly $1.63 billion of debt at meaningfully higher cost. Growth essentially stalls. Our bull case (about $74/share) assumes Hampden House leases up faster and reaches close to Twinbrook's level by 2028, Twinbrook's remaining retail opens on schedule in 2026, and the small Ashland Square redevelopment in Prince William County, Virginia — where the company signed a new Publix lease during 2025 and plans about 124,000 square feet of retail once complete — contributes as planned, alongside the mature portfolio's demonstrated pricing power. We did not include a larger expansion of the Twinbrook Quarter site itself: the company's own filing says a timetable for those additional phases has not yet been set, so there is no committed project to put a value on today. The company carries meaningful debt, and preferred shareholders and partnership unitholders both sit ahead of or alongside common shareholders in ways that reduce what's left for common stock — our bear case reflects that leverage cutting against shareholders in a soft-economy scenario. Given the real uncertainty in how quickly Hampden House fills up and how the next round of debt gets priced, the margin-of-safety price sits meaningfully below our normal-value estimate — around $40 or below — and that estimate is firmer if Hampden House's leasing shows continued, visible progress rather than stalling.