The B. F. Saul Real Estate Investment Trust should reach the break even point in cash flow within the next six months and might be able to resume dividends next year, Chairman B. Francis Saul II told shareholders at the annual meeting yesterday.
Saul said the REIT will begin working with banks next week to obtain permanent financing to replace its $108 million revolving credit line. The long-term mortgages not only would provide lower interest rates, but also could remove present bans on paying dividends, he said.
"I would hope that at the annual meeting next year, we could announce resumption of dividends," he said.
"I would hope that at the annual meeting next year, we could announce resumption of dividends," he said. The Saul REIT las paid a dividend (15 cents) in December 1974.
Reminding stockholders that at the previous annual meeting he had predicted the trust would generate a positive cash flow within 12 to 18 months, Saul said yesterday, "I do expect to meet that goal withing the 18 months."
Other offictrs of the REIT said its real estate properties now are producing an operating profit, but the company is still in the red when management and trust charges are counted.
Answering a stockholder's question, Saul said the goal of the refinancing is to get mortgages with more favorable terms than the 25 per cent over the prime rate now being paid on the revolving credit agreement with a group of 35 banks. He said he hoped to reduce the number of banks participating in the agreement by two thirds.
Negotiations for the refinancing have not started yet, he said. The aim is to obtain long term mortgages for about $50 million of commercial property and $40 million of apartments.
Saul told shareholders of the long-troubled REIT. "We're not completely through the recovery program, but we are in the final stage."
Compared with previous meetings in which REIT executives faced exten sive criticism from shareholders, the meeting was placid except for a lengthy debate Sauls had with one shareholder.
Frank Dooley, who said he owns about 4,500 shares, grilled Saul about stock options granted to several executives. Dooley accused Saul of misleading shareholders about the reason for the reduction of the par value of the company's stock from $10 to $1 a year ago.
Saul acknowledged that the move allowed options to be granted below the $10-per-share level, but insisted that stockholders knew that. Under questioning from Dooley, Saul listed 24 executives who were granted options to buy from 2,500 to 22,000 shares of stock at a price of $5.93 per share. (The shares recently have improved in price to about $5.)
Saul said the option price was equivalent to the book value of the stock on Sept. 30, when the options were granted.
Contending that the book value did not reflect the true value of the stock - a point with which Saul agreed - Dooley labeled the options "one of the biggest steals that I've ever seen thrust on the shareholders."
Replied Saul, "It is highly improper for you to impune any unethical motives."
He added that it was wrong for Dooley "to sit here and make insinuations without having all the facts." Saul said the options were necessary to reward and retain key executives who were vital to turning around the company.
Dooley disagreed with the merits of the executives. "Most of them worked for this company when the sins were committed.They dragged the company down."
In a subsequent discussion of the REIT's progress, Saul predicted future earnings from properties which have caused passed losses. "We didn't sell because the cost of carrying (the unporfitable properties) was infinitesmal compared to the increase in value," he said.
He said the company expects a profit between $750,000 and $800,000 from the pending sale of four properties worth about $5 million.
A report to shareholders showed the REIT's nine shopping centers in the Washington area are about 97 percent leased, substantially above the company-wide average.
The Saul RETT investments her include the Rockville Pike GKIANT LOCATION - soon to be taken by Woolco - Beacon Mall in Alexandria, White Oak Shopping Center in Silver Spring, Great Eastern in District Heights, Hampshire Langley in Takoma Park, a strip center on Leesburg Pike near Bailey's Crossroads, Fairfax Mall in Fairfax City, the Olney Shopping Center and Wheeler Road Center in Oxon Hill.