Freedom Maintains “Buy” Rating on Saul Centers (BFS) Shares with 13% Upside Potential

Freedom analysts reaffirmed a “Buy” rating on shares of U.S. real estate investment trust Saul Centers (BFS) following the release of its results for Q2 2026. The target price was lowered from $40 to $39 due to revised forecasts. From the $34.51 price used in the analyst report, the new target implies upside of about 13%.

Saul Centers reported growth in its retail and residential businesses

Saul Centers is a real estate investment trust (REIT) that owns and operates shopping centers, mixed-use properties, and rental apartments. A significant portion of its portfolio is concentrated in the Washington–Baltimore metro area. Freedom analysts believe the resilience of the company’s assets and the development outlook for its residential projects are not yet fully reflected in BFS’s market valuation.

In the second quarter, revenue and net operating income (NOI) for the comparable portfolio increased 6.9% year over year. Excluding the new Twinbrook Quarter properties, growth in these metrics was, by Freedom’s estimate, 3% and 1.9%, respectively.

In shopping centers, revenue rose 4.9% and NOI increased 3.6%. During the quarter, Saul Centers leased 293 thousand sq. ft. to new and existing tenants at rates averaging 3.9% above those in expiring leases. Retail occupancy reached 95.7%—up 1.1 pp from a year earlier.

The residential segment looked even stronger: its revenue grew 15% and NOI increased 24.4%. One of the main drivers was The Milton at Twinbrook Quarter, where occupancy rose from 77% to 97% over the year. Total occupancy of the comparable residential portfolio was 97.3%.

Office real estate remains Saul Centers’ weak spot

The company posted its weakest results in the office segment. Comparable-portfolio revenue fell 2.2% year over year and NOI declined 3.9%. Overall office occupancy decreased to 87%—down 1.2 pp over the quarter and 1.9 pp year over year.

The drop was especially notable at Washington Square, where occupancy fell from 86% to 76% over the quarter, and at 601 Pennsylvania Ave.—from 91% to 84%. This was partially offset by improvement at Clarendon Center–South Block from 53% to 72%.

Saul Centers’ profit came in below Freedom’s forecast 

FFO per share—a key REIT metric for cash from operations—was $0.69 in the second quarter, down 5.5% year over year. The result was below Freedom’s forecast of $0.73. The negative impact was partially offset by operating expenses that were lower than expected.

At the same time, analysts expect financial performance to improve going forward. According to Freedom’s forecast, Saul Centers’ revenue could rise from $289.8 mln in 2025 to $311.4 mln in 2026 and $322 mln in 2027. FFO per share is projected at $2.86 in 2026 and $3.16 in 2027.

Saul Centers increased liquidity to $164 mln

During the quarter, Saul Centers also raised $145 mln through new 15-year mortgage loans secured by Clarendon Center and Severna Park Shopping Center. Part of the proceeds was used to repay $90.8 mln of existing mortgage debt and reduce borrowings under the credit facility.

After these transactions, Saul Centers’ available liquidity increased to $164 mln, including $158 mln of unused credit facility capacity and $6 mln in cash.

Analysts also view the limited volume of upcoming lease expirations as an additional positive factor. Through the end of 2026, leases for about 235 thousand sq. ft. of commercial space are set to expire, representing only 2.8% of the company’s annual base rental income.

Why Freedom recommends buying Saul Centers shares

In its investment thesis, Freedom highlights a resilient retail real estate portfolio in the economically stable Washington–Baltimore region, the development of the Hampden House and Twinbrook Quarter projects, and the high ownership stake of the Saul family and related entities in the company’s equity. The two new projects have already delivered more than 800 apartments and over 100 thousand sq. ft. of retail space.

Against the backdrop of revised forecasts, analysts lowered the BFS target price from $40 to $39 but maintained a “Buy” rating. At a price of $34.51, the new target corresponds to an upside potential of 13.01%. Key risks include weakness in the office segment, the portfolio’s geographic concentration, and the need to successfully lease up new properties.

What other REITs Freedom recommends 

Previously, Freedom maintained a “Buy” recommendation on shares of Millrose Properties (MRP) with a target price of $35. At the time of publication, this corresponded to upside potential of about 17.6%. In the second quarter, the company’s adjusted cash flow increased 10.9% year over year to $127.6 mln, and invested capital reached $8.8 bln. Millrose also ties additional growth opportunities to entering the multifamily housing market, which would allow the company to expand beyond financing the construction of single-family homes.

Analysts also assess the prospects for FrontView (FVR) positively. Freedom raised the company’s target share price to $22 and maintained a “Buy” recommendation. Upside potential at the time of publication was about 13%. FrontView’s leased-property share reached 99.4%, and the company improved its forecast for adjusted cash flow per share for 2026 for the third consecutive time. In addition, FrontView increased its plan for new investments from $110 mln to $120 mln.

Not an individual investment recommendation.