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## MESSAGE MESSAGE TO OUR SHAREHOLDERS 

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In April 2004, we completed construction of 15,000 square feet of new small shop space at the Thruway shopping center located in Winston-Salem, North Carolina. The new development replaced a former 6,100 square foot single-tenant pad building with a new multi-tenant building. The space is 100% leased to tenants which include Ann Taylor Loft, Jos. A Banks Clothiers, Chico’s and Liz Claiborne. 

In January 2004, we purchased 3.4 acres of undeveloped land adjacent to our 109,000 square foot Kentlands Square shopping center located in Gaithersburg, Maryland. By April 2004, we commenced construction of a 41,000 square foot retail/office building, comprised of 24,000 square feet of in-line retail space and 17,000 square feet of professional office suites. Construction of the development, named Kentlands Place, was completed in early 2005. As of March 2005, Kentlands Place is 77% leased. 

In August 2003, we acquired Olde Forte Village, a Safeway anchored neighborhood shopping center located in Fort Washington, Maryland. Redevelopment of the center commenced when Safeway constructed and opened a 58,000 square foot grocery store in March 2003 after relocating from a smaller store within the center. We are continuing the redevelopment by creating approximately 33,000 

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square feet of small shop space, which was formerly the Safeway space and some adjoining area. Construction of site improvements and the new space were substantially completed during the first quarter of 2005. A total of 8,000 square feet of the redeveloped space has been leased, and leases are under negotiation for another 10,000 square feet. 

We expect the value added by ongoing development and redevelopment projects to fuel a significant part of Saul Centers’ growth platform in future years. 

## Development Pipeline 

We continued to add land to our future development pipeline with the December 2004 acquisition of a 19.3 acre parcel of land in Prince William County, Virginia. The site is zoned for development of a grocery anchored neighborhood shopping center to be known as Ashland Square. We are in the process of finalizing a site plan to submit for County approvals during the second quarter of 2005 and are actively marketing the project to grocers and other retail tenants. In March 2005, we closed on the acquisition of a 7.1 acre land parcel in New Market, Maryland, in a growing area of Frederick County. Also, we have approximately 40 acres adjacent to this parcel under contract, with closing expected later this year. 

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