MESSAGE TO OUR SHAREHOLDERS Office Performance 9 Loudoun County. This phase consists of 25,000 square feet of retail space and two pad sites. Leases have been signed for over 21,000 square feet of this new space. The entire Ashburn Village shopping center is 98% leased. Also during the third quarter, the Company acquired a 109,625 square foot neighborhood retail center located within the Kentlands development in Gaithersburg, Maryland. The property is anchored by a 102,250 square foot Lowe’s home improvement store and is part of Kentlands Square, a shopping center exceeding 350,000 square feet of retail space. The Kentlands Square property is contained within  the 352 acre Kentlands development, home  to approximately 5,000 residents, living in  1,500 units. Looking forward, we remain committed to the value which we see embedded in the future of our convenience and necessity-oriented strip retail centers, located in well populated service areas. Retail leases totaling 345,000 square feet, or 6.8% of our retail portfolio have expiration dates in 2003. Tenants leasing approximately 50% of these current year expirations have already renewed and extended their lease  terms as of March 1, 2003. Our premier high-rise office building is 601 Pennsylvania Avenue, located in the East End submarket of Washington, DC. Washington continues to remain one of the healthiest office submarkets in the country, with downtown vacancy rates, including sublet space, of 6.5% at year end. The market has continued to prove its resilience and stability during economic downturns. The year end 2002 expiration of During 2002, the Company nearly completed the leasing of its most significant development property, Washington Square. This development  is a 235,000 square foot Class A mixed-use office/retail complex on North Washington Street in historic Old Town Alexandria, Virginia. Leases have been signed on 90% of the space. Washington Square  Washington Square lobby I, rn ney 5 nun La a | ii T he office/industrial component of the Saul Centers’ 2002 property financial results comprised 32% of total property operating income. The Avenel Business Park and 601 Pennsylvania Avenue, together produced 65%  of office operating income. The 388,000  square foot Avenel Business Park in Gaithersburg, Maryland was 98% leased at year end and continues to attract new businesses centered around life science and biomedical research. New tenants, leasing 38,000 square feet, joined the park in 2002 at rental rates averaging 17% higher than expiring rents. remains one of the healthiest office markets in the U.S. RBCS Ss | N Q Q °° DK VY, A tM _~ >