American Assets Trust(US:AAT)2022-07-28 16:00markdown [PART 1. FINANCIAL INFORMATION](index=5&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) This part presents the consolidated financial statements for American Assets Trust, Inc. and its Operating Partnership, with detailed notes on accounting policies, debt, and segment performance [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the consolidated financial statements for American Assets Trust, Inc. and its Operating Partnership, including detailed notes on accounting policies, real estate, debt, and segment performance [Consolidated Financial Statements of American Assets Trust, Inc.](index=6&type=section&id=Consolidated%20Financial%20Statements%20of%20American%20Assets%20Trust%2C%20Inc.) This sub-section provides the consolidated financial statements for American Assets Trust, Inc., detailing its financial position, comprehensive income, equity changes, and cash flows [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202022%20%28unaudited%29%20and%20December%2031%2C%202021) This section presents the consolidated balance sheets, detailing total assets, liabilities, and equity for American Assets Trust, Inc | Metric | June 30, 2022 (Thousands) | December 31, 2021 (Thousands) | | :---------------- | :------------------------ | :---------------------------- | | Total Assets | $3,007,190 | $3,017,927 | | Total Liabilities | $1,807,222 | $1,807,804 | | Total Equity | $1,199,968 | $1,210,123 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28unaudited%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202022%20and%202021) This section presents the consolidated statements of comprehensive income, detailing revenue, expenses, operating income, and net income for American Assets Trust, Inc | Metric | 3 Months Ended June 30, 2022 (Thousands) | 3 Months Ended June 30, 2021 (Thousands) | 6 Months Ended June 30, 2022 (Thousands) | 6 Months Ended June 30, 2021 (Thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total Revenue | $104,155 | $91,809 | $205,625 | $175,795 | | Total Operating Expenses | $75,839 | $65,386 | $148,967 | $129,310 | | Operating Income | $28,316 | $26,423 | $56,658 | $46,485 | | Net Income | $13,588 | $11,487 | $27,102 | $13,220 | | Net Income Attributable to AAT Stockholders | $10,582 | $8,941 | $21,105 | $10,198 | | Basic EPS | $0.18 | $0.15 | $0.35 | $0.17 | | Diluted EPS | $0.18 | $0.15 | $0.35 | $0.17 | | Dividends Declared Per Common Share | $0.32 | $0.28 | $0.64 | $0.56 | [Consolidated Statement of Equity](index=8&type=section&id=Consolidated%20Statement%20of%20Equity%20%28unaudited%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202022%20and%202021) This section presents the consolidated statement of equity, detailing changes in stockholders' equity and noncontrolling interests for American Assets Trust, Inc | Metric | Balance at Dec 31, 2021 (Thousands) | 3 Months Ended June 30, 2022 (Thousands) | Balance at June 30, 2022 (Thousands) | | :---------------------------------------------- | :---------------------------------- | :--------------------------------------- | :----------------------------------- | | Total American Assets Trust, Inc. Stockholders' Equity | $1,238,964 | -$7,262 | $1,231,702 | | Noncontrolling Interests | -$28,841 | -$2,893 | -$31,734 | | Total Equity | $1,210,123 | -$10,155 | $1,199,968 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28unaudited%29%20for%20the%20six%20months%20ended%20June%2030%2C%202022%20and%202021) This section presents the consolidated statements of cash flows, detailing cash provided by operating, investing, and financing activities for American Assets Trust, Inc | Metric | 6 Months Ended June 30, 2022 (Thousands) | 6 Months Ended June 30, 2021 (Thousands) | | :---------------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net Cash Provided by Operating Activities | $86,057 | $76,726 | | Net Cash Used in Investing Activities | -$112,479 | -$37,091 | | Net Cash (Used in) Provided by Financing Activities | -$52,352 | $191,298 | | Net (Decrease) Increase in Cash and Cash Equivalents | -$78,774 | $230,933 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $60,750 | $369,982 | [Consolidated Financial Statements of American Assets Trust, L.P.](index=11&type=section&id=Consolidated%20Financial%20Statements%20of%20American%20Assets%20Trust%2C%20L.P.) This sub-section presents the consolidated financial statements for American Assets Trust, L.P., mirroring the parent company's figures due to the partnership structure [Consolidated Balance Sheets](index=11&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202022%20%28unaudited%29%20and%20December%2031%2C%202021) This section presents the consolidated balance sheets, detailing total assets, liabilities, and capital for American Assets Trust, L.P | Metric | June 30, 2022 (Thousands) | December 31, 2021 (Thousands) | | :---------------- | :------------------------ | :---------------------------- | | Total Assets | $3,007,190 | $3,017,927 | | Total Liabilities | $1,807,222 | $1,807,804 | | Total Capital | $1,199,968 | $1,210,123 | [Consolidated Statements of Comprehensive Income](index=12&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28unaudited%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202022%20and%202021) This section presents the consolidated statements of comprehensive income, detailing revenue, expenses, operating income, and net income for American Assets Trust, L.P | Metric | 3 Months Ended June 30, 2022 (Thousands) | 3 Months Ended June 30, 2021 (Thousands) | 6 Months Ended June 30, 2022 (Thousands) | 6 Months Ended June 30, 2021 (Thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total Revenue | $104,155 | $91,809 | $205,625 | $175,795 | | Total Operating Expenses | $75,839 | $65,386 | $148,967 | $129,310 | | Operating Income | $28,316 | $26,423 | $56,658 | $46,485 | | Net Income | $13,588 | $11,487 | $27,102 | $13,220 | | Net Income Attributable to AAT, L.P. | $13,434 | $11,352 | $26,793 | $12,948 | | Basic EPU | $0.18 | $0.15 | $0.35 | $0.17 | | Diluted EPU | $0.18 | $0.15 | $0.35 | $0.17 | | Distributions Per Unit | $0.32 | $0.28 | $0.64 | $0.56 | [Consolidated Statement of Partners' Capital](index=13&type=section&id=Consolidated%20Statement%20of%20Partners%27%20Capital%20%28unaudited%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202022%20and%202021) This section presents the consolidated statement of partners' capital, detailing changes in total capital for American Assets Trust, L.P | Metric | Balance at Dec 31, 2021 (Thousands) | 3 Months Ended June 30, 2022 (Thousands) | Balance at June 30, 2022 (Thousands) | | :---------------- | :---------------------------------- | :--------------------------------------- | :----------------------------------- | | Total Capital | $1,210,123 | -$10,155 | $1,199,968 | [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28unaudited%29%20for%20the%20six%20months%20ended%20June%2030%2C%202022%20and%202021) This section presents the consolidated statements of cash flows, detailing cash provided by operating, investing, and financing activities for American Assets Trust, L.P | Metric | 6 Months Ended June 30, 2022 (Thousands) | 6 Months Ended June 30, 2021 (Thousands) | | :---------------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net Cash Provided by Operating Activities | $86,057 | $76,726 | | Net Cash Used in Investing Activities | -$112,479 | -$37,091 | | Net Cash (Used in) Provided by Financing Activities | -$52,352 | $191,298 | | Net (Decrease) Increase in Cash and Cash Equivalents | -$78,774 | $230,933 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $60,750 | $369,982 | [Notes to Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28unaudited%29) These notes provide detailed disclosures on significant accounting policies, real estate, fair value measurements, debt, equity, income taxes, commitments, and segment reporting [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=16&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's business as a self-administered REIT, its financial statement presentation, key accounting policies, segment information, and COVID-19 rent concession impacts - American Assets Trust, Inc. operates as a self-administered REIT, with its operations carried out through its Operating Partnership and subsidiaries. The company owned an approximate **78.8% partnership interest** in the Operating Partnership as of June 30, 2022[43](index=43&type=chunk)[8](index=8&type=chunk) - The company's portfolio consists of **31 operating properties** (office, retail, multifamily, mixed-use) and land held for development/construction in progress at three properties as of June 30, 2022[45](index=45&type=chunk) - The company provided immaterial lease concessions to certain tenants in Q2 2022 due to ongoing COVID-19 impacts, primarily in the retail segment[56](index=56&type=chunk) [NOTE 2. REAL ESTATE](index=19&type=section&id=NOTE%202.%20REAL%20ESTATE) This note describes the acquisition of Bel-Spring 520, a multi-tenant office campus, for **$45.5 million** in March 2022, and its initial operating results - Acquired Bel-Spring 520, a **93,000 sq ft office campus**, for **$45.5 million** on March 8, 2022, using cash on hand[59](index=59&type=chunk)[60](index=60&type=chunk) | Metric | Bel-Spring 520 (Thousands) | | :----------------------------------- | :------------------------- | | Revenues (Acquisition to June 30, 2022) | $953 | | Operating Expenses | $947 | | Operating Income | $6 | [NOTE 3. ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES](index=20&type=section&id=NOTE%203.%20ACQUIRED%20IN-PLACE%20LEASES%20AND%20ABOVE%2FBELOW%20MARKET%20LEASES) This note summarizes the net balances of acquired lease intangibles, including in-place and above/below market leases | Metric | June 30, 2022 (Thousands) | December 31, 2021 (Thousands) | | :----------------------------------- | :------------------------ | :---------------------------- | | Acquired Lease Intangible Assets, Net | $26,546 | $29,234 | | Acquired Lease Intangible Liabilities, Net | $21,326 | $22,402 | [NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=20&type=section&id=NOTE%204.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note outlines the fair value measurement of financial instruments, categorizing inputs into Level 1, 2, and 3, and provides fair values for liabilities and debt - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[64](index=64&type=chunk) | Instrument | June 30, 2022 (Thousands) | December 31, 2021 (Thousands) | | :------------------------- | :------------------------ | :---------------------------- | | Deferred Compensation Liability | $2,231 | $2,503 | | Interest Rate Swap Asset | $7,103 | $0 | | Interest Rate Swap Liability | $0 | $1,807 | [NOTE 5. DERIVATIVE AND HEDGING ACTIVITIES](index=21&type=section&id=NOTE%205.%20DERIVATIVE%20AND%20HEDGING%20ACTIVITIES) This note describes the company's use of interest rate derivatives, primarily swaps, to manage interest rate risk and stabilize interest expense - The company uses interest rate swaps to add stability to interest expense and manage exposure to interest rate movements[72](index=72&type=chunk) | Swap Counterparty | Notional Amount (Thousands) | Effective Date | Maturity Date | Fair Value (Thousands) | | :--------------------- | :-------------------------- | :------------- | :------------ | :--------------------- | | U.S. Bank N.A. | $100,000 | 3/1/2016 | 3/1/2023 | $938 | | Wells Fargo Bank, N.A. | $50,000 | 5/2/2016 | 3/1/2023 | $459 | | Bank of America, N.A. | $50,000 | 1/14/2022 | 1/5/2027 | $2,865 | | Wells Fargo Bank, N.A. | $50,000 | 1/14/2022 | 1/5/2027 | $2,841 | - Estimated cash flow hedges will reduce interest expense by approximately **$1.1 million** over the next twelve months[75](index=75&type=chunk) [NOTE 6. OTHER ASSETS](index=22&type=section&id=NOTE%206.%20OTHER%20ASSETS) This note provides a detailed breakdown of other assets, including leasing commissions, interest rate swap assets, acquired leases, and prepaid expenses | Other Assets (Thousands) | June 30, 2022 | December 31, 2021 | | :--------------------------------- | :------------ | :---------------- | | Leasing commissions, net | $39,687 | $38,589 | | Interest rate swap asset | $7,103 | $0 | | Acquired in-place leases, net | $26,418 | $29,085 | | Right-of-use lease asset, net | $25,098 | $26,254 | | Prepaid expenses and other | $10,446 | $9,136 | | Total other assets | $114,217 | $106,253 | [NOTE 7. OTHER LIABILITIES AND DEFERRED CREDITS](index=22&type=section&id=NOTE%207.%20OTHER%20LIABILITIES%20AND%20DEFERRED%20CREDITS) This note details the components of other liabilities and deferred credits, including acquired below-market leases, prepaid rent, and deferred compensation | Other Liabilities and Deferred Credits (Thousands) | June 30, 2022 | December 31, 2021 | | :----------------------------------------------- | :------------ | :---------------- | | Acquired below market leases, net | $21,326 | $22,402 | | Prepaid rent and deferred revenue | $16,112 | $16,309 | | Interest rate swap liability | $0 | $1,807 | | Deferred compensation | $2,231 | $2,503 | | Lease liability | $26,831 | $27,917 | | Total other liabilities and deferred credits, net | $82,864 | $86,215 | [NOTE 8. DEBT](index=23&type=section&id=NOTE%208.%20DEBT) This note provides a comprehensive overview of the company's debt structure, clarifying that American Assets Trust, Inc. guarantees the Operating Partnership's debt - American Assets Trust, Inc. does not hold any indebtedness directly but guarantees the Operating Partnership's obligations under credit facilities, term loans, and notes[79](index=79&type=chunk) [Debt of American Assets Trust, Inc.](index=23&type=section&id=Debt%20of%20American%20Assets%20Trust%2C%20Inc.) This sub-section clarifies that American Assets Trust, Inc. holds no direct debt but guarantees the Operating Partnership's obligations - American Assets Trust, Inc. does not hold any indebtedness directly. All debt is held by the Operating Partnership, but American Assets Trust, Inc. guarantees these obligations[79](index=79&type=chunk) [Debt of American Assets Trust, L.P.](index=23&type=section&id=Debt%20of%20American%20Assets%20Trust%2C%20L.P.) This sub-section details the Operating Partnership's debt, including secured and unsecured notes payable, term loans, and credit facilities [Secured notes payable](index=23&type=section&id=Secured%20notes%20payable) This sub-section details the company's secured notes payable, including principal balance, stated interest rate, and maturity date | Description of Debt | Principal Balance as of June 30, 2022 (Thousands) | Stated Interest Rate as of June 30, 2022 | Stated Maturity Date | | :------------------ | :------------------------------------------------ | :--------------------------------------- | :------------------- | | City Center Bellevue | $111,000 | 3.98% | November 1, 2022 | [Unsecured notes payable](index=24&type=section&id=Unsecured%20notes%20payable) This sub-section details the company's unsecured notes payable, including term loans and senior guaranteed notes, with their principal balances and maturity dates | Description of Debt | Principal June 30, 2022 (Thousands) | Stated Interest Rate as of June 30, 2022 | Stated Maturity Date | | :------------------------------ | :---------------------------------- | :--------------------------------------- | :------------------- | | Term Loan A | $100,000 | Variable (fixed at ~2.70% via swap) | January 5, 2027 | | Term Loan B | $100,000 | Variable (fixed at ~2.65% via swap) | March 1, 2023 | | Term Loan C | $50,000 | Variable (fixed at ~2.64% via swap) | March 1, 2023 | | Senior Guaranteed Notes, Series F | $100,000 | 3.78% (effective 3.85%) | July 19, 2024 | | Senior Guaranteed Notes, Series B | $100,000 | 4.45% | February 2, 2025 | | Senior Guaranteed Notes, Series C | $100,000 | 4.50% | April 1, 2025 | | Senior Guaranteed Notes, Series D | $250,000 | 4.29% (effective 3.87%) | March 1, 2027 | | Senior Guaranteed Notes, Series E | $100,000 | 4.24% (effective 4.18%) | May 23, 2029 | | Senior Guaranteed Notes, Series G | $150,000 | 3.91% (effective 3.88%) | July 30, 2030 | | 3.375% Senior Unsecured Notes | $500,000 | 3.38% | February 1, 2031 | | Total | $1,550,000 | | | [Amended Term Loan Agreement](index=25&type=section&id=Amended%20Term%20Loan%20Agreement) This sub-section describes the **$150 million** unsecured term loan, its maturity date, and the floating interest rates tied to LIBOR or base rate - The **$150 million** unsecured term loan (Term Loan B and C) matures on March 1, 2023[86](index=86&type=chunk) - Borrowings bear interest at floating rates (LIBOR + spread or base rate + spread), with spreads ranging from **1.20% to 1.70%** (LIBOR) or **0.70% to 1.35%** (base rate) based on the consolidated leverage ratio[86](index=86&type=chunk) [Third Amended and Restated Credit Facility](index=25&type=section&id=Third%20Amended%20and%20Restated%20Credit%20Facility) This sub-section details the **$500 million** unsecured credit facility, comprising a revolver loan and a term loan, with floating interest rates and compliance with covenants - The Third Amended and Restated Credit Facility provides up to **$500 million** in unsecured borrowings, comprising a **$400 million** 2022 Revolver Loan (matures Jan 5, 2026) and a **$100 million** 2022 Term Loan A (matures Jan 5, 2027)[90](index=90&type=chunk) - Borrowings bear interest at floating rates tied to SOFR or a base rate, with spreads based on the consolidated leverage ratio[90](index=90&type=chunk) - As of June 30, 2022, there were no amounts outstanding under the 2022 Revolver Loan, and the Operating Partnership was in compliance with all financial covenants[90](index=90&type=chunk)[92](index=92&type=chunk) [NOTE 9. PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P.](index=26&type=section&id=NOTE%209.%20PARTNERS%27%20CAPITAL%20OF%20AMERICAN%20ASSETS%20TRUST%2C%20L.P.) This note explains the noncontrolling interests in the Operating Partnership, representing **21.2% ownership**, and details the calculation of earnings per unit - Noncontrolling interests in the Operating Partnership consisted of 16,181,537 common units, representing approximately **21.2% ownership** as of June 30, 2022[93](index=93&type=chunk) - Basic earnings per unit (EPU) is computed by dividing income applicable to unitholders by the weighted average Operating Partnership units outstanding, adjusted for participating securities using the two-class method[95](index=95&type=chunk) [NOTE 10. EQUITY OF AMERICAN ASSETS TRUST, INC.](index=27&type=section&id=NOTE%2010.%20EQUITY%20OF%20AMERICAN%20ASSETS%20TRUST%2C%20INC.) This note details American Assets Trust, Inc.'s stockholders' equity, including its **$250 million** at-the-market equity program, dividend declarations, and stock-based compensation - The company has an at-the-market (ATM) equity program allowing the sale of up to **$250 million** in common stock, with no shares sold through this program for the six months ended June 30, 2022[97](index=97&type=chunk)[98](index=98&type=chunk) | Period | Amount per Share/Unit | Period Covered | Dividend Paid Date | | :-------------- | :-------------------- | :--------------------------------- | :----------------- | | First Quarter 2022 | $0.32 | January 1, 2022 to March 31, 2022 | March 24, 2022 | | Second Quarter 2022 | $0.32 | April 1, 2022 to June 30, 2022 | June 23, 2022 | - Unrecognized stock-based compensation expense was **$7.2 million** at June 30, 2022[102](index=102&type=chunk) [NOTE 11. INCOME TAXES](index=28&type=section&id=NOTE%2011.%20INCOME%20TAXES) This note explains the company's REIT status, generally exempting it from corporate-level income tax on distributed earnings, and details income tax expenses for its taxable REIT subsidiary - As a REIT, the company is generally not subject to corporate-level income tax on distributed earnings from REIT-qualifying activities[106](index=106&type=chunk) | Metric | 3 Months Ended June 30, 2022 (Thousands) | 3 Months Ended June 30, 2021 (Thousands) | 6 Months Ended June 30, 2022 (Thousands) | 6 Months Ended June 30, 2021 (Thousands) | | :----------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Income Tax Expense | $202 | $174 | $400 | $301 | [NOTE 12. COMMITMENTS AND CONTINGENCIES](index=29&type=section&id=NOTE%2012.%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses legal proceedings, management agreements, franchise agreements, environmental remediation, and concentrations of credit risk across the company's property portfolio - The company is involved in various legal proceedings but does not believe the ultimate outcome will have a material adverse effect on its financial position[108](index=108&type=chunk)[109](index=109&type=chunk) - Management agreements with Outrigger Hotels & Resorts involve monthly management fees (**3.0% of net retail revenues**, **6.0% of hotel gross operating profit** + **3.0% of hotel gross revenues**, capped at **3.5% of hotel gross revenues**)[111](index=111&type=chunk) - The company has a franchise license agreement with Embassy Suites for the Waikiki Beach Walk hotel, requiring royalty fees (**4.0% of gross room revenue** through Dec 2022, then **5.0%**) and a monthly program fee (**4.0% of gross room revenue**)[113](index=113&type=chunk) - Environmental remediation is ongoing at Del Monte Center, financed by an escrow account, with long-term ground monitoring expected for 5-7 years[113](index=113&type=chunk) - The company has significant concentrations of credit risk in Southern California (**15 properties**), with retail tenants accounting for **23.9%** and office tenants for **48.7%** of total revenues for the six months ended June 30, 2022[114](index=114&type=chunk) [NOTE 13. LEASES](index=30&type=section&id=NOTE%2013.%20LEASES) This note details the company's operating leases as both a lessor for its properties and a lessee for an adjacent building, including future minimum rentals and lease liabilities - The company leases real estate under operating leases as a lessor, with terms generally ranging from 3-10 years for office/retail and 7-15 months for apartments[115](index=115&type=chunk)[116](index=116&type=chunk) | Year Ending December 31, | Future Minimum Rentals (Thousands) | | :----------------------- | :--------------------------------- | | 2022 (six months) | $95,859 | | 2023 | $242,131 | | 2024 | $214,853 | | 2025 | $190,574 | | 2026 | $175,043 | | Thereafter | $432,730 | | Total | $1,351,190 | - As a lessee, the company leases a building adjacent to The Landmark at One Market under an operating lease effective through June 30, 2026, with an option to extend until 2031[122](index=122&type=chunk) | Year Ending December 31, | Lessee Lease Payments (Thousands) | | :----------------------- | :-------------------------------- | | 2022 (six months) | $1,640 | | 2023 | $3,328 | | 2024 | $3,428 | | 2025 | $3,531 | | 2026 | $3,584 | | Thereafter | $16,126 | | Total Lease Payments | $31,637 | | Present Value of Lease Liability | $26,831 | [NOTE 14. COMPONENTS OF RENTAL INCOME AND EXPENSE](index=33&type=section&id=NOTE%2014.%20COMPONENTS%20OF%20RENTAL%20INCOME%20AND%20EXPENSE) This note breaks down rental income by property type and rental expenses by category for the three and six months ended June 30, 2022, and 2021 | Rental Income (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Office | $48,949 | $43,012 | $96,999 | $86,374 | | Retail | $23,286 | $21,575 | $47,327 | $42,428 | | Multifamily | $13,167 | $11,763 | $26,083 | $23,515 | | Mixed-use | $2,814 | $3,438 | $5,614 | $4,233 | | Hotel revenue | $9,414 | $6,191 | $17,469 | $9,462 | | Total Rental Income | $99,016 | $87,639 | $196,002 | $168,769 | | Rental Expenses (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Rental operating | $11,379 | $9,655 | $22,523 | $19,151 | | Hotel operating | $6,474 | $4,134 | $12,122 | $6,858 | | Repairs and maintenance | $5,309 | $4,029 | $10,069 | $7,771 | | Management fees | $518 | $283 | $974 | $490 | | Total Rental Expenses | $25,853 | $20,204 | $49,998 | $38,450 | [NOTE 15. OTHER (EXPENSE) INCOME, NET](index=33&type=section&id=NOTE%2015.%20OTHER%20%28EXPENSE%29%20INCOME%2C%20NET) This note summarizes the components of other (expense) income, net, primarily consisting of interest and investment income and income tax expense, showing an increase in net expense | Other (Expense) Income, Net (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Interest and investment income | $21 | $100 | $57 | $174 | | Income tax expense | -$202 | -$174 | -$400 | -$301 | | Total other (expense) income, net | -$181 | -$74 | -$343 | -$127 | [NOTE 16. RELATED PARTY TRANSACTIONS](index=34&type=section&id=NOTE%2016.%20RELATED%20PARTY%20TRANSACTIONS) This note discloses related party transactions, including lease agreements for office space and aircraft services with entities controlled by the company's CEO - Rental revenue from AAI (controlled by CEO Ernest Rady) leases was **$0.1 million** for both the six months ended June 30, 2022, and 2021[133](index=133&type=chunk) - Incurred approximately **$0.1 million** in expenses for aircraft services from AAIA (controlled by CEO Ernest Rady) for both the six months ended June 30, 2022, and 2021[134](index=134&type=chunk) [NOTE 17. SEGMENT REPORTING](index=34&type=section&id=NOTE%2017.%20SEGMENT%20REPORTING) This note presents financial information by the company's four business segments, evaluating performance based on segment profit, net real estate, and capital expenditures - The company operates in four business segments: retail, office, multifamily, and mixed-use real estate[136](index=136&type=chunk) | Segment Profit (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Office | $36,530 | $32,922 | $72,769 | $66,022 | | Retail | $16,908 | $16,246 | $34,021 | $30,578 | | Multifamily | $7,993 | $7,246 | $15,803 | $14,307 | | Mixed-Use | $5,584 | $4,579 | $10,318 | $4,472 | | Total Segments' Profit | $67,015 | $60,993 | $132,911 | $115,379 | | Net Real Estate (Thousands) | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Office | $1,603,702 | $1,536,212 | | Retail | $587,082 | $591,107 | | Multifamily | $376,012 | $381,315 | | Mixed-Use | $170,630 | $173,347 | | Total | $2,737,426 | $2,681,981 | | Capital Expenditures (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Office | $30,051 | $21,343 | $56,717 | $30,870 | | Retail | $3,697 | $1,778 | $7,257 | $3,500 | | Multifamily | $1,315 | $1,033 | $2,886 | $1,996 | | Mixed-Use | $121 | $684 | $452 | $688 | | Total | $35,184 | $24,838 | $67,312 | $37,054 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition and results, including business overview, acquisitions, accounting policies, liquidity, and non-GAAP measures like NOI and FFO [Forward-Looking Statements](index=37&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements regarding capital resources, portfolio performance, and future operations, subject to various risks - Forward-looking statements are identified by terms like "believes," "expects," "may," "will," and "anticipates," and are subject to risks such as epidemics (e.g., COVID-19), adverse economic developments, tenant defaults, and interest rate fluctuations[146](index=146&type=chunk)[147](index=147&type=chunk) [Overview](index=38&type=section&id=Overview) This section provides a general description of American Assets Trust, Inc. as a self-administered REIT operating in retail, office, multifamily, and mixed-use properties across key markets - American Assets Trust, Inc. is a full-service, vertically integrated, self-administered REIT operating in retail, office, multifamily, and mixed-use properties[149](index=149&type=chunk) - As of June 30, 2022, the portfolio included **12 retail shopping centers**, **12 office properties**, a mixed-use property (hotel and retail), and **6 multifamily properties**, with land held for development[149](index=149&type=chunk) - The company, as the sole general partner, controlled **78.8%** of its Operating Partnership as of June 30, 2022, and consolidates its assets, liabilities, and results of operations[149](index=149&type=chunk) [Acquisitions](index=38&type=section&id=Acquisitions) This section reports the acquisition of Bel-Spring 520, a multi-tenant office campus, for **$45.5 million** on March 8, 2022, funded with cash on hand - Acquired Bel-Spring 520, a **93,000 square feet office campus** in Bellevue, Washington, for **$45.5 million** on March 8, 2022[150](index=150&type=chunk) - The acquisition was funded with cash on hand[150](index=150&type=chunk) [Critical Accounting Policies](index=38&type=section&id=Critical%20Accounting%20Policies) This section states that no material changes to critical accounting policies were made during the period, except as described in Footnote 1 - No material changes to critical accounting policies were made during the reporting period, except as noted in Footnote 1[151](index=151&type=chunk) [Same-store](index=38&type=section&id=Same-store) This section explains the methodology for classifying properties as 'same-store' or 'redevelopment same-store' to provide consistent performance measures, noting reclassifications and acquisitions - Same-store properties include those owned and operated for the entirety of both comparison periods, excluding properties with significant redevelopment, under development, held for development, or discontinued operations[152](index=152&type=chunk) - Waikiki Beach Walk Retail and Embassy Suites™ Hotel were reclassified to same-store properties after spalling repair activity completed by September 30, 2020[155](index=155&type=chunk) - Eastgate Office Park, Corporate Campus East III, and Bel-Spring 520 are classified as non-same-store properties due to recent acquisitions[155](index=155&type=chunk) | Property Classification | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Same-Store | 27 | 26 | 27 | 26 | | Non-Same-Store | 4 | 2 | 4 | 2 | | Total Properties | 31 | 28 | 31 | 28 | | Redevelopment Same-Store | 28 | 27 | 28 | 27 | | Total Development Properties | 3 | 3 | 3 | 3 | [Outlook](index=39&type=section&id=Outlook) This section outlines the company's growth strategy, focusing on increasing earnings, FFO, and cash flows through same-store growth, development, and opportunistic acquisitions - Growth strategy focuses on same-store portfolio growth, property development/redevelopment, and expansion through acquisitions in high-barrier-to-entry markets[158](index=158&type=chunk) - Intends to opportunistically pursue development projects (e.g., La Jolla Commons, Lloyd Portfolio) and redevelopments (e.g., Waikele Center, One Beach Street), contingent on market conditions and risk-adjusted returns[159](index=159&type=chunk) - Acquisitions are typically financed by available cash, mortgage loans, and/or revolving line of credit, with long-term funding from equity or debt issuances[160](index=160&type=chunk) [COVID-19](index=40&type=section&id=COVID-19) This section discusses the ongoing impact of the COVID-19 pandemic on the company's business, tenants, and financial condition, acknowledging uncertainties but expressing confidence in its financial strength - The COVID-19 pandemic continues to impact global economic activity, leading to uncertainties in financial condition, results of operations, and cash flows due to evolving variants, government actions, and economic effects[161](index=161&type=chunk) - The company believes its financial condition and liquidity are strong, and its efficient business model will help manage the evolving crisis, despite potential negative impacts on tenant operations and rent payments[162](index=162&type=chunk)[163](index=163&type=chunk) [Leasing](index=40&type=section&id=Leasing) This section reports on leasing activity for office and retail spaces, highlighting rental rate increases for comparable leases and associated tenant improvements and incentives - Same-store growth is primarily driven by increases in rental rates on new leases and renewals, and changes in portfolio occupancy[163](index=163&type=chunk) | Lease Type (3 Months Ended June 30, 2022) | Square Feet | Average Rental Rate Increase (Cash Basis) | Average Rental Rate Increase (GAAP Basis) | Tenant Improvements & Incentives per Sq Ft | | :---------------------------------------- | :---------- | :---------------------------------------- | :---------------------------------------- | :----------------------------------------- | | Office (Comparable Renewal) | 128,335 | 21.1% | 20.7% | N/A | | Office (New Comparable) | 12,365 | 15.1% | 48.9% | $91.28 | | Retail (Comparable Renewal) | 67,209 | 5.7% | 20.2% | N/A | | Retail (New Comparable) | 4,004 | 5.1% | N/A | $44.89 | [Capitalized Costs](index=41&type=section&id=Capitalized%20Costs) This section details the capitalization of external and internal costs related to real estate development, redevelopment, and other property improvements, including interest costs | Capitalized Costs (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Development & Redevelopment | $22,800 | $15,900 | $45,500 | $19,800 | | Other Property Improvements | $10,200 | $13,500 | $19,100 | $22,900 | | Interest Costs | $1,400 | $700 | $2,600 | $1,200 | [Results of Operations](index=41&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's consolidated results of operations for the three and six months ended June 30, 2022, versus 2021, analyzing changes in revenue, expenses, and net income [Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021](index=41&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202022%20to%20the%20three%20months%20ended%20June%2030%2C%202021) This sub-section compares financial performance for the three months ended June 30, 2022, to 2021, showing increases in total property revenue and net income, driven by acquisitions and improved occupancy [Revenue](index=43&type=section&id=Revenue) Total property revenue increased by **$12.3 million (13%)** to **$104.2 million**, primarily due to new acquisitions, increased occupancy and rates at Waikiki Beach Walk Embassy Suites, and higher multifamily base rent | Revenue (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change (Thousands) | % Change | | :------------------ | :--------------------------- | :--------------------------- | :----------------- | :------- | | Rental Income | $99,016 | $87,639 | $11,377 | 13% | | Other Property Income | $5,139 | $4,170 | $969 | 23% | | Total Property Revenues | $104,155 | $91,809 | $12,346 | 13% | - Total office rental revenue increased **$6.0 million**, with **$4.7 million** from new acquisitions (Eastgate Office Park, Corporate Campus East III, Bel-Spring 520). Same-store office rental revenue increased **$1.1 million** due to higher occupancy and base rent[178](index=178&type=chunk) - Total retail rental revenue increased **$1.5 million**, driven by new tenant leases, previous tenants reverting to basic monthly rent, and a **$0.5 million** increase in cost recoveries due to fewer COVID-related rent concessions[179](index=179&type=chunk) - Multifamily revenue increased **$1.4 million** due to an increase in occupancy (**93.2%** vs **87.8%**) and average monthly base rent (**$2,297** vs **$2,187**)[180](index=180&type=chunk) - Mixed-use rental revenue increased **$2.5 million** due to lifting of COVID-19 travel restrictions, leading to higher hotel occupancy (**78.8%** vs **67.2%**) and revenue per available room (**$280** vs **$184**)[181](index=181&type=chunk) [Property Expenses](index=45&type=section&id=Property%20Expenses) Total property expenses increased by **$6.3 million (21%)** to **$37.1 million**, driven by recent acquisitions and increased repairs, maintenance, and utility costs as COVID-19 restrictions eased | Expenses (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change (Thousands) | % Change | | :------------------- | :--------------------------- | :--------------------------- | :----------------- | :------- | | Rental Expenses | $25,853 | $20,204 | $5,649 | 28% | | Real Estate Taxes | $11,287 | $10,612 | $675 | 6% | | Total Property Expenses | $37,140 | $30,816 | $6,324 | 21% | - Office rental expense increased **$2.1 million**, with **$1.0 million** from new acquisitions. Same-store office rental expenses increased **$1.1 million** due to higher repairs, maintenance, utilities, and facility services as employees returned to offices[187](index=187&type=chunk) - Mixed-use rental expense increased **$2.7 million** due to higher hotel room expenses and general excise tax, in line with increased tourism and hotel occupancy[190](index=190&type=chunk) - Mixed-use real estate taxes decreased **$0.2 million** due to Honolulu County's reduction in tax burden for hotels for 2021-2022 due to COVID-19[193](index=193&type=chunk) [Property Operating Income](index=46&type=section&id=Property%20Operating%20Income) Total property operating income increased by **$6.0 million (10%)** to **$67.0 million**, primarily due to incremental income from recent acquisitions and improved performance across all segments | Property Operating Income (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change (Thousands) | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------------- | :------- | | Office | $36,530 | $32,922 | $3,608 | 11% | | Retail | $16,908 | $16,246 | $662 | 4% | | Multifamily | $7,993 | $7,246 | $747 | 10% | | Mixed-Use | $5,584 | $4,579 | $1,005 | 22% | | Total Property Operating Income | $67,015 | $60,993 | $6,022 | 10% | - Total office property operating income increased **$3.6 million**, with **$3.4 million** from recent acquisitions. Same-store office property operating income increased **$0.1 million** due to higher occupancy and base rent[194](index=194&type=chunk) - Total mixed-use property operating income increased **$1.0 million**, driven by the return of tourism and increased hotel occupancy (**78.8%** vs **67.2%** YoY)[198](index=198&type=chunk) [Other](index=47&type=section&id=Other) This sub-section discusses changes in general and administrative expenses, depreciation and amortization, interest expense, and other (expense) income, net, for the three months ended June 30, 2022 - General and administrative expenses increased by **$0.7 million (10%)** to **$7.6 million**, primarily due to higher stock-based compensation and employee-related costs[199](index=199&type=chunk) - Depreciation and amortization increased by **$3.4 million (12%)** to **$31.1 million**, mainly due to **$2.9 million** from recent acquisitions and higher depreciation at The Landmark at One Market and Alamo Quarry Market[200](index=200&type=chunk) - Interest expense decreased by **$0.3 million (2%)** to **$14.5 million**, primarily due to increased capitalized interest on development projects, partially offset by higher interest on Term Loan A (now fixed via swaps)[201](index=201&type=chunk) [Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021](index=48&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202022%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202021) This sub-section compares financial performance for the six months ended June 30, 2022, to 2021, showing significant increases in total property revenue and net income, largely due to acquisitions and mixed-use recovery [Revenue](index=48&type=section&id=Revenue) Total property revenue increased by **$29.8 million (17%)** to **$205.6 million**, primarily driven by new acquisitions and a strong recovery in the mixed-use hotel segment | Revenue (Thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change (Thousands) | % Change | | :------------------ | :--------------------------- | :--------------------------- | :----------------- | :------- | | Rental Income | $196,002 | $168,769 | $27,233 | 16% | | Other Property Income | $9,623 | $7,026 | $2,597 | 37% | | Total Property Revenues | $205,625 | $175,795 | $29,830 | 17% | - Total office rental revenue increased **$10.8 million**, with **$9 million** from new acquisitions. Same-store office rental revenue increased **$1.8 million** due to higher base rents and occupancy[208](index=208&type=chunk) - Retail rental revenue increased **$4.5 million**, primarily from tenants reverting to basic monthly rent (**$2.4 million**) and increased cost recoveries (**$1.3 million**) as COVID-related concessions decreased[209](index=209&type=chunk) - Mixed-use rental revenue increased **$9.3 million**, with **$8 million** from the Waikiki Beach Walk hotel due to lifted travel restrictions, leading to higher occupancy (**75.8%** vs **57.4%**) and revenue per available room (**$262** vs **$142**)[211](index=211&type=chunk) [Property Expenses](index=50&type=section&id=Property%20Expenses) Total property expenses increased by **$12.3 million (20%)** to **$72.7 million**, mainly due to recent acquisitions and higher operating costs across segments as economic activity resumed | Expenses (Thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change (Thousands) | % Change | | :------------------- | :--------------------------- | :--------------------------- | :----------------- | :------- | | Rental Expenses | $49,998 | $38,450 | $11,548 | 30% | | Real Estate Taxes | $22,716 | $21,966 | $750 | 3% | | Total Property Expenses | $72,714 | $60,416 | $12,298 | 20% | - Office rental expenses increased **$3.7 million**, with **$1.8 million** from new acquisitions. Same-store office rental expenses increased **$1.9 million** due to higher repairs, maintenance, utilities, and facility services[218](index=218&type=chunk) - Mixed-use rental expenses increased **$6.0 million** due to higher hotel room and personnel expenses, driven by increased tourism and hotel occupancy in Hawaii[221](index=221&type=chunk) - Mixed-use real estate taxes decreased **$0.4 million** due to Honolulu County's reduced tax burden for hotels for 2021-2022[225](index=225&type=chunk) [Property Operating Income](index=51&type=section&id=Property%20Operating%20Income) Total property operating income increased by **$17.5 million (15%)** to **$132.9 million**, reflecting strong performance from acquisitions and recovery in the mixed-use segment | Property Operating Income (Thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change (Thousands) | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------------- | :------- | | Office | $72,769 | $66,022 | $6,747 | 10% | | Retail | $34,021 | $30,578 | $3,443 | 11% | | Multifamily | $15,803 | $14,307 | $1,496 | 10% | | Mixed-Use | $10,318 | $4,472 | $5,846 | 131% | | Total Property Operating Income | $132,911 | $115,379 | $17,532 | 15% | - Total office property operating income increased **$6.7 million**, with **$6.5 million** from recent acquisitions. Same-store office property operating income increased **$0.3 million** due to higher occupancy and base rent[226](index=226&type=chunk) - Total mixed-use property operating income increased **$5.8 million**, with **$3.9 million** from the Waikiki Beach Walk hotel due to lifted travel restrictions and increased occupancy (**75.8%** vs **57.4%** YoY)[229](index=229&type=chunk) [Other](index=52&type=section&id=Other) This sub-section discusses changes in general and administrative expenses, depreciation and amortization, interest expense, loss on early extinguishment of debt, and other (expense) income, net, for the six months ended June 30, 2022 - General and administrative expenses increased by **$1.0 million (7%)** to **$14.8 million**, primarily due to higher stock-based compensation and employee-related costs[230](index=230&type=chunk) - Depreciation and amortization increased by **$6.4 million (12%)** to **$61.5 million**, mainly due to **$5.9 million** from recent acquisitions and higher depreciation at The Landmark at One Market[231](index=231&type=chunk) - Interest expense increased by **$0.3 million (1%)** to **$29.2 million**, primarily due to the 3.375% Senior Notes offering in January 2021 and higher interest on Term Loan A (now fixed via swaps), partially offset by increased capitalized interest[232](index=232&type=chunk) - Loss on early extinguishment of debt decreased by **$4.3 million**, as the prior year included the repayment of Senior Guaranteed Notes, Series A[233](index=233&type=chunk) [Liquidity and Capital Resources of American Assets Trust, Inc.](index=52&type=section&id=Liquidity%20and%20Capital%20Resources%20of%20American%20Assets%20Trust%2C%20Inc.) This section explains that American Assets Trust, Inc. operates through its Operating Partnership, holds no direct debt, and its liquidity depends on distributions to fund dividends and meet guarantee obligations - American Assets Trust, Inc. operates primarily through its Operating Partnership, holds no direct indebtedness, and its liquidity is dependent on distributions from the Operating Partnership[236](index=236&type=chunk)[238](index=238&type=chunk)[240](index=240&type=chunk) - The company's primary funding requirement is dividend payments to stockholders, which are sourced from distributions from the Operating Partnership[238](index=238&type=chunk) - To maintain REIT qualification, the company must pay annual dividends of at least **90%** of its REIT taxable income, which limits reliance on retained earnings for funding[244](index=244&type=chunk) [Liquidity and Capital Resources of American Assets Trust, L.P.](index=54&type=section&id=Liquidity%20and%20Capital%20Resources%20of%20American%20Assets%20Trust%2C%20L.P.) This section details the Operating Partnership's liquidity, relying on cash flow from operations, credit facilities, and potential equity/debt issuances to meet short-term and long-term needs - The Operating Partnership generates significant cash from operations, used for operating expenses, capital expenditures, debt service, and distributions[248](index=248&type=chunk) - Short-term liquidity needs are met through net cash from operations, existing cash reserves, and borrowings under the credit facility[249](index=249&type=chunk) - Long-term liquidity needs are expected to be met by net cash from operations, long-term secured/unsecured indebtedness, and potential equity/debt securities issuances[250](index=250&type=chunk) - As of June 30, 2022, the Operating Partnership held **$60.8 million** in cash and cash equivalents[248](index=248&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) This section states that the company currently has no off-balance sheet arrangements - The company currently has no off-balance sheet arrangements[253](index=253&type=chunk) [Cash Flows](index=55&type=section&id=Cash%20Flows) This section compares cash flow activities for the six months ended June 30, 2022, and 2021, showing changes in operating, investing, and financing activities | Cash Flow Activity (Thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change (Thousands) | | :----------------------------- | :--------------------------- | :--------------------------- | :----------------- | | Net Cash from Operating Activities | $86,100 | $76,700 | +$9,300 | | Net Cash Used in Investing Activities | -$112,500 | -$37,100 | -$75,400 | | Net Cash (Used in) Provided by Financing Activities | -$52,400 | $191,300 | -$243,700 | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $60,800 | $370,000 | -$309,200 | [Net Operating Income](index=56&type=section&id=Net%20Operating%20Income) This section defines Net Operating Income (NOI) as a non-GAAP financial measure used to evaluate property performance, excluding general and administrative expenses, interest, and depreciation - NOI is defined as operating revenues less property and related expenses, excluding general and administrative expenses, interest expense, depreciation and amortization, and other non-property items[257](index=257&type=chunk) - NOI is used to evaluate and compare property performance, capture trends in occupancy, rental rates, and operating costs, and is a widely recognized measure for REITs[258](index=258&type=chunk) | NOI Reconciliation (Thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Operating Income | $67,015 | $60,993 | $132,911 | $115,379 | | Net Income | $13,588 | $11,487 | $27,102 | $13,220 | [Funds from Operations](index=56&type=section&id=Funds%20from%20Operations) This section defines Funds from Operations (FFO) as a non-GAAP financial measure, calculated per NAREIT standards, used to assess operational performance by excluding real estate-related depreciation and gains/losses - FFO is a non-GAAP measure, calculated per NAREIT standards, representing net income excluding gains/losses from sales of depreciable operating property, impairment losses, and real estate-related depreciation and amortization[262](index=262&type=chunk) - FFO is used as a supplemental performance measure to capture trends in occupancy rates, rental rates, and operating costs, and to compare performance with other REITs[263](index=263&type=chunk) | FFO (Thousands) | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Net Income | $13,588 | $27,102 | | Plus: Real estate depreciation and amortization | $31,087 | $61,499 | | Funds from Operations | $44,675 | $88,601 | | FFO attributable to common stock and units | $44,522 | $88,295 | | FFO per diluted share/unit | $0.58 | $1.16 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risk, particularly interest rate risk, and its strategies for managing this risk through debt and derivative instruments [Interest Rate Risk](index=57&type=section&id=Interest%20Rate%20Risk) This sub-section details the company's management of interest rate risk for its fixed and variable rate debt, including the use of interest rate swaps and hypothetical interest rate changes - The company manages market risk by matching anticipated cash inflows with outflows for debt payments, dividends, investments, and capital expenditures[265](index=265&type=chunk) [Outstanding Debt](index=57&type=section&id=Outstanding%20Debt) This sub-section discusses how interest rate risk amounts are determined by considering the impact of hypothetical interest rates on the company's debt - Interest rate risk amounts are determined by considering the impact of hypothetical interest rates on the company's debt[266](index=266&type=chunk) [Fixed Interest Rate Debt](index=58&type=section&id=Fixed%20Interest%20Rate%20Debt) This sub-section details the company's fixed-rate debt outstanding and the impact of hypothetical interest rate changes on its fair value - As of June 30, 2022, the company had **$1.41 billion** of fixed-rate debt outstanding with an estimated fair value of **$1.32 billion**[268](index=268&type=chunk) - A hypothetical **1.0% increase** in interest rates would decrease the fair value of fixed-rate debt by approximately **$50.3 million**, while a **1.0% decrease** would increase it by approximately **$73.8 million**[268](index=268&type=chunk) [Variable Interest Rate Debt](index=58&type=section&id=Variable%20Interest%20Rate%20Debt) This sub-section details the company's variable-rate debt outstanding and the impact of interest rate swaps on annual interest expense - As of June 30, 2022, the company had **$250.0 million** of variable-rate debt outstanding[269](index=269&type=chunk) - Due to interest rate swaps, a hypothetical **1.0% increase or decrease** in market interest rates would result in approximately **$0.0 million** change in annual interest expense[269](index=269&type=chunk) [Prospective Mortgage Interest Rate Risk](index=58&type=section&id=Prospective%20Mortgage%20Interest%20Rate%20Risk) This sub-section discusses the company's interest rate lock agreement for a prospective **$75 million** non-recourse mortgage on City Center Bellevue - On July 25, 2022, the company entered into an interest rate lock agreement for a prospective **$75 million** non-recourse mortgage on City Center Bellevue, with a fixed interest rate of **5.08%**[270](index=270&type=chunk) - The new mortgage is expected to close in Q3 or Q4 2022 and will be used to pay off the expiring City Center Bellevue mortgage[270](index=270&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and procedures for both American Assets Trust, Inc. and its Operating Partnership, confirming their effectiveness with no material changes [Controls and Procedures (American Assets Trust, Inc.)](index=58&type=section&id=Controls%20and%20Procedures%20%28American%20Assets%20Trust%2C%20Inc.%29) American Assets Trust, Inc.'s management evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2022, concluding they were effective with no material changes - American Assets Trust, Inc.'s disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[271](index=271&type=chunk)[272](index=272&type=chunk) - No material changes to internal control over financial reporting were identified during the period[273](index=273&type=chunk) [Controls and Procedures (American Assets Trust, L.P.)](index=59&type=section&id=Controls%20and%20Procedures%20%28American%20Assets%20Trust%2C%20L.P.%29) The Operating Partnership's management evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2022, concluding they were effective with no material changes - The Operating Partnership's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[274](index=274&type=chunk)[275](index=275&type=chunk) - No material changes to internal control over financial reporting were identified during the period[276](index=276&type=chunk) [PART II. OTHER INFORMATION](index=59&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information and exhibits [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is not currently a party to any material legal proceedings that would significantly impact its business or financial results - The company is not currently a party to any material legal proceedings that would significantly impact its business or financial results[277](index=277&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that no material changes to the risk factors from the annual report on Form 10-K for December 31, 2021, were identified - No material changes to the risk factors from the annual report on Form 10-K for December 31, 2021, were identified[278](index=278&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that no unregistered sales of equity securities or use of proceeds occurred during the period - No unregistered sales of equity securities or use of proceeds occurred during the period[278](index=278&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that no defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[280](index=280&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[280](index=280&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section reports that there is no other information to disclose under this item - No other information to disclose under this item[281](index=281&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Third Amended and Restated Credit Agreement, CEO/CFO certifications, and XBRL documents - Exhibits include the Third Amended and Restated Credit Agreement, CEO/CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and various XBRL taxonomy documents[282](index=282&type=chunk) [SIGNATURES](index=61&type=section&id=SIGNATURES) This section contains the signatures of the principal executive and financial officers for both American Assets Trust, Inc. and its Operating Partnership, certifying the report - The report was signed by Ernest Rady (Chairman and CEO) and Robert F. Barton (EVP, CFO) for both American Assets Trust, Inc. and American Assets Trust, L.P. on **July 29, 2022**[285](index=285&type=chunk)[286](index=286&type=chunk)