Financial Data and Key Metrics Changes - The company reported a fourth quarter net loss of $36.9 million, or $0.21 per share, with FFO totaling $14.6 million, or $0.08 per diluted share, in line with consensus estimates [23][27] - Property level NOI was $70 million, slightly below forecast due to increased operating costs [23] - The company anticipates 2026 FFO at the midpoint to be $0.55 per diluted share, representing a 5.8% increase compared to 2025 [27][29] Business Line Data and Key Metrics Changes - The wholly owned core portfolio is 88.3% occupied and 90.4% leased, with leasing activity for the year approximating 1.6 million sq ft [3][4] - New leasing mark-to-market was strong at 13%, with a GAAP mark-to-market of 4.2% [5][27] - The contribution from unconsolidated joint ventures is expected to improve from an $11 million loss in 2025 to a $1 million contribution in 2026 [28] Market Data and Key Metrics Changes - The company captured 30% market share of all new leasing activity in Market West and University City, significantly outperforming its 15% target [7][8] - In Philadelphia, the largest sub-market, occupancy is at 95% and leasing is at 97%, with only 6% of space rolling through 2028 [6] - The Pennsylvania suburbs are 89.4% leased, with Radnor at 91% [9] Company Strategy and Development Direction - The 2026 business plan focuses on returning to earnings growth, stabilizing One Uptown and 3151, and accelerating sales to reduce debt [15][21] - The company plans to maintain minimal balances on its $600 million unsecured line of credit and aims to return to investment-grade metrics [10][22] - The sales program is projected to generate between $280 million and $300 million, primarily in the first half of the year [20][31] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating platform enables the company to capitalize on improving real estate market conditions, with expectations for further improvement in 2027 [38] - The company is optimistic about the leasing activity and market dynamics, particularly in CBD Philadelphia and University City [62] - Management emphasized the importance of deleveraging while also considering share buybacks as the stock is viewed as undervalued [80][82] Other Important Information - The company has no unsecured bonds maturing until November 2027 and plans to refinance higher-priced bonds to reduce interest costs [10][25] - The company is actively evaluating recapitalization of joint ventures, with plans to maintain a minority stake in future developments [33][60] - The anticipated renovation costs for redeveloping an existing building in Austin are estimated to be between $30 million and $40 million [72] Q&A Session Summary Question: What is the hurdle for refinancing bonds? - Management indicated that the focus is on executing the sales program to generate liquidity and improve credit metrics before considering bond refinancing [40][41] Question: How will the $125 million earmarked for debt or share repurchase be allocated? - The primary objective is to reduce leverage first, with share buybacks being considered opportunistically after achieving debt reduction goals [42][43] Question: Are there specific properties being targeted for sale? - Management believes the entire portfolio is undervalued and is evaluating which assets to sell based on market conditions and growth potential [46][48] Question: What is the status of the life science incubator space? - There are signs of activity and expansion in the life science sector, particularly in cell and gene therapy, with a healthy pipeline of tenants [51][52] Question: What is the timeline for joint venture recapitalizations? - Recapitalizations are planned for the second half of 2026, with management monitoring market conditions to optimize timing [56][60]

Financial Data and Key Metrics Changes - FFO for the quarter was $1.08 per diluted share, including approximately $0.03 per share of one-time items [22] - Cash same property NOI growth for the third quarter was 60 basis points, with real estate tax appeals contributing to 150 basis points of growth [22] - Occupancy improved modestly, ending at 81%, up from 80.8% at the end of the second quarter [22] Business Line Data and Key Metrics Changes - Over 550,000 square feet of new and renewal leases were signed during the quarter, marking the highest third quarter of leasing activity in six years [5] - SOMA assets executed over 95,000 square feet of new and renewal leases this quarter, with tour activity up 170% year over year [6][8] - In life sciences, 84,000 square feet of leases were signed to date with established biotech companies, indicating strong demand [9][10] Market Data and Key Metrics Changes - Office demand in San Francisco reached a post-pandemic high of nearly 9 million square feet, up from approximately 7 million square feet last quarter [5] - The XBI index is up more than 20% year to date, reflecting strong performance from biotech companies [9] - Over 2 million square feet of sublease space has been taken off the market in San Francisco, indicating a sustained recovery [39] Company Strategy and Development Direction - The company is focusing on capturing growing demand across markets and ensuring assets are well-positioned to outperform [8] - Capital allocation strategy includes recycling capital with a focus on long-term cash flow and value creation [13] - The company is actively engaged in the Flower Mart project, exploring various development scenarios to maximize value [15] Management's Comments on Operating Environment and Future Outlook - Management noted improving workplace norms and a resurgence in leasing activity, particularly in the West Coast office and life science markets [4] - The company anticipates modest improvement in occupancy in the fourth quarter due to accelerated rent commencement activity [23] - Management expressed confidence in the leasing momentum continuing into 2026, driven by strong demand from various sectors [44] Other Important Information - The company completed the sale of a four-building campus in Silicon Valley for gross proceeds of $365 million and acquired Maple Plaza for $205 million [13] - The company raised its 2025 FFO outlook to a range of $4.18 to $4.24 per share, reflecting updated expectations [25] Q&A Session Summary Question: Thoughts on retention for expirations and occupancy commencement - Management indicated a remaining expiration pool in 2026 of about 970,000 square feet, with limited opportunities for additional renewals [31][32] Question: Competitive positioning in San Francisco - Management noted a shift in tenant preferences towards impactful space and highlighted strong demand from AI companies [36][38] Question: Update on KOP2 leasing activity - Management confirmed strong demand across various sectors, with a focus on biotech and life sciences [42][45] Question: Insights on Noy House lease and rent contribution - Management clarified that the Noy House lease would impact occupancy and emphasized efforts to minimize downtime [51][52] Question: KOP lease economics and tenant improvements - Management stated that rental rates are in line with original underwriting, though tenant improvement costs have increased [56][64] Question: Considerations for fourth quarter guidance - Management highlighted a difficult comp from the previous year due to recognized restoration fee income [67]

Financial Data and Key Metrics Changes - FFO for the quarter was $1.08 per diluted share, including approximately $0.03 per share of one-time items [21] - Cash same property NOI growth for the third quarter was 60 basis points, with real estate tax appeals contributing to 150 basis points of growth [21] - Occupancy improved modestly, ending at 81%, up from 80.8% at the end of the second quarter [21] Business Line Data and Key Metrics Changes - Over 550,000 sq ft of new and renewal leases were signed during the quarter, marking the highest third quarter of leasing activity in six years [5] - In San Francisco, office demand reached a post-pandemic high of nearly 9 million sq ft, up from approximately 7 million sq ft last quarter [5] - Life science demand rose over 20% from 1.8 million sq ft to 2 million sq ft in Q3 [40] Market Data and Key Metrics Changes - San Francisco led all U.S. metros in office leasing growth over the last 12 months [5] - Tour activity in SoMa assets increased by 170% year-over-year [6] - The XBI index is up more than 20% year to date, indicating strong performance in the biotech sector [9] Company Strategy and Development Direction - The company is focusing on capturing growing demand across its markets and ensuring assets are well-positioned to outperform [8] - The acquisition of Maple Plaza in Beverly Hills marks the company's first investment in a highly sought-after area with low vacancy rates [12] - The Flower Mart Project is being redesigned with multiple development scenarios submitted to the city's planning department [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the return to office is improving, driven by evolving workplace norms and recognition of the office's role in culture and collaboration [4] - The company anticipates modest improvement in occupancy in the fourth quarter due to accelerated rent commencement activity [22] - Management raised the 2025 FFO outlook to a range of $4.18-$4.24 per share, reflecting positive updates to expectations [23] Other Important Information - The company completed the sale of a four-building campus in Silicon Valley for gross proceeds of $365 million [12] - The company is actively engaged with potential tenants for KOP 2, with discussions reflecting an overall improvement in the life science market [11] - The company is focused on optimizing portfolio returns and maintaining a strong capital structure [13] Q&A Session Summary Question: Thoughts on retention for expirations and occupancy commencement - Management indicated that the remaining expiration pool for 2026 is about 970,000 sq ft, with limited opportunities for additional renewals [30][31] Question: Competitive positioning in San Francisco - Management noted a shift in tenant preferences towards landlords who can deliver space quickly, with significant demand from AI companies [34][36] Question: Update on KOP leasing activity and demand - Management reported strong demand across various sectors, including biotech, AI, and robotics, with a focus on creating a dynamic life science ecosystem [40][42] Question: Insights on NeueHouse lease and rent contribution - Management clarified that the departure of NeueHouse will impact occupancy but the space's high-quality build-out is generating strong interest from prospective users [48][49] Question: Lease economics at KOP - Management stated that lease economics vary, but rental rates are holding steady relative to original underwriting, with higher tenant improvement costs [52][53] Question: Capital allocation strategy and priorities - Management emphasized a disciplined approach to capital allocation, evaluating opportunities for investment and maintaining a strong balance sheet [78][80]

Company Overview and Strategy - American Assets Trust (AAT) was founded by Ernest Rady and has a 58+ year history[8] - Adam Wyll was named the new CEO in 2025[8] - The company successfully raised $489 million through a follow-on equity offering[8] Financial Performance and Growth - Total revenue in 2025 is estimated to be $432 million[8] - Funds From Operations (FFO) per share in 2025 is estimated to be $194[8] - Net Operating Income (NOI) grew at a CAGR of 67% from IPO to 2024[8] - Total Revenue grew at a CAGR of 63% from IPO to 2024[8] - Dividends grew at a CAGR of 62% from 2011 to 2024[8] - FFO per share grew at a CAGR of 40% from IPO to 2024[8] Portfolio Composition - The portfolio consists of 41 million square feet of retail space and 25 million square feet of office space[11] - The portfolio includes 2302 multifamily units and 369 hotel suites[11] - By sector, Cash NOI is comprised of 52% Office, 26% Retail, 14% Multifamily, and 8% Mixed-Use[11] - By region/state, Cash NOI is comprised of 47% Southern California, 13% Northern California, 13% Hawaii, 12% Washington, 9% Oregon, and 6% Texas[11] Liquidity and Debt Profile - The company has approximately $144 million in cash on hand[16] - The company has $400 million available on its line of credit[16] - The company's total liquidity is approximately $544 million[16] - The company's total weighted average fixed interest rate is 45%[17] - The weighted average term to maturity is 59 years[17]