American Assets Trust(AAT) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2022, the company reported FFO per share of $0.58, an increase of approximately $0.01 compared to Q1 2022, primarily driven by outperformance from Embassy Suites and Waikiki Beach [22] - Net income attributable to common stockholders per share was $0.18 for Q2 2022 [22] - Same-store cash NOI grew by approximately 3.6% year-over-year in Q2 2022, with expectations for total same-store cash NOI to be approximately 9.5% for the year [23][25] Business Line Data and Key Metrics Changes - The San Diego multifamily portfolio saw leases on vacant units rent at an average of approximately 23% over prior rates, while renewed units increased by an average of 10% [13] - The retail sector experienced a 1.8% decrease in same-store cash NOI in Q2, but when excluding prior year COVID-related accounts receivable collections, it increased to a positive 1% growth year-over-year [24] - Office leasing spreads were strong, with cash basis and GAAP basis increases of 20% over prior rents [26] Market Data and Key Metrics Changes - The Embassy Suites is expected to end at approximately 83% of 2019 pre-COVID NOI, up from an estimate of 74% at the end of Q1 2022 [31] - The Portland multifamily market has shown momentum, with Hassalo on Eighth leasing vacant units at an average of approximately 15% over prior rents [16] Company Strategy and Development Direction - The company aims to optimize long-term growth of earnings and net asset value while maintaining a strong balance sheet and investing in high-quality properties [4] - The strategy includes focusing on premium office space and enhancing amenities to attract tenants [12][41] - The company is optimistic about leasing prospects for ongoing developments like La Jolla Commons 3 and One Beach Street [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for continued near-term growth across assets despite challenges from inflation and potential economic slowdowns [7][8] - The company is prepared for various economic scenarios and has increased its guidance for the rest of the year based on positive performance [8][28] Other Important Information - The Board of Directors approved a quarterly dividend of $0.32 for Q3, reflecting confidence in the portfolio's growth [8] - The company issued its 2021 sustainability report, highlighting ESG initiatives [20] Q&A Session Summary Question: Has the view on office exposure changed with recent acquisitions? - Management noted that they found office opportunities priced below replacement cost and believe this strategy has proven effective [44][46] Question: What is the strategy and timeframe for releasing space at Eastgate office park? - Management acknowledged the decrease in occupancy was expected due to acquiring vacancy and plans to improve the property significantly [49][51] Question: Are apartment rent increases expected to moderate? - Management indicated strong market conditions in San Diego, with rents averaging upwards of 23% over prior rates, suggesting continued pricing power [53][54]