American Assets Trust(AAT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2025, the company reported FFO per share of $2.00, which is about 3% above initial expectations [3] - Same-store cash NOI increased by 0.5% compared to 2024 [18] - Fourth quarter FFO per share was $0.47, a decrease of approximately $0.02 compared to Q3 2025 [18] Business Line Data and Key Metrics Changes - Office segment same-store NOI increased by 2.3% for the year, driven by higher base rent and improved expense recoveries [19] - Retail segment same-store NOI increased by 1.2% for the year, reflecting strong growth in the first half of 2025 [19] - Multifamily segment declined by 3.2% for the year due to flat to modestly lower rents and elevated concessions [20] - Mixed-use segment declined by 6.7% in 2025, impacted by softer hotel demand in Waikiki [20] Market Data and Key Metrics Changes - The office portfolio ended the quarter 83% leased, with same-store office portfolio at 86% leased, up about 150 basis points from Q3 [6] - Retail segment ended the year at 98% leased, with positive cash and GAAP leasing spreads [10] - Multifamily ended the year 95.5% leased, with approximately 1% net effective rent growth year over year [11] Company Strategy and Development Direction - The company aims to drive office leasing by converting prospect activity into signed leases and commenced revenue [16] - Retail momentum will be maintained by keeping centers full and managing expirations [16] - The company plans to manage through the multifamily supply cycle with disciplined revenue management and cost control [16] - The focus will be on prudent hotel operations while responding to market demand [16] Management's Comments on Operating Environment and Future Outlook - Management believes that coastal infill locations and high-quality real estate position the company to capture demand as it materializes [5] - The company views 2026 as an opportunity to build upon the progress made in 2025, with a focus on operational execution and long-term value creation [15][16] - Management expressed frustration with the current share price, indicating that it does not reflect the intrinsic value of the company's assets [14] Other Important Information - The company declared a quarterly dividend of $0.34 per share for the first quarter, with expectations to maintain the dividend at current levels [15] - Liquidity at the end of the fourth quarter was approximately $529 million, with a leverage ratio of 6.9x on a trailing twelve-month basis [22][23] Q&A Session Summary Question: Regarding elevated TIs for office renewals - Management acknowledged that higher capital burdens for office leasing are expected to moderate over time as occupancy improves [35][36] Question: Timeline to achieve target leverage of 5.5x - Management indicated that leasing up La Jolla Commons 3 and One Beach will help achieve the target leverage [40] Question: Steps to reinvigorate stock price - Management is open to strategic asset sales if they reflect long-term value but will not sell at a discount [42][43] Question: Guidance assumptions for office segment lease rates - Management reported that 68,000 sq ft has been signed year-to-date, with a significant pipeline of leasing activity [49] Question: Credit reserves in guidance - Management clarified that credit reserves are a conservative measure and not indicative of specific tenant concerns [84]