American Assets Trust Q2 Earnings Call Highlights

Key Points

• Q2 FFO exceeded expectations at $0.51 per diluted share, while same-store cash NOI rose 0.3% year over year, or 1.3% excluding a one-time office receivable reserve.
• Office leasing created significant embedded growth: the portfolio was 84.4% leased, with about 200,000 square feet of signed leases yet to commence and an estimated $0.29 per share of potential incremental FFO from stabilizing key properties.
• American Assets Trust reaffirmed full-year FFO guidance of $1.96–$2.10 per share and said results could reach the upper half of the range if office leasing, multifamily performance and hotel demand improve; liquidity totaled approximately $610 million.

American Assets Trust NYSE: AAT reported second-quarter funds from operations of $0.51 per diluted share, ahead of its internal expectations, as recently commenced office leases contributed incremental rental income. Net income attributable to common stockholders was $0.09 per diluted share.

Portfolio-wide same-store cash net operating income increased 0.3% from the prior-year quarter, or 1.3% excluding a one-time reserve related to an office tenant receivable. President and CEO Adam Wyll said the company’s outlook supports reaching the midpoint of its full-year FFO guidance, with potential to move into the upper half if leasing, multifamily and hotel trends develop favorably.

Office Leasing Drives Embedded Growth Opportunity

The office portfolio was 84.4% leased at quarter-end. American Assets Trust signed about 110,000 square feet of office leases during the quarter, generating comparable cash leasing spreads of 9% and straight-line spreads of 10%.

The company entered the third quarter with approximately 200,000 square feet of signed office leases that had not yet begun paying cash rent, representing more than $10 million of annualized base rent. It also had 73,000 square feet in lease documentation and proposals outstanding on nearly 150,000 square feet of new and expansion space.

Wyll said leasing conditions vary by market but that the company is seeing demand for higher-quality office properties. He pointed to activity in the UTC and Del Mar Heights submarkets in San Diego, San Francisco’s technology-driven leasing environment, and improving availability trends in Bellevue. Portland remains challenged, although the company said leasing activity there is concentrating in stronger buildings.

At La Jolla Commons Tower 3, which was 49% leased, proposals represented another 33% of the building. At One Beach Street in San Francisco, which was 35% leased, the company is converting remaining first- and second-floor availability into spec suites, with completion expected in the coming months.

During the question-and-answer session, Wyll said the company’s goal for office occupancy has not changed, though year-end results are “more binary” because several large tenant requirements remain in proposal stages. He said the company would not pursue occupancy at the expense of lease rates, term or tenant credit.

Chief Financial Officer Bob Barton said the company sees approximately $0.29 per share of incremental FFO potential from the eventual stabilization of La Jolla Commons Tower 3, One Beach Street and suburban Bellevue properties. About $0.14 of that amount is tied to leases already signed, while $0.15 depends on future speculative leasing. The company has recognized $0.03 of the signed-lease contribution in the first half and expects another $0.02 in the second half, followed by $0.09 next year.

The one-time office reserve was related to a tenant that had been on the company’s watch list in 2025. Wyll said American Assets Trust reserved roughly $1.1 million to $1.2 million in cash receivables and straight-line rent during the second quarter, while adding that no recovery is assumed in the 2026 outlook. The space has already been backfilled. Steve Center, senior vice president of office properties, said the replacement tenant has a signed 84-month lease scheduled to commence May 1, with a starting rent of about $63 per square foot, seven months of free rent and 3% annual increases.

Retail and Multifamily Performance

The retail portfolio ended the quarter 98% leased. The company executed approximately 139,000 square feet of retail leases, with comparable cash spreads of 3% and straight-line spreads of 20%. Retail same-store NOI declined 0.4%, reflecting the absence of a one-time real estate tax refund received in the second quarter of 2025.

Multifamily same-store NOI increased 0.9%, or 1.6% excluding the RV park. The multifamily portfolio, excluding the RV park, was more than 94% leased. San Diego communities were 96% leased, where renewal rents increased 5% and new lease rents declined 2%, producing 3% blended growth. Hassalo on Eighth in Portland was 88% leased, with 2% renewal growth and 1% new lease growth.

Wyll described 2026 as a stabilization year for multifamily rather than a year of significant rent growth, citing elevated supply in San Diego and Portland. He said development activity has slowed materially in both markets, which could improve the supply-demand balance over the next several years.

Hotel Results and Balance Sheet

At Waikiki Beach Walk, stronger retail operations and bad-debt collections offset rate pressure at the Embassy Suites Waikiki hotel. Hotel occupancy increased to 90.5% from 86% a year earlier, while RevPAR rose 0.9% to $308. Average daily rate declined 0.4% to $340, and hotel NOI was approximately $2.5 million, compared with $2.9 million in the prior-year period.

Barton said the company ended the quarter with about $610 million of total liquidity, including $110 million of cash and $500 million available under its revolving credit facility. The company’s revolver and $100 million term loan were extended to April 2030. Net debt to EBITDA was 6.7 times on a quarterly annualized basis and 6.9 times on a trailing 12-month basis, compared with its long-term target of 5.5 times or below.

Guidance Reaffirmed

American Assets Trust reaffirmed full-year FFO guidance of $1.96 to $2.10 per diluted share, with a midpoint of $2.03. Barton said the company could trend toward the upper half of the range if reserved retail tenants continue meeting rent obligations, office leases begin sooner than expected, multifamily occupancy and rents outperform expectations, and tourism demand improves at Embassy Suites Waikiki.

The board also declared a quarterly dividend of $0.34 per share, payable Sept. 17 to shareholders of record on Sept. 3. Wyll said dividend coverage is expected to improve as signed office leases commence and leasing and redevelopment investments contribute more meaningfully to cash flow.

About American Assets Trust (NYSE:AAT)

American Assets Trust, Inc is a publicly traded real estate investment trust (REIT) that acquires, develops and manages a diversified portfolio of commercial properties across multiple asset classes. The company's holdings include retail centers, office buildings, multifamily communities and select hotel and resort properties. American Assets Trust pursues an integrated strategy combining proactive redevelopment, leasing initiatives and sustainable design to enhance asset value and drive long-term growth.

Founded in 1998 and headquartered in San Diego, California, American Assets Trust has built a presence in key markets along the West Coast and select western U.S.

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