American Assets Trust Q3 Earnings Call Highlights

Key Points

• Strong quarterly performance: Third-quarter FFO was $0.56 per diluted share, about $0.05 above internal projections. Same-store cash NOI grew 8.3%, or 5.1% excluding primarily one-time items.
• 2026 outlook raised: American Assets Trust increased its full-year FFO guidance to $2.04–$2.10 per share, with the midpoint up 2% from its prior forecast.
• Leasing and operating momentum continued: Office occupancy rose to approximately 86%, retail was 98% leased, and the Waikiki hotel’s NOI increased to $3.1 million as occupancy and RevPAR improved. However, leverage remained above the company’s long-term target, and refinancing costs are expected to rise in 2027.

American Assets Trust NYSE: AAT reported third-quarter 2026 funds from operations of $0.56 per diluted share, exceeding its internal projections by about $0.05 per share, as leasing activity, hotel performance and one-time items supported results.

President and CEO Adam Wyll said the company generated portfolio-wide same-store cash net operating income growth of 8.3% from a year earlier. Excluding primarily property-tax refunds and the collection of a previously reserved office receivable, same-store cash NOI grew 5.1%.

The company raised its full-year 2026 FFO guidance range to $2.04 to $2.10 per diluted share, compared with its previous range of $1.96 to $2.10. The new midpoint of $2.07 represents a 2% increase from the prior midpoint.

Office Leasing Gains Continue

American Assets Trust ended the quarter with its office portfolio approximately 86% leased, up nearly 400 basis points from a year earlier and 140 basis points sequentially. The company completed about 124,000 square feet of office leasing during the quarter, producing comparable cash rent spreads of 2.1% and straight-line rent spreads of 8.2%.

The company entered the fourth quarter with approximately 210,000 square feet of executed office leases that had not yet commenced, representing roughly $12 million in annualized base rent. Wyll said 35% of that rent is expected to commence in the fourth quarter, while about 60% is expected to begin during the first half of 2027, primarily in the first quarter.

Management also reported 132,000 square feet in lease documentation and proposals outstanding on about 178,000 square feet. Wyll said leasing decisions involving larger spaces have taken longer to complete, though the company has not been losing deals during the extended process.

At La Jolla Commons Tower 3, the company was awaiting signatures on two full-floor leases totaling about 41,000 square feet with a prospective high-credit-quality tenant, in addition to being in documentation on another 3,600 square feet. If completed, those transactions would bring the building to about 72% leased, Wyll said.

At One Beach Street in San Francisco, the company was exchanging proposals for the remaining second-floor space. Wyll said a completed transaction would bring the property to 82% leased. He noted that the leases discussed for La Jolla Commons and One Beach Street were not yet executed.

Based on anticipated leasing activity, American Assets Trust expects to end 2026 with its office portfolio between approximately 84% and 86% leased. The company highlighted its spec-suite program, saying 42% of its spec-suite square footage since the start of 2024 was pre-leased before construction finished, more than half was leased within three months of completion, and more than 75% was leased within six months.

Retail, Multifamily and Hotel Results

The retail portfolio ended the third quarter 98% leased. American Assets Trust executed approximately 108,000 square feet of retail leases during the period, with comparable cash rent spreads of 7.4% and straight-line spreads of 16.8%.

Retail same-store cash NOI increased 9.6%, or 6.3% excluding real estate tax refunds, according to Executive Vice President and CFO Bob Barton. The underlying increase reflected higher expense reimbursements at Alamo Quarry, higher base rents from leases and tenant expansions at Alamo Quarry, Lomas Santa Fe and Gateway Marketplace, and lower rental expenses at Carmel Mountain Plaza.

In San Diego multifamily, excluding the RV Park, communities ended the quarter 97% leased and 95% occupied. Renewal rents and new lease rents each increased 4% during the quarter. Pacific Ridge ended the period nearly 97% occupied, compared with 77% at the end of the second quarter and 92% a year earlier.

Hassalo on Eighth in Portland ended the quarter 92% leased and 91% occupied, with flat blended rent growth. The company said its retail and multifamily portfolios achieved record average rental rates during the quarter.

At the Embassy Suites Hotel at Waikiki Beach Walk, hotel NOI rose to about $3.1 million from $2.6 million a year earlier. Occupancy increased to 88.5% from 78.3%, while revenue per available room rose 13.3% to $337. Average daily rate increased 0.2% to $381.

Wyll said the hotel benefited partly from other hotels being unavailable during renovations, allowing American Assets Trust to capture additional occupancy even as rates remained relatively flat.

Balance Sheet and Capital Allocation

American Assets Trust ended the quarter with approximately $590 million of total liquidity, including $90 million of cash and $500 million available under its revolving credit facility. Net debt to EBITDA was 6.4 times on a quarterly annualized basis and 6.9 times on a trailing 12-month basis, compared with the company’s long-term target of 5.5 times or below.

All of the company’s debt is fixed-rate or swap-to-fixed, with no maturities until March 2027, Wyll said. However, he said borrowing costs are expected to rise when the company refinances that maturity and when its term-loan swap expires in January. Management plans to address those effects in its 2027 outlook.

The board declared a quarterly dividend of $0.34 per share, payable Dec. 17 to shareholders of record Dec. 10. Wyll said dividend coverage was pressured in the third quarter partly by a large tenant-improvement reimbursement associated with an office lease signed several years ago. He said coverage should improve gradually as capital spending moderates and signed leases begin generating cash rent.

Management said it continues to assess acquisitions and capital-recycling opportunities but will not pursue transactions solely to expand. Wyll identified the hotel, the RV Park and a Walnut Creek retail property as potential assets that could be considered for recycling, while emphasizing that any sale would need to provide compelling economics after considering taxes, transaction costs and lost cash flow.

About American Assets Trust (NYSE:AAT)

American Assets Trust, Inc NYSE: AAT is a self-administered and self-managed real estate investment trust (REIT) that owns, operates, acquires and develops primarily commercial and residential properties. Its portfolio includes office buildings, retail centers and multifamily communities.

The company focuses on high-quality properties in markets with attractive economic and demographic characteristics. Its properties are concentrated in select coastal regions of the United States, including Southern California, Northern California, Washington and Hawaii.

American Assets Trust traces its roots to a real estate business established by Ernest S.

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