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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
aat2019q3a17.jpg
AMERICAN ASSETS TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
Commission file number: 001-35030

AMERICAN ASSETS TRUST, L.P.
(Exact Name of Registrant as Specified in its Charter)
Commission file number: 333-202342-01
 
Maryland (American Assets Trust, Inc.)27-3338708 (American Assets Trust, Inc.)
Maryland (American Assets Trust, L.P.)27-3338894 (American Assets Trust, L.P.)
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
3420 Carmel Mountain Road, Suite 100
San Diego, California 92121
(Address of Principal Executive Offices and Zip Code)
(858) 350-2600
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

    American Assets Trust, Inc.               Yes     No
    American Assets Trust, L.P.              Yes     No
(American Assets Trust, L.P. became subject to filing requirements under Section 13 of the Securities Exchange Act of 1934, as amended, upon effectiveness of its Registration Statement on Form S-3 on February 6, 2015 and has filed all required reports subsequent to that date.)
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    
    
    American Assets Trust, Inc.               Yes      No
    American Assets Trust, L.P.              Yes      No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
American Assets Trust, Inc.
Large Accelerated FilerAccelerated Filer
Non-Accelerated Filer(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company

American Assets Trust, L.P.
Large Accelerated FilerAccelerated Filer
Non-Accelerated Filer(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      
    
    American Assets Trust, Inc.               Yes      No
    American Assets Trust, L.P.              Yes      No

Securities registered pursuant to Section 12(b) of the Act:
Name of RegistrantTitle of each classTrading SymbolName of each exchange on which registered
American Assets Trust, Inc.Common Stock, par value $0.01 per shareAATNew York Stock Exchange
American Assets Trust, L.P.NoneNoneNone

American Assets Trust, Inc. had 60,893,698 shares of common stock, par value $0.01 per share, outstanding as of May 3, 2024.



EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2024 of American Assets Trust, Inc., a Maryland corporation, and American Assets Trust, L.P., a Maryland limited partnership, of which American Assets Trust, Inc. is the parent company and sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our” or “the company” refer to American Assets Trust, Inc. together with its consolidated subsidiaries, including American Assets Trust, L.P. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “our Operating Partnership” or “the Operating Partnership” refer to American Assets Trust, L.P. together with its consolidated subsidiaries.

American Assets Trust, Inc. operates as a real estate investment trust, or REIT, and is the sole general partner of the Operating Partnership. As of March 31, 2024, American Assets Trust, Inc. owned an approximate 78.8% partnership interest in the Operating Partnership. The remaining approximately 21.2% partnership interests are owned by non-affiliated investors and certain of our directors and executive officers. As the sole general partner of the Operating Partnership, American Assets Trust, Inc. has full, exclusive and complete authority and control over the Operating Partnership’s day-to-day management and business, can cause it to enter into certain major transactions, including acquisitions, dispositions and debt refinancings, and can cause changes in its line of business, capital structure and distribution policies.

American Assets Trust, Inc. believes that combining the quarterly reports on Form 10-Q of American Assets Trust, Inc. and the Operating Partnership into a single report will result in the following benefits:

better reflects how management and the analyst community view the business as a single operating unit;
enhance investors' understanding of American Assets Trust, Inc. and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
greater efficiency for American Assets Trust, Inc. and the Operating Partnership and resulting savings in time, effort and expense; and
greater efficiency for investors by reducing duplicative disclosure by providing a single document for their review.

The management of American Assets Trust, Inc. and the Operating Partnership is the same and operates American Assets Trust, Inc. and the Operating Partnership as one enterprise.

There are certain differences between American Assets Trust, Inc. and the Operating Partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between American Assets Trust, Inc. and the Operating Partnership in the context of how American Assets Trust, Inc. and the Operating Partnership operate as an interrelated consolidated company. American Assets Trust, Inc. is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, American Assets Trust, Inc. does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. American Assets Trust, Inc. itself does not hold any indebtedness. The Operating Partnership holds substantially all the assets of the company, directly or indirectly holds the ownership interests in the company's real estate ventures, conducts the operations of the business and is structured as a partnership with no publicly-traded equity. Except for net proceeds from public equity issuances by American Assets Trust, Inc., which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by American Assets Trust, Inc.'s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of operating partnership units.

Noncontrolling interests and stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of American Assets Trust, Inc. and those of American Assets Trust, L.P. The partnership interests in the Operating Partnership that are not owned by American Assets Trust, Inc. are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in American Assets Trust, Inc.’s financial statements. To help investors understand the significant differences between American Assets Trust, Inc. and the Operating Partnership, this report presents the following separate sections for each of American Assets Trust, Inc. and the Operating Partnership:

consolidated financial statements;
the following notes to the consolidated financial statements:
Debt;
Equity/Partners' Capital; and
Earnings Per Share/Unit; and


Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of American Assets Trust, Inc. and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of American Assets Trust, Inc. have made the requisite certifications and American Assets Trust, Inc. and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.




AMERICAN ASSETS TRUST, INC. AND AMERICAN ASSETS TRUST, L.P.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2024
 
PART 1. FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Financial Statements of American Assets Trust, Inc.:
Consolidated Financial Statements of American Assets Trust, L.P.:
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


American Assets Trust, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Data)
 
March 31,December 31,
20242023
 (unaudited)
ASSETS
Real estate, at cost
Operating real estate$3,516,354 $3,502,251 
Construction in progress235,719 239,030 
Held for development487 487 
3,752,560 3,741,768 
Accumulated depreciation(1,061,670)(1,036,453)
Real estate, net2,690,890 2,705,315 
Cash and cash equivalents98,553 82,888 
Accounts receivable, net7,606 7,624 
Deferred rent receivables, net90,884 89,210 
Other assets, net100,266 99,644 
TOTAL ASSETS$2,988,199 $2,984,681 
LIABILITIES AND EQUITY
LIABILITIES:
Secured notes payable, net$74,691 $74,669 
Unsecured notes payable, net1,615,608 1,614,958 
Accounts payable and accrued expenses65,292 61,312 
Security deposits payable8,862 8,880 
Other liabilities and deferred credits, net68,358 71,187 
Total liabilities1,832,811 1,831,006 
Commitments and contingencies (Note 11)
EQUITY:
American Assets Trust, Inc. stockholders’ equity
Common stock, $0.01 par value, 490,000,000 shares authorized, 60,894,491 and 60,895,786 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
609 609 
Additional paid-in capital1,470,823 1,469,206 
Accumulated dividends in excess of net income(281,183)(280,239)
Accumulated other comprehensive income9,304 8,282 
Total American Assets Trust, Inc. stockholders’ equity1,199,553 1,197,858 
Noncontrolling interests(44,165)(44,183)
Total equity1,155,388 1,153,675 
TOTAL LIABILITIES AND EQUITY$2,988,199 $2,984,681 
The accompanying notes are an integral part of these consolidated financial statements.
1

American Assets Trust, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands, Except Shares and Per Share Data)
 Three Months Ended March 31,
 20242023
REVENUE:
Rental income$105,021 $102,710 
Other property income5,674 5,044 
Total revenue110,695 107,754 
EXPENSES:
Rental expenses29,841 27,506 
Real estate taxes11,246 11,632 
General and administrative8,842 8,999 
Depreciation and amortization30,217 29,901 
Total operating expenses80,146 78,038 
OPERATING INCOME30,549 29,716 
Interest expense, net(16,255)(15,729)
Other income, net10,329 6,679 
NET INCOME24,623 20,666 
Net income attributable to restricted shares(196)(189)
Net income attributable to unitholders in the Operating Partnership(5,167)(4,341)
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS$19,260 $16,136 
EARNINGS PER COMMON SHARE
Earnings per common share, basic
$0.32 $0.27 
Weighted average shares of common stock outstanding - basic60,309,921 60,144,609 
Earnings per common share, diluted
$0.32 $0.27 
Weighted average shares of common stock outstanding - diluted76,491,458 76,326,146 
DIVIDENDS DECLARED PER COMMON SHARE$0.335 $0.330 
COMPREHENSIVE INCOME
Net income$24,623 $20,666 
Other comprehensive income - unrealized income (loss) on swap derivatives during the period 1,392 (2,269)
Reclassification of amortization of forward-starting swap included in interest expense(98)(854)
Comprehensive income25,917 17,543 
Comprehensive income attributable to non-controlling interests(5,439)(3,677)
Comprehensive income attributable to American Assets Trust, Inc.$20,478 $13,866 
The accompanying notes are an integral part of these consolidated financial statements.
2

American Assets Trust, Inc.
Consolidated Statement of Equity
(Unaudited)
(In Thousands, Except Share Data)
 American Assets Trust, Inc. Stockholders’ EquityNoncontrolling Interests - Unitholders in the Operating PartnershipTotal
 Common SharesAdditional
Paid-in
Capital
Accumulated
Dividends in
Excess of Net
Income
Accumulated Other Comprehensive Income (Loss)
 SharesAmount
Balance at December 31, 202360,895,786 $609 $1,469,206 $(280,239)$8,282 $(44,183)$1,153,675 
Net income— — — 19,456 — 5,167 24,623 
Forfeiture of restricted stock(1,295)— — — — — — 
Dividends declared and paid— — — (20,400)— (5,421)(25,821)
Stock-based compensation— — 1,617 — — — 1,617 
Other comprehensive income - change in value of interest rate swaps— — — — 1,100 292 1,392 
Reclassification of amortization of forward-starting swap included in interest expense— — — — (78)(20)(98)
Balance at March 31, 202460,894,491 $609 $1,470,823 $(281,183)$9,304 $(44,165)$1,155,388 


 American Assets Trust, Inc. Stockholders’ EquityNoncontrolling Interests - Unitholders in the Operating PartnershipTotal
 Common SharesAdditional
Paid-in
Capital
Accumulated
Dividends in
Excess of Net
Income
Accumulated Other Comprehensive Income (Loss)
 SharesAmount
Balance at December 31, 202260,718,653 $607 $1,461,201 $(251,167)$10,624 $(35,740)$1,185,525 
Net income— — — 16,325 — 4,341 20,666 
Forfeiture of restricted stock(818)— — — — — — 
Dividends declared and paid— — — (20,037)— (5,340)(25,377)
Stock-based compensation— — 2,035 — — 2,035 
Other comprehensive loss - change in value of interest rate swaps— — — — (1,786)(483)(2,269)
Reclassification of amortization of forward-starting swap included in interest expense— — — — (673)(181)(854)
Balance at March 31, 202360,717,835 $607 $1,463,236 $(254,879)$8,165 $(37,403)$1,179,726 

The accompanying notes are an integral part of these consolidated financial statements.
3

American Assets Trust, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
 Three Months Ended March 31,
 20242023
OPERATING ACTIVITIES
Net income$24,623 $20,666 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred rent revenue and amortization of lease intangibles(3,150)(3,155)
Depreciation and amortization30,217 29,901 
Amortization of debt issuance costs and debt discounts835 884 
Provision for uncollectable rental income418 518 
Stock-based compensation expense1,617 2,035 
Other noncash interest expense, net(98)(854)
Other, net(556)207 
Changes in operating assets and liabilities
Change in accounts receivable(227)(926)
Change in other assets(107)(218)
Change in accounts payable and accrued expenses979 2,464 
Change in security deposits payable(19)140 
Change in other liabilities and deferred credits246 305 
Net cash provided by operating activities54,778 51,967 
INVESTING ACTIVITIES
Capital expenditures(10,939)(24,518)
Leasing commissions(2,353)(1,177)
Net cash used in investing activities(13,292)(25,695)
FINANCING ACTIVITIES
Proceeds from unsecured term loan 225,000 
Repayment of unsecured line of credit (36,000)
Repayment of unsecured term loan (150,000)
Debt issuance costs (2,138)
Dividends paid to common stock and unitholders(25,821)(25,377)
Shares withheld for employee taxes  
Net cash (used in) / provided by financing activities(25,821)11,485 
Net increase in cash and cash equivalents15,665 37,757 
Cash and cash equivalents, beginning of period82,888 49,571 
Cash and cash equivalents, end of period$98,553 $87,328 

The accompanying notes are an integral part of these consolidated financial statements.
4

American Assets Trust, L.P.
Consolidated Balance Sheets
(In Thousands, Except Unit Data)
 
March 31,December 31,
20242023
 (unaudited)
ASSETS
Real estate, at cost
Operating real estate$3,516,354 $3,502,251 
Construction in progress235,719 239,030 
Held for development487 487 
3,752,560 3,741,768 
Accumulated depreciation(1,061,670)(1,036,453)
Real estate, net2,690,890 2,705,315 
Cash and cash equivalents98,553 82,888 
Accounts receivable, net7,606 7,624 
Deferred rent receivables, net90,884 89,210 
Other assets, net100,266 99,644 
TOTAL ASSETS$2,988,199 $2,984,681 
LIABILITIES AND CAPITAL
LIABILITIES:
Secured notes payable, net$74,691 $74,669 
Unsecured notes payable, net1,615,608 1,614,958 
Accounts payable and accrued expenses65,292 61,312 
Security deposits payable8,862 8,880 
Other liabilities and deferred credits, net68,358 71,187 
Total liabilities1,832,811 1,831,006 
Commitments and contingencies (Note 11)
CAPITAL:
Limited partners' capital, 16,181,537 and 16,181,537 units issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
(47,190)(46,936)
General partner's capital, 60,894,491 and 60,895,786 units issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
1,190,249 1,189,576 
Accumulated other comprehensive income12,329 11,035 
Total capital1,155,388 1,153,675 
TOTAL LIABILITIES AND CAPITAL$2,988,199 $2,984,681 

The accompanying notes are an integral part of these consolidated financial statements.

5

American Assets Trust, L.P.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands, Except Shares and Per Unit Data)
 Three Months Ended March 31,
 20242023
REVENUE:
Rental income$105,021 $102,710 
Other property income5,674 5,044 
Total revenue110,695 107,754 
EXPENSES:
Rental expenses29,841 27,506 
Real estate taxes11,246 11,632 
General and administrative8,842 8,999 
Depreciation and amortization30,217 29,901 
Total operating expenses80,146 78,038 
OPERATING INCOME30,549 29,716 
Interest expense, net(16,255)(15,729)
Other income, net10,329 6,679 
NET INCOME24,623 20,666 
Net income attributable to restricted shares(196)(189)
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P.$24,427 $20,477 
EARNINGS PER UNIT - BASIC
Earnings per unit, basic
$0.32 $0.27 
Weighted average units outstanding - basic76,491,458 76,326,146 
EARNINGS PER UNIT - DILUTED
Earnings per unit, diluted
$0.32 $0.27 
Weighted average units outstanding - diluted76,491,458 76,326,146 
DISTRIBUTIONS PER UNIT$0.335 $0.330 
COMPREHENSIVE INCOME
Net income$24,623 $20,666 
Other comprehensive income - unrealized income (loss) on swap derivatives during the period 1,392 (2,269)
Reclassification of amortization of forward-starting swap included in interest expense(98)(854)
Comprehensive income25,917 17,543 
Comprehensive income attributable to Limited Partners(5,439)(3,677)
Comprehensive income attributable to General Partner$20,478 $13,866 

The accompanying notes are an integral part of these consolidated financial statements.
6

American Assets Trust, L.P.
Consolidated Statement of Partners' Capital
(Unaudited)
(In Thousands, Except Unit Data)

Limited Partners' Capital (1)
General Partner's Capital (2)
Accumulated Other Comprehensive Income (Loss)Total Capital
UnitsAmountUnitsAmount
Balance at December 31, 202316,181,537 $(46,936)60,895,786 $1,189,576 $11,035 $1,153,675 
Net income— 5,167 — 19,456 — 24,623 
Forfeiture of restricted units— — (1,295)— — — 
Distributions— (5,421)— (20,400)— (25,821)
Stock-based compensation— — — 1,617 — 1,617 
Other comprehensive income - change in value of interest rate swap— — — — 1,392 1,392 
Reclassification of amortization of forward starting swaps included in interest expense— — — — (98)(98)
Balance at March 31, 202416,181,537 $(47,190)60,894,491 $1,190,249 $12,329 $1,155,388 


 
Limited Partners' Capital (1)
General Partner's Capital (2)
Accumulated Other Comprehensive Income (Loss)Total Capital
 UnitsAmountUnitsAmount
Balance at December 31, 202216,181,537 $(39,127)60,718,653 $1,210,641 $14,011 $1,185,525 
Net income— 4,341 — 16,325 — 20,666 
Forfeiture of restricted units— — (818)— — — 
Distributions— (5,340)— (20,037)— (25,377)
Stock-based compensation— — — 2,035 — 2,035 
Other comprehensive loss - change in value of interest rate swap— — — — (2,269)(2,269)
Reclassification of amortization of forward starting swaps included in interest expense— — — — (854)(854)
Balance at March 31, 202316,181,537 $(40,126)60,717,835 $1,208,964 $10,888 $1,179,726 


(1) Consists of limited partnership interests held by third parties.
(2) Consists of general partnership interests held by American Assets Trust, Inc.
The accompanying notes are an integral part of these consolidated financial statements.
7

American Assets Trust, L.P.
Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
 Three Months Ended March 31,
 20242023
OPERATING ACTIVITIES
Net income$24,623 $20,666 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred rent revenue and amortization of lease intangibles(3,150)(3,155)
Depreciation and amortization30,217 29,901 
Amortization of debt issuance costs and debt discounts835 884 
Provision for uncollectable rental income418 518 
Stock-based compensation expense1,617 2,035 
Other noncash interest expense, net(98)(854)
Other, net(556)207 
Changes in operating assets and liabilities
Change in accounts receivable(227)(926)
Change in other assets(107)(218)
Change in accounts payable and accrued expenses979 2,464 
Change in security deposits payable(19)140 
Change in other liabilities and deferred credits246 305 
Net cash provided by operating activities54,778 51,967 
INVESTING ACTIVITIES
Capital expenditures(10,939)(24,518)
Leasing commissions(2,353)(1,177)
Net cash used in investing activities(13,292)(25,695)
FINANCING ACTIVITIES
Proceeds from unsecured term loan 225,000 
Repayment of unsecured line of credit (36,000)
Repayment of unsecured notes payable (150,000)
Debt issuance costs (2,138)
Distributions(25,821)(25,377)
Net cash (used in) / provided by financing activities(25,821)11,485 
Net increase in cash and cash equivalents15,665 37,757 
Cash and cash equivalents, beginning of period82,888 49,571 
Cash and cash equivalents, end of period$98,553 $87,328 


The accompanying notes are an integral part of these consolidated financial statements.
8

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements
March 31, 2024
(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Organization
American Assets Trust, Inc. (which may be referred to in these financial statements as the “company,” “we,” “us,” or “our”) is a Maryland corporation formed on July 16, 2010 that did not have any operating activity until the consummation of our initial public offering on January 19, 2011. The company is the sole general partner of American Assets Trust, L.P., a Maryland limited partnership formed on July 16, 2010 (the “Operating Partnership”). The company’s operations are carried on through our Operating Partnership and its subsidiaries, including our taxable real estate investment trust ("REIT") subsidiary ("TRS"). Since the formation of our Operating Partnership, the company has controlled our Operating Partnership as its general partner and has consolidated its assets, liabilities and results of operations.
We are a full service, vertically integrated, and self-administered REIT with approximately 230 employees providing substantial in-house expertise in asset management, property management, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing.
As of March 31, 2024, we owned or had a controlling interest in 31 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of March 31, 2024, we owned land at three of our properties that we classify as held for development and/or construction in progress. A summary of the properties owned by us is as follows:
Office
La Jolla CommonsOne Beach StreetCorporate Campus East III
Torrey Reserve CampusFirst & MainBel-Spring 520
Torrey PointLloyd Portfolio
Solana CrossingCity Center Bellevue
The Landmark at One MarketEastgate Office Park
Retail
Carmel Country PlazaGateway MarketplaceAlamo Quarry Market
Carmel Mountain PlazaDel Monte CenterHassalo on Eighth - Retail
South Bay MarketplaceGeary Marketplace
Lomas Santa Fe PlazaThe Shops at Kalakaua
Solana Beach Towne CentreWaikele Center
Multifamily
Loma PalisadesHassalo on Eighth - Residential
Imperial Beach Gardens
Mariner's Point
Santa Fe Park RV Resort
Pacific Ridge Apartments
Mixed-Use
Waikiki Beach Walk Retail and Embassy Suites™ Hotel
Held for Development and/or Construction in Progress
La Jolla Commons – Land
Solana Crossing – Land
Lloyd Portfolio – Construction in Progress
9

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)


Basis of Presentation
Our consolidated financial statements include the accounts of the company, our Operating Partnership and our subsidiaries. The equity interests of other investors in our Operating Partnership are reflected as noncontrolling interests.
The company follows the Financial Accounting Standards Board (the "FASB") guidance for determining whether an entity is a variable interest entity (“VIE”) and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity would be required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. American Assets Trust, Inc. has concluded that the Operating Partnership is a VIE, and because American Assets Trust, Inc. has both the power and the rights to control the Operating Partnership, American Assets Trust, Inc. is the primary beneficiary and is required to continue to consolidate the Operating Partnership. Substantially all of the assets and liabilities of the company are related to the operating partnership VIE.
All intercompany transactions and balances are eliminated in consolidation.
The accompanying consolidated financial statements of the company and the Operating Partnership have been prepared in accordance with the rules applicable to Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (“GAAP”) for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and notes therein included in the company's and Operating Partnership's annual report on Form 10-K for the year ended December 31, 2023.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using our best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Any reference to the number of properties, number of units, square footage, employee numbers or percentages of beneficial ownership of our shares are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.
Consolidated Statements of Cash Flows—Supplemental Disclosures
The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows (in thousands): 
 Three Months Ended March 31,
 20242023
Supplemental cash flow information
Total interest costs incurred$18,311 $17,571 
Interest capitalized$2,056 $1,842 
Interest expense, net$16,255 $15,729 
Cash paid for interest, net of amounts capitalized$21,178 $20,375 
Cash paid for income taxes$490 $392 
Supplemental schedule of noncash investing and financing activities  
Accounts payable and accrued liabilities for construction in progress$18,254 $18,322 
Accrued leasing commissions$2,576 $2,443 


10

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

 Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no changes to our significant accounting policies during the three months ended March 31, 2024.

Segment Information
Segment information is prepared on the same basis that our chief operating decision maker reviews information for operational decision-making purposes. We operate in four business segments: the acquisition, redevelopment, ownership and management of office real estate, retail real estate, multifamily real estate and mixed-use real estate. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room all-suite hotel.
Revenue Recognition and Accounts Receivable
Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed rent escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on management's assessment of credit, collection and other business risks.
We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which require significant judgment by management. The collectability of receivables is affected by numerous different factors including current economic conditions, the impact of tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communications between our operating personnel and tenants, the extent of security deposits and letters of credit held with respect to tenants, and the ability of tenants to perform under the terms of their lease agreement. The provision for doubtful accounts at March 31, 2024 and December 31, 2023 was approximately $1.4 million and $1.4 million, respectively.
Recent Accounting Pronouncements
 
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures. The pronouncement requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within the segment measure of profit or loss. The pronouncement will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. We are currently evaluating the impact this pronouncement will have on our disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This pronouncement requires enhanced income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This pronouncement is effective for annual periods in fiscal years beginning after December 15, 2024, and should be applied either prospectively or retrospectively. We are currently evaluating the impact this pronouncement will have on our disclosures.
11

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

NOTE 2. ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES
The following summarizes our acquired lease intangibles and leasing costs, which are included in other assets and other liabilities and deferred credits, as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
In-place leases$51,456 $51,575 
Accumulated amortization(34,011)(32,977)
Above market leases1,724 1,724 
Accumulated amortization(1,668)(1,658)
Acquired lease intangible assets, net$17,501 $18,664 
Below market leases$50,561 $50,624 
Accumulated accretion(34,776)(34,087)
Acquired lease intangible liabilities, net$15,785 $16,537 

NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy for inputs used in measuring fair value is as follows:

1.Level 1 Inputs—quoted prices in active markets for identical assets or liabilities
2.Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities
3.Level 3 Inputs—unobservable inputs
The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs. We measure the fair value of this liability based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques.

The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contract at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

12

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2024 we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative. As a result, we have determined that our derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows (in thousands):
 March 31, 2024December 31, 2023
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Deferred compensation liability$ $2,622 $ $2,622 $ $2,627 $ $2,627 
Interest rate swap asset$ $9,355 $ $9,355 $ $7,963 $ $7,963 
Interest rate swap liability$ $ $ $ $ $ $ $ 
 The fair value of our secured notes payable and unsecured senior guaranteed notes are sensitive to fluctuations in interest rates. Discounted cash flow analysis using observable market interest rates (Level 2) is generally used to estimate the fair value of our secured notes payable, using rates ranging from 5.7% to 6.5%.
Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The carrying values of our term loans set forth below are deemed to be at fair value since the outstanding debt is directly tied to monthly SOFR. A summary of the carrying amount and fair value of our secured financial instruments, all of which are based on Level 2 inputs, is as follows (in thousands):  
 March 31, 2024December 31, 2023
 Carrying ValueFair ValueCarrying ValueFair Value
Secured notes payable, net$74,691 $74,115 $74,669 $74,804 
Unsecured term loans, net$323,781 $325,000 $323,491 $325,000 
Unsecured senior guaranteed notes, net$798,875 $769,152 $798,772 $770,998 
Senior unsecured notes, net$492,952 $406,635 $492,694 $405,860 

NOTE 4. DERIVATIVE AND HEDGING ACTIVITIES

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.  To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 
13

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

The following is a summary of the terms of our outstanding interest rate swaps as of March 31, 2024 (dollars in thousands):
Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value
Bank of America, N.A.$50,000 1/14/20221/5/2027$3,738 
Wells Fargo Bank, N.A.$50,000 1/14/20221/5/2027$3,899 
Wells Fargo Bank, N.A.$150,000 1/5/20231/5/2025$1,352 
Mizuho Capital Markets LLC$75,000 1/5/20231/5/2025$366 
The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings for as long as hedged cash flows remain probable. During the next twelve months, we estimate the cash flow hedges in place will reduce interest expense by approximately $0.4 million.
The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative.  This analysis reflects the contractual terms of the derivative, including the period to maturity, and counterparty credit risk and uses observable market-based inputs, including interest rate curves, and implied volatilities.  The fair value of the interest rate swap is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. 
NOTE 5. OTHER ASSETS

Other assets consist of the following (in thousands): 
March 31, 2024December 31, 2023
Leasing commissions, net of accumulated amortization of $49,662 and $47,978, respectively
$37,938 $36,721 
Interest rate swap asset9,355 7,963 
Acquired above market leases, net56 66 
Acquired in-place leases, net17,445 18,598 
Lease incentives, net of accumulated amortization of $1,268 and $1,205, respectively
1,431 1,232 
Other intangible assets, net of accumulated amortization of $1,896 and $1,813, respectively
1,723 1,809 
Debt issuance costs, net of accumulated amortization of $1,458 and $1,296, respectively
1,133 1,295 
Right-of-use lease asset, net20,885 21,503 
Prepaid expenses and other10,300 10,457 
Total other assets$100,266 $99,644 

14

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

NOTE 6. OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits consist of the following (in thousands):
March 31, 2024December 31, 2023
Acquired below market leases, net$15,785 $16,537 
Prepaid rent and deferred revenue16,451 17,261 
Deferred compensation2,622 2,627 
Deferred tax liability784 784 
Straight-line rent liability10,041 10,666 
Lease liability22,621 23,254 
Other liabilities54 58 
Total other liabilities and deferred credits, net$68,358 $71,187 
Straight-line rent liability relates to leases which have rental payments that decrease over time or one-time upfront payments for which the rental revenue is deferred and recognized on a straight-line basis.
NOTE 7. DEBT
Debt of American Assets Trust, Inc.
American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's obligations under the (i) 3.375%
senior notes, (ii) senior guaranteed notes, (iii) third amended and restated credit facility, and (iv) amended and restated term
loan agreement, each discussed below.
Debt of American Assets Trust, L.P.
Secured notes payable
The following table is a summary of our total secured notes payable outstanding as of March 31, 2024 and December 31, 2023 (in thousands):
 Principal Balance as ofStated Interest RateStated Maturity Date
Description of DebtMarch 31, 2024December 31, 2023as of March 31, 2024
City Center Bellevue (1)
$75,000 $75,000 5.08 %October 1, 2027
75,000 75,000 
Debt issuance costs, net of accumulated amortization of $565 and $542, respectively
(309)(331)
Total Secured Notes Payable Outstanding$74,691 $74,669 

(1)Interest only.
The Operating Partnership has provided a carve-out guarantee on the mortgage at City Center Bellevue. Certain loans require the Operating Partnership to comply with various financial covenants. As of March 31, 2024, the Operating Partnership was in compliance with these financial covenants.

15

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

Unsecured notes payable
The following table is a summary of the Operating Partnership's total unsecured notes payable outstanding as of March 31, 2024 and December 31, 2023 (in thousands):
Description of DebtPrincipal Balance as ofStated Interest RateStated Maturity Date
March 31, 2024December 31, 2023as of March 31, 2024
Term Loan A$100,000 $100,000 Variable
(1)
January 5, 2027
Term Loan B150,000 150,000 Variable
(3)
January 5, 2025
(2)
Term Loan C75,000 75,000 Variable
(3)
January 5, 2025
(2)
Senior Guaranteed Notes, Series F100,000 100,000 3.78 %
(4)
July 19, 2024
Senior Guaranteed Notes, Series B100,000 100,000 4.45 %February 2, 2025
Senior Guaranteed Notes, Series C100,000 100,000 4.50 %April 1, 2025
Senior Guaranteed Notes, Series D250,000 250,000 4.29 %
(5)
March 1, 2027
Senior Guaranteed Notes, Series E100,000 100,000 4.24 %
(6)
May 23, 2029
Senior Guaranteed Notes, Series G150,000 150,000 3.91 %
(7)
July 30, 2030
3.375% Senior Notes
500,000 500,000 3.38 %February 1, 2031
1,625,000 1,625,000 
Debt discount and issuance costs, net of accumulated amortization of $7,910 and $7,259, respectively
(9,392)(10,042)
Total Unsecured Notes Payable$1,615,608 $1,614,958 
 
(1)The Operating Partnership entered into two interest rate swap agreements that are intended to fix the interest rate associated with Term Loan A at approximately 2.70% through its maturity date, subject to adjustments based on our consolidated leverage ratio.
(2)On January 5, 2023, we extended Term Loan B and Term Loan C to a maturity date of January 5, 2025 with one, twelve-month extension option and increased the fully drawn borrowings thereunder to $150 million and $75 million, respectively.
(3)The Operating Partnership entered into interest rate swap agreements that are intended to fix the effective interest rate associated with Term Loan B and Term Loan C, subject to adjustments based on our consolidated leverage ratio, at, 5.47% from January 5, 2023 to January 4, 2024 and at 5.57% from January 5, 2024 to January 4, 2025.
(4)The Operating Partnership entered into a treasury lock contract on May 31, 2017, which was settled on June 23, 2017 at a loss of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.85% per annum.
(5)The Operating Partnership entered into forward-starting interest rate swap contracts on March 29, 2016 and April 7, 2016, which were settled on January 18, 2017 at a gain of approximately $10.4 million. The forward-starting interest swap rate contracts were deemed to be highly effective cash flow hedges, accordingly, the effective interest rate is approximately 3.87% per annum.
(6)The Operating Partnership entered into a treasury lock contract on April 25, 2017, which was settled on May 11, 2017 at a gain of approximately $0.7 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 4.18% per annum.
(7)The Operating Partnership entered into a treasury lock contract on June 20, 2019, which was settled on July 17, 2019 at a gain of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88% per annum.

3.375% Senior Notes

On January 26, 2021, the Operating Partnership issued $500 million of senior unsecured notes (the "3.375% Senior Notes") that mature February 1, 2031 and bear interest at 3.375% per annum. The 3.375% Senior Notes were priced at 98.935% of the principal amount with a yield to maturity of 3.502%. The net proceeds of the 3.375% Senior Notes, after the issuance discount, underwriting fees, and other costs were approximately $489.7 million, which were primarily used to (i) prepay our $150 million Senior Guaranteed Notes, Series A, with a make-whole payment (as defined in the Note Purchase Agreement for the Series A Notes) thereon of approximately $3.9 million, on January 26, 2021, (ii) repay our $100 million then outstanding balance under our then-existing revolver loan on January 26, 2021, (iii) fund the development of the La Jolla Commons III office building and (iv) for general corporate purposes.
The 3.375% Senior Notes include a number of customary financial covenants, including:
A maximum aggregate debt ratio of 60%,
16

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

A minimum debt service ratio of 1.5x,
A maximum secured debt ratio of 40%,
A minimum maintenance of total unencumbered assets of 150%.
As of March 31, 2024, the Operating Partnership was in compliance with all then in-place 3.375% Senior Notes covenants.

Senior Guaranteed Notes

On October 31, 2014, the Operating Partnership entered into a note purchase agreement (the "Note Purchase Agreement") with a group of institutional purchasers that provided for the private placement of an aggregate of $350 million of senior guaranteed notes, of which (i) $150 million are designated as 4.04% Senior Guaranteed Notes, Series A, due October 31, 2021 (the “Series A Notes”), (ii) $100 million are designated as 4.45% Senior Guaranteed Notes, Series B, due February 2, 2025 (the “Series B Notes”) and (iii) $100 million are designated as 4.50% Senior Guaranteed Notes, Series C, due April 1, 2025 (the “Series C Notes”). The Series A Notes were issued on October 31, 2014, the Series B Notes were issued on February 2, 2015 and the Series C Notes were issued on April 2, 2015. The Series A Notes, the Series B Notes and the Series C Notes will pay interest quarterly on the last day of January, April, July and October until their respective maturities. On January 26, 2021, we repaid the entirety of the $150.0 million Series A Notes with a make-whole payment (as defined in the Note Purchase Agreement) of approximately $3.9 million.

On March 1, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $250 million of 4.29% Senior Guaranteed Notes, Series D, due March 1, 2027 (the "Series D Notes"). The Series D Notes were issued on March 1, 2017 and pay interest quarterly on the last day of January, April, July and October until their respective maturities.
On May 23, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $100 million of 4.24% Senior Guaranteed Notes, Series E, due May 23, 2029 (the "Series E Notes"). The Series E Notes were issued on May 23, 2017 and pay interest semi-annually on the 23rd of May and November until their respective maturities.
On July 19, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $100 million of 3.78% Senior Guaranteed Notes, Series F, due July 19, 2024 (the "Series F Notes"). The Series F Notes were issued on July 19, 2017 and pay interest semi-annually on the 31st of January and July until their respective maturities.

On July 30, 2019, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $150 million of 3.91% Senior Guaranteed Notes, Series G, due July 30, 2030 (the "Series G Notes" and collectively with the Series A Notes, Series B Notes, Series C Notes, Series D Notes, Series E Notes, and Series G Notes are referred to herein as, the “Notes".) The Series G Notes were issued on July 30, 2019 and pay interest semi-annually on the 30th of July and January until their maturity.
The Operating Partnership may prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 5% of the aggregate principal amount of any series of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid plus a make-whole amount.
The Note Purchase Agreements contain a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured and unsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Note Purchase Agreement and the Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, Make-Whole Amount or interest under the Notes, and (ii) a default in the payment of certain other indebtedness by us or our subsidiaries, the principal, accrued and unpaid interest, and the make-whole amount on the outstanding Notes will become due and payable at the option of the purchasers.
The Operating Partnership's obligations under the Notes are fully and unconditionally guaranteed by the Operating Partnership and certain of the Operating Partnership's subsidiaries.
Certain loans require the Operating Partnership to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of March 31, 2024, the Operating Partnership was in compliance with all loan covenants.

17

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

Third Amended and Restated Credit Facility
On January 5, 2022, the Operating Partnership entered into the third amended and restated credit facility (the “Third Amended and Restated Credit Facility”) , which amended and restated our then-existing credit facility. The Third Amended and Restated Credit Facility provides for aggregate, unsecured borrowings of up to $500 million, consisting of a revolving line of credit of $400 million (the “Revolver Loan”) and a term loan of $100 million (“Term Loan A”). The Revolver Loan initially matures on January 5, 2026, subject to two, six-month extension options. Term Loan A matures on January 5, 2027, with no further extension options. As of March 31, 2024, the entirety of the principal amount of Term Loan A was outstanding, there were no amounts outstanding under the Revolver Loan, and the Operating Partnership had incurred approximately $1.13 million of net debt issuance costs which are recorded in other assets, net on the consolidated balance sheet. For the three months ended March 31, 2024, the weighted average interest rate on the Revolver Loan was 6.54%.
Borrowings under the Third Amended and Restated Credit Agreement bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) the applicable SOFR, plus the applicable SOFR Adjustment and a spread which ranges from (a) 1.05%-1.50% (with respect to the Revolver Loan) and (b) 1.20% to 1.70% (with respect to Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps, (c) the Term SOFR Screen Rate with a term of one month plus 100 bps and (d) 1.00%, plus a spread which ranges from (i) 0.10%-0.50% (with respect to the Revolver Loan) and (ii) 0.20% to 0.70% (with respect to Term Loan A), in each case based on our consolidated leverage ratio. On January 14, 2022, the Operating Partnership entered into an interest rate swap agreement intended to fix the interest rate associated with the Term Loan A at approximately 2.70% through January 5, 2027, subject to adjustments based on our consolidated leverage ratio.
The Third Amended and Restated Credit Facility includes a number of customary financial covenants, including:
A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset
value) of 60%,
A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 40%,
A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and
amortization to consolidated fixed charges) of 1.50x,
A minimum unsecured interest coverage ratio of 1.75x,
A maximum unsecured leverage ratio of 60%, and
Recourse indebtedness at any time cannot exceed 15% of total asset value.
The Third Amended and Restated Credit Facility also provides that our annual distributions may not exceed the greater of (1) 95% of our funds from operations (“FFO”) or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.
As of March 31, 2024, the Operating Partnership was in compliance with all then in-place Third Amended and Restated Credit Facility covenants.

Amended and Restated Term Loan Agreement
On January 5, 2023, we entered into the amended and restated term loan agreement (the “Amended and Restated Term Loan Agreement”), which amended and restated our then-existing term loan agreement. The Amended and Restated Term Loan Agreement provides to the Operating Partnership a term loan of $150 million (“Term Loan B”) and a term loan of $75 million (“Term Loan C”), each maturing on January 5, 2025, with one, twelve-month extension option, subject to certain conditions. As of March 31, 2024, the entirety of the principal amounts of Term Loan B and Term Loan C were outstanding.
Borrowings under the Amended and Restated Term Loan Agreement bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) the applicable SOFR, plus a SOFR adjustment and a spread (based on the Operating Partnership’s consolidated leverage ratio and applicable year of Term Loan B and Term Loan C) ranging from 1.20% to 1.90%, or (2) a base rate equal to the highest of (a) 0%, (b) the prime rate, (c) the federal funds rate plus 50 bps and (d) the one-month SOFR, plus a SOFR adjustment and 100 bps, plus, in each case, a spread (based on the Operating Partnership’s consolidated
18

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

leverage ratio and applicable year of Term Loan B and Term Loan C) ranging from 0.20% to 0.90%. Additionally, the Operating Partnership may elect for borrowings to bear interest based on a ratings-based pricing grid based on the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Amended and Restated Term Loan Agreement. Prior to entering into the Amended and Restated Term Loan Agreement, the Operating Partnership entered into interest rate swap agreements that are intended to fix the interest rate associated with Term Loan B and Term Loan C at approximately (1) 5.47% for the first year of Term Loan B and Term Loan C and (2) 5.57% for the second year of Term Loan B and Term Loan C, subject to adjustments based on the company’s consolidated leverage ratio.
The Amended and Restated Term Loan Agreement contains a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured and unsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Amended and Restated Term Loan Agreement, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal or interest under Term Loan B or Term Loan C, and (ii) a default in the payment of certain other indebtedness of the Operating Partnership, the company or their subsidiaries, the principal and accrued and unpaid interest and prepayment penalties on the outstanding Term Loan B or Term Loan C will become due and payable at the option of the lenders.
NOTE 8. PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P.
Noncontrolling interests in our Operating Partnership are interests in the Operating Partnership that are not owned by us. Noncontrolling interests consisted of 16,181,537 common units (the “noncontrolling common units”), and represented approximately 21.2% of the ownership interests in our Operating Partnership at March 31, 2024. Common units and shares of our common stock have essentially the same economic characteristics in that common units and shares of our common stock share equally in the total net income or loss distributions of our Operating Partnership. Investors who own common units have the right to cause our Operating Partnership to redeem any or all of their common units for cash equal to the then-current market value of one share of our common stock, or, at our election, shares of our common stock on a one-for-one basis.
During the three months ended March 31, 2024, no common units were converted into shares of our common stock.
Earnings Per Unit of the Operating Partnership
Basic earnings per unit (“EPU”) of the Operating Partnership is computed by dividing income applicable to unitholders by the weighted average Operating Partnership units outstanding, as adjusted for the effect of participating securities. Operating Partnership units granted in equity-based payment transactions that have non-forfeitable dividend equivalent rights are considered participating securities prior to vesting. The impact of unvested Operating Partnership unit awards on EPU has been calculated using the two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested Operating Partnership units’ participation rights in undistributed earnings.
The calculation of diluted EPU for the three months ended March 31, 2024 and 2023 does not include the weighted average of 585,210 and 573,253 unvested outstanding Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.
NOTE 9. EQUITY OF AMERICAN ASSETS TRUST, INC.
Stockholders' Equity
On December 3, 2021, we entered into an at-the-market ("ATM") equity program with five sales agents in which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $250 million. The sales of shares of our common stock made through the ATM equity program, as amended, are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. For the three months ended March 31, 2024, no shares of common stock were sold through the ATM equity program.
19

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As of March 31, 2024, we had the capacity to issue up to $250 million in shares of our common stock under our current ATM equity program. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs. As of March 31, 2024, we have no obligation to sell the remaining shares available for sale under the ATM equity program.

Dividends
The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the three months ended March 31, 2024:
PeriodAmount per
Share/Unit
Period CoveredDividend Paid Date
First Quarter 2024$0.335 January 1, 2024 to March 31, 2024March 21, 2024
Taxability of Dividends
Earnings and profits, which determine the taxability of distributions to stockholders and holders of common units, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of revenue recognition and compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation.
Stock-Based Compensation

We follow the FASB guidance related to stock-based compensation which establishes financial accounting and reporting standards for stock-based employee compensation plans, including all arrangements by which employees receive shares of stock or other equity instruments of the employer.  The guidance also defines a fair value-based method of accounting for an employee stock award or similar equity instrument.
The following table summarizes the activity of restricted stock awards during the three months ended March 31, 2024:
UnitsWeighted Average Grant Date Fair Value
Nonvested at January 1, 2024585,865 $17.95 
Granted  
Vested  
Forfeited(1,295)17.32 
Nonvested at March 31, 2024584,570 $17.95 
We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $1.6 million and $2.0 million in noncash compensation expense for the three months ended March 31, 2024 and 2023, respectively, which is included in general and administrative expenses on the consolidated statements of comprehensive income. Unrecognized compensation expense was $7.1 million at March 31, 2024.
20

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

Earnings Per Share
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings. The weighted average unvested shares outstanding, which are considered participating securities, were 585,210 and 573,253 for the three months ended March 31, 2024 and 2023, respectively. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares as these unvested shares have nonforfeitable dividend equivalent rights.
Diluted EPS is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method. For the three months ended March 31, 2024 and 2023, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable. Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive for all periods presented, and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
The computation of basic and diluted EPS is presented below (dollars in thousands, except share and per share amounts):
 
Three Months Ended March 31,
20242023
NUMERATOR
Net income$24,623 $20,666 
Less: Net income attributable to restricted shares(196)(189)
Less: Income from operations attributable to unitholders in the Operating Partnership
(5,167)(4,341)
Net income attributable to common stockholders—basic
$19,260 $16,136 
Income from operations attributable to American Assets Trust, Inc. common stockholders—basic
$19,260 $16,136 
Plus: Income from operations attributable to unitholders in the Operating Partnership
5,167 4,341 
Net income attributable to common stockholders—diluted
$24,427 $20,477 
DENOMINATOR
Weighted average common shares outstanding—basic60,309,921 60,144,609 
Effect of dilutive securities—conversion of Operating Partnership units
16,181,537 16,181,537 
Weighted average common shares outstanding—diluted76,491,458 76,326,146 
Earnings per common share, basic$0.32 $0.27 
Earnings per common share, diluted$0.32 $0.27 

NOTE 10. INCOME TAXES
We elected to be taxed as a REIT and operate in a manner that allows us to qualify as a REIT for federal income tax purposes commencing with our initial taxable year. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. Taxable income from non-REIT activities managed through our TRS is subject to federal and state income taxes.
We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes. We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases. Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic 740, Income Taxes.
A deferred tax asset is included in our consolidated balance sheets of $0.9 million and $0.9 million, and a deferred tax liability is included in our consolidated balance sheets of $0.8 million and $0.8 million as of March 31, 2024 and December 31,
21

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

2023, respectively, in relation to real estate asset basis differences of property subject to state taxes based on income and certain prepaid expenses of our TRS.
Income tax expense is recorded in other income, net on our consolidated statements of comprehensive income. For the three months ended March 31, 2024, we recorded income tax expense of $0.3 million. For the three months ended March 31, 2023, we recorded income tax expense of $0.3 million.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Legal
We are sometimes involved in various disputes, lawsuits, warranty claims, environmental considerations, and other matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.
We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum amount within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also, under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us as owner of the properties due to certain matters relating to the operation of the properties by the tenant.
Commitments
See Footnote 12 for description of our leases, as a lessee.
We have management agreements with Outrigger Hotels & Resorts or an affiliate thereof (“Outrigger”) pursuant to which Outrigger manages each of the retail and hotel portions of the Waikiki Beach Walk property. Under the management agreement with Outrigger relating to the retail portion of Waikiki Beach Walk (the “retail management agreement”), we pay Outrigger a monthly management fee of 3.0% of net revenues from the retail portion of Waikiki Beach Walk. Pursuant to the terms of the retail management agreement, if the agreement is terminated in certain instances, including our election not to repair damage or destruction at the property, a condemnation or our failure to make required working capital infusions, we would be obligated to pay Outrigger a termination fee equal to the sum of the management fees paid for the two months immediately preceding the termination date. The retail management agreement may not be terminated by us or by Outrigger without cause. Under our management agreement with Outrigger relating to the hotel portion of Waikiki Beach Walk (the “hotel management agreement”), we pay Outrigger a monthly management fee of 6.0% of the hotel's gross operating profit, as well as 3.0% of the hotel's gross revenues; provided that the aggregate management fee payable to Outrigger for any year shall not exceed 3.5% of the hotel's gross revenues for such fiscal year. The hotel management agreement may not be terminated by us or by Outrigger without cause. Additionally, we have a management agreement with Outrigger pursuant to which Outrigger manages our Waikele Center and Shops at Kalakaua. In connection with such management agreement, we pay Outrigger a fixed management fee of $12,000 per month in the aggregate plus additional amounts for any lease renewal services provided by Outrigger at our request. This management agreement can be terminated by us at any time and for any reason on 30 days' notice without any cancellation or termination fees.
22

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

A wholly owned subsidiary of our Operating Partnership, WBW Hotel Lessee LLC, entered into a franchise license agreement with Embassy Suites Franchise LLC, the franchisor of the brand “Embassy Suites™,” to obtain the non-exclusive right to operate the hotel under the Embassy SuitesTM brand for 20 years. The franchise license agreement provides that WBW Hotel Lessee LLC must comply with certain management, operational, record keeping, accounting, reporting and marketing standards and procedures. In connection with this agreement, we are also subject to the terms of a product improvement plan pursuant to which we expect to undertake certain actions to ensure that our hotel's infrastructure is maintained in compliance with the franchisor's brand standards. In addition, we must pay to Embassy Suites Franchise LLC a monthly franchise royalty fee equal to 5.0% of the hotel's gross room revenue, as well as a monthly program fee equal to 4.0% of the hotel's gross room revenue. If the franchise license is terminated due to our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment, which could be as high as $7.9 million based on operating performance through March 31, 2024.
Our Del Monte Center property has ongoing environmental remediation related to ground water contamination. The environmental issue existed at purchase and remains in remediation. The final stages of the remediation will include routine, long term ground monitoring by the appropriate regulatory agency over the next several years. The work performed is financed through an escrow account funded by the seller upon purchase of Del Monte Center. We believe the funds in the escrow account are sufficient for the remaining work to be performed. However, if further work is required that costs more than the remaining escrow funds, we may be required to pay such overage, although we may have a contractual claim for such costs against the prior owner or our environmental remediation consultant.
Concentrations of Credit Risk
Our properties are located in Southern California, Northern California, Washington, Oregon, Texas and Hawaii. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory, social, and health factors affecting the markets in which the tenants operate. Fifteen of our consolidated properties are located in Southern California, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio. Tenants in the office industry accounted for 46.7% of total revenues for the three months ended March 31, 2024. This makes us susceptible to demand for office rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the office industry. Furthermore, tenants in the retail industry accounted for 23.5% of total revenues for the three months ended March 31, 2024. This makes us susceptible to demand for retail rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the retail industry. For the three months ended March 31, 2024 and 2023, no tenant accounted for more than 10% of our total rental revenue.
NOTE 12. LEASES
Lessor Operating Leases

We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases.
Our leases with office, retail, mixed-use and residential tenants are classified as operating leases. Leases at our office and retail properties and the retail portion of our mixed-use property generally range from three years to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents, usually provide for cost recoveries for the tenant’s share of certain operating costs. Our leases may also include variable lease payments in the form of percentage rents based on the tenant’s level of sales achieved in excess of a breakpoint threshold. Leases on apartments generally range from seven months to fifteen months, with a majority having 12-month lease terms. Rooms at the hotel portion of our mixed-use property are rented on a nightly basis.
Leases at our office and retail properties and the retail portion of our mixed-use property may contain lease extension options, at our lessee's discretion. The extension options are generally for 3 to 10 years and contain primarily rent at fixed rates or the prevailing market rent. The extension options are generally exercisable 6 to 12 months prior to the expiration of the lease and require the lessee to not be in default of the lease terms.
We attempt to maximize the amount we expect to derive from the underlying real estate property following the end of a lease, to the extent it is not extended.  We maintain a proactive leasing and capital improvement program that, combined with
23

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2024
(Unaudited)

the quality and locations of our properties, has made our properties attractive to tenants. However, the residual value of a real estate property is still subject to various market-specific, asset-specific, and tenant-specific risks and characteristics. 
As of March 31, 2024, minimum future rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our office and retail properties and the retail portion of our mixed-use property are as follows for the years ended December 31 (in thousands):
 
2024 (nine months ending December 31, 2024)$187,854 
2025244,091 
2026229,790 
2027201,651 
2028158,207 
Thereafter246,380 
Total$1,267,973 
 
The above future minimum rentals exclude residential leases, which typically range from seven months to fifteen months, and exclude the hotel, as rooms are rented on a nightly basis.

Lessee Operating Leases
We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases.
At The Landmark at One Market, we lease, as lessee, a building adjacent to The Landmark at One Market under an operating lease effective through June 30, 2026, which we have the option to extend until 2031 (the "Annex Lease"). The lease payments under the extension option provided for under the Annex Lease will be equal to the fair rental value at the time the extension option is exercised. The extension option is included in the calculation of the right-of-use asset and lease liability as we are reasonably certain of exercising the extension option.
Our lease agreements do not contain any residual value guarantees or material restrictive covenants. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments.
As of March 31, 2024, current annual payments under the operating leases are as follows for the years ended December 31 (in thousands): 
2024 (nine months ending December 31, 2024)$2,584 
20253,531 
20263,584 
20273,584