American Assets Trust, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Bond Offering: Successfully issued a $525 million 10-year bond at 6.15% coupon, which strengthened liquidity and addressed debt maturities into early 2027.
• Dividend: Board declared a quarterly dividend of $0.335 per share for the fourth quarter, payable on December 16.
• Segment Performances: Office leasing had 60% new leasing vs. renewals in 2024 YTD; retail renewed nearly all lease expirations in 2024 with <7% expiring in 2025; multifamily had strong occupancy and rent increases.
• Developments: La Jolla Commons Tower III, One Beach, and suburban Bellevue office projects have leasing activity and upcoming amenities.

Segment Performance

• Office: Same-store office portfolio's NOI increased by 27.6% in Q3 2024, primarily due to a $11 million lease termination fee. Excluding the fee, same-store office cash NOI would have decreased by ~3% due to move-outs and rent abatements.
• Retail: Same-store retail portfolio's NOI increased by 7% in Q3 2024, driven by higher base rents at Carmel Mountain Plaza and Solana Beach Towne Centre in San Diego.
• Multifamily: Same-store multifamily portfolio's NOI increased by 4% in Q3 2024, due to higher revenue at San Diego multifamily properties like Loma Palisades and Pacific Ridge.
• Mixed-use: NOI decreased by 7% in Q3 2024, mainly due to lower occupancy and higher expenses at Embassy Suites, Waikiki.

Guidance

• 2024 FFO: Increased guidance range to $2.51 to $2.55 per share, midpoint $2.53, up from prior range. Excluding one-time items, 2024 FFO forecasted at ~$2.24 per share.
• 2025 Impact: Increased net interest expense from the $525 million bond will reduce FFO by ~$0.04 in 2025. Potential FFO upside from assets like La Jolla Commons III, One Beach, and Bellevue projects, with stabilization expected in 2026.

Risks

• General economic uncertainties, including impact of interest rates, geopolitical events, and consumer spending trends that could affect property performance.

Question and Answer

Q: About office leasing, specifically non-comparable pool deals.

A: Vacant longer than six months, new leases with no backup, TIs in line with new long-term deals.

Q: Near-term outlook for office occupancy.

A: Optimistic, with positive net absorption, 60% new leasing vs. renewals in 2024 YTD, and ongoing tour activity.

Q: Interest in acquisitions.

A: Focus on markets known, options available for debt management and acquisitions, but depends on opportunity presentation.

Q: 4Q and 2025 expectations for multifamily and retail.

A: Uncertainty due to economic factors, but assets are in first-class shape and expected to perform well.

Q: FFO upside from certain assets and 2025 guidance.

A: Too early for detailed 2025 guidance, but $0.30 FFO upside from assets like La Jolla Commons III, with stabilization expected in 2026.