What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-30 compared with 2020-07-31 · 188 added, 190 removed, 451 unchanged (46% of the section changed)

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The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

• the impacts from the COVID-19 outbreak and the actions taken by government authorities and others related thereto, including the ability of our company, our properties and our tenants to operate;

• the impact of epidemics, pandemics, or other outbreaaks of illness, disease or virus(such as the COVID-19 outbreak) and the actions taken by government authorities and others related thereto, including the ability of our company, our properties and our tenants to operate;

• adverse economic or real estate developments in our markets;

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We are a full service, vertically integrated and self-administered REIT that owns, operates, acquires and develops high quality retail, office, multifamily and mixed-use properties in attractive, high-barrier-to-entry markets in Southern California, Northern California, Oregon, Washington, Texas and Hawaii.

As of June 30, 2020, our portfolio was comprised of twelve retail shopping centers;

As of September 30, 2020, our portfolio was comprised of twelve retail shopping centers;

nine office properties;

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and six multifamily properties.

Additionally, as of June 30, 2020, we owned land at three of our properties that we classified as held for development and/or construction in progress.

Additionally, as of September 30, 2020, we owned land at three of our properties that we classified as held for development and/or construction in progress.

Our core markets include San Diego;

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Rady or his affiliates, including the Ernest Rady Trust U/D/T March 13, 1983, or the Rady Trust, and did not have any operating activity until the consummation of our initial public offering on January 19, 2011.

Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.5% of our Operating Partnership as of June 30, 2020.

Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.7% of our Operating Partnership as of September 30, 2020.

Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership.

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Properties are deemed stabilized typically at the earlier of (i) reaching 90% occupancy or (ii) four quarters following a property's inclusion in operating real estate.

We typically remove properties from same-store properties when the development, redevelopment or expansion has or is expected to have a significant impact on the property's annualized base rent, occupancy and operating income within the calendar year.

Our evaluation of significant impact related to development, redevelopment or expansion activity is based on

quantitative and qualitative measures including, but not limited to the following:

calendar year.

Our evaluation of significant impact related to development, redevelopment or expansion activity is based on quantitative and qualitative measures including, but not limited to the following:

the total budgeted cost of planned construction activity compared to the property’s annualized base rent, occupancy and property operating income within the calendar year;

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Acquired properties are classified into same-store properties once we have owned such properties for the entirety of comparable period(s) and the properties are not under significant development or expansion.

Below is a summary of our same-store composition for the three and six months ended June 30, 2020 and 2019.

For the three months ended June 30, 2020, Torrey Point was reclassified to same-store properties when compared to the designations for the three months ended June 30, 2019 as the entity was placed into operations and became available for occupancy in August 2018.

For the three months ended June 30, 2020, One Beach Street was reclassified to non-same-store properties when compared to the designations for the three months ended June 30, 2019 due to redevelopment activity to renovate the property.

Waikiki Beach Walk Retail and Embassy Suites™ Hotel is classified as a non-same-store property due to spalling repair activity disrupting the hotel portion of the properties operations.

Below is a summary of our same-store composition for the three and nine months ended September 30, 2020 and 2019.

For the three months ended September 30, 2020, Torrey Point was reclassified to same-store properties when compared to the designations for the three months ended September 30, 2019 as the entity was placed into operations and became available for occupancy in August 2018.

Furthermore, La Jolla Commons was reclassified to same-store properties as it was acquired on June 20, 2019 and is comparable for the three months ended September 30, 2020.

For the three months ended September 30, 2020, One Beach Street was reclassified to non-same-store properties when compared to the designations for the three months ended September 30, 2019 due to redevelopment activity to renovate the property.

Waikiki Beach Walk Retail and Embassy Suites™ Hotel is classified as a non-same-store property due to spalling repair activity previously disrupting the hotel portion of the properties operations.

Waikele Center is classified as a non-same-store property due to significant redevelopment activity.

La Jolla Commons is classified as a non-same-store property, as it was acquired on June 20, 2019.

For the six months ended June 30, 2020, Torrey Point was reclassified to same-store properties when compared to the designations for the six months ended June 30, 2019 as the entity was placed into operations and became available for occupancy in August 2018.

For the six months ended June 30, 2020, One Beach Street was reclassified to non-same-store properties when compared to the designation for the six months ended June 30, 2019 due to redevelopment activity to renovate the property.

Waikiki Beach Walk Retail and Embassy Suites™ Hotel is classified as a non-same-store property due to spalling repair activity disrupting the hotel portion of the properties operations.

For the nine months ended September 30, 2020, Torrey Point was reclassified to same-store properties when compared to the designations for the nine months ended September 30, 2019 as the entity was placed into operations and became available for occupancy in August 2018.

For the nine months ended September 30, 2020, One Beach Street was reclassified to non-same-store properties when compared to the designation for the nine months ended September 30, 2019 due to redevelopment activity to renovate the property.

Waikiki Beach Walk Retail and Embassy Suites™ Hotel is classified as a non-same-store property due to spalling repair activity previously disrupting the hotel portion of the properties operations.

Waikele Center is classified as a non-same-store property due to significant redevelopment activity.

La Jolla Commons is classified as a non-same-store property, as it was acquired on June 20, 2019.

In our determination of same-store and redevelopment same-store properties for the six months ended June 30, 2020, Waikele Center and One Beach Street have been identified as same-store redevelopment properties due to significant redevelopment activity.

Retail same-store net operating income decreased approximately 17.3% for the six months ended June 30, 2020 compared to the same period in 2019.

Retail redevelopment same-store net operating income decreased approximately 12.7% for the six months ended June 30, 2020 compared to the same period in 2019.

Office same-store net operating income increased 30.2% for the six months ended June 30, 2020 compared to the same period in 2019.

Office redevelopment same-store net operating income increased 25.6% for the six months ended June 30, 2020 compared to the same period in 2019.

Three Months Ended June 30, Six Months Ended June 30,

In our determination of same-store and redevelopment same-store properties for the nine months ended September 30, 2020, Waikele Center and One Beach Street have been identified as same-store redevelopment properties due to significant redevelopment activity.

Retail same-store net operating income decreased approximately 21.9% for the nine months ended September 30, 2020 compared to the same period in 2019.

Retail redevelopment same-store net operating income decreased approximately 17.7% for the nine months ended September 30, 2020 compared to the same period in 2019.

Office same-store net operating income increased 20.8% for the nine months ended September 30, 2020 compared to the same period in 2019.

Office redevelopment same-store net operating income increased 16.7% for the nine months ended September 30, 2020 compared to the same period in 2019.

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

Certain states and cities, including where we own properties, have development sites and where our principal place of business is located, have also reacted by instituting quarantines, restrictions on travel, "stay-at-home" orders or “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.

The Company cannot predict when restrictions currently in place will expire.

Certain states and cities, including where we own properties, have development sites and where our principal place of business is located, have also reacted by instituting quarantines, restrictions on travel, "stay-at-home" orders or “shelter in place” rules, social distancing measures, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.

The Company cannot predict when restrictions or social distancing measures currently in place will expire.

Even after certain of such restrictions are lifted or reduced, the willingness of customers to visit certain of out tenants' businesses may be reduced due to lingering concerns regarding the continued risk of COVID-19 transmission and heightened sensitivity to risks associated with the transmission of other diseases.

As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which the Company and our tenants operate.

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however, any material effect on these parties could adversely impact us.

For the second quarter of 2020, we have collected to date approximately 98% of office rents, 58% of retail rents (including retail component of Waikiki Beach Walk) and 95% of multifamily rents that were due during the second quarter of 2020.

During the second quarter of 2020, we received and executed a significant amount of rent deferment requests from various tenants, primarily within the retail segment, as a result of COVID-19.

For the third quarter of 2020, we have collected to date approximately 98% of office rents, 73% of retail rents (including retail component of Waikiki Beach Walk) and 94% of multifamily rents that were due during the third quarter of 2020.

During the third quarter of 2020, we received and executed a significant amount of rent deferment requests from various tenants, primarily within the retail segment, as a result of COVID-19.

We are evaluating each tenant rent deferment request on an individual basis, considering a number of factors.

Not all rent deferment requests will ultimately result in lease modification agreements.

As of June 30, 2020, we have entered into lease modifications that resulted in COVID-19 adjustments (including rent deferrals and other monetary lease concessions) for approximately 5 % of the rent originally contracted for the three months ended June 30, 2020.

Not all rent deferment requests will ultimately result in executed lease modification agreements.

As of September 30, 2020, we have entered into lease modifications that resulted in COVID-19 adjustments (including rent deferrals and other monetary lease concessions) for approximately 2 % of the rent originally contracted for the three months ended September 30, 2020.

We believe the company's financial condition and liquidity are currently strong.

Although there is uncertainty related to the anticipated impact of the COVID-19 outbreak on the Company's future results, we believe our efficient business model and ongoing steps we have taken to strengthen our balance sheet has positioned to manage our business through this crisis as it continues to unfold.

continues to unfold.

We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our tenants, vendors, and other third-party relationships, and developing new opportunities for growth.

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and any reduction in our tenants' abilities to pay base rent, percentage rent or other charges, including as a result of the COVID-19 pandemic, will adversely affect our financial condition and results of operations.

During the three months ended June 30, 2020, we signed 7 office leases for a total of 47,743 square feet of office space including 39,534 square feet of comparable space leases, at an average rental rate increase on a cash and GAAP basis of 32.3% and 65.5%, respectively.

New office leases for comparable spaces were signed for 1,749 square feet at an average rental rate increase on a cash and GAAP basis of 11.3% and 21.4%, respectively.

Renewals for comparable office spaces were signed for 37,785 square feet at an average rental rate increase on a cash and GAAP basis of 33.1% and 67.3%, respectively.

Tenant improvements and incentives were $51.12 per square foot of office space for comparable new leases for the three months ended June 30, 2020, mainly attributed to tenants at Lloyd District Portfolio.

During the three months ended June 30, 2020, we signed 13 retail leases for a total of 25,314 square feet of retail space including 23,364 square feet of comparable space leases (leases for which there was a prior tenant), at an average rental rate increase on a cash basis and GAAP basis of 0.9% and 2.2%, respectively.

New retail leases for comparable spaces were signed for 505 square feet at an average rental rate decrease on a cash and GAAP basis of 1.9% and 4.5%, respectively.

Renewals for comparable retail spaces were signed for 22,859 square feet at an average rental rate increase on a cash and GAAP basis of 0.9% and 2.3%, respectively.

Tenant improvements and incentives were $19.58 per square foot of retail space for comparable new leases for the three months ended June 30, 2020, mainly due to tenants at Lomas Santa Fe Plaza.

During the three months ended September 30, 2020, we signed 10 office leases for a total of 59,196 square feet of office space including 55,152 square feet of comparable renewal office space leases (leases for which there was a prior tenant), at an average rental rate increase on a cash and GAAP basis of 6.7% and 10.8%, respectively.

No new offices leases for comparable spaces were signed during the third quarter of 2020.

During the three months ended September 30, 2020, we signed 21 retail leases for a total of 71,419 square feet of retail space including 71,419 square feet of comparable renewal retail space leases (leases for which there was a prior tenant), at an average rental rate decrease on a cash basis and GAAP basis of 6.2% and 3.6%, respectively.

No new retail leases for comparable spaces were signed during the third quarter of 2020.

The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period.

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We cease capitalization on the portion substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with any remaining portion under construction.

We capitalized external and internal costs related to both development and redevelopment activities combined of $1.4 million and $0.9 million for the three months ended June 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to both development and redevelopment activities combined of $2.7 million and $2.6 million for the six months ended June 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to other property improvements combined of $12.5 million and $23.8 million for the three months ended June 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to other property improvements totaling $33.3 million and $48.1 million for the six months ended June 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to both development and redevelopment activities combined of $1.4 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to both development and redevelopment activities combined of $4.2 million and $3.0 million for the nine months ended September 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to other property improvements combined of $9.0 million and $17.8 million for the three months ended September 30, 2020 and 2019, respectively.

We capitalized external and internal costs related to other property improvements totaling $42.3 million and $65.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service.

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If the time period for capitalizing interest is extended, however, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period.

We capitalized interest costs related to development activities of $0.3 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively.

We capitalized interest costs related to development activities of $0.5 million and $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

We capitalized interest costs related to development activities of $0.3 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively.

We capitalized interest costs related to development activities of $0.8 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Results of Operations

For our discussion of results of operations, we have provided information on a total portfolio and same-store basis.

Comparison of the three months ended June 30, 2020 to the three months ended June 30, 2019

The following summarizes our consolidated results of operations for the three months ended June 30, 2020 compared to our consolidated results of operations for the three months ended June 30, 2019.

As of June 30, 2020, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of June 30, 2020, we owned land at three of our properties that we classified as held for development and/or construction in progress.

As of June 30, 2019, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of June 30, 2019, we owned land at three of our properties that we classified as held for development and/or construction in progress.

The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended June 30, 2020 and 2019 (dollars in thousands):

Three Months Ended June 30, Change %

Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019

The following summarizes our consolidated results of operations for the three months ended September 30, 2020 compared to our consolidated results of operations for the three months ended September 30, 2019.

As of September 30, 2020, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of September 30, 2020, we owned land at three of our properties that we classified as held for development and/or construction in progress.

As of September 30, 2019, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of September 30, 2019, we owned land at three of our properties that we classified as held for development and/or construction in progress.

The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019 (dollars in thousands):

Three Months Ended September 30, Change %

Rental income $ 80,759 $ 93,147 $ (12,388) (13) %

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Interest expense (13,302) (13,734) 432 (3)

Gain on sale of real estate — 633 (633) 100

Other income (expense), net 162 (50) 212 (424)

Other (expense) income, net (531) (131) (400) 305

Net income 6,490 16,519 (10,029) (61)

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Total property revenue consists of rental revenue and other property income.

Total property revenue decreased $2.0 million, or 2%, to $82.1 million for the three months ended June 30, 2020 compared to $84.1 million for the three months ended June 30, 2019.

The percentage leased was as follows for each segment as of June 30, 2020 and 2019:

Total property revenue decreased $14.0 million, or 14%, to $84.4 million for the three months ended September 30, 2020 compared to $98.4 million for the three months ended September 30, 2019.

The percentage leased was as follows for each segment as of September 30, 2020 and 2019:

Percentage Leased (1)

September 30,

Office 93.8 % 94.7 %

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87.8 % 98.0 %

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of June 30, 2020 or 2019, as applicable.

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of September 30, 2020 or 2019, as applicable.

(2) Includes the retail portion of the mixed-use property only.

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Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents.

Rental revenue decreased $0.4 million, or 1%, to $79.2 million for the three months ended June 30, 2020 compared to $79.7 million for the three months ended June 30, 2019.

Rental revenue decreased $12.4 million, or 13%, to $80.8 million for the three months ended September 30, 2020 compared to $93.1 million for the three months ended September 30, 2019.

Rental revenue by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio (1)

Three Months Ended June 30, Change % Three Months Ended June 30, Change %

Three Months Ended September 30, Change % Three Months Ended September 30, Change %

2020 2019 2020 2019

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and (v) land held for development.

Total office rental revenue increased $14.0 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental revenue of approximately $9.5 million during the period.

Total office rental revenue increased $3.0 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to higher annualized base rents at La Jolla Commons, City Center Bellevue, Lloyd District Portfolio, Torrey Point and Torrey Reserve Campus.

The increase in total office rental revenue is partially offset by the decrease in rental revenue of approximately $0.8 million at One Beach Street due to expiration of leases to allow for the modernization of the property.

Same-store office rental revenue increased $5.4 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, Torrey Point, and City Center Bellevue.

Total retail rental revenue decreased $4.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the increase in bad debt contra-revenue of rent receivables of approximately $0.7 million and straight-line rent receivables of approximately $1.4 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, and Carmel Country Plaza as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Additionally, the decrease in total retail rental revenue is also attributable to decrease in cost reimbursements of approximately $1.5 million due to real estate tax refund at Alamo Quarry Market and a decrease in annualized base rent at Del Monte Center due to the bankruptcy of Forever 21.

The decrease in total retail rental revenue was partially offset by higher annualized base rent at Waikele Center related to the Safeway lease and higher annualized base rent at Carmel Mountain Plaza related to the At Home Stores lease.

Total multifamily rental revenue decreased $0.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the decrease in the average occupancy to 88.5% for the three months ended June 30, 2020 compared to 92.8% for the three months ended June 30, 2019.

The decrease in average occupancy is partially offset by the increase in average base rent per unit to $2,152 for the three months ended June 30, 2020 compared to $2,092 for the three months ended June 30, 2019.

Total mixed-use rental revenue decreased $9.8 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions during the second quarter which led to a decrease in average occupancy and revenue per available room to 17.0% and $34 for the three months ended June 30, 2020, respectively, compared to 91.6% and $282 for three months ended June 30, 2019, respectively.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental revenue at the hotel portion of the mixed-use property through at least the remainder of 2020.

Total retail rental revenue decreased $5.7 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to the increase in bad debt contra-revenue of rent receivables of approximately $2.7 million and straight-line rent receivables of approximately $1.3 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, Del Monte Center, and The Shops at Kalakaua as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Additionally, the decrease in total retail rental revenue is also attributable to a decrease in annualized base rent at Alamo Quarry Market and Del Monte Center due to the bankruptcy of Forever 21 and lease modifications providing rent concessions.

Total mixed-use rental revenue decreased $9.7 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions during the second and third quarters which led to a decrease in average occupancy and revenue per available room to 65.9% and $138 for the three months ended September 30, 2020, respectively, compared to 92.9% and $332 for three months ended September 30, 2019, respectively.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental revenue at the hotel portion of the mixed-use property through the remainder of 2020 and into the first quarter of 2021.

The decrease in total mixed-use rental revenue is also attributed to the increase in bad debt contra-revenue of rent receivables of approximately $2.2 million and straight-line rent of approximately $0.5 million as the collectability was determined to be no longer probable for certain tenants at the retail portion of our mixed-use property.

Other property income .

Other property income decreased $1.6 million, or 35%, to $2.9 million for the three months ended June 30, 2020 compared to $4.5 million for the three months ended June 30, 2019.

Other property income decreased $1.6 million, or 31%, to $3.6 million for the three months ended September 30, 2020 compared to $5.2 million for the three months ended September 30, 2019.

Other property income by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Three Months Ended June 30, Change % Three Months Ended June 30, Change %

Three Months Ended September 30, Change % Three Months Ended September 30, Change %

2020 2019 2020 2019

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$ 3,615 $ 5,215 $ (1,600) (31) % $ 2,729 $ 3,368 $ (639) (19) %

Office other property income decreased $0.3 million for the three months ended June 30, 2020 primarily due to the decrease in parking garage income at City Center Bellevue, Lloyd District Portfolio, and First & Main as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic caused a substantial portion of our tenants employees and their guests to work from home during the period.

The decrease in office other property income was partially offset by the acquisition of La Jolla Commons on June 20, 2019, which had incremental parking income of $0.1 million and lease termination fees received at City Center Bellevue during the period.

Retail other property income decreased $0.1 million for the three months ended June 30, 2020 primarily due to the absence of the extension fee of approximately $0.3 million related to the option sale agreement for our former Solana Beach - Highway 101 property during the three months ended June 30, 2019.

The decrease in retail other property income was partially offset by the increase in lease termination fees received at Alamo Quarry Market during the period.

Multifamily other property income decreased by $0.1 million for the three months ended June 30, 2020 primarily due to the decrease in parking garage income at Hassalo on Eighth and late fees.

Mixed-use other property income decreased $1.0 million for the three months ended June 30, 2020 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy beginning in March 2020 which led to a decrease in excise tax and food & beverage revenue at the hotel portion of our mixed-use property and a decrease in parking income at the retail portion of our mixed-use property.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce mixed-use other property income through at least the remainder of 2020.

Office other property income decreased $1.0 million for the three months ended September 30, 2020 primarily due to the decrease in parking garage income at City Center Bellevue, Lloyd District Portfolio, and First & Main as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic during the second quarter caused a substantial portion of our tenants employees and their guests to continue to partially work from home during the period.

Additionally, the decrease in office other property income was also attributable to a decrease in lease termination fees received at City Center Bellevue during the period.

Retail other property income increased $0.5 million for the three months ended September 30, 2020 primarily due to the lease termination fees received at Del Monte Center and Carmel Country Plaza during the period.

Multifamily other property income decreased by $0.1 million for the three months ended September 30, 2020 primarily due to the decrease in parking garage income at Hassalo on Eighth and late fees.

Mixed-use other property income decreased $0.9 million for the three months ended September 30, 2020 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy beginning in March 2020 which led to a decrease in excise tax and food & beverage revenue at the hotel portion of our mixed-use property and a decrease in parking income at the retail portion of our mixed-use property.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce mixed-use other property income through at least the remainder of 2020 and into the first quarter of 2021.

Property Expenses

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Total property expenses consist of rental expenses and real estate taxes.

Total property expenses decreased $5.2 million, or 17%, to $25.9 million, for the three months ended June 30, 2020 compared to $31.1 million for the three months ended June 30, 2019.

Total property expenses decreased $4.2 million, or 12%, to $30.7 million, for the three months ended September 30, 2020 compared to $34.9 million for the three months ended September 30, 2019.

Rental Expenses.

Rental expenses decreased $4.8 million, or 22%, to $17.0 million for the three months ended June 30, 2020 compared to $21.8 million for the three months ended June 30, 2019.

Rental expenses decreased $4.8 million, or 20%, to $19.2 million for the three months ended September 30, 2020 compared to $24.0 million for the three months ended September 30, 2019.

Rental expense by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Three Months Ended June 30, Change % Three Months Ended June 30, Change %

Three Months Ended September 30, Change % Three Months Ended September 30, Change %

2020 2019 2020 2019

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$ 19,208 $ 23,989 $ (4,781) (20) % $ 13,524 $ 13,757 $ (233) (2) %

Total office rental expenses increased $0.5 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental expenses of $1.2 million during the period.

Same-store office rental expenses decreased $0.6 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to a decrease in utilities expense, janitorial services and supplies, and repairs and maintenance as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic caused substantial portion of our tenants' employees to work temporarily from home during

The decrease in same-store office rental expenses was partially offset by the increase in sublease expense related to the Annex Lease extension option exercised in March 2020.

Retail rental expenses decreased $0.4 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to a decrease in utilities, day porter services, repairs and maintenance, and trash services during the period as temporary store closures and restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused reduced demand for these rental expenses.

The decrease in retail rental expenses was partially offset by the increase in insurance expense and general excise tax during the period.

Multifamily rental expenses increased $0.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to an increase in personnel compensation expenses, utilities, security services, and insurance expense during the period.

Mixed-use rental expense decreased $5.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to a decrease in hotel room expenses, marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental expenses at the hotel portion of our mixed-use property through at least the remainder of 2020.

Total office rental expenses decreased $0.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to a decrease in utilities expense, janitorial services and supplies, and repairs and maintenance as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic during the second quarter caused a substantial portion of our tenants' employees to continue to split working from home during the period.

The decrease in total office rental expenses was partially offset by the increase in sublease expense related to the Annex Lease extension option exercised in March 2020.

Retail rental expenses decreased $0.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to a decrease in utilities, repairs and maintenance, and marketing expenses during the period as temporary store closures and restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused reduced demand for these rental expenses.

The decrease in retail rental expenses was partially offset by the increase in insurance expense and landscaping expense during the period.

Multifamily rental expenses increased $0.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to an increase in personnel compensation expenses, insurance expense, and janitorial services and supplies expense during the period.

Mixed-use rental expense decreased $4.5 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to a decrease in hotel room expenses, marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

Additionally, the decrease in mixed-use rental expenses is also due to the decrease of personnel compensation, repairs and maintenance, and utilities expenses at the retail portion of our mixed-use property during the period.

Real Estate Taxes.

Real estate taxes decreased $0.3 million, or 3%, to $9.0 million for the three months ended June 30, 2020 compared to $9.3 million for the three months ended June 30, 2019.

Real estate taxes decreased $0.5 million, or 5%, to $11.5 million for the three months ended September 30, 2020 compared to $10.9 million for the three months ended September 30, 2019.

Real estate tax expense by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Three Months Ended June 30, Change % Three Months Ended June 30, Change %

Three Months Ended September 30, Change % Three Months Ended September 30, Change %

2020 2019 2020 2019

4 unchanged sentences

$ 11,491 $ 10,942 $ 549 5 % $ 9,426 $ 8,980 $ 446 5 %

Office real estate taxes increased $1.8 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental real estate taxes of $1.6 million.

Same-store office real estate taxes increased $0.2 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to an increase in tax assessments at City Center Bellevue, The Landmark at One Market and Torrey Reserve Campus during the period.

Retail real estate taxes decreased $2.4 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to a real estate tax refund of approximately $2.3 million at Alamo Quarry Market for the tax assessments for 2016 through 2018.

Mixed-use real estate taxes increased $0.2 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to an increase in tax assessments at the hotel portion of our mixed-use property.

Office real estate taxes increased $0.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due an increase in tax assessments at City Center Bellevue, The Landmark at One Market, Lloyd District Portfolio, and Torrey Reserve Campus during the period.

Total retail real estate taxes increased $0.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to a increase in tax assessment at Waikele Center.

Same-Store retail real estate taxes increased $0.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to an increase in tax assessments at Alamo Quarry Market, Del Monte Center, and Carmel Mountain Plaza.

Multifamily real estate taxes increased $0.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to an increase in tax assessments at the Pacific Ridge Apartments, Loma Palisades, and Hassalo on Eighth - Residential during the period.

Property Operating Income

Property operating income increased $3.2 million, or 6%, to $56.2 million for the three months ended June 30, 2020, compared to $53.0 million for the three months ended June 30, 2019.

Property operating income decreased $9.8 million, or 15%, to $53.7 million for the three months ended September 30, 2020, compared to $63.4 million for the three months ended September 30, 2019.

Property operating income by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Three Months Ended June 30, Change % Three Months Ended June 30, Change %

Three Months Ended September 30, Change % Three Months Ended September 30, Change %

2020 2019 2020 2019

4 unchanged sentences

$ 53,675 $ 63,431 $ (9,756) (15) % $ 50,874 $ 53,558 $ (2,684) (5) %

Total office property operating income increased $11.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental property operating income of $6.8 million during the period.

Same-store property operating income increased $5.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, Torrey Point, and City Center Bellevue during the period.

Total retail property operating income decreased $1.6 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the increase in bad debt contra-revenue of approximately $2.1 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza and Carmel Country Plaza as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

The decrease in total retail property operating income was partially offset by the net property operating income related to the real estate tax refund at Alamo Quarry Market during the period and higher annualized base rent at Waikele Center related to the Safeway lease.

Total multifamily property operating income decreased $0.9 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the decrease in average occupancy to 88.5% for the three months ended June 30, 2020 compared to 92.8% for the three months ended June 30, 2019 and an increase in personnel compensation expenses, utilities, security services and insurance expense during the period.

Total mixed-use property operating income decreased $5.8 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the impact of the COVID-19 pandemic reducing tourism and hotel occupancy during the second quarter of 2020 which led to a decrease in hotel occupancy and revenue per available room to 17.0% and $34 for the three months ended June 30, 2020 compared to 91.6% and $282 for the three months ended June 30, 2019.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce property other property income through at least the remainder of 2020.

Total office property operating income increased $2.0 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to higher annualized base rents at La Jolla Commons, City Center

Bellevue, and Torrey Reserve Campus during the period.

The increase in total office property operating income was partially offset by the decrease in rental revenue at One Beach Street due to the expiration of leases to allow for the modernization of the property and a decrease in parking garage income.

Total retail property operating income decreased $5.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to the increase in bad debt contra-revenue of approximately $4.0 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, Del Monte Center, and The Shops at Kalakaua as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

The decrease in total retail property operating income is also attributable to a decrease in annualized base rent at Alamo Quarry Market and Del Monte Center due to the bankruptcy of Forever 21 and lease modifications providing rent concessions.

Total multifamily property operating income decreased $0.3 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to the decrease in parking income and late fees along with an increase in personnel compensation expenses, insurance expense, and janitorial services and supplies expense during the period.

Total mixed-use property operating income decreased $6.3 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to the impact of the COVID-19 pandemic reducing tourism and hotel occupancy during the second and third quarters of 2020 which led to a decrease in hotel occupancy and revenue per available room to 65.9% and $138 for the three months ended September 30, 2020 compared to 92.9% and $332 for the three months ended September 30, 2019.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce property other property income through at least the remainder of 2020 and into the first quarter of 2021.

General and Administrative.

General and administrative expenses increased $0.7 million, or 12%, to $6.7 million for the three months ended June 30, 2020, compared to $5.9 million for the three months ended June 30, 2019.

This increase was primarily due to increases in employee-related costs and furlough expense for our hotel staff.

General and administrative expenses decreased $0.0 million, or 1%, to $6.4 million for the three months ended September 30, 2020, compared to $6.5 million for the three months ended September 30, 2019.

This decrease was primarily due to a decrease in employee-related costs.

Depreciation and Amortization.

Depreciation and amortization expense increased $3.9 million, or 17%, to $26.5 million for the three months ended June 30, 2020, compared to $22.6 million for the three months ended June 30, 2019.

This increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental depreciation and amortization of $2.9 million during the period and higher depreciation and amortization at Lloyd District Portfolio, City Center Bellevue, Torrey Point and Waikele Center due to tenant improvements that were put into service in 2019 and 2020.

Depreciation and amortization expense increased $0.3 million, or 1%, to $26.9 million for the three months ended September 30, 2020, compared to $26.6 million for the three months ended September 30, 2019.

This increase was primarily due to higher depreciation and amortization at Lloyd District Portfolio, The Landmark at One Market, Torrey Reserve Campus, and Waikele Center due to tenant improvements that were put into service in 2019 and 2020.

Interest Expense.

Interest expense increased $0.2 million, or 2%, to $13.3 million for the three months ended June 30, 2020, compared to $13.1 million for the three months ended June 30, 2019.

This increase was primarily due to the closing of our offering of Series G Notes on July 30, 2019 and higher average outstanding balance on the line of credit in 2020, offset by the repayment of the mortgage loans at Torrey Reserve - VCI, VCII, VCIII, Solana Crossing I-II, and Solana Beach Towne Centre on March 2, 2020.

Gain on Sale of Real Estate.

Gain on sale of real estate of $0.6 million during the prior period relates to our sale of Solana Beach - Highway 101 on May 22, 2019.

Other Income (Expense), Net.

Other income (expense), net increased $0.2 million, or 424%, to other income, net of $0.2 million for the three months ended June 30, 2020, compared to other expense, net of $0.1 million for the three months ended June 30, 2019 primarily due to a decrease in income tax expense related to lower taxable income for our taxable REIT subsidiary.

Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

The following summarizes our consolidated results of operations for the six months ended June 30, 2020 compared to our consolidated results of operations for the six months ended June 30, 2019.

The following table sets forth selected data from our unaudited consolidated statements of income for the six months ended June 30, 2020 and 2019 (dollars in thousands):

Six Months Ended June 30, Change %

Interest expense decreased $0.4 million, or 3%, to $13.3 million for the three months ended September 30, 2020, compared to $13.7 million for the three months ended September 30, 2019.

This decrease was primarily due to the repayment of the mortgage loans at Torrey Reserve - VCI, VCII, VCIII, Solana Crossing I-II, and Solana Beach Towne Centre on March 2, 2020 and a lower weighted average interest rate on the line of credit in 2020, offset by the closing of our Series G Notes on July 30, 2019.

Other (Expense) Income, Net.

Other (expense) income, net decreased $0.4 million, or 305%, to other expense, net of $0.5 million for the three months ended September 30, 2020, compared to other expense, net of $0.1 million for the three months ended September 30, 2019 primarily due to the August 2020 Treasury Lock being in a loss position during the period partially offset by a decrease in income tax expense related to lower taxable income for our taxable REIT subsidiary.

Comparison of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

The following summarizes our consolidated results of operations for the nine months ended September 30, 2020 compared to our consolidated results of operations for the nine months ended September 30, 2019.

The following table sets forth selected data from our unaudited consolidated statements of income for the nine months ended September 30, 2020 and 2019 (dollars in thousands):

Nine Months Ended September 30, Change %

Rental income $ 252,059 $ 249,634 $ 2,425 1 %

9 unchanged sentences

Gain on sale of real estate — 633 (633) 100

Other income (expense), net 270 (279) 549 197

Other (expense) income, net (261) (410) 149 36

Net income 31,800 43,703 (11,903) (27)

6 unchanged sentences

Total property revenue consists of rental revenue and other property income.

Total property revenue increased $9.4 million, or 6%, to $178.9 million for the six months ended June 30, 2020 compared to $169.4 million for the six months ended June 30, 2019.

The percentage leased was as follows for each segment as of June 30, 2020 and 2019:

Total property revenue decreased $4.6 million, or 2%, to $263.2 million for the nine months ended September 30, 2020 compared to $267.8 million for the nine months ended September 30, 2019.

The percentage leased was as follows for each segment as of September 30, 2020 and 2019:

Percentage Leased (1)

September 30,

Office 93.8 % 94.7 %

3 unchanged sentences

87.8 % 98.0 %

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of June 30, 2020 or June 30, 2019, as applicable.

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of September 30, 2020 or September 30, 2019, as applicable.

(2) Includes the retail portion of the mixed-use property only.

The increase in total property revenue was attributable primarily to the factors discussed below.

The decrease in total property revenue was attributable primarily to the factors discussed below.

Rental revenues .

Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents.

Rental revenue increased $14.8 million, or 9%, to $171.3 million for the six months ended June 30, 2020 compared to $156.5 million for the six months ended June 30, 2019.

Rental revenue increased $2.4 million, or 1%, to $252.1 million for the nine months ended September 30, 2020 compared to $249.6 million for the nine months ended September 30, 2019.

Rental revenue by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio (1)

Six Months Ended June 30, Change % Six Months Ended June 30, Change %

Nine Months Ended September 30, Change % Nine Months Ended September 30, Change %

2020 2019 2020 2019

11 unchanged sentences

and (v) land held for development.

Total office rental revenue increased $30.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental revenue of approximately $19.7 million during the period.

Same-store office rental revenue increased $12.0 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, City Center Bellevue, Torrey Point, and Solana Crossing.

Total retail rental revenue decreased $3.7 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the increase in bad debt contra-revenue of rent receivables of approximately $0.7 million and straight-line rent receivables of approximately $1.4 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, and Carmel Country Plaza as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Total office rental revenue increased $33.2 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental revenue of approximately $21.1 million during the period.

The increase in total office rental revenue is partially offset by the decrease in rental revenue of approximately $2.4 million at One Beach Street due to the expiration of leases to allow for the modernization of the property.

Same-store office rental revenue increased $14.5 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, City Center Bellevue, Torrey Point, and Solana Crossing.

Total retail rental revenue decreased $9.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the increase in bad debt contra-revenue of rent receivables of approximately $3.3 million and straight-line rent receivables of approximately $2.6 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, Del Monte Center, and The Shops at Kalakaua as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Additionally, the decrease in total retail rental revenue is also attributable to decrease in cost reimbursements of approximately $1.5 million due to a real estate tax refund at Alamo Quarry Market.

Multifamily rental revenue decreased $0.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the decrease in the average occupancy to 90.5% for the six months ended June 30, 2020 compared to 93.7% for the six months ended June 30, 2019.

The decrease in average occupancy is partially offset by the increase in average base rent per unit to $2,115 for the six months ended June 30, 2020 compared to $2,074 for the six months ended June 30, 2019.

Mixed-use rental revenue decreased $11.3 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions during the second quarter, which led to a decrease in average occupancy and revenue per available room to 46.4% and $139 for the six months ended June 30, 2020, respectively, compared to 91.7% and $286 for six months ended June 30, 2019, respectively.

Multifamily rental revenue decreased $0.3 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the decrease in average occupancy to 89.2% for the nine months ended September 30, 2020 compared to 93.0% for the nine months ended September 30, 2019.

The decrease in occupancy primarily related to Hassalo on Eighth - Residential.

The decrease in average occupancy is partially offset by the increase in average base rent per unit to $2,140 for the nine months ended September 30, 2020 compared to $2,074 for the nine months ended September 30, 2019.

Mixed-use rental revenue decreased $21.0 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions during the second and third quarters, which led to a decrease in average occupancy and revenue per available room to 52.8% and $138 for the nine months ended September 30, 2020, respectively, compared to 92.1% and $301 for nine months ended September 30, 2019, respectively.

The decrease in total mixed-use rental revenue is also attributed to the increase in bad debt contra-revenue of rent receivables of approximately $3.1 million and straight-line rent of approximately $0.7 million as the collectability was determined to be no longer probable for certain tenants at the retail portion of our mixed-use property.

Other property income .

Other property income decreased $5.4 million, or 42%, to $7.6 million for the six months ended June 30, 2020 compared to $12.9 million for the six months ended June 30, 2019.

Other property income decreased $7.0 million, or 39%, to $11.2 million for the nine months ended September 30, 2020 compared to $18.2 million for the nine months ended September 30, 2019.

Other property income by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Six Months Ended June 30, Change % Six Months Ended June 30, Change %

Nine Months Ended September 30, Change % Nine Months Ended September 30, Change %

2020 2019 2020 2019

4 unchanged sentences

$ 11,167 $ 18,160 $ (6,993) (39) % $ 7,393 $ 12,341 $ (4,948) (40) %

Total office other property income increased $0.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental other property income of approximately $0.4 million during the period.

Same-store office other property income decreased $0.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to decrease in parking garage income at Lloyd District Portfolio, City Center Bellevue and First & Main during the period as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic caused a substantial portion of our tenants employees and their guests to work from home during the period.

Total retail other property income decreased $4.3 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to non-cash lease termination fees recognized in connection with the termination of a ground lease, and the ground lessee's surrender of, the former Sears building at Carmel Mountain Plaza during the six months ended June 30, 2019.

The decrease in retail other property income was partially offset by an increase in lease termination fees received at Alamo Quarry Market during the quarter.

Total multifamily other property income decreased $0.1 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the decrease in parking garage income at Hassalo on Eighth and late fees.

Total mixed-use other property income decreased $1.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy beginning in March 2020 which led to a decrease in excise tax and food & beverage revenue at the hotel portion of our mixed-use property and a decrease in parking income at the retail portion of our mixed-use property.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce mixed-use other property income through at least the remainder of 2020.

Total office other property income decreased $0.8 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental other property income of approximately $0.3 million during the period.

Same-store office other property income decreased $1.2 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the decrease in parking garage income at Lloyd District Portfolio, City Center Bellevue and First & Main during the period as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic during the second quarter caused a substantial portion of our tenants employees and their guests to continue to partially work from home during the period.

Total retail other property income decreased $3.8 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to non-cash lease termination fees recognized in connection with the termination of a ground lease, and the ground lessee's surrender of, the former Sears building at Carmel Mountain Plaza during the nine months ended September 30, 2019.

The decrease in retail other property income was partially offset by an increase in lease termination fees received at Alamo Quarry Market, Del Monte Center, Carmel Country Plaza during the period.

Total multifamily other property income decreased $0.3 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the decrease in parking garage income at Hassalo on Eighth and late fees.

Total mixed-use other property income decreased $2.1 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy beginning in March 2020 which led to a decrease in excise tax and food & beverage revenue at the hotel portion of our mixed-use property and a decrease in parking income at the retail portion of our mixed-use property.

Property Expenses

1 unchanged sentence

Total property expenses consist of rental expenses and real estate taxes.

Total property expenses decreased by $1.4 million, or 2%, to $59.6 million for the six months ended June 30, 2020, compared to $60.9 million for the six months ended June 30, 2019.

Total property expenses decreased by $5.6 million, or 6%, to $90.3 million for the nine months ended September 30, 2020, compared to $95.9 million for the nine months ended September 30, 2019.

This decrease in total property expenses was attributable primarily to the factors discussed below .

Rental Expenses.

Rental expenses decreased $3.1 million, or (7)%, to $39.5 million for the six months ended June 30, 2020, compared to $42.6 million for the six months ended June 30, 2019.

Rental expenses decreased $7.9 million, or (12)%, to $58.8 million for the nine months ended September 30, 2020, compared to $66.6 million for the nine months ended September 30, 2019.

Rental expense by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Six Months Ended June 30, Change % Six Months Ended June 30, Change %

Nine Months Ended September 30, Change % Nine Months Ended September 30, Change %

2020 2019 2020 2019

4 unchanged sentences

$ 58,757 $ 66,611 $ (7,854) (12) % $ 36,467 $ 36,246 $ 221 1 %

Total office rental expenses increased $2.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental expenses of approximately $2.3 million during the period.

Same-store office rental expenses decreased $0.1 million for the six

months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to utilities expense, janitorial services and supplies, and repairs and maintenance as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic caused a substantial portion of our tenants' employees to work from home during the period.

Total office rental expenses increased $1.9 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental expenses of approximately $2.2 million during the period.

Same-store office rental expenses decreased $0.2 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to utilities expense, janitorial services and supplies, and repairs and maintenance as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic during the second quarter caused a substantial portion of our tenants' employees to continue to work from home during the period.

The decrease in same-store office rental expenses was partially offset by the increase in sublease expense related to the Annex Lease extension option exercised in March 2020, an increase in commercial rent tax at The Landmark at One Market, and an increase in insurance expense during the period.

Total retail rental expenses decreased $0.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to a decrease in utilities, day porter services, repairs and maintenance and trash services during the period as temporary store closures and restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused reduced demand for these rental expenses.

The decrease in retail rental expense was partially offset by the increase in insurance expense and general excise tax during the period.

Total multifamily rental expenses increased $0.7 million or the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to personnel compensation expenses, utilities, security services and insurance expense during the period.

Total mixed-use rental expenses decreased $5.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to decrease in hotel room expenses, marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

Total retail rental expenses decreased $0.5 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to a decrease in utilities, day porter services, repairs and maintenance and trash services during the period as temporary store closures and restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused reduced demand for these rental expenses.

The decrease in retail rental expense was partially offset by the increase in insurance expense during the period.

Total multifamily rental expenses increased $0.8 million or the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to an increase in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to personnel compensation expenses, utilities, janitorial services and supplies, security services and insurance expense during the period.

Total mixed-use rental expenses decreased $10.1 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to decrease in hotel room expenses, marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

Real Estate Taxes.

Real estate tax expense increased $1.7 million, or 9%, to $20.0 million for the six months ended June 30, 2020 compared to $18.3 million for the six months ended June 30, 2019.

Real estate tax expense increased $2.2 million, or 8%, to $31.5 million for the nine months ended September 30, 2020 compared to $29.3 million for the nine months ended September 30, 2019.

Real estate tax expense by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Six Months Ended June 30, Change % Six Months Ended June 30, Change %

Nine Months Ended September 30, Change % Nine Months Ended September 30, Change %

2020 2019 2020 2019

4 unchanged sentences

$ 31,497 $ 29,263 $ 2,234 8 % $ 20,954 $ 22,228 $ (1,274) (6) %

Total office real estate taxes increased $3.5 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental real estate taxes of approximately $3.1 million during the period.

Same-store office real estate taxes increased $0.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in tax assessments at City Center Bellevue, The Landmark at One Market and Torrey Reserve Campus during the period.

Retail real estate taxes decreased $2.3 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to a net real estate tax refund of approximately $2.3 million at Alamo Quarry Market for the tax assessments for 2016 through 2018.

Multifamily real estate taxes increased $0.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in tax assessments for Pacific Ridge Apartments and Lomas Palisades.

Mixed-use real estate taxes increased $0.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in tax assessments for the hotel portion of our mixed-use property.

Total office real estate taxes increased $3.7 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental real estate taxes of approximately $3.1 million during the period.

Same-store office real estate taxes increased $0.7 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to an increase in tax assessments at City Center Bellevue, The Landmark at One Market, Lloyd District Portfolio, and Torrey Reserve Campus during the period.

Retail real estate taxes decreased $2.1 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to a net real estate tax refund of approximately $2.3 million at Alamo Quarry Market for the tax assessments for 2016 through 2018.

The decrease in retail real estate taxes was partially offset by the increase in tax assessments at Waikele Center during the period.

Multifamily real estate taxes increased $0.3 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to an increase in tax assessments for Pacific Ridge Apartments, Lomas Palisades, and Hassalo on Eighth - Residential during the period.

Mixed-use real estate taxes increased $0.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to an increase in tax assessments for the hotel portion of our mixed-use property.

Property Operating Income

Property operating income increased $10.8 million, or 10%, to $119.3 million for the six months ended June 30, 2020, compared to $108.5 million for the six months ended June 30, 2019.

Property operating income increased $1.1 million, or 1%, to $173.0 million for the nine months ended September 30, 2020, compared to $171.9 million for the nine months ended September 30, 2019.

Property operating income by segment was as follows (dollars in thousands):

Total Portfolio Same-Store Portfolio

Six Months Ended June 30, Change % Six Months Ended June 30, Change %

Nine Months Ended September 30, Change % Nine Months Ended September 30, Change %

2020 2019 2020 2019

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$ 172,972 $ 171,920 $ 1,052 1 % $ 136,057 $ 136,246 $ (189) — %

Total office property operating income increased $24.7 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental property operating income of $14.7 million during the period.

Same-store property operating income increased $11.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, City Center Bellevue, Torrey Point, and Solana Crossing.

Total retail property operating income decreased $5.3 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in bad debt contra-revenue of approximately $2.0 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza and Carmel Country Plaza as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Total office property operating income increased $26.8 million during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental property operating income of $16.1 million during the period.

Same-store property operating income increased $12.8 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, City Center Bellevue, Torrey Point, and Solana Crossing.

Total retail property operating income decreased $10.6 million during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to an increase in bad debt contra-revenue of approximately $6.0 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza and Del Monte Center as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Additionally, the decrease in total retail property operating income was also due to the non-cash lease termination fees recognized in connection with the termination of a ground lease, and the ground lessee's surrender of, the former Sears building at Carmel Mountain Plaza during the prior period.

The decrease i total retail property operating income was partially offset by the net property operating income related to the real estate tax refund at Alamo Quarry Market during the period and higher annualized base rent at Waikele Center related to the Safeway lease and higher annualized base rent at Carmel Mountain Plaza related to the At Home Stores lease.

Multifamily property operating income decreased $1.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the average occupancy of 90.5% for the six months ended June 30, 2020 compared to 93.7% for the six months ended June 30, 2019 and an increase in personnel compensation expenses, utilities, security services and insurance expense during the period.

Total mixed-use property operating income decreased $7.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the impact of the COVID-19 pandemic reducing tourism and hotel occupancy during the second quarter of 2020 which led to a decrease in hotel occupancy and revenue per available room to 46.4% and $139 for the six months ended June 30, 2020 compared to 91.7% and $286 for the six months ended June 30, 2019.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce property operating income through at least the remainder of 2020.

Multifamily property operating income decreased $1.7 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the average occupancy of 89.4% for the nine months ended September 30, 2020 compared to 93.0% for the nine months ended September 30, 2019, an increase in real estate tax assessments at Pacific Ridge Apartments, Lomas Palisades, and Hassalo on Eighth - Residential, and an increase in personnel compensation expenses, utilities, security services and insurance expense during the period.

Total mixed-use property operating income decreased $13.5 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the impact of the COVID-19 pandemic reducing tourism and hotel occupancy during the second and third quarters of 2020 which led to a decrease in hotel occupancy and revenue per available room to 52.8% and $138 for the nine months ended September 30, 2020 compared to 92.1% and $301 for the nine months ended September 30, 2019.

The decrease in total mixed-use property operating income is also attributed to the increase in bad debt contra-revenue of rent receivables of approximately $3.8 million as the collectability was determined to be no longer probable for certain tenants at the retail portion of our mixed-use property.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce property operating income through at least the remainder of 2020 and into the first quarter of 2021.

General and Administrative.

General and administrative expenses increased $1.5 million, or 12%, to $13.5 million for the six months ended June 30, 2020, compared to $12.0 million for the six months ended June 30, 2019.

General and administrative expenses increased $1.4 million, or 8%, to $19.9 million for the nine months ended September 30, 2020, compared to $18.5 million for the nine months ended September 30, 2019.

This increase was primarily due to an increase in employee-related costs and furlough expense for our hotel staff.

Depreciation and Amortization.

Depreciation and amortization expense increased $10.8 million, or 25%, to $54.0 million for the six months ended June 30, 2020, compared to $43.2 million for the six months ended June 30, 2019.

This increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental depreciation and amortization of $7.9 million during the period and higher depreciation and amortization at Lloyd District Portfolio, City Center Bellevue, Torrey Point and Waikele Center due to tenant improvements that were put into service in 2019 and 2020.

Depreciation and amortization expense increased $11.1 million, or 16%, to $80.9 million for the nine months ended September 30, 2020, compared to $69.7 million for the nine months ended September 30, 2019.

This increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental depreciation and amortization of $7.5 million during the period and higher depreciation and amortization at Lloyd District Portfolio, City Center

Bellevue, Torrey Reserve Campus, Torrey Point, and Waikele Center due to tenant improvements that were put into service in 2019 and 2020.

Interest Expense.

Interest expense increased $0.3 million, or 1%, to $26.8 million for the six months ended June 30, 2020 compared to $26.5 million for the six months ended June 30, 2019.

This increase was primarily due to the closing of our offering of Series G Notes on July 30, 2019, offset by the repayment of the mortgage loans at Torrey Reserve - VCI, VCII,

VCIII, Solana Crossing I-II, and Solana Beach Towne Centre on March 2, 2020 and a higher weighted average interest rate on the line of credit in 2019.

Interest expense decreased $0.1 million, or 0%, to $40.1 million for the nine months ended September 30, 2020 compared to $40.2 million for the nine months ended September 30, 2019.

Gain on Sale of Real Estate.

Gain on sale of real estate of $0.6 million during the prior period relates to our sale of Solana Beach - Highway 101 on May 22, 2019.

Other Income (Expense), Net.

Other income (expense), net increased $0.5 million , o r 197%, to other income, net of $0.3 million for the six months ended June 30, 2020, compared to other expense, net of $0.3 million for the six months ended June 30, 2019 primarily due to a decrease in income tax expense related to lower taxable income for our taxable REIT subsidiary and an increase in interest and investment income attributed to higher average cash balances during the period.

Other (Expense) Income, Net.

Other (expense) income, net increased $0.1 million , o r 36%, to other expense, net of $0.3 million for the nine months ended September 30, 2020, compared to other expense, net of $0.4 million for the nine months ended September 30, 2019 primarily due to a decrease in income tax expense related to lower taxable income for our taxable REIT subsidiary and an increase in interest and investment income attributed to higher average cash balances during the period, offset by the August 2020 Treasury Lock being in a loss position during the period.

Liquidity and Capital Resources of American Assets Trust, Inc.

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The company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership.

As of June 30, 2020, the company owned an approximate 78.5% partnership interest in the Operating Partnership.

As of September 30, 2020, the company owned an approximate 78.7% partnership interest in the Operating Partnership.

The remaining 21.3% are owned by non-affiliated investors and certain of the company's directors and executive officers.

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We believe the Operating Partnership’s sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured line of credit, are adequate for it to make its distribution payments to the company and, in turn, for the company to make its dividend payments to its stockholders.

As of June 30, 2020, the company has determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months.

As of September 30, 2020, the company has determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months.

However, we cannot assure you that the Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the company.

The unavailability of capital could adversely affect the Operating Partnership’s ability to pay its distributions to the company, which would in turn, adversely affect the company’s ability to pay cash dividends to its stockholders.

The unavailability of capital could

adversely affect the Operating Partnership’s ability to pay its distributions to the company, which would in turn, adversely affect the company’s ability to pay cash dividends to its stockholders.

The COVID-19 pandemic is expected to temporarily impact some of our tenants' ability or willingness to remit rent payments due to the tenants' operations being affected by state and local stay-at-home orders.

In the second quarter of 2020, we received rent deferment requests from some tenants' and have begun negotiating and executing lease modifications for the deferment of rent.

These rent deferments will continue to adversely affect the Operating Partnership's cash flow from operations until the scheduled repayment period.

In the third quarter of 2020, we continued to receive rent deferment and other rent concession requests from some tenants and have been negotiating and executing lease modifications for the deferment of rent and other rent concessions.

These rent deferments and other rent concessions will continue to adversely affect the Operating Partnership's cash flow from operations until the scheduled repayment period.

Our short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to the company’s stockholders, operating expenses and other expenditures directly associated with our properties, interest expense and scheduled principal payments on outstanding indebtedness, general and administrative expenses, funding construction projects, capital expenditures, tenant improvements and leasing commissions.

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The sales of shares of the company's 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.

As of June 30, 2020, we had the capacity to issue up to an additional $132.6 million in shares of common stock under the ATM equity program.

As of September 30, 2020, we had the capacity to issue up to an additional $132.6 million in shares of common stock under the ATM equity program.

We intend to use the net proceeds to fund development or redevelopment activities, repay amounts outstanding from time to time under our amended and restated credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes.

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must generally make annual distributions to its stockholders of at least 90% of its net taxable income.

As of June 30, 2020, we held $146.1 million in cash and cash equivalents.

As of September 30, 2020, we held $155.3 million in cash and cash equivalents.

Our short-term liquidity requirements consist primarily of operating expenses and other expenditures associated with our properties, regular debt service requirements, dividend payments to American Assets Trust, Inc.'s stockholders required to maintain its REIT status, distributions to our unitholders, capital expenditures and, potentially, acquisitions.

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We currently do not have any off-balance sheet arrangements.

Comparison of the six months ended June 30, 2020 to the six months ended June 30, 2019

Cash, cash equivalents, and restricted cash were $150.1 million and $54.5 million at June 30, 2020 and 2019, respectively.

Net cash provided by operating activities decreased $1.0 million to $69.1 million for the six months ended June 30, 2020 compared to $70.2 million for the six months ended June 30, 2019.

Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019

Cash, cash equivalents, and restricted cash were $156.6 million and $126.1 million at September 30, 2020 and 2019, respectively.

Net cash provided by operating activities decreased $13.0 million to $109.1 million for the nine months ended September 30, 2020 compared to $122.1 million for the nine months ended September 30, 2019.

The decrease in cash from operations was primarily due to the decrease in rental revenue from the hotel portion of our mixed-use property and a decrease in rent collections from our retail portfolio.

Net cash used in investing activities decreased $510.9 million to $39.1 million for the six months ended June 30, 2020 compared to $550.1 million for the six months ended June 30, 2019.

Net cash used in investing activities decreased $520.5 million to $53.6 million for the nine months ended September 30, 2020 compared to $574.0 million for the nine months ended September 30, 2019.

The decrease was primarily due to the acquisition of La Jolla Commons on June 20, 2019 in the prior period.

Net cash used in financing activities decreased $466.4 million to cash provided of $10.6 million for the six months ended June 30, 2020 compared to cash provided of $477.1 million for the six months ended June 30, 2019.

Net cash used in financing activities decreased $529.2 million to cash used of $8.5 million for the nine months ended September 30, 2020 compared to cash provided of $520.7 million for the nine months ended September 30, 2019.

The decrease in cash provided by financing activities was primarily due to underwritten public offering that settled on June 14, 2019.

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This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in “Management's Discussion and Analysis of Financial Condition and Results of Operations” regarding the components of net income that are eliminated in the calculation of NOI.

Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net income for the three and six months ended June 30, 2020 and 2019 computed in accordance with GAAP (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Other companies may use different methods for calculating NOI or similarly entitled measures and,

accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net income for the three and nine months ended September 30, 2020 and 2019 computed in accordance with GAAP (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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FFO also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

The following table sets forth a reconciliation of our FFO for the three and six months ended June 30, 2020 to net income, the nearest GAAP equivalent (in thousands, except per share and share data):

Three Months Ended June 30, Six Months Ended June 30,

The following table sets forth a reconciliation of our FFO for the three and nine months ended September 30, 2020 to net income, the nearest GAAP equivalent (in thousands, except per share and share data):

Three Months Ended September 30, Nine Months Ended September 30,

Funds from Operations (FFO)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis