American Assets Trust, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Controls and Procedures (American Assets Trust, Inc.) Evaluation of Disclosure Controls and Procedures American Assets Trust, Inc. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, American Assets Trust, Inc. carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on the foregoing, American Assets Trust, Inc.’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, American Assets Trust, Inc.’s disclosure controls and procedures were effective and were operating at a reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, American Assets Trust, Inc.’s Chief Executive Officer and Chief Financial Officer, and effected by American Assets Trust, Inc.’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the company, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including American Assets Trust, Inc.’s Chief Executive Officer and Chief Financial Officer, American Assets Trust, Inc. conducted an evaluation of the effectiveness of its internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the company’s internal control over financial reporting. Based on its evaluation, management has concluded that the company’s internal control over financial reporting was effective as of December 31, 2020. American Assets Trust, Inc.’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report over American Assets Trust, Inc.’s internal control over financial reporting, which report is contained elsewhere in this annual report on Form 10-K. Changes in Internal Control over Financial Reporting 66 There were no changes in American Assets Trust, Inc.'s internal control over financial reporting during the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, American Assets Trust, Inc.'s internal control over financial reporting. Controls and Procedures (American Assets Trust, L.P.) Evaluation of Disclosure Controls and Procedures The Operating Partnership maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer of its general partner, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, the Operating Partnership carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of its general partner, of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of the Operating Partnership's general partner concluded that, as of the end of the period covered by this report, the Operating Partnership’s disclosure controls and procedures were effective and were operating at a reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer of the Operating Partnership's general partner and effected by the general partner's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Operating Partnership; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Operating Partnership are being made only in accordance with authorizations of management and directors of the general partner of the Operating Partnership; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Operating Partnership’s assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Operating Partnership, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of the Operating Partnership's general partner, the Operating Partnership conducted an evaluation of the effectiveness of its internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the Operating Partnership’s internal control over financial reporting. Based on its evaluation, management has concluded that the Operating Partnership’s internal control over financial reporting was effective as of December 31, 2020. Changes in Internal Control over Financial Reporting There were no changes in the Operating Partnership's internal control over financial reporting during the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting. 67 ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information concerning our directors, executive officers and corporate governance required by Item 10 will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. Pursuant to instruction G(3) to Form 10-K, information concerning audit committee financial expert disclosure set forth under the heading “Information Regarding the Board - Committees of the Board - Audit Committee” will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. Pursuant to instruction G(3) to Form 10-K, information concerning compliance with Section 16(a) of the Exchange Act concerning our directors and executive officers set forth under the heading entitled “General - Section 16(a) Beneficial Ownership Reporting Compliance” will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information concerning our executive compensation required by Item 11 will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information concerning the security ownership of certain beneficial owners and management and related stockholder matters required by Item 12 will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information concerning certain relationships and related transactions, and director independence required by Item 13 will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information concerning our principal accountant fees and services required by Item 14 will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2021 Annual Meeting of Stockholders and is incorporated herein by reference. 68 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) Financial Statements Our consolidated financial statements and notes thereto, together with Report of Independent Registered Public Accounting Firm are included as a separate section of this Annual Report on Form 10-K commencing on page F-1. (2) Financial Statement Schedule Our financial statement schedule is included in a separate section of this Annual Report on Form 10-K commencing on page F-1. (3) Exhibits A list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference. (b) See Exhibit Index (c) Not Applicable 69 EXHIBIT INDEX Exhibit No. Description 3.1(1) Articles of Amendment and Restatement of American Assets Trust, Inc. 3.2(1) Amended and Restated Bylaws of American Assets Trust, Inc. 3.3(2) Certificate of Limited Partnership of American Assets Trust, L.P. 4.1(1) Form of Certificate of Common Stock of American Assets Trust, Inc. 4.2(3) Indenture, dated January 26, 2021, by and among American Assets Trust, L.P., as issuer, American Assets Trust, Inc., as guarantor, and U.S. Bank National Association, as trustee 4.3* Description of Securities 10.1(4) Amended and Restated Agreement of Limited Partnership of American Assets Trust, L.P., dated January 19, 2011 10.2(4) Registration Rights Agreement among American Assets Trust, Inc. and the persons named therein, dated January 19, 2011 10.3(1) American Assets Trust, Inc. and American Assets Trust, L.P. Amended and Restated 2011 Equity Incentive Award Plan 10.4(1) Form of Indemnification Agreement between American Assets Trust, Inc. and its directors and officers 10.5* Form of American Assets Trust, Inc. Restricted Stock Award Agreement (Performance Vesting) 10.6(4) Transition Services Agreement between American Assets, Inc. and American Assets Trust, L.P., dated January 19, 2011 10.7(1) Management Agreement for Waikiki Beach Walk®—Retail between ABW Holdings LLC and Retail Resort Properties LLC, dated as of November 1, 2007 10.8(1) Outrigger Hotels Hawaii—Hotel Management Agreement—Embassy SuitesTM—Waikiki Beach WalkTM Hotel by and among EBW Hotel LLC, Waikele Venture Holdings, LLC, Broadway 225 Sorrento Holdings, LLC, Broadway 225 Stonecrest Holdings, LLC and Outrigger Hotels Hawaii, dated as of January 10, 2006 10.9(4) Franchise License Agreement—Embassy Suites—Waikiki Beach Walk—Honolulu, Hawaii between Embassy Suites Franchise LLC and WBW Hotel Lessee, LLC, dated January 19, 2011 10.10(5) Deed of Trust and Security Agreement by and between AAT CC Bellevue, LLC, as Borrower, and PNC Bank, National Association, as Lender, dated October 10, 2012. 10.11(5) Promissory Note by AAT CC Bellevue, LLC, as maker, to PNC Bank, National Association, dated as of October 10, 2012. 10.12(6) American Assets Trust, Inc. and American Assets Trust, L.P. Amended and Restated Incentive Bonus Plan, effective as of December 5, 2019. 10.13(7) Amended and Restated Employment Agreement among American Assets Trust, Inc., American Assets Trust, L.P. and Ernest S. Rady dated March 25, 2014 10.14(7) Amended and Restated Employment Agreement among American Assets Trust, Inc., American Assets Trust, L.P. and Robert F. Barton dated March 25, 2014 10.15(7) Amended and Restated Employment Agreement among American Assets Trust, Inc., American Assets Trust, L.P. and Adam Wyll dated March 25, 2014 10.16(8) Note Purchase Agreement, dated as of October 31, 2014 by and among American Assets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series A, B and C) 10.17(9) Joinder and First Amendment to Term Loan Agreement, dated as of May 2, 2016, among American Assets Trust, Inc., the American Assets Trust, L.P., the Lenders party thereto and U.S. Bank National Association, as Administrative Agent. 10.18(10) Note Purchase Agreement, dated as of March 1, 2017 by and among American Assets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series D) 10.19(11) Note Purchase Agreement, dated as of May 23, 2017 by and among American Assets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series E) 10.20(11) Second Amendment to the Amended and Restated Credit Agreement dated as of May 23, 2017, by and among American Assets Trust, Inc., American Assets Trust, L.P., the lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the other entities named therein. 10.21(11) Second Amendment to the Term Loan Agreement dated as of May 23, 2017, by and among American Assets Trust, Inc., American Assets Trust, L.P., the lenders from time to time party thereto, U.S. Bank National Association, as Administrative Agent, and the other entities named therein. 10.22(11) First Amendment, dated as of May 23, 2017, to the Note Purchase Agreement, dated as if October 31, 2014, by and among American Assets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series E) 70 Exhibit No. Description 10.23(11) First Amendment, dated as of May 23, 2017, to the Note Purchase Agreement, dated as of March 1, 2017, by and among American Assets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series E) 10.24(12) Note Purchase Agreement, dated as of July 19, 2017, by and among American Assets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series F) 10.25(13) Second Amended and Restated Credit Agreement dated January 9, 2018, by and among the company, the Operating Partnership, Bank of America, N.A., as Administrative Agent, and other entities named therein. 10.26(13) Third Amendment to Term Loan Agreement dated January 9, 2018, by and among the company, the Operating Partnership, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent. 10.27(14) Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., and RBC Capital Markets, LLC 10.28(14) Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Merrill Lynch, Pierce, Fenner & Smith Incorporated 10.29(14) Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Morgan Stanley & Co, LLC 10.30(14) Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Wells Fargo Securities, LLC 10.31(14) Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Mizuho Securities USA LLC 10.32(15) First Amendment to Second Amended and Restated Credit Agreement dated January 9, 2019, by and among the company, the Operating Partnership, Bank of America, N.A., as Administrative Agent, and other entities named therein. 10.33(16) Note Purchase Agreement, dated as of July 30, 2019, by and among the Company, the Operating Partnership, and the purchasers named therein. 21.1* List of Subsidiaries of American Assets Trust, Inc. 22.1* Subsidiary Guarantors and Issuers of Guaranteed Securities 23.1* Consent of Independent Registered Public Accounting Firm for American Assets Trust, Inc. 23.2* Consent of Independent Registered Public Accounting Firm for American Assets Trust, L.P. 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, Inc. 31.2* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, L.P. 31.3* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, Inc. 31.4* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, L.P. 32.1* Certification of Chief Executive Officer and Chief Financial Officer of American Assets Trust, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Executive Officer and Chief Financial Officer of American Assets Trust, L.P. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS* Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith. (1) Incorporated herein by reference to American Assets Trust, Inc.'s Registration Statement on Form S-11, as amended (File No. 333-169326), filed with the Securities and Exchange Commission on September 13, 2010. 71 (2) Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2015. (3) Incorporated herein by reference to American Assets Trust, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2021. (4) Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 19, 2011. (5) Incorporated herein by reference to American Assets Trust, Inc’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 10, 2012. (6) Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 10-K filed with the Securities and Exchange Commission on February 14, 2020. (7) Incorporated herein by reference to American Assets Trust, Inc’s Current Report on Form 10-Q filed with the Securities and Exchange Commission on May 2, 2014. (8) Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2014. (9) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 10-Q filed with the Securities and Exchange Commission on July 29, 2016. (10) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 1, 2017. (11) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 23, 2017. (12) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 19, 2017. (13) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 9, 2018. (14) Incorporated herein by reference to American Assets Trust, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 5, 2018. (15) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 9, 2019. (16) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2019. 72 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrants have duly caused this Report to be signed on their behalf by the undersigned thereunto duly authorized this 16 th day of February, 2021. American Assets Trust, Inc. American Assets Trust, L.P. By: American Assets Trust, Inc. Its: General Partner /s/ ERNEST RADY /s/ ERNEST RADY Ernest Rady Ernest Rady Chairman, President and Chief Executive Officer Chairman, President and Chief Executive Officer (Principal Executive Officer) (Principal Executive Officer) /s/ ROBERT F. BARTON /s/ ROBERT F. BARTON Robert F. Barton Executive Vice President and Chief Financial Officer Robert F. Barton Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrants and in the capacities and on the dates indicated. Signature Title Date /s/ ERNEST RADY Chairman of the Board, President and Chief Executive Officer February 16, 2021 Ernest Rady /s/ ROBERT F. BARTON Executive Vice President, Chief Financial Officer and Treasurer February 16, 2021 Robert F. Barton /s/ JOY L. SCHAEFER Director February 16, 2021 Joy L. Schaefer /s/ DUANE A. NELLES Director February 16, 2021 Duane A. Nelles /s/ THOMAS S. OLINGER Director February 16, 2021 Thomas S. Olinger /s/ ROBERT S. SULLIVAN Director February 16, 2021 Robert S. Sullivan 73 Item 8 and Item 15(a) (1) and (2) Index to Consolidated Financial Statements and Schedule Reports of Independent Registered Public Accounting Firm F- 2 American Assets Trust, Inc. Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 9 Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019, and 2018 F- 10 Consolidated Statements of Equity for the years ended December 31, 2020, 2019, and 2018 F- 11 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018 F- 13 American Assets Trust, L.P. Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 14 Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019, and 2018 F- 15 Consolidated Statements of Partners' Capital for the years ended December 31, 20 20 , 201 9 , and 20 18 F- 16 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018 F- 18 Notes to Consolidated Financial Statements of American Assets Trust, Inc. and American Assets Trust, L.P. F- 19 Schedule III—Consolidated Real Estate and Accumulated Depreciation F- 56 F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of American Assets Trust, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of American Assets Trust, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 16, 2021 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-2 Impairment of real estate properties Description of the Matter The Company’s net real estate properties totaled $2.5 billion as of December 31, 2020. As discussed in Note 1 to the consolidated financial statements, the Company reviews for impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. Impairment is recognized on properties held for use when the expected undiscounted cash flows for a property are less than its carrying amount, at which time the property is written down to its estimated fair value. Properties classified as held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. There were no impairment charges during the year ended December 31, 2020. Auditing the Company's impairment assessment for real estate properties is challenging because of the subjective auditor judgment necessary in evaluating management’s identification of indictors of potential impairment and the related assessment of the severity of such indicators in determining whether a triggering event has occurred that requires the Company to evaluate the recoverability of the asset. Additionally, for real estate properties where a triggering event has occurred, the auditing involves a high degree of auditor judgment and increased extent of audit effort to evaluate management’s estimates underlying projected future cash flows as they are based on subjective assumptions such as market rents, occupancy rates and hold periods, which are affected by expectations about future market or economic conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s property impairment review process. For example, we tested controls over management’s process for identifying and evaluating potential impairment indicators and their review of the prospective financial data used in the Company’s impairment analysis. Our testing of the Company’s impairment assessment included, among other procedures, evaluating significant judgments applied in determining whether indicators of impairment were present at any given property by obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments. For example, we searched for tenants or groups of tenants with large reserved balances or upcoming lease expirations that occupy a substantial portion of any particular property and searched for significant declines in operating results of any particular property due to occupancy changes, tenant bankruptcies, environmental issues, adverse changes in legal factors or natural disasters. Additionally, for real estate properties where a triggering event has occurred, our testing also included, among other procedures, involving our internal valuation specialists and evaluating and testing the methodologies and significant assumptions used in the models as well as evaluating and testing the completeness and accuracy of the underlying prospective financial data. F-3 Collectability of accounts receivable and straight-line rents receivable Description of the Matter The Company’s accounts receivable and straight-line rent receivable totaled $79.4 million as of December 31, 2020. As discussed in Note 1 to the consolidated financial statements, the Company makes estimates of the collectability of its current accounts receivable and straight-line rents receivable which requires significant judgment by management as the collectability of receivables is affected by numerous different factors including current economic trends, including the impact of the COVID-19 pandemic on tenants' businesses and changes in tenants' payment patterns, tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in tenants' credit ratings, communications between the Company’s operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenants to perform under the terms of their lease agreement. If management’s assessment of these factors indicates it is not probable that the Company will be able to collect substantially all rents, the Company recognizes a charge to rental income and limits rental income recognition to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected. During 2020, the Company recorded a $18.4 million collectability related adjustment as a reduction to rental income. Auditing the Company's collectability assessment is challenging because of the subjective auditor judgment necessary in evaluating management’s determination that collectability of lease payments from each of its tenants may not be probable and the related assessment of the severity of factors in determining whether collectability of substantially all of the remaining lease payments from a given tenant remains probable. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s collectability assessment process. For example, we tested controls over management’s process for identifying and evaluating potential factors indicating that collectability of lease payments from each of its tenants may not be probable and controls over the completeness and accuracy of the data used in management’s analyses. Our testing of the Company’s collectability assessment included, among other procedures, reviewing the Company’s tenant portfolio for tenants at higher risk of being negatively impacted by the COVID-19 pandemic and evaluating significant judgments applied in determining whether factors indicating that collectability of lease payments may not be probable were present by obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments. For example, we searched publicly available information for indicators of tenants experiencing financial difficulty, performed a look-back analysis in which we compared actual lease payments collected to previous estimates of collectability made by management, and made inquiries of operating personnel regarding their communications with tenants. In addition, we tested the completeness and accuracy of the data that was used in management’s collectability analyses. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2010. San Diego, California February 16, 2021 F-4 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of American Assets Trust, Inc. Opinion on Internal Control over Financial Reporting We have audited American Assets Trust, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, American Assets Trust, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 16, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Diego, California February 16, 2021 F-5 Report of Independent Registered Public Accounting Firm To the Partners of American Assets Trust, L.P. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of American Assets Trust, L.P. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-6 Impairment of real estate properties Description of the Matter The Company’s net real estate properties totaled $2.5 billion as of December 31, 2020. As discussed in Note 1 to the consolidated financial statements, the Company reviews for impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. Impairment is recognized on properties held for use when the expected undiscounted cash flows for a property are less than its carrying amount, at which time the property is written down to its estimated fair value. Properties classified as held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. There were no impairment charges during the year ended December 31, 2020. Auditing the Company's impairment assessment for real estate properties is challenging because of the subjective auditor judgment necessary in evaluating management’s identification of indictors of potential impairment and the related assessment of the severity of such indicators in determining whether a triggering event has occurred that requires the Company to evaluate the recoverability of the asset. Additionally, for real estate properties where a triggering event has occurred, the auditing involves a high degree of auditor judgment and increased extent of audit effort to evaluate management’s estimates underlying projected future cash flows as they are based on subjective assumptions such as market rents, occupancy rates and hold periods, which are affected by expectations about future market or economic conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s property impairment review process. For example, we tested controls over management’s process for identifying and evaluating potential impairment indicators and their review of the prospective financial data used in the Company’s impairment analysis. Our testing of the Company’s impairment assessment included, among other procedures, evaluating significant judgments applied in determining whether indicators of impairment were present at any given property by obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments. For example, we searched for tenants or groups of tenants with large reserved balances or upcoming lease expirations that occupy a substantial portion of any particular property and searched for significant declines in operating results of any particular property due to occupancy changes, tenant bankruptcies, environmental issues, adverse changes in legal factors or natural disasters. Additionally, for real estate properties where a triggering event has occurred, our testing also included, among other procedures, involving our internal valuation specialists and evaluating and testing the methodologies and significant assumptions used in the models as well as evaluating and testing the completeness and accuracy of the underlying prospective financial data. F-7 Collectability of accounts receivable and straight-line rents receivable Description of the Matter The Company’s accounts receivable and straight-line rent receivable totaled $79.4 million as of December 31, 2020. As discussed in Note 1 to the consolidated financial statements, the Company makes estimates of the collectability of its current accounts receivable and straight-line rents receivable which requires significant judgment by management as the collectability of receivables is affected by numerous different factors including current economic trends, including the impact of the COVID-19 pandemic on tenants' businesses and changes in tenants' payment patterns, tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in tenants' credit ratings, communications between the Company’s operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenants to perform under the terms of their lease agreement. If management’s assessment of these factors indicates it is not probable that the Company will be able to collect substantially all rents, the Company recognizes a charge to rental income and limits rental income recognition to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected. During 2020, the Company recorded a $18.4 million collectability related adjustment as a reduction to rental income. Auditing the Company's collectability assessment is challenging because of the subjective auditor judgment necessary in evaluating management’s determination that collectability of lease payments from each of its tenants may not be probable and the related assessment of the severity of factors in determining whether collectability of substantially all of the remaining lease payments from a given tenant remains probable. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s collectability assessment process. For example, we tested controls over management’s process for identifying and evaluating potential factors indicating that collectability of lease payments from each of its tenants may not be probable and controls over the completeness and accuracy of the data used in management’s analyses. Our testing of the Company’s collectability assessment included, among other procedures, reviewing the Company’s tenant portfolio for tenants at higher risk of being negatively impacted by the COVID-19 pandemic and evaluating significant judgments applied in determining whether factors indicating that collectability of lease payments may not be probable were present by obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments. For example, we searched publicly available information for indicators of tenants experiencing financial difficulty, performed a look-back analysis in which we compared actual lease payments collected to previous estimates of collectability made by management, and made inquiries of operating personnel regarding their communications with tenants. In addition, we tested the completeness and accuracy of the data that was used in management’s collectability analyses. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. San Diego, California February 16, 2021 F-8 American Assets Trust, Inc. Consolidated Balance Sheets (In Thousands, Except Share Data) December 31, 2020 December 31, 2019 ASSETS Real estate, at cost Operating real estate $ 3,155,280 $ 3,096,886 Construction in progress 91,047 91,264 Held for development 547 547 3,246,874 3,188,697 Accumulated depreciation ( 754,140 ) ( 665,222 ) Net real estate 2,492,734 2,523,475 Cash and cash equivalents 137,333 99,303 Restricted cash 1,716 10,148 Accounts receivable, net 6,938 12,016 Deferred rent receivables, net 72,476 52,171 Other assets, net 106,112 93,220 TOTAL ASSETS $ 2,817,309 $ 2,790,333 LIABILITIES AND EQUITY LIABILITIES: Secured notes payable, net $ 110,923 $ 161,879 Unsecured notes payable, net 1,196,677 1,195,780 Unsecured line of credit, net 99,151 — Accounts payable and accrued expenses 59,262 62,576 Security deposits payable 6,590 8,316 Other liabilities and deferred credits 91,300 68,110 Total liabilities 1,563,903 1,496,661 Commitments and contingencies (Note 12) EQUITY: American Assets Trust, Inc. stockholders' equity Common stock, $ 0.01 par value, 490,000,000 shares authorized, 60,476,292 and 60,068,228 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively 605 601 Additional paid-in capital 1,445,644 1,452,014 Accumulated dividends in excess of net income ( 176,560 ) ( 144,378 ) Accumulated other comprehensive income 1,753 5,680 Total American Assets Trust, Inc. stockholders' equity 1,271,442 1,313,917 Noncontrolling interests ( 18,036 ) ( 20,245 ) Total equity 1,253,406 1,293,672 TOTAL LIABILITIES AND EQUITY $ 2,817,309 $ 2,790,333 The accompanying notes are an integral part of these consolidated financial statements. F-9 American Assets Trust, Inc. Consolidated Statements of Comprehensive Income (In Thousands, Except Shares and Per Share Data) Year Ended December 31, 2020 2019 2018 REVENUE: Rental income $ 330,312 $ 343,865 $ 309,537 Other property income 14,261 22,876 21,330 Total revenue 344,573 366,741 330,867 EXPENSES: Rental expenses 79,178 91,967 86,482 Real estate taxes 41,941 40,013 34,973 General and administrative 26,581 24,871 22,784 Depreciation and amortization 108,292 96,205 107,093 Total operating expenses 255,992 253,056 251,332 OPERATING INCOME 88,581 113,685 79,535 Interest expense ( 53,440 ) ( 54,008 ) ( 52,248 ) Gain on sale of real estate — 633 — Other income (expense), net 447 ( 122 ) ( 85 ) NET INCOME 35,588 60,188 27,202 Net income attributable to restricted shares ( 383 ) ( 381 ) ( 311 ) Net income attributable to unitholders in the Operating Partnership ( 7,545 ) ( 14,089 ) ( 7,205 ) NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS $ 27,660 $ 45,718 $ 19,686 EARNINGS PER COMMON SHARE, BASIC Basic income attributable to common stockholders per share $ 0.46 $ 0.84 $ 0.42 Weighted average shares of common stock outstanding - basic 59,806,309 54,110,949 46,950,812 EARNINGS PER COMMON SHARE, DILUTED Diluted income attributable to common stockholders per share $ 0.46 $ 0.84 $ 0.42 Weighted average shares of common stock outstanding - diluted 76,119,763 70,786,132 64,136,559 COMPREHENSIVE INCOME Net income $ 35,588 $ 60,188 $ 27,202 Other comprehensive (loss) gain - unrealized (loss) gain on swap derivatives during the period ( 3,649 ) ( 5,571 ) 120 Reclassification of amortization of forward starting swap included in interest expense ( 1,330 ) ( 1,304 ) ( 1,279 ) Comprehensive income 30,609 53,313 26,043 Comprehensive income attributable to noncontrolling interest ( 6,496 ) ( 12,301 ) ( 6,877 ) Comprehensive income attributable to American Assets Trust, Inc. $ 24,113 $ 41,012 $ 19,166 The accompanying notes are an integral part of these consolidated financial statements. F-10 American Assets Trust, Inc. Consolidated Statements of Equity (In Thousands, Except Share Data) American Assets Trust, Inc. Stockholders' Equity Noncontrolling Interests - Unitholders in the Operating Partnership Total Common Shares Additional Paid-in Capital Accumulated Dividends in Excess of Net Income Accumulated Other Comprehensive Income (Loss) Shares Amount Balance at December 31, 2017 47,204,588 $ 473 $ 919,066 $ ( 97,280 ) $ 11,451 $ 10,434 $ 844,144 Net income — — — 19,997 — 7,205 27,202 Issuance of restricted stock 205,110 2 ( 2 ) — — — — Forfeiture of restricted stock ( 78,975 ) ( 1 ) 1 — — — — Conversion of operating partnership units 17,372 — ( 916 ) — — 916 — Dividends declared and paid — — — ( 51,495 ) — ( 18,733 ) ( 70,228 ) Stock-based compensation — — 3,039 — — — 3,039 Shares withheld for employee taxes ( 12,686 ) — ( 527 ) — — — ( 527 ) Other comprehensive income - change in value of interest rate swaps — — — — 105 15 120 Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 936 ) ( 343 ) ( 1,279 ) Balance at December 31, 2018 47,335,409 474 920,661 ( 128,778 ) 10,620 ( 506 ) 802,471 Net income — — — 46,099 — 14,089 60,188 Common shares issued 11,871,552 118 515,236 — — — 515,354 Issuance of restricted stock 173,008 2 ( 2 ) — — — — Forfeiture of restricted stock ( 70,641 ) ( 1 ) 1 — — — — Conversion of operating partnership units 787,060 8 12,979 — 148 ( 13,135 ) — Dividends declared and paid — — — ( 61,699 ) — ( 18,906 ) ( 80,605 ) Stock-based compensation — — 4,477 — — — 4,477 Shares withheld for employee taxes ( 28,160 ) — ( 1,338 ) — — — ( 1,338 ) Other comprehensive loss - change in value of interest rate swaps — — — — ( 4,482 ) ( 1,602 ) ( 6,084 ) Other comprehensive income - unrealized gain on forward-starting interest rate swap — — — — 392 121 513 Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 998 ) ( 306 ) ( 1,304 ) Balance at December 31, 2019 60,068,228 601 1,452,014 ( 144,378 ) 5,680 ( 20,245 ) 1,293,672 Net income — — — 28,043 — 7,545 35,588 Issuance of restricted stock 317,574 3 ( 3 ) — — — — Forfeiture of restricted stock ( 95,086 ) ( 1 ) 1 — — — — Conversion of operating partnership units 209,011 2 ( 12,003 ) — 3 11,998 — Dividends declared and paid — — — ( 60,225 ) — ( 16,285 ) ( 76,510 ) Stock-based compensation — — 6,307 — — — 6,307 Shares withheld for employee taxes ( 23,435 ) — ( 672 ) — — — ( 672 ) F-11 Other comprehensive loss - change in value of interest rate swaps — — — — ( 2,885 ) ( 764 ) ( 3,649 ) Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 1,045 ) ( 285 ) ( 1,330 ) Balance at December 31, 2020 60,476,292 $ 605 $ 1,445,644 $ ( 176,560 ) $ 1,753 $ ( 18,036 ) $ 1,253,406 The accompanying notes are an integral part of these consolidated financial statements. F-12 American Assets Trust, Inc. Consolidated Statements of Cash Flows (In Thousands) Year ended December 31, 2020 2019 2018 OPERATING ACTIVITIES Net income $ 35,588 $ 60,188 $ 27,202 Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent revenue and amortization of lease intangibles ( 31,242 ) ( 6,985 ) ( 1,157 ) Depreciation and amortization 108,292 96,205 107,093 Amortization of debt issuance costs and debt fair value adjustments 1,477 1,467 1,530 Provision for uncollectable rental income 18,427 1,751 790 Gain on sale of real estate — ( 633 ) — Stock-based compensation expense 6,307 4,477 3,039 Settlement of forward interest rate swap agreement — 513 — Lease termination income — ( 4,518 ) — Other noncash interest expense ( 1,330 ) ( 1,304 ) ( 1,279 ) Other, net ( 695 ) 4,746 ( 407 ) Changes in operating assets and liabilities Change in accounts receivable ( 4,940 ) ( 1,071 ) ( 336 ) Change in other assets 141 ( 2,420 ) ( 227 ) Change in accounts payable and accrued expenses ( 2,108 ) 5,956 ( 3,297 ) Change in security deposits payable ( 1,726 ) ( 971 ) 2,274 Change in other liabilities and deferred credits ( 1,206 ) ( 3,585 ) 1,282 Net cash provided by operating activities 126,985 153,816 136,507 INVESTING ACTIVITIES Acquisition of real estate, net — ( 507,780 ) — Capital expenditures ( 63,488 ) ( 88,327 ) ( 54,411 ) Proceeds from sale of real estate, net of selling costs — 8,191 — Leasing commissions ( 5,589 ) ( 11,267 ) ( 9,936 ) Net cash used in investing activities ( 69,077 ) ( 599,183 ) ( 64,347 ) FINANCING ACTIVITIES Repayment of secured notes payable ( 51,003 ) ( 20,762 ) ( 97,124 ) Proceeds from unsecured line of credit 100,000 59,000 84,000 Repayment of unsecured line of credit — ( 123,000 ) ( 20,000 ) Proceeds from issuance of unsecured notes payable — 150,000 — Debt issuance costs ( 125 ) ( 1,103 ) ( 2,727 ) Proceeds from issuance of common stock, net — 515,354 ( 236 ) Dividends paid to common stock and unitholders ( 76,510 ) ( 80,605 ) ( 70,228 ) Shares withheld for employee taxes ( 672 ) ( 1,338 ) ( 527 ) Net cash provided by (used in) financing activities ( 28,310 ) 497,546 ( 106,842 ) Net increase (decrease) in cash, cash equivalents and restricted cash 29,598 52,179 ( 34,682 ) Cash, cash equivalents and restricted cash, beginning of year 109,451 57,272 91,954 Cash, cash equivalents and restricted cash, end of year $ 139,049 $ 109,451 $ 57,272 The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows: Year ended December 31, 2020 2019 2018 Cash and cash equivalents $ 137,333 $ 99,303 $ 47,956 Restricted cash 1,716 10,148 9,316 Total cash, cash equivalents and restricted cash shown in Statement of Cash Flows $ 139,049 $ 109,451 $ 57,272 The accompanying notes are an integral part of these consolidated financial statements. F-13 American Assets Trust, L.P. Consolidated Balance Sheets (In Thousands, Except Unit Data) December 31, December 31, 2020 2019 ASSETS Real estate, at cost Operating real estate $ 3,155,280 $ 3,096,886 Construction in progress 91,047 91,264 Held for development 547 547 3,246,874 3,188,697 Accumulated depreciation ( 754,140 ) ( 665,222 ) Net real estate 2,492,734 2,523,475 Cash and cash equivalents 137,333 99,303 Restricted cash 1,716 10,148 Accounts receivable, net 6,938 12,016 Deferred rent receivables, net 72,476 52,171 Other assets, net 106,112 93,220 TOTAL ASSETS $ 2,817,309 $ 2,790,333 LIABILITIES AND CAPITAL LIABILITIES: Secured notes payable, net $ 110,923 $ 161,879 Unsecured notes payable, net 1,196,677 1,195,780 Unsecured line of credit, net 99,151 — Accounts payable and accrued expenses 59,262 62,576 Security deposits payable 6,590 8,316 Other liabilities and deferred credits 91,300 68,110 Total liabilities 1,563,903 1,496,661 Commitments and contingencies (Note 12) CAPITAL: Limited partners' capital, 16,181,537 and 16,390,548 units issued and outstanding as of December 31, 2020 and December 31, 2019, respectively ( 19,020 ) ( 22,281 ) General partner's capital, 60,476,292 and 60,068,228 units issued and outstanding as of December 31, 2020 and December 31, 2019, respectively 1,269,689 1,308,237 Accumulated other comprehensive income 2,737 7,716 Total capital 1,253,406 1,293,672 TOTAL LIABILITIES AND CAPITAL $ 2,817,309 $ 2,790,333 The accompanying notes are an integral part of these consolidated financial statements. F-14 American Assets Trust, L.P. Consolidated Statements of Comprehensive Income (In Thousands, Except Units and Per Unit Data) Year Ended December 31, 2020 2019 2018 REVENUE: Rental income $ 330,312 $ 343,865 $ 309,537 Other property income 14,261 22,876 21,330 Total revenue 344,573 366,741 330,867 EXPENSES: Rental expenses 79,178 91,967 86,482 Real estate taxes 41,941 40,013 34,973 General and administrative 26,581 24,871 22,784 Depreciation and amortization 108,292 96,205 107,093 Total operating expenses 255,992 253,056 251,332 OPERATING INCOME 88,581 113,685 79,535 Interest expense ( 53,440 ) ( 54,008 ) ( 52,248 ) Gain on sale of real estate — 633 — Other income (expense), net 447 ( 122 ) ( 85 ) NET INCOME 35,588 60,188 27,202 Net income attributable to restricted shares ( 383 ) ( 381 ) ( 311 ) NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P. $ 35,205 $ 59,807 $ 26,891 EARNINGS PER UNIT - BASIC Earnings per unit, basic $ 0.46 $ 0.84 $ 0.42 Weighted average units outstanding, basic 76,119,763 70,786,132 64,136,559 EARNINGS PER UNIT - DILUTED Earnings per unit, diluted $ 0.46 $ 0.84 $ 0.42 Weighted average units outstanding, diluted 76,119,763 70,786,132 64,136,559 DISTRIBUTIONS PER UNIT $ 1.00 $ 1.14 $ 1.09 COMPREHENSIVE INCOME Net income $ 35,588 $ 60,188 $ 27,202 Other comprehensive (loss) gain - unrealized (loss) gain on swap derivatives during the period ( 3,649 ) ( 5,571 ) 120 Reclassification of amortization of forward starting swaps included in interest expense ( 1,330 ) ( 1,304 ) ( 1,279 ) Comprehensive income 30,609 53,313 26,043 Comprehensive income attributable to Limited Partners ( 6,496 ) ( 12,301 ) ( 6,877 ) Comprehensive income attributable to General Partner $ 24,113 $ 41,012 $ 19,166 The accompanying notes are an integral part of these consolidated financial statements. F-15 American Assets Trust, L.P. Consolidated Statements of Partners' Capital (In Thousands, Except Unit Data) Limited Partners' Capital (1) General Partner's Capital (2) Accumulated Other Comprehensive Income (Loss) Total Capital Units Amount Units Amount Balance at December 31, 2017 17,194,980 $ 6,135 47,204,588 $ 822,259 $ 15,750 $ 844,144 Net income — 7,205 — 19,997 — 27,202 Conversion of operating partnership units ( 17,372 ) 916 17,372 ( 916 ) — — Issuance of restricted units — — 205,110 — — — Forfeiture of restricted units — — ( 78,975 ) — — — Distributions — ( 18,733 ) — ( 51,495 ) — ( 70,228 ) Stock-based compensation — — — 3,039 — 3,039 Units withheld for employee taxes — — ( 12,686 ) ( 527 ) — ( 527 ) Other comprehensive income - change in value of interest rate swaps — — — — 120 120 Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 1,279 ) ( 1,279 ) Balance at December 31, 2018 17,177,608 ( 4,477 ) 47,335,409 792,357 14,591 802,471 Net income — 14,089 — 46,099 — 60,188 Contributions from American Assets Trust, Inc. — — 11,871,552 515,354 — 515,354 Conversion of operating partnership units ( 787,060 ) ( 12,987 ) 787,060 12,987 — — Issuance of restricted units — — 173,008 — — — Forfeiture of restricted units — — ( 70,641 ) — — — Distributions — ( 18,906 ) — ( 61,699 ) — ( 80,605 ) Stock-based compensation — — — 4,477 — 4,477 Units withheld for employee taxes — — ( 28,160 ) ( 1,338 ) — ( 1,338 ) Other comprehensive loss - change in value of interest rate swaps — — — — ( 6,084 ) ( 6,084 ) Other comprehensive income - unrealized gain on forward-starting interest rate swap — — — — 513 513 Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 1,304 ) ( 1,304 ) Balance at December 31, 2019 16,390,548 ( 22,281 ) 60,068,228 1,308,237 7,716 1,293,672 Net income — 7,545 — 28,043 — 35,588 Conversion of operating partnership units ( 209,011 ) 12,001 209,011 ( 12,001 ) — — Issuance of restricted units — — 317,574 — — — Forfeiture of restricted units — — ( 95,086 ) — — — Distributions — ( 16,285 ) — ( 60,225 ) — ( 76,510 ) Stock-based compensation — — — 6,307 — 6,307 Units withheld for employee taxes — — ( 23,435 ) ( 672 ) — ( 672 ) Other comprehensive loss - change in value of interest rate swaps — — — — ( 3,649 ) ( 3,649 ) F-16 Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 1,330 ) ( 1,330 ) Balance at December 31, 2020 16,181,537 $ ( 19,020 ) 60,476,292 $ 1,269,689 $ 2,737 $ 1,253,406 (1) Consists of limited partnership interests held by third parties. (2) Consists of general and limited partnership interests held by American Assets Trust, Inc. The accompanying notes are an integral part of these consolidated financial statements. F-17 American Assets Trust, L.P. Consolidated Statements of Cash Flows (In Thousands) Year Ended December 31, 2020 2019 2018 OPERATING ACTIVITIES Net income $ 35,588 $ 60,188 $ 27,202 Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent revenue and amortization of lease intangibles ( 31,242 ) ( 6,985 ) ( 1,157 ) Depreciation and amortization 108,292 96,205 107,093 Amortization of debt issuance costs and debt fair value adjustments 1,477 1,467 1,530 Provision for uncollectable rental income 18,427 1,751 790 Gain on sale of real estate — ( 633 ) — Stock-based compensation expense 6,307 4,477 3,039 Settlement of forward interest rate swap agreement — 513 — Lease termination income — ( 4,518 ) — Other noncash interest expense ( 1,330 ) ( 1,304 ) ( 1,279 ) Other, net ( 695 ) 4,746 ( 407 ) Changes in operating assets and liabilities Change in accounts receivable and deferred rent receivables ( 4,940 ) ( 1,071 ) ( 336 ) Change in other assets 141 ( 2,420 ) ( 227 ) Change in accounts payable and accrued expenses ( 2,108 ) 5,956 ( 3,297 ) Change in security deposits payable ( 1,726 ) ( 971 ) 2,274 Change in other liabilities and deferred credits ( 1,206 ) ( 3,585 ) 1,282 Net cash provided by operating activities 126,985 153,816 136,507 INVESTING ACTIVITIES Acquisition of real estate, net — ( 507,780 ) — Capital expenditures ( 63,488 ) ( 88,327 ) ( 54,411 ) Proceeds from sale of real estate, net of selling costs — 8,191 — Leasing commissions ( 5,589 ) ( 11,267 ) ( 9,936 ) Net cash used in investing activities ( 69,077 ) ( 599,183 ) ( 64,347 ) FINANCING ACTIVITIES Repayment of secured notes payable ( 51,003 ) ( 20,762 ) ( 97,124 ) Proceeds from unsecured line of credit 100,000 59,000 84,000 Repayment of unsecured line of credit — ( 123,000 ) ( 20,000 ) Proceeds from issuance of unsecured notes payable — 150,000 — Debt issuance costs ( 125 ) ( 1,103 ) ( 2,727 ) Contributions from American Assets Trust, Inc. — 515,354 ( 236 ) Distributions ( 76,510 ) ( 80,605 ) ( 70,228 ) Shares withheld for employee taxes ( 672 ) ( 1,338 ) ( 527 ) Net cash provided by (used in) financing activities ( 28,310 ) 497,546 ( 106,842 ) Net increase (decrease) in cash, cash equivalents and restricted cash 29,598 52,179 ( 34,682 ) Cash, cash equivalents and restricted cash, beginning of year 109,451 57,272 91,954 Cash, cash equivalents and restricted cash, end of year $ 139,049 $ 109,451 $ 57,272 The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows: Year ended December 31, 2020 2019 2018 Cash and cash equivalents $ 137,333 $ 99,303 $ 47,956 Restricted cash 1,716 10,148 9,316 Total cash, cash equivalents and restricted cash shown in Statement of Cash Flows $ 139,049 $ 109,451 $ 57,272 The accompanying notes are an integral part of these consolidated financial statements. F-18 American Assets Trust, Inc. and American Assets Trust, L.P. Notes to Consolidated Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization American Assets Trust, Inc. (which may be referred to in these financial statements as the “company,” “we,” “us,” or “our”) is a Maryland corporation formed on July 16, 2010 that did not have any operating activity until the consummation of our initial public offering (the “Offering”) and the related acquisition on January 19, 2011 of certain assets of a combination of entities whose assets included entities owned and/or controlled by Ernest S. Rady and his affiliates, including the Rady Trust, which in turn owned (1) controlling interests in entities owning 17 properties and the property management business of American Assets, Inc. and (2) noncontrolling interests in entities owning four properties. The company is the sole general partner of American Assets Trust, L.P., a Maryland limited partnership formed on July 16, 2010 (the “Operating Partnership”). The company's operations are carried on through our Operating Partnership and its subsidiaries, including our taxable REIT subsidiary. Since the formation of our Operating Partnership, the company has controlled our Operating Partnership as its general partner and has consolidated its assets, liabilities and results of operations. We are a vertically integrated and self-administered REIT with 189 employees providing substantial in-house expertise in asset management, property management, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing. Any reference to the number of properties or units, square footage or acres, employees; or references to beneficial ownership interests, are unaudited and outside the scope of our independent registered public accounting firm's audit of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board. As of December 31, 2020, we owned or had a controlling interest in 28 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of December 31, 2020, we owned land at three of our properties that we classify as held for development and construction in progress. A summary of the properties owned by us is as follows: Retail Carmel Country Plaza Gateway Marketplace Alamo Quarry Market Carmel Mountain Plaza Del Monte Center Hassalo on Eighth - Retail South Bay Marketplace Geary Marketplace Lomas Santa Fe Plaza The Shops at Kalakaua Solana Beach Towne Centre Waikele Center Office La Jolla Commons One Beach Street Torrey Reserve Campus First & Main Torrey Point Lloyd District Portfolio Solana Crossing (formerly Solana Beach Corporate Centre) City Center Bellevue The Landmark at One Market Multifamily Loma Palisades Hassalo on Eighth - Multifamily Imperial Beach Gardens Mariner's Point Santa Fe Park RV Resort Pacific Ridge Apartments Mixed-Use Waikiki Beach Walk Retail and Embassy Suites™ Hotel F-19 Table of Contents Held for Development and Construction in Progress La Jolla Commons - Land Solana Crossing – Land Lloyd District Portfolio – Construction in Progress Basis of Presentation Our consolidated financial statements include the accounts of the company, our Operating Partnership and our subsidiaries. The equity interests of other investors in our Operating Partnership are reflected as noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. Certain reclassifications have been made to conform to current period presentation. Impact of COVID-19 We are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional 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, 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. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management's best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates. F-20 Table of Contents Consolidated Statements of Cash Flows-Supplemental Disclosures The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows (in thousands): Year Ended December 31, 2020 2019 2018 Supplemental cash flow information Total interest costs incurred $ 54,510 $ 54,636 $ 53,736 Interest capitalized $ 1,070 $ 628 $ 1,488 Interest expense $ 53,440 $ 54,008 $ 52,248 Cash paid for interest, net of amounts capitalized $ 53,467 $ 51,975 $ 52,632 Cash paid for income taxes $ 844 $ 971 $ 462 Supplemental schedule of noncash investing and financing activities Accounts payable and accrued liabilities for construction in progress $ 22,884 $ 25,413 $ 14,440 Accrued leasing commissions $ 555 $ 3,345 $ 5,229 Reduction to capital for prepaid equity financing costs $ — $ — $ 241 Building recorded in termination of ground lease $ — $ 4,518 $ — Revenue Recognition and Accounts Receivable Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed rent escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, based on management's assessment of credit, collection and other business risks. When we determine that we are the owner of tenant improvements and the tenant has reimbursed us for a portion or all of the tenant improvement costs, we consider the amount paid to be additional rent, which is recognized on a straight-line basis over the term of the related lease. For first generation tenants, in instances in which we fund tenant improvements and the improvements are deemed to be owned by us, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When we determine that the tenant is the owner of tenant improvements, tenant allowances are recorded as lease incentives and we commence revenue recognition and lease incentive amortization when possession or control of the space is turned over to the tenant for tenant work to begin. Percentage rents, which represent additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. Other property income includes parking income, general excise tax billed to tenants and fees charged to tenants at our multifamily properties. Other property income is recognized when we satisfy performance obligations as evidenced by the transfer of control of our services to customers. We measure other property income based on the amount of consideration we expect to be entitled to in exchange for the services provided. We recognize general excise tax gross, with the amounts billed to tenants and customers recorded in other property income and the related taxes paid as rental expense. The general excise tax included in other income was $ 2.3 million, $ 3.5 million and $ 3.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has relinquished control of the space are generally recognized on the later of the termination date or the satisfaction of all conditions precedent to the lease termination, including, without limitation, payment of all lease termination fees. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement. Current accounts receivable from tenants primarily relate to contractual minimum rent and percentage rent as well as real estate tax and other cost reimbursements. Accounts receivable from straight-line rent is typically longer term in nature and relates to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the contractual lease agreement. F-21 Table of Contents We recognize revenue on the hotel portion of our mixed-use property from the rental of hotel rooms and guest services when we satisfy performance obligations as evidenced by the transfer of control when the rooms are occupied and services have been provided. Food and beverage sales are recognized when the customer has been served or at the time the transaction occurs. Revenue from room rental is included in rental revenue on the statement of income. Revenue from other sales and services provided is included in other property income on the statement of income. We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which requires significant judgment by management. The collectability of receivables is affected by numerous different factors including current economic trends, including the impact of the COVID-19 pandemic on tenant's businesses and changes in tenants' payment patterns, tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communications between our operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenant to perform under the terms of their lease agreement when evaluating the adequacy of the allowance for doubtful accounts. If our assessment of these factors indicates that it is no longer probable that we will be able to collect substantially all rents, we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected. If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the period we make a change to our prior conclusion. At December 31, 2020 and December 31, 2019, our allowance for doubtful accounts was $ 10.0 million and $ 1.2 million, respectively. Total collectability related adjustments for rental income, which includes the our allowance for doubtful accounts and deferred rent receivables, was $ 18.4 million, $ 1.8 million and $ 0.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. Total collectability related adjustments for the years ended December 31, 2020 and 2019 were included as a reduction to rental income on the consolidated statements of comprehensive income while the total collectability related adjustments for the years ended December 31, 2018 were included in rental expenses on the consolidated statements of comprehensive income. During the year ended December 31, 2020, we provided lease concessions to certain tenants, primarily within the retail segment, as a result of the COVID-19 pandemic, in the form of rent deferrals and abatements. These lease concessions generally included an increase in our rights as a lessor. We assess each lease concession and determine whether it represents a lease modifications under Accounting Standards Codification Topic 842, Leases ("ASC 842"). The FASB staff provided guidance that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under ASC 842 as though enforceable rights and obligations for those concessions existed in the existing lease contract, as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee, thereby not requiring entities to apply lease modification guidance to those contracts. The Company has elected to account for such COVID-19 concessions as lease modifications. As of December 31, 2020, we have entered into lease modifications that resulted in adjustments (including rent deferrals and other monetary lease concessions) believed to be caused by the COVID-19 pandemic for approximately $ 13.4 million or 4 % of the rent originally contracted for the year ended December 31, 2020. Effective January 1, 2018, (upon the adoption of ASU 2014-09, Revenue from Contracts with Customers ) sales of real estate are recognized generally upon the transfer of control, which usually occurs when the real estate is legally sold. Prior to January 1, 2018, sales of real estate were recognized only when sufficient down payments had been obtained, possession and other attributes of ownership had been transferred to the buyer and we had no significant continuing involvement. The application of these criteria can be complex and required us to make assumptions. We believe the relevant criteria were met for all real estate sold during the periods presented. Real Estate Land, buildings and improvements are recorded at cost. Depreciation is computed using the straight-line method. Estimated useful lives range generally from 30 years to a maximum of 40 years on buildings and major improvements. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 3 years to 15 years. Maintenance and repairs that do not improve or extend the useful lives of the related assets are charged to operations as incurred. Tenant improvements are capitalized and depreciated over the life of the related lease or their estimated useful life, whichever is shorter. If a tenant vacates its space prior to the contractual termination of its lease, the undepreciated balance of any tenant improvements are written off if they are replaced or have no future value. For the years ended December 31, 2020, 2019 and 2018, real estate depreciation expense was $ 95.8 million, $ 85.3 million and $ 99.6 million, respectively. F-22 Table of Contents Acquisitions of properties are accounted for in accordance with the authoritative accounting guidance on acquisitions and business combinations. Our methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraised values. When we acquire operating real estate properties, the purchase price is allocated to land and buildings, intangibles such as in-place leases, and to current assets and liabilities acquired, if any. Such valuations include a consideration of the noncancelable terms of the respective leases as well as any applicable renewal periods. The fair values associated with below market renewal options are determined based on a review of several qualitative and quantitative factors on a lease-by-lease basis at acquisition to determine whether it is probable that the tenant would exercise its option to renew the lease agreement. These factors include: (1) the type of tenant in relation to the property it occupies, (2) the quality of the tenant, including the tenant's long term business prospects and (3) whether the fixed rate renewal option was sufficiently lower than the fair rental of the property at the date the option becomes exercisable such that it would appear to be reasonably assured that the tenant would exercise the option to renew. The value allocated to in-place leases is amortized over the related lease term and reflected as depreciation and amortization in the statement of income. The value of above and below market leases associated with the original noncancelable lease terms are amortized to rental income over the terms of the respective noncancelable lease periods and are reflected as either an increase (for below market leases) or a decrease (for above market leases) to rental income in the statement of income. The value of the leases associated with below market lease renewal options that are likely to be exercised are amortized to rental income over the respective renewal periods. If a tenant vacates its space prior to contractual termination of its lease or the lease is not renewed, the unamortized balance of any in-place lease value is written off to rental income and amortization expense. Transaction costs related to the acquisition of a business, such as broker fees, transfer taxes, legal, accounting, valuation, and other professional and consulting fees, are expensed as incurred and included in “general and administrative expenses” in our consolidated statements of comprehensive income. For asset acquisitions not meeting the definition of a business, transaction costs are capitalized as part of the acquisition cost. Capitalized Costs We capitalize certain costs related to the development and redevelopment of real estate including pre-construction costs, real estate taxes, insurance and construction costs and salaries and related costs of personnel directly involved. Additionally, we capitalize interest costs related to development and significant redevelopment activities. Capitalization of these costs begins when the activities and related expenditures commence and cease when the project is substantially complete and ready for its intended use, at which time the project is placed in service and depreciation commences. Additionally, we make estimates as to the probability of certain development and redevelopment projects being completed. If we determine that the completion of development or redevelopment is no longer probable, we expense all capitalized costs which are not recoverable. Impairment of Long Lived Assets We review for impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. Impairment is recognized on properties held for use when the expected undiscounted cash flows for a property are less than its carrying amount at which time the property is written-down to fair value. Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. As discussed above, as a result of the COVID-19 pandemic, certain of the our tenants may be unable to operate their businesses, maintain profitability and make timely rental payments under their leases. Accordingly, the reduction of estimated future cash flows could result in the recognition of an impairment charge on certain of our long-lived assets. Management does not believe that the value of our real estate investments was impaired at December 31, 2020 or December 31, 2019. There were no impairment charges during the years ended December 31, 2020, 2019 and 2018. Financial Instruments The estimated fair values of financial instruments are determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair values. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. Accordingly, estimated fair values are not necessarily indicative of the amounts that could be realized in current market exchanges. F-23 Table of Contents Derivative Instruments At times, we may use derivative instruments to manage exposure to variable interest rate risk. We may enter into interest rate swaps to manage our exposure to variable interest rate risk. If and when we enter into derivative instruments, we ensure that such instruments qualify as cash flow hedges and would not enter into derivative instruments for speculative purposes. Any interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into interest expense as interest is incurred on the related variable rate debt. Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness of the counterparty. When ineffectiveness exists, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the period affected. See the discussion under Note 8 for certain quantitative details related to interest rate swaps and for a discussion on how we value derivative financial instruments. Cash and Cash Equivalents We define cash and cash equivalents as cash on hand, demand deposits with financial institutions and short term liquid investments with an initial maturity of less than 3 months. Cash balances in individual banks may exceed the federally insured limit of $ 250,000 by the Federal Deposit Insurance Corporation (the "FDIC"). No losses have been experienced related to such accounts. At December 31, 2020 and December 31, 2019, we had $ 33.0 million and $ 36.2 million, respectively, in excess of the FDIC insured limit. At December 31, 2020 and December 31, 2019, we had $ 97.8 million and $ 52.5 million, respectively, in money market funds that are not FDIC insured. Restricted Cash Restricted cash consists of amounts held by lenders to provide for future real estate tax expenditures, insurance expenditures and reserves for capital improvements. At December 31, 2020 and 2019, we had $ 1.7 million and $ 10.1 million, respectively, in restricted cash. Other Assets Other assets consist primarily of lease costs, lease incentives, acquired in-place leases and acquired above market leases. Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had the leasing transaction not taken place and include third party commissions related to obtaining a lease. Capitalized lease costs are amortized over the life of the related lease and included in depreciation and amortization expense on the statement of income. If a tenant vacates its space prior to the contractual termination of its lease, the unamortized balance of any lease costs are written off. We view these lease costs as part of the up-front initial investment we made in order to generate a long-term cash inflow. Therefore, we classify cash outflows for lease costs as an investing activity in our consolidated statements of cash flows. Variable Interest Entities Certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest qualify as variable interest entities (“VIEs”). VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is the party that has a controlling interest in the VIE. Identifying the party with the controlling interest requires a focus on which entity has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (1) the obligation to absorb the expected losses of the VIE or (2) the right to receive the benefits from the VIE. At December 31, 2020 and December 31, 2019 we had no investments in real estate joint ventures, and no other interests in VIEs to be evaluated for consolidated. Stock-Based Compensation We grant stock-based compensation awards to our employees and directors typically in the form of restricted shares of common stock, options to purchase common stock and/or shares of common stock. We measure stock-based compensation expense based on the fair value of the award on the grant date and recognize the expense ratably over the vesting period. F-24 Table of Contents Modifications of stock-based compensation awards are treated as an exchange of the original award for a new award with the resulting total compensation cost equal to the grant-date fair value of the original award plus the incremental value of the modification to the award. The calculation of the incremental value is based on the excess of the fair value of the new (modified) award based on current circumstances over the fair value of the original option measured immediately before its terms are modified. For the year ended December 31, 2020, we incurred incremental compensation cost of approximately $ 1.2 million related to the discretionary vesting of previously granted restricted stock awards that did not meet the original vesting criteria. For the years ended December 31, 2019 and 2018, there were no modifications of stock-based compensation awards. Deferred Compensation Our Operating Partnership has adopted the American Assets Trust Executive Deferral Plan V (“EDP V”) and the American Assets Trust Executive Deferral Plan VI (“EDP VI”). These plans were adopted by our Operating Partnership as successor plans to those deferred compensation plans maintained by American Assets Inc. ("AAI") in which certain employees of AAI, who were transferred to us in connection with the Offering (the “Transferred Participants”), participated prior to the Offering. EDP V and EDP VI contain substantially the same terms and conditions as these predecessor plans. AAI transferred to our Operating Partnership the Transferred Participants' account balances under the predecessor plans. These transferred account balances represent amounts deferred by the Transferred Participants prior to the Offering while they were employed by AAI. At the time eligible participants defer compensation, we record compensation cost and a corresponding deferred compensation plan liability, which is included in other liabilities and deferred credits on our consolidated balance sheets. This liability is adjusted to fair value at the end of each accounting period based on the performance of the benchmark funds selected by each participant, and the impact of adjusting the liability to fair value is recorded as an increase or decrease to compensation cost. Income Taxes We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) commencing with the taxable year ending December 31, 2011. To maintain our qualification as a REIT, we are required to distribute at least 90 % of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we maintain our qualification for taxation as a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to maintain our qualification as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to regular U.S. federal income tax. We are subject to certain state and local income taxes. We, together with one of our subsidiaries, have elected to treat such subsidiary as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes. Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to federal and state income taxes. Segment Information Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in four reportable segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369 -room all-suite hotel. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which provides the principles for the recognition, measurement, presentation and disclosure of leases. This ASU significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate F-25 Table of Contents real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases. We adopted the provisions of ASU No. 2016-02 effective January 1, 2019 using the modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements , which allows lessors to elect a practical expedient by class of underlying assets to not separate non-lease components from the lease component if certain conditions are met. The lessor’s practical expedient election would be limited to circumstances in which the non-lease components otherwise would be accounted for under the new revenue guidance and both (i) the timing and pattern of transfer are the same for the non-lease component and the related lease component and (ii) the lease component would be classified as an operating lease. The company elected the practical expedient, which allows the company the ability to combine the lease and non-lease components if the underlying asset meets the criteria above. Due to our election of the practical expedient approach, for the year ended December 31, 2020 and 2019, approximately $ 37.6 million and $ 38.4 million, respectively, of non-lease components are combined with lease rental income. ASU 2018-11 also includes an optional transition method in addition to the existing requirements for transition to the new standard by recognizing a cumulative effect adjustment to the opening balance sheet of retained earnings in the period of adoption. Consequently, a company’s reporting for the comparative periods presented in the financial statements would continue to be in accordance with previous GAAP (Topic 840). The company elected this practical expedient as well. Further, bad debt expense, which has previously been recorded in rental expenses, has now been classified as a contra-revenue account in rental income in the company’s consolidated statements of comprehensive income beginning in the year ended December 31, 2019. We evaluated all leases within this scope under existing accounting standards and under the new ASU lease standard recognized approximately $ 7.7 million of right-of-use assets and lease liabilities for the year ended December 31, 2019. Effective January 1, 2019, approximately $ 0.8 million of deferred rent expense was reclassified to lease liability within the other liabilities and deferred credits, net. As of December 31, 2020 and 2019, the remaining contractual payments under lease agreements for which the company is the lessee aggregated approximately $ 36.4 million and $ 5.6 million, respectively. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers . The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards. The pronouncement is effective for reporting periods beginning after December 15, 2017. We adopted the provisions of the ASU effective January 1, 2018 using the modified retrospective approach. As discussed above, lease are specifically excluded from this and will be governed by the applicable lease codification. We evaluated the revenue recognition for all contracts within this scope under existing accounting standards and under the new revenue recognition ASU and confirmed that there were no differences in the amounts recognized or the pattern of recognition. This evaluation included revenues from the hotel portion of our mixed-use property, parking income and excise taxes charged to customers. Therefore, the adoption of this ASU did not result in an adjustment to the company’s retained earnings on January 1, 2018. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Topics . The pronouncement requires companies to adopt a new approach to estimating credit losses on certain types of financial instruments, such as trade and other receivables and loans. The standard requires entities to estimate a lifetime expected credit loss for most financial instruments, including trade receivables. The pronouncement is effective for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , which clarifies that receivables arising from operating leases are not within the scope of the pronouncement. We adopted the provisions of ASU No. 2016-13 effective January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements as the majority of our receivables are derived from operating leases and are excluded from this standard. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) , which provides the principles for the recognition, measurement, presentation and disclosure of leases. This ASU provides companies with optional practical expedients to ease the accounting burden for contract modifications associated with transitioning away from LIBOR and other interbank offered rates that are expected to be discontinued as part of reference rate reform. For hedges, the guidance generally allows changes to the reference rate and other critical terms without having to de-designate the hedging relationship, as well as allows the shortcut method to continue to be applied. For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract. This guidance can be applied immediately, however, is F-26 Table of Contents generally only available through December 31, 2022. We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients. NOTE 2. REAL ESTATE A summary of our real estate investments is as follows (in thousands): Retail Office Multifamily Mixed-Use Total December 31, 2020 Land $ 254,016 $ 225,238 $ 72,668 $ 76,635 $ 628,557 Buildings 526,522 1,137,711 392,224 128,477 2,184,934 Land improvements 47,425 11,672 7,346 2,606 69,049 Tenant improvements 88,326 186,423 — 1,890 276,639 Furniture, fixtures, and equipment 1,069 3,236 16,480 15,651 36,436 Construction in progress 5,170 43,595 1,831 663 51,259 (1) 922,528 1,607,875 490,549 225,922 3,246,874 Accumulated depreciation ( 314,610 ) ( 290,768 ) ( 100,745 ) ( 48,017 ) ( 754,140 ) Net real estate $ 607,918 $ 1,317,107 $ 389,804 $ 177,905 $ 2,492,734 December 31, 2019 Land $ 254,016 $ 225,238 $ 72,668 $ 76,635 $ 628,557 Buildings 523,645 1,132,990 390,379 126,726 2,173,740 Land improvements 46,335 11,097 7,106 2,606 67,144 Tenant improvements 87,707 151,662 — 2,252 241,621 Furniture, fixtures, and equipment 911 3,065 14,995 7,187 26,158 Construction in progress 6,487 35,397 2,212 7,381 51,477 (1) 919,101 1,559,449 487,360 222,787 3,188,697 Accumulated depreciation ( 294,189 ) ( 241,595 ) ( 86,208 ) ( 43,230 ) ( 665,222 ) Net real estate $ 624,912 $ 1,317,854 $ 401,152 $ 179,557 $ 2,523,475 (1) Land related to held for development and construction in progress is included in the Held for Development and Construction in Progress classifications on the consolidated balance sheets. Dispositions On May 22, 2019, we sold Solana Beach – Highway 101. The property is located in Solana Beach, California and was previously included in our retail segment. The sales price of this property was approximately $ 9.4 million, less costs to sell, and resulted in net proceeds to us of approximately $ 9.4 million. Accordingly, we recorded a gain on sale of approximately nil , $ 0.6 million and nil for the years ended December 31, 2020, 2019, and 2018, respectively. Property Asset Acquisitions On June 20, 2019, we acquired La Jolla Commons, consisting of two office towers totaling approximately 724,000 square feet, an entitled development parcel and two parking structures, located in San Diego, California. The acquisition was classified as an asset acquisition with a purchase price of approximately $ 525 million, less seller credits of (i) approximately $ 11.5 million for speculative lease-up, (ii) approximately $ 4.2 million for assumed contractual liabilities (iii) and approximately $ 1.7 million for closing prorations, excluding closing costs of approximately $ 0.2 million. The property was acquired with proceeds from an underwritten public offering and borrowings under the company's Second Amended and Restated Credit Facility (defined herein). F-27 Table of Contents The financial information set forth below summarizes the company’s purchase price allocations for La Jolla Commons during the year ended December 31, 2019 (in thousands): La Jolla Commons Land $ 82,759 Building 361,471 Land improvements 1,359 Furniture, fixtures, and equipment 30,822 Total real estate 476,411 Lease intangibles 40,082 Prepaid expenses and other assets 13 Assets acquired $ 516,506 Accounts payable and accrued expenses $ 3,578 Security deposits payable 443 Other liabilities and deferred credits 3,817 Liabilities assumed $ 7,838 The value allocated to lease intangibles is amortized over the related lease term as depreciation and amortization expense in the statement of comprehensive income. The remaining weighted average amortization period as of December 31, 2020, is 7.2 years. The following table summarizes the operating results for the La Jolla Commons included in the company’s historical consolidated statement of comprehensive income and in the office segment for the period of acquisition through December 31, 2019 (in thousands): June 20, 2019 through December 31, 2019 Revenues $ 20,579 Operating expenses $ 18,140 Operating income $ 2,439 Net income attributable to American Assets Trust, Inc. $ 2,650 Pro Forma Financial Information (Unaudited) The pro forma financial information set forth below is based upon the company’s historical consolidated statements of operations for the year ended December 31, 2019 and 2018, adjusted to give effect to the acquisition of La Jolla Commons, described above, as if such transaction had been completed on January 1, 2018. The pro forma financial information includes adjustments to depreciation expense for acquired property and equipment and adjustments to amortization charges for acquired intangible assets and liabilities. The pro forma financial information set forth below is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2018, nor does it purport to represent the results of future operations (in thousands). Year Ended December 31, 2019 Year Ended December 31, 2018 As Reported ProForma As Reported ProForma Total revenue $ 366,741 $ 383,125 $ 330,867 $ 365,326 Total operating expenses $ 253,056 $ 264,107 $ 251,332 $ 281,253 Operating income $ 113,685 $ 119,018 $ 79,535 $ 84,073 Net income $ 60,188 $ 64,278 $ 27,202 $ 30,662 F-28 NOTE 3. ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES The following summarizes our acquired lease intangibles, which are included in other assets and other liabilities and deferred credits (in thousands): December 31, 2020 December 31, 2019 In-place leases $ 60,965 $ 63,896 Accumulated amortization ( 34,758 ) ( 32,672 ) Above market leases 5,389 7,534 Accumulated amortization ( 5,268 ) ( 7,351 ) Acquired lease intangible assets, net $ 26,328 $ 31,407 Below market leases $ 56,677 $ 62,126 Accumulated accretion ( 35,219 ) ( 36,674 ) Acquired lease intangible liabilities, net $ 21,458 $ 25,452 The value allocated to in-place leases is amortized over the related lease term as depreciation and amortization expense in the statement of income. Above and below market leases are amortized over the related lease term as additional rental income for below market leases or a reduction of rental income for above market leases in the statement of income. Rental income (loss) includes net amortization from acquired above and below market leases of $ 3.9 million, $ 3.8 million and $ 3.6 million in 2020, 2019 and 2018, respectively. The remaining weighted-average amortization period as of December 31, 2020, is 7.9 years, 4.4 years and 11.3 years for in-place leases, above market leases and below market leases, respectively. Below market leases include $ 10.5 million related to below market renewal options, and the weighted-average period prior to the commencement of the renewal options is 9.4 years. Increases (decreases) in net income as a result of amortization of our in-place leases, above market leases and below market leases are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Amortization of in-place leases $ ( 5,018 ) $ ( 4,762 ) $ ( 2,090 ) Amortization of above market leases ( 62 ) ( 345 ) ( 660 ) Amortization of below market leases 3,994 4,131 4,230 Net income (loss) $ ( 1,086 ) $ ( 976 ) $ 1,480 As of December 31, 2020, the amortization for acquired leases during the next five years and thereafter, assuming no early lease terminations, is as follows (in thousands): In-Place Leases Above Market Leases Below Market Leases Year Ending December 31, 2021 $ 4,215 $ 28 $ 3,035 2022 3,560 28 2,467 2023 3,341 26 2,232 2024 3,156 24 1,932 2025 2,918 15 1,564 Thereafter 9,017 — 10,228 $ 26,207 $ 121 $ 21,458 F-29 NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy for inputs used in measuring fair value is as follows: 1. Level 1 Inputs—quoted prices in active markets for identical assets or liabilities 2. Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities 3. Level 3 Inputs—unobservable inputs In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. Financial assets and liabilities whose fair values we measure on a recurring basis using Level 2 inputs consist of our deferred compensation liability and interest rate swap liability. We measure the fair values of these liabilities based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques provided by third parties using proprietary valuation models and analytical tools as of December 31, 2020 and 2019. These valuation models and analytical tools use market pricing or similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. A summary of our financial liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy is as follows (in thousands): December 31, 2020 December 31, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Deferred compensation liability $ — $ 2,059 $ — $ 2,059 $ — $ 1,669 $ — $ 1,669 Interest rate swap asset $ — $ — $ — $ — $ — $ 434 $ — $ 434 Interest rate swap liability $ — $ 4,531 $ — $ 4,531 $ — $ 1,317 $ — $ 1,317 The fair value of our secured notes payable and unsecured notes payable is sensitive to fluctuations in interest rates. Discounted cash flow analysis (Level 2) is generally used to estimate the fair value of our mortgages and notes payable, using rates ranging from 2.4 % to 3.1 %. Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The carrying values of our line of credit and term loan set forth below are deemed to be at fair value since the outstanding debt is directly tied to monthly LIBOR contracts. A summary of the carrying amount and fair value of our financial instruments, all of which are based on Level 2 inputs, is as follows (in thousands): December 31, 2020 December 31, 2019 Carrying Value Fair Value Carrying Value Fair Value Secured notes payable $ 110,923 $ 114,074 $ 161,879 $ 166,885 Unsecured term loan $ 249,233 $ 250,000 $ 248,864 $ 250,000 Unsecured senior guaranteed notes $ 947,444 $ 1,017,378 $ 946,916 $ 975,291 Unsecured line of credit $ 99,151 $ 100,000 $ — $ — F-30 NOTE 5. OTHER ASSETS Other assets consist of the following (in thousands): December 31, 2020 December 31, 2019 Leasing commissions, net of accumulated amortization of $ 35,167 and $ 30,775 , respectively $ 38,173 $ 42,539 Interest rate swap asset — 434 Acquired above market leases, net 121 183 Acquired in-place leases, net 26,207 31,224 Lease incentives, net of accumulated amortization of $ 802 and $ 565 , respectively 994 2,603 Other intangible assets, net of accumulated amortization of $ 1,213 and $ 1,031 , respectively 2,565 2,893 Debt issuance costs, net of accumulated amortization of $ 0 and $ 814 , respectively — 1,256 Right-of-use lease asset, net 29,350 4,863 Prepaid expenses, deposits and other 8,702 7,225 Total other assets $ 106,112 $ 93,220 Lease incentives are amortized over the term of the related lease and included as a reduction of rental income in the statement of income. NOTE 6. OTHER LIABILITIES AND DEFERRED CREDITS Other liabilities and deferred credits consist of the following (in thousands): December 31, 2020 December 31, 2019 Acquired below market leases, net $ 21,458 $ 25,452 Prepaid rent and deferred revenue 14,518 16,969 Interest rate swap liability 4,531 1,317 Straight-line rent liability 18,049 16,903 Deferred rent expense and lease intangible 16 28 Deferred compensation 2,059 1,669 Deferred tax liability 570 332 Lease liability 30,060 5,380 Other liabilities 39 60 Total other liabilities and deferred credits, net $ 91,300 $ 68,110 Straight-line rent liability relates to leases which have rental payments that decrease over time or one-time upfront payments for which the rental revenue is deferred and recognized on a straight-line basis. F-31 Table of Contents NOTE 7. DEBT Debt of American Assets Trust, Inc. American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's Second Amended and Restated Credit Facility, term loan and carve-out guarantees on property-level debt. Debt of American Assets Trust, L.P. Secured notes payable The following is a summary of the Operating Partnership's total secured notes payable outstanding as of December 31, 2020 and December 31, 2019 (in thousands): Description of Debt Principal Balance as of Stated Interest Rate Stated Maturity Date December 31, 2020 December 31, 2019 as of December 31, 2020 Torrey Reserve—VCI, VCII, VCIII (1)(2) — 6,498 6.36 % June 1, 2020 Solana Beach Corporate Centre I-II (1)(2) — 10,270 5.91 % June 1, 2020 Solana Beach Towne Centre (1)(2) — 34,235 5.91 % June 1, 2020 City Center Bellevue (3) 111,000 111,000 3.98 % November 1, 2022 111,000 162,003 Debt issuance costs, net of accumulated amortization of $ 345 and $ 449 , respectively ( 77 ) ( 124 ) Total Secured Notes Payable $ 110,923 $ 161,879 (1) Loan repaid in full, without premium or penalty, on March 2, 2020. (2) Principal payments based on a 30 -year amortization schedule. (3) Interest only. Certain loans require us to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2020, we were in compliance with all loan covenants. F-32 Table of Contents Unsecured notes payable The following is a summary of the Operating Partnership's total unsecured notes payable outstanding as of December 31, 2020 and December 31, 2019 (in thousands): Description of Debt Principal Balance as of Stated Interest Rate Stated Maturity Date December 31, 2020 December 31, 2019 as of December 31, 2020 Term Loan A $ 100,000 $ 100,000 Variable (1) January 9, 2022 Senior Guaranteed Notes, Series A 150,000 150,000 4.04 % (2) October 31, 2021 Term Loan B 100,000 100,000 Variable (3) March 1, 2023 Term Loan C 50,000 50,000 Variable (4) March 1, 2023 Senior Guaranteed Notes, Series F 100,000 100,000 3.78 % (5) July 19, 2024 Senior Guaranteed Notes, Series B 100,000 100,000 4.45 % February 2, 2025 Senior Guaranteed Notes, Series C 100,000 100,000 4.50 % April 1, 2025 Senior Guaranteed Notes, Series D 250,000 250,000 4.29 % (6) March 1, 2027 Senior Guaranteed Notes, Series E 100,000 100,000 4.24 % (7) May 23, 2029 Senior Guaranteed Notes, Series G 150,000 150,000 3.91 % (8) July 30, 2030 1,200,000 1,200,000 Debt issuance costs, net of accumulated amortization of $ 8,856 and $ 7,835 , respectively ( 3,323 ) ( 4,220 ) Total Unsecured Notes Payable $ 1,196,677 $ 1,195,780 (1) The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan A at approximately 4.13 % through its January 9, 2021, subject to adjustments based on our consolidated leverage ratio. Subsequent to January 9, 2021, the interest rate associated with Term Loan A will be variable as described below. (2) The company entered into a one month forward-starting seven years swap contract on August 19, 2014, which was settled on September 19, 2014 at a gain of approximately $ 1.6 million (see Note 8). The forward-starting seven-year swap contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88 % per annum. On January 26, 2021, we prepaid the entirety of the Senior Guaranteed Notes, Series A with make-whole premium thereon. (3) The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan B at approximately 3.15 % through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan B is approximately 2.75 %, subject to adjustments based on our consolidated leverage ratio. (4) The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan C at approximately 3.14 % through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan C is approximately 2.74 %, subject to adjustments based on our consolidated leverage ratio. (5) The Operating Partnership entered into a treasury lock contract on May 31, 2017, which was settled on June 23, 2017 at a loss of approximately $ 0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.85 % per annum. (6) The Operating Partnership entered into forward-starting interest rate swap contracts on March 29, 2016 and April 7, 2016, which were settled on January 18, 2017 at a gain of approximately $ 10.4 million. The forward-starting interest swap rate contracts were deemed to be highly effective cash flow hedges, accordingly, the effective interest rate is approximately 3.87 % per annum. (7) The Operating Partnership entered into a treasury lock contract on April 25, 2017, which was settled on May 11, 2017 at a gain of approximately $ 0.7 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 4.18 % per annum. (8) The Operating Partnership entered into a treasury lock contract on June 20, 2019, which was settled on July 17, 2019 at a gain of approximately $ 0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88 % per annum. On March 1, 2016, the Operating Partnership entered into a Term Loan Agreement with each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent (as amended, the “Term Loan Agreement”). The Term Loan Agreement provides for a new, seven years unsecured term loan to the Operating Partnership of $ 100 million that matures on March 1, 2023 (“Term Loan B”). Concurrent with the closing of the Term Loan Agreement, the Operating Partnership drew down the entirety of Term Loan B. On May 2, 2016, the Operating Partnership entered into a Joinder and First Amendment to the Term Loan Agreement to provide for a new lender to fund an incremental term loan. The Joinder and First Amendment provides for a new, seven years unsecured term loan to the Operating Partnership of $ 50 million that matures on March 1, 2023 ("Term Loan C"). Term Loan F-33 Table of Contents C has the same borrowing terms as the Term Loan Agreement noted below. Concurrent with the closing of the Joinder and First Amendment, the Operating Partnership drew down the entirety of Term Loan C. Borrowings under the Term Loan Agreement with respect to Term Loan B and Term Loan C bear interest at floating rates equal to, at our option, either (1) LIBOR , plus a spread which ranges from 1.70 % to 2.35 % based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) 0 %, (b) the prime rate , (c) the federal funds rate plus 50 bps or (d) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.70 % to 1.35 % based on our consolidated leverage ratio. The company entered into interest rate swap agreements intended to fix the interest rates associated with Term Loan B and Term Loan C at approximately 3.15 % and 3.14 %, respectively, through the maturity dates, subject to adjustments based on our consolidated leverage ratio. The Term Loan Agreement contains a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured and unsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Term Loan Agreement, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal or interest under Term Loan B or Term Loan C, and (ii) a default in the payment of certain other indebtedness of the Operating Partnership, the company or their subsidiaries, the principal and accrued and unpaid interest and prepayment penalties on the outstanding Term Loan B or Term Loan C will become due and payable at the option of the lenders. On January 9, 2018, we entered into the Third Amendment (“Third Amendment”) to the Term Loan Agreement, which maintains the seven years $ 150 million unsecured term loan (Term Loan B and Term Loan C) to the Operating Partnership that matures on March 1, 2023 (the “$150mm Term Loan”). Effective as of March 1, 2018, borrowings under the Term Loan Agreement with respect to the $150mm Term Loan bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) LIBOR , plus a spread which ranges from 1.20 % to 1.70 % based on the Operating Partnership’s consolidated leverage ratio, or (2) a base rate equal to the highest of (a) 0 %, (b) the prime rate , (c) the federal funds rate plus 50 bps or (d) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.70 % to 1.35 % based on the Operating Partnership’s consolidated leverage ratio. The foregoing rates are intended to be more favorable than previously contained in the Term Loan Agreement. Additionally, the Operating Partnership may elect for borrowings to bear interest based on a ratings-based pricing grid as per the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Term Loan Agreement. On October 31, 2014, the Operating Partnership entered into a note purchase agreement (the "Note Purchase Agreement") with a group of institutional purchasers that provided for the private placement of an aggregate of $ 350 million of senior guaranteed notes, of which (i) $ 150 million are designated as 4.04 % Senior Guaranteed Notes, Series A, due October 31, 2021 (the “Series A Notes”), (ii) $ 100 million are designated as 4.45 % Senior Guaranteed Notes, Series B, due February 2, 2025 (the “Series B Notes”) and (iii) $ 100 million are designated as 4.50 % Senior Guaranteed Notes, Series C, due April 1, 2025 (the “Series C Notes”). The Series A Notes were issued on October 31, 2014, the Series B Notes were issued on February 2, 2015 and the Series C Notes were issued on April 2, 2015. The Series A Notes, the Series B Notes and the Series C Notes will pay interest quarterly on the last day of January, April, July and October until their respective maturities. On January 26, 2021, we repaid the entirety of the $ 150.0 million Series A Notes with a make-whole payment (as defined in the Note Purchase Agreement) of approximately $ 3.9 million. On March 1, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $ 250 million of 4.29 % Senior Guaranteed Notes, Series D, due March 1, 2027 (the "Series D Notes"). The Series D Notes were issued on March 1, 2017 and will pay interest quarterly on the last day of January, April, July and October until their respective maturities. On May 23, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $ 100 million of 4.24 % Senior Guaranteed Notes, Series E, due May 23, 2029 (the "Series E Notes"). The Series E Notes were issued on May 23, 2017 and will pay interest semi-annually on the 23rd of May and November until their respective maturities. On July 19, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $ 100 million of 3.78 % Senior Guaranteed Notes, Series F, due July 19, 2024 (the "Series F Notes"). The Series F Notes were issued on July 19, 2017 and will pay interest semi-annually on the 31st of January and July until their respective maturities. On July 30, 2019, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $ 150 million of 3.91 % Senior Guaranteed Notes, Series G, due July 30, 2030 (the "Series G Notes" and collectively with the Series A F-34 Table of Contents Notes, Series B Notes, Series C Notes, Series D Notes, Series E Notes, and Series G Notes are referred to herein as, the “Notes".) The Series G Notes were issued on July 30, 2019 and will pay interest semi-annually on the 30th of July and January until their maturity. The Operating Partnership may prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 5 % of the aggregate principal amount of any series of the Notes then outstanding in the case of a partial prepayment, at 100 % of the principal amount so prepaid plus a Make-Whole Amount. The Note Purchase Agreements contain a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured and unsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Note Purchase Agreement and the Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, Make-Whole Amount or interest under the Notes, and (ii) a default in the payment of certain other indebtedness by us or our subsidiaries, the principal, accrued and unpaid interest, and the Make-Whole Amount on the outstanding Notes will become due and payable at the option of the purchasers. The Operating Partnership's obligations under the Notes are fully and unconditionally guaranteed by the Operating Partnership and certain of the Operating Partnership's subsidiaries. Certain loans require the Operating Partnership to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2020, the Operating Partnership was in compliance with all loan covenants. Scheduled principal payments on secured and unsecured notes payable as of December 31, 2020 are as follows (in thousands): 2021 $ 150,000 2022 211,000 2023 150,000 2024 100,000 2025 200,000 Thereafter 500,000 $ 1,311,000 Credit Facility On January 9, 2014, the company and the Operating Partnership entered into an amended and restated credit agreement (the "Prior Credit Facility"), or the amended and restated credit facility, which amended and restated the then in-place credit facility. The amended and restated credit facility provides for aggregate, unsecured borrowing of $ 350 million, consisting of a revolving line of credit of $ 250 million (the "Prior Revolver Loan") and a term loan of $ 100 million (the "Term Loan A"). The Prior Credit Facility had an accordion feature that allowed the Operating Partnership to increase the availability thereunder up to an additional $ 250 million, subject to meeting specified requirements and obtaining additional commitments from lenders. On October 16, 2014, we entered into a first amendment to the Prior Credit Agreement that amended provisions of the Prior Credit Agreement to, among other things, (1) describe the treatment of our pari passu obligations under the amended and restated credit agreement and (2) remove the material acquisition provisions previously set forth in the Prior Credit Agreement. Borrowings under the Prior Credit Facility initially bore interest at floating rates equal to, at our option, either (1) LIBOR , plus a spread which ranges from (a) 1.35 %- 1.95 % (with respect to the Prior Revolver Loan) and (b) 1.30 % to 1.90 % (with respect to Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate , (b) the federal funds rate plus 50 bps or (c) the Eurodollar rate plus 100 bps, plus a spread which ranges from (i) 0.35 %- 0.95 % (with respect to the Prior Revolver Loan) and (ii) 0.30 % to 0.90 % (with respect to Term Loan A), in each case based on our consolidated leverage ratio. The foregoing rates were more favorable than previously contained in the credit agreement in place as of December 31, 2013. If American Assets Trust, Inc. obtained an investment grade debt rating, under the terms set forth in the Prior Credit Facility, the spreads would further improve. The Prior Revolver Loan initially matured on January 9, 2018, subject to the Operating Partnership's option to extend the Prior Revolver Loan up to two times, with each such extension for a six months period. The Term Loan initially matured on January 9, 2016, subject to our option to extend the Term Loan A up to three times, with each such extension for a 12 -month F-35 Table of Contents period. The foregoing extension options were exercisable by us subject to the satisfaction of certain conditions. Effective as of January 8, 2018, the Operating Partnership exercised the third of three options to extend the maturity date of Term Loan A to January 9, 2019. Concurrent with the closing of the Prior Credit Facility, the Operating Partnership drew down on the entirety of the $ 100 million Term Loan, which remains outstanding and is included in unsecured notes payable as discussed above. Additionally, the Prior Credit Facility included a number of financial covenants, including: • A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60 %, • A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 40 %, • A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x, • A minimum unsecured interest coverage ratio of 1.75x, • A maximum unsecured leverage ratio of 60 %, • A minimum tangible net worth of $ 721.16 million, and 75 % of the net proceeds of any additional equity issuances (other than additional equity issuances in connection with any dividend reinvestment program), and • Recourse indebtedness at any time cannot exceed 15 % of total asset value. The Prior Credit Facility provided that American Assets Trust, Inc.'s annual distributions may not exceed the greater of (1) 95 % of our funds from operations (“FFO”) or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT. American Assets Trust, Inc. and certain of its subsidiaries guaranteed the obligations under the Prior Credit Agreement, and certain of its subsidiaries pledged specified equity interests in our subsidiaries as collateral for our obligations under the Prior Credit Facility. On January 9, 2018, we entered into a second amended and restated credit agreement (the "Second Amended and Restated Credit Facility"), which amended and restated the Prior Credit Agreement. The Second Amended and Restated Credit Facility provides for aggregate, unsecured borrowing of $ 450 million, consisting of a revolving line of credit of $ 350 million (the "Revolver Loan") and a term loan of $ 100 million (the "Term Loan A"). The Second Amended and Restated Credit Facility has an accordion feature that may allow us to increase the availability thereunder up to an additional $ 250 million, subject to meeting specified requirements and obtaining additional commitments from lenders. At December 31, 2020, there was $ 100 million outstanding balance under the Revolver Loan and we had incurred approximately $ 0.8 million of debt issuance costs, net, which are recorded in other assets, net on the consolidated balance sheet. Borrowings under the Second Amended and Restated Credit Facility initially bear interest at floating rates equal to, at our option, either (1) LIBOR , plus a spread which ranges from (a) 1.05 % to 1.50 % (with respect to the Revolver Loan) and (b) 1.30 % to 1.90 % (with respect to Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate , (b) the federal funds rate plus 50 bps or (c) LIBOR plus 100 bps, plus a spread which ranges from (i) 0.10 % to 0.50 % (with respect to the Revolver Loan) and (ii) 0.30 % to 0.90 % (with respect to Term Loan A), in each case based on our consolidated leverage ratio. The foregoing rates are more favorable than previously contained in the Prior Credit Facility in place as of December 31, 2017. For the year-ended December 31, 2020, the weighted average interest rate on the Revolver Loan was 1.32 %. The Revolver Loan initially matures on January 9, 2022, subject to our option to extend the Revolver Loan up to two times, with each such extension for a six months period. The extension options are exercisable by us subject to the satisfaction of certain conditions. On January 9, 2019, we entered into the first amendment (“First Amendment”) to the Second Amended and Restated Credit Facility, which extended the maturity date of Term Loan A to January 9, 2021, subject to three , one year extension options. On October 16, 2020, we exercised an option to extend the maturity date of Term Loan A to January 9, 2022. Additionally, in connection with the First Amendment, borrowings under the Second Amended and Restated Credit Facility F-36 Table of Contents with respect to Term Loan bear interest at floating rates equal to, at our option, either (1) LIBOR , plus a spread which ranges from 1.20 % to 1.70 % based on our consolidated total leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate , (b) the federal funds rate plus 50 bps or (c) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.20 % to 0.70 % based on our consolidated total leverage ratio. The foregoing rates are more favorable than previously contained in the Second Amended and Restated Credit Facility (prior to entry into the First Amendment) with respect to Term Loan A. Additionally, the Second Amended and Restated Credit Facility includes a number of customary financial covenants, including: • A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60 %, • A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 40 %, • A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x, • A minimum unsecured interest coverage ratio of 1.75x, • A maximum unsecured leverage ratio of 60 %, and • Recourse indebtedness at any time cannot exceed 15 % of total asset value. The Second Amended and Restated Credit Facility provides that our annual distributions may not exceed the greater of (1) 95 % of our FFO or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT. As of December 31, 2020, the Operating Partnership was in compliance with all then in-place Second Amended and Restated Credit Facility covenants. F-37 Table of Contents NOTE 8. DERIVATIVE AND HEDGING ACTIVITIES Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movement. To accomplish these objectives, we use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Concurrent with the closing of our second amended and restated credit facility, we entered into an interest rate swap agreement that is intended to fix the interest rate associated with our term loan of $ 100 million at approximately 4.13 % through its original maturity date, subject to adjustments based on our consolidated leverage ratio. On January 29, 2016, we entered into a forward-starting interest rate swap contract with U.S. Bank National Association to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective $100 million seven-year term loan. The forward-starting seven years swap contract had a notional amount of $ 100 million, a termination date of March 1, 2023 , a fixed pay rate of 1.4485 %, and a receive rate equal to the one-month LIBOR, with fixed rate payments due monthly commencing April 1, 2016, floating payments due monthly commencing April 1, 2016, and floating reset dates two days prior to the first day of each calculation period. The forward-starting seven-year swap contract accrual period, March 1, 2016 to March 1, 2023 , was designed to match the expected tenor of our then prospective $ 100 million seven years term loan, which successfully closed on March 1, 2016. On March 23, 2016, we entered into a forward-starting interest rate swap contract with Wells Fargo Bank, National Association to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective incremental $50 million seven-year term loan. The forward-starting seven years swap contract had a notional amount of $ 50 million, a termination date of March 1, 2023 , a fixed pay rate of 1.4410 %, and a receive rate equal to the one-month LIBOR, with fixed rate payments due monthly commencing June 1, 2016, floating payments due monthly commencing June 1, 2016, and floating reset dates two days prior to the first day of each calculation period. The forward-starting seven-year swap contract accrual period, May 2, 2016 to March 1, 2023 , was designed to match the expected tenor of our then prospective incremental $ 50 million seven years term loan, which successfully closed on May 2, 2016. On March 29, 2016, we entered into a forward-starting interest rate swap contract with Wells Fargo Bank, National Association to reduce the interest rate variability exposure of the projected interest cash flows of our prospective new ten-year debt offering (private placement, investment grade bonds, term loan or otherwise) (anticipated to close on or before March 31, 2017 ). The forward-starting ten years swap contract had a notional amount of $ 150 million, a termination date of March 31, 2027 , a fixed pay rate of 1.8800 %, and a receive rate equal to the three-month LIBOR, with fixed rate payments due semi-annually commencing September 29, 2017, floating payments due semi-annually commencing September 29, 2017, and floating reset dates the first day of each quarterly period. The forward-starting ten-year swap contract accrual period, March 31, 2017 to March 31, 2027, was designed to match the expected tenor of our prospective new ten years debt offering (private placement, investment grade bonds, term loan or otherwise). On April 7, 2016, we entered into a forward-starting interest rate swap contract with Wells Fargo Bank, National Association to reduce the interest rate variability exposure of the projected interest cash flows of our prospective new ten-year debt offering (private placement, investment grade bonds, term loan or otherwise) (anticipated to close on or before March 31, 2017 ). The forward-starting ten years swap contract had a notional amount of $ 100 million, a termination date of March 31, 2027 , a fixed pay rate of 1.7480 %, and a receive rate equal to the three-month LIBOR, with fixed rate payments due semi-annually commencing September 29, 2017, floating payments due semi-annually commencing September 29, 2017, and floating reset dates the first day of each quarterly period. The forward-starting ten-year swap contract accrual period, March 31, 2017 to March 31, 2027, was designed to match the expected tenor of our prospective new ten years debt offering (private placement, investment grade bonds, term loan or otherwise). On January 18, 2017, we settled the March 29, 2016 $ 150 million and April 7, 2016 $ 100 million ten-year forward-starting interest rate swaps resulting in an aggregate gain of approximately $ 10.4 million. This gain is included in accumulated other comprehensive income and will be amortized to interest expense over the life of the Series D Notes. The forward-starting interest rate swap contracts have been deemed to be highly effective cash flow hedges and we elected to designate all the forward-starting swap contracts as accounting hedges. F-38 Table of Contents On April 25, 2017, we entered into a treasury lock contract (the "April 2017 Treasury Lock") with Bank of America, National Association, to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective new twelve years private placement. The April 2017 Treasury Lock had a notional amount of $ 100 million, termination date of May 18, 2017, a fixed pay rate of 2.313 %, and a receive rate equal to the ten years treasury rate on the settlement date. On May 11, 2017, we settled the April 2017 Treasury Lock, resulting in a gain of approximately $ 0.7 million. This gain is included in accumulated other comprehensive income and will be amortized to interest expense over ten years . The April 2017 Treasury Lock has been deemed to be a highly effective cash flow hedge and we elected to designate the April 2017 Treasury Lock as an accounting hedge. On May 31, 2017, we entered into a treasury lock contract (the "May 2017 Treasury Lock") with Bank of America, National Association, to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective new seven years private placement. The May 2017 Treasury Lock had a notional amount of $ 100 million, termination date of July 26, 2017 , a fixed pay rate of 2.064 %, and a receive rate equal to the seven years treasury rate on the settlement date. On June 23, 2017, we settled the May 2017 Treasury Lock, resulting in a loss of approximately $ 0.5 million. This loss is included in accumulated other comprehensive income and will be amortized to interest expense over seven years . The May 2017 Treasury Lock has been deemed to be a highly effective cash flow hedge and we elected to designate the May 2017 Treasury Lock as an accounting hedge. On November 26, 2018, we entered into an interest rate swap agreement with Bank of America, National Association, to fix the interest rate associated with Term Loan A associated with our then prospective First Amendment at approximately 4.13 % through its maturity date of January 9, 2021, subject to adjustments based on our consolidated leverage ratio. On June 20, 2019, we entered into a treasury lock contract (the "June 2019 Treasury Lock") with Wells Fargo Bank, N.A., to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective eleven-year private placement. The treasury lock contract has a notional amount of $ 100 million, termination date of July 31, 2019 , a fixed pay rate of 1.9925 %, and a receive rate equal to the ten years treasury rate on the settlement date. On July 17, 2019, we settled the June 2019 Treasury Lock, resulting in a gain of approximately $ 0.5 million, which is included in accumulated other comprehensive income and will be amortized to interest expense over ten years . The treasury lock contract has been deemed to be a highly effective cash flow hedge and we elected to designate the treasury lock contract as an accounting hedge. The forward-starting interest rate swap contracts have been deemed to be highly effective cash flow hedges and we elected to designate all the forward-starting swap contracts as accounting hedges. On August 11, 2020, we entered into a treasury lock contract (the "August 2020 Treasury Lock") with Wells Fargo Bank, N.A., to reduce the interest rate variability exposure of the projected interest cash flows of a then prospective future financing. The treasury lock contract had a notional amount of $ 200 million, termination date of November 12, 2020 , a fixed pay rate of 0.7115 %, and a receive rate equal to the ten years treasury rate on the settlement date. We determined that there was no compelling reason from a capital requirement perspective to move forward with the prospective financing at prevailing rates and, as a result, on October 1, 2020, we settled the August 2020 Treasury Lock, resulting in no gain or loss. The following is a summary of the terms of the interest rate swaps as of December 31, 2020 (dollars in thousands): Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value Bank of America, N.A. $ 100,000 1/9/2019 1/9/2021 $ ( 85 ) U.S. Bank N.A. $ 100,000 3/1/2016 3/1/2023 $ ( 2,972 ) Wells Fargo Bank, N.A. $ 50,000 5/2/2016 3/1/2023 $ ( 1,474 ) The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded as accumulated other comprehensive income and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. During the next twelve months, we estimate that $ 1.3 million will be reclassified as a decrease to interest expense. F-39 Table of Contents The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves, and implied volatilities. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. NOTE 9. PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P. As of December 31, 2020, the Operating Partnership had 16,181,537 common units (the “Noncontrolling Common Units”) outstanding. American Assets Trust, Inc. owned 78.8 % of the Operating Partnership at December 31, 2020. The remaining 21.3 % of the partnership interests are owned by non-affiliated investors and certain of our directors and executive officers. Common units and shares of the company's common stock have essentially the same economic characteristics in that common units and shares of the company's common stock share equally in the total net income or loss distributions of the Operating Partnership. American Assets Trust, Inc. is the Operating Partnership’s general partner and is responsible for the management of the Operating Partnership’s business. As the general partner of the Operating Partnership, the company effectively controls the ability to issue common stock of American Assets Trust, Inc. upon a limited partner’s notice of redemption. Investors who own common units have the right to cause the Operating Partnership to redeem any or all of their common units for cash equal to the then-current market value of one share of the company's common stock, or, at the company's election, shares of the company's common stock on a one-for-one basis. In addition, American Assets Trust, Inc. has generally acquired common units upon a limited partner’s notice of redemption in exchange for shares of the company's common stock. The redemption provisions of common units owned by limited partners that permit the Operating Partnership to settle in either cash or common stock at the option of the company are further evaluated in accordance with applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement to settle in unregistered shares, and determined that these common units meet the requirements to qualify for presentation as permanent equity. During the years ended December 31, 2020, 2019 and 2018, approximately 209,011 , 787,060 and 17,372 , respectively, common units were converted into shares of the company's common stock. F-40 Table of Contents NOTE 10. EQUITY OF AMERICAN ASSETS TRUST, INC. Stockholders' Equity On May 6, 2013, we entered into an at-the-market (“ATM”) equity program with four sales agents pursuant to which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $ 150.0 million. We completed $ 150.0 million of issuances under such ATM program on May 21, 2015. On May 27, 2015, we entered into a new ATM equity program with five sales agents under which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $ 250.0 million. The sales of shares of our common stock made through the ATM equity program are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. For the year ended December 31, 2020, no shares of common stock were sold through the ATM equity program. We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As of December 31, 2020, we had the capacity to issue up to an additional $ 132.6 million in shares of our common stock under our ATM equity program. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under the active ATM equity program. In June 2019, we issued and sold 10,925,000 shares of common stock in an underwritten public offering. The shares of common stock that we issued and sold included the full exercise of the underwriters' option to purchase 1,425,000 additional shares. We received net proceeds of approximately $ 472.6 million, after deducting underwriting discounts, commissions and offering expenses. Preferred Stock Authorized Shares We have been authorized to issue 10,000,000 shares of preferred stock with a par value of $ 0.01 , of which no shares were outstanding at December 31, 2020. Upon issuance, our board of directors has the ability to define the terms of the preferred shares, including voting rights, liquidation preferences, conversion and redemption provisions and dividend rates. Dividends The following table lists the dividends declared and paid on our shares of common stock and Noncontrolling Common Units for the years ended December 31, 2020, 2019 and 2018: Period Amount per Share/Unit Period Covered Dividend Paid Date First Quarter 2018 $ 0.27 January 1, 2018 to March 31, 2018 March 19, 2018 Second Quarter 2018 $ 0.27 April 1, 2018 to June 30, 2018 June 28, 2018 Third Quarter 2018 $ 0.27 July 1, 2018 to September 30, 2018 September 27, 2018 Fourth Quarter 2018 $ 0.28 October 1, 2018 to December 31, 2018 December 27, 2018 First Quarter 2019 $ 0.28 January 1, 2019 to March 31, 2019 March 28, 2019 Second Quarter 2019 $ 0.28 April 1, 2019 to June 30, 2019 June 27, 2019 Third Quarter 2019 $ 0.28 July 1, 2019 to September 30, 2019 September 26, 2019 Fourth Quarter 2019 $ 0.30 October 1, 2019 to December 31, 2019 December 26, 2019 First Quarter 2020 $ 0.30 January 1, 2020 to March 31, 2020 March 26, 2020 Second Quarter 2020 $ 0.20 April 1, 2020 to June 30, 2020 June 25, 2020 Third Quarter 2020 $ 0.25 July 1, 2020 to September 30, 2020 September 24, 2020 Fourth Quarter 2020 $ 0.25 October 1, 2020 to December 31, 2020 December 24, 2020 F-41 Table of Contents Taxability of Dividends Earnings and profits, which determine the taxability of distributions to stockholders and holders of common units, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of loss on extinguishment of debt, revenue recognition and compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation. A summary of the income tax status of dividends per share paid is as follows: Year Ended December 31, 2020 2019 2018 Per Share % Per Share % Per Share % Ordinary income $ 0.66 66.0 % $ 1.09 95.6 % $ 1.05 96.3 % Capital gain — — % — — % — — % Return of capital 0.34 34.0 % 0.05 4.4 % 0.04 3.7 % Total $ 1.00 100.0 % $ 1.14 100.0 % $ 1.09 100.0 % Stock-Based Compensation The company has established the 2011 Equity Incentive Award Plan (the "2011 Plan"), which provides for grants to directors, employees and consultants of the company and the Operating Partnership of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stock appreciation rights and other incentive awards. In June 2020, at the annual shareholder meeting, the shareholders approved the Amended and Restated 2011 Equity Incentive Award Plan ("Amended and Restated 2011 Plan"). An aggregate of 4,054,411 shares of our common stock are authorized for issuance under awards granted pursuant to the Amended and Restated 2011 Plan, and as of December 31, 2020, 2,477,277 shares of common stock remain available for future issuance. The following shares of restricted common stock have been issued as of December 31, 2020: Grant Fair Value at Grant Date Number June 12, 2018 (1) $ 37.58 5,320 December 6, 2018 (2) $ 25.68 - $ 28.18 199,790 June 11, 2019 (1) $ 45.35 4,412 December 9, 2019 (3) $ 28.06 - $ 30.97 168,596 June 9, 2020 (1) $ 33.29 6,008 December 4, 2020 (4) $ 19.02 - $ 20.83 311,566 (1) Restricted common stock issued to members of the company's non-employee directors. These awards of restricted stock will vest subject to the director's continued service on the Board of Directors on the earlier of (i) the one year anniversary of the date of grant or (ii) the date of the next annual meeting of our stockholders, if such non-employee director continues his or her service on the Board of Directors until the next annual meeting of stockholders, but not thereafter, pursuant to our independent director compensation policy. (2) Restricted common stock issued to certain of the company's senior management and other employees, which are subject to quantitative and qualitative performance criteria based vesting. Up to one-third of the shares of restricted stock may vest based on such performance criteria determined as of November 30, 2019, 2020 and 2021, subject to the employee's continued employment on those dates. (3) Restricted common stock issued to certain of the company's senior management and other employees, which are subject to quantitative and qualitative performance criteria based vesting. Up to one-third of the shares of restricted stock may vest based on such performance criteria determined as of November 30, 2020, 2021 and 2022, subject to the employee's continued employment on those dates. (4) Restricted common stock issued to certain of the company's senior management and other employees, which are subject to quantitative and qualitative performance criteria based vesting. Up to one-third of the shares of restricted stock may vest based on such performance criteria determined as of November 30, 2021, 2022 and 2023, subject to the employee's continued employment on those dates. For the performance-based stock awards, the fair value of the awards was estimated using a Monte Carlo Simulation model. Our stock price, along with the stock prices of the group of peer REITs, is assumed to follow the Multivariate Geometric Brownian Motion Process. Multivariate Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on the stock price of the company and the group REITs were estimated based on a three year look-back period. The expected growth rate of the stock prices over the “derived service period” of the employee is determined with consideration of the risk free rate as of the grant date. For the restricted stock grants that are time-vesting, we estimate the stock compensation expense based on the fair value of the stock at the grant date. F-42 Table of Contents The following table summarizes the activity of non-vested restricted stock awards during the year ended December 31, 2020: 2020 Units Weighted Average Grant Date Fair Value Balance at beginning of year 345,156 $ 28.75 Granted 317,574 20.20 Vested ( 75,687 ) 28.46 Forfeited ( 95,086 ) 27.49 Balance at end of year 491,957 $ 23.53 We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 6.3 million, $ 4.5 million and $ 3.0 million in noncash compensation expense for the years ended December 31, 2020, 2019 and 2018, respectively, each of which is included in general and administrative expense on the statement of income. Unrecognized compensation expense was $ 8.4 million at December 31, 2020, which will be recognized over a weighted-average period of 1.6 years. Earnings Per Share We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings. For the years ended December 31, 2020, 2019 and 2018, we had a weighted average of approximately 357,048 shares, 330,197 shares and 271,905 unvested shares outstanding, respectively, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares. Diluted EPS is calculated by dividing the net income attributable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method. For the year ended December 31, 2020, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable. Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive for all periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS. Earnings Per Unit of the Operating Partnership Basic earnings (loss) per unit (“EPU”) of the Operating Partnership is computed by dividing income (loss) applicable to unitholders by the weighted average Operating Partnership units outstanding, as adjusted for the effect of participating securities. Operating Partnership units granted in equity-based payment transactions are considered participating securities prior to vesting. The impact of unvested Operating Partnership unit awards on EPU has been calculated using the two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested Operating Partnership units’ participation rights in undistributed earnings (losses). The calculation of diluted earnings per unit for the year ended December 31, 2020, 2019 and 2018 does not include 357,048 , 330,197 , and 271,905 unvested weighted average Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive. F-43 Table of Contents The computation of basic and diluted EPS for American Assets Trust, Inc. is presented below (dollars in thousands, except share and per share amounts): Year Ended December 31, 2020 2019 2018 NUMERATOR Net income $ 35,588 $ 60,188 $ 27,202 Less: Net income attributable to restricted shares ( 383 ) ( 381 ) ( 311 ) Less: Income attributable to unitholders in the Operating Partnership ( 7,545 ) ( 14,089 ) ( 7,205 ) Net income attributable to common stockholders—basic $ 27,660 $ 45,718 $ 19,686 Income attributable to American Assets Trust, Inc. common stockholders—basic $ 27,660 $ 45,718 $ 19,686 Plus: Income attributable to unitholders in the Operating Partnership 7,545 14,089 7,205 Net income attributable to common stockholders—diluted $ 35,205 $ 59,807 $ 26,891 DENOMINATOR Weighted average common shares outstanding—basic 59,806,309 54,110,949 46,950,812 Effect of dilutive securities—conversion of Operating Partnership units 16,313,454 16,675,183 17,185,747 Weighted average common shares outstanding—diluted 76,119,763 70,786,132 64,136,559 Earnings per common share, basic $ 0.46 $ 0.84 $ 0.42 Earnings per common share, diluted $ 0.46 $ 0.84 $ 0.42 NOTE 11. INCOME TAXES We elected to be taxed as a REIT and operate in a manner that allows us to qualify as a REIT, for federal income tax purposes commencing with our taxable year ending December 31, 2011. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. Taxable income from non-REIT activities managed through our TRS is subject to federal and state income taxes. We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes. We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases. Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic 740, Income Taxes . A deferred tax liability is included in our consolidated balance sheets of $ 0.6 million and $ 0.3 million as of December 31, 2020 and 2019, respectively, in relation to real estate asset basis differences and prepaid expenses for our TRS. The income tax provision included in other income (expense) on the consolidated statement of income is as follows (in thousands): Year Ended December 31, 2020 2019 2018 Current: Federal $ ( 542 ) $ 48 $ 60 State 412 625 465 Deferred: Federal $ ( 80 ) $ 237 $ ( 6 ) State 201 ( 91 ) ( 192 ) Provision for income taxes (benefit) $ ( 9 ) $ 819 $ 327 F-44 Table of Contents NOTE 12. COMMITMENTS AND CONTINGENCIES Legal We are sometimes involved in various disputes, lawsuits, warranty claims, environmental and other matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters. We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also, under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us as owner of the properties due to certain matters relating to the operation of the properties by the tenant. Commitments See Footnote 13 for description of our leases, as a lessee. We have management agreements with Outrigger Hotels & Resorts or an affiliate thereof (“Outrigger”) pursuant to which Outrigger manages each of the retail and hotel portions of the Waikiki Beach Walk property. Under the management agreement with Outrigger relating to the retail portion of Waikiki Beach Walk (the “retail management agreement”), we pay Outrigger a monthly management fee of 3.0 % of net revenues from the retail portion of Waikiki Beach Walk. Pursuant to the terms of the retail management agreement, if the agreement is terminated in certain instances, including our election not to repair damage or destruction at the property, a condemnation or our failure to make required working capital infusions, we would be obligated to pay Outrigger a termination fee equal to the sum of the management fees paid for the two months immediately preceding the termination date. The retail management agreement may not be terminated by us or by Outrigger without cause. Under our management agreement with Outrigger relating to the hotel portion of Waikiki Beach Walk (the “hotel management agreement”), we pay Outrigger a monthly management fee of 6.0 % of the hotel's gross operating profit, as well as 3.0 % of the hotel's gross revenues; provided that the aggregate management fee payable to Outrigger for any year shall not exceed 3.5 % of the hotel's gross revenues for such fiscal year. Pursuant to the terms of the hotel management agreement, if the agreement is terminated in certain instances, including upon a transfer by us of the hotel or upon a default by us under the hotel management agreement, we would be required to pay a cancellation fee calculated by multiplying (1) the management fees for the previous 12 months by (2) (a) eight , if the agreement is terminated in the first 11 years of its term, or (b) four , three , two or one , if the agreement is terminated in the twelfth, thirteenth, fourteenth or fifteenth year, respectively, of its term. The hotel management agreement may not be terminated by us or by Outrigger without cause. A wholly owned subsidiary of our Operating Partnership, WBW Hotel Lessee LLC, entered into a franchise license agreement with Embassy Suites Franchise LLC, the franchisor of the brand “Embassy Suites™,” to obtain the non-exclusive right to operate the hotel under the Embassy Suites brand for 20 years. The franchise license agreement provides that WBW Hotel Lessee LLC must comply with certain management, operational, record keeping, accounting, reporting and marketing standards and procedures. In connection with this agreement, we are also subject to the terms of a product improvement plan pursuant to which we expect to undertake certain actions to ensure that our hotel's infrastructure is maintained in compliance with the franchisor's brand standards. In addition, we must pay to Embassy Suites Franchise LLC a monthly franchise royalty fee equal to 4.0 % of the hotel's gross room revenue through December 2021 and 5.0 % of the hotel's gross room revenue thereafter, as well as a monthly program fee equal to 4.0 % of the hotel's gross room revenue. If the franchise license is terminated due to our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment, which could be as high as $ 5.5 million based on operating performance through December 31, 2020. F-45 Table of Contents Our Del Monte Center property has ongoing environmental remediation related to ground water contamination. The environmental issue existed at purchase and is currently in the final stages of remediation. The final stages of the remediation will include routine, long term ground monitoring by the appropriate regulatory agency over the next five years to seven years years. The work performed is financed through an escrow account funded by the seller upon our purchase of the Del Monte Center. We believe the funds in the escrow account are sufficient for the remaining work to be performed. However, if further work is required costing more than the remaining escrow funds, we could be required to pay such overage, although we may have a contractual claim for such costs against the prior owner or our environmental remediation consultant. As of December 31, 2020, the company accrued approximately $ 6.6 million for transfer taxes in connection with its Offering. The company believes that it has filed all necessary forms with the requisite taxing authorities. Concentrations of Credit Risk Our properties are located in Southern California, Northern California, Hawaii, Oregon, Texas and Washington. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate. Fifteen of our consolidated properties, representing 45.1 % of our total revenue for the year ended December 31, 2020, are located in Southern California, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio. Our mixed-use property located in Honolulu, Hawaii accounted for 8.2 % of total revenues for the year ended December 31, 2020. Tenants in the retail industry accounted for 25.6 % and 29.3 % of total revenues for the years December 31, 2020 and 2019, respectively. This makes us susceptible to demand for retail rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the retail industry. Two retail properties, Alamo Quarry Market and Waikele Center, accounted for 9.1 % and 10.0 % of total revenues for the years ended December 31, 2020 and 2019, respectively. Tenants in the office industry accounted for 51.5 % and 39.5 % of total revenues for the years December 31, 2020 and 2019, respectively. This makes us susceptible to demand for office rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the office industry. For the years ended December 31, 2020 and 2019, no tenant accounted for more than 10.0 % of our total rental revenue. At December 31, 2020, Google LLC at The Landmark at One Market accounted for 10.0 % of total annualized base rent. Four other tenants (LPL Holdings, Inc., Autodesk, Inc., Smartsheet, Inc., and VMware, Inc.) comprise 17.6 % of our total annualized base rent at December 31, 2020, in the aggregate. No other tenants represent greater than 2.0 % of our total annualized base rent. Total annualized base rent used for the percentage calculations includes the annualized base rent as of December 31, 2020 for our office properties, retail properties and the retail portion of our mixed-use property. NOTE 13. LEASES Lessor Operating Leases We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases. Our leases with office, retail, mixed-use and residential tenants are classified as operating leases. Leases at our office and retail properties and the retail portion of our mixed-use property generally range from three years to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents, usually provide for cost recoveries for the tenant’s share of certain operating costs. Our leases may also include variable lease payments in the form of percentage rents based on the tenant’s level of sales achieved in excess of a breakpoint threshold. Leases on apartments generally range from seven months to fifteen months , with a majority having 12 months lease terms. Rooms at the hotel portion of our mixed-use property are rented on a nightly basis. Leases at our office and retail properties and the retail portion of our mixed-use property may contain lease extension options, at our lessee's discretion. The extension options are generally for 3 to 10 years and contain primarily rent at fixed rates or the prevailing market rent. The extension options are generally exercisable 6 to 12 months prior to the expiration of the lease and require the lessee to not be in default of the lease terms. We attempt to maximize the amount we expect to derive from the underlying real estate property following the end of a lease, to the extent it is not extended. We maintain a proactive leasing and capital improvement program that, combined with F-46 Table of Contents the quality and locations of our properties, has made our properties attractive to tenants. However, the residual value of a real estate property is still subject to various market-specific, asset-specific, and tenant-specific risks and characteristics. At December 31, 2020, our retail, office and mixed-use properties are located in five states: California, Oregon, Hawaii, Washington and Texas. At December 31, 2020, we had approximately 816 leases with office and retail tenants, including the retail portion of our mixed-use property. Our multifamily properties are located in Southern California and Portland, Oregon, and we had 1,722 leases with residential tenants at December 31, 2020, excluding Santa Fe Park RV Resort. As of December 31, 2020, minimum future rentals from noncancelable operating leases before any reserve for uncollectible amounts and assuming no early lease terminations, at our office and retail properties and the retail portion of our mixed-use property are as follows for the years ended December 31 (in thousands): 2021 $ 222,357 2022 210,536 2023 192,702 2024 163,025 2025 142,446 Thereafter 435,100 Total $ 1,366,166 The above future minimum rentals exclude residential leases, which are typically range from seven months to fifteen months , and exclude the hotel, as rooms are rented on a nightly basis. Lessee Operating Leases We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases. At the Landmark at One Market, we lease, as lessee, a building adjacent to the Landmark at One Market under an operating lease effective through June 30, 2026, which we have the option to extend until 2031 by way of the remaining five years extension option (the "Annex Lease"). The lease payments under the extension option provided for under the Annex Lease will be equal to the fair rental value at the time the extension option is exercised. The extension option is included in the calculation of the right-of-use asset and lease liability as we are reasonably certain of exercising the extension option. In March 2020, we exercised a five years extension option to extend the Annex Lease through June 30, 2026, which was memorialized in a lease amendment executed in August 2020 that additionally modified other certain lease payment terms. At Waikiki Beach Walk, we lease a portion of the building of which Quiksilver is currently in possession, under an operating lease effective through December 31, 2021. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. F-47 Table of Contents Current annual payments under the operating leases are as follows, as of December 31, 2020 (in thousands): Year Ending December 31, 2021 $ 3,215 2022 3,232 2023 3,328 2024 3,428 2025 3,531 Thereafter 19,710 Total lease payments $ 36,444 Imputed interest $ ( 6,384 ) Present value of lease liability $ 30,060 Lease costs under the operating leases are as follows (in thousands): Year Ended December 31, 2020 2019 Operating lease cost $ 3,902 $ 3,334 Variable lease cost — — Sublease income ( 4,297 ) ( 3,098 ) Total lease (income) cost $ ( 395 ) $ 236 Weighted-average remaining lease term - operating leases (in years) 10.2 Weighted-average discount rate - operating leases 3.22 % Supplemental cash flow information and non-cash activity related to our operating leases are as follow (in thousands): Year Ended December 31, 2020 2019 Operating cash flow information: Cash paid for amounts included in the measurement of lease liabilities $ 3,422 $ 3,347 Non-cash activity: Right-of-use assets obtained in exchange for operating lease obligations $ 27,321 $ 7,661 Subleases At The Landmark at One Market, we (as sublandlord) sublease the Annex Lease building under operating leases effective through December 31, 2029. The subleases contain extension options, subject to our ability to extend the Annex Lease, that can extend the subleases through December 31, 2039 at the fair rental value at the time the extension option is exercised. At Waikiki Beach Walk, we (as sublandlord) sublease a portion of the building to Quiksilver under an operating lease effective through December 31, 2021. F-48 Table of Contents NOTE 14. COMPONENTS OF RENTAL INCOME AND EXPENSE The principal components of rental income are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Minimum rents Office $ 170,853 $ 136,118 $ 95,081 Retail 82,176 99,601 77,147 Multifamily 47,071 47,448 46,897 Mixed-Use 7,302 15,702 11,019 Cost reimbursement — — 34,584 Percentage rent 3,516 2,476 3,149 Hotel revenue 17,209 40,297 40,049 Other 2,185 2,223 1,611 Total rental income $ 330,312 $ 343,865 $ 309,537 Minimum rents include $ 18.9 million, $ 3.2 million and $ 2.4 million for the years ended December 31, 2020, 2019 and 2018, respectively, to recognize minimum rents on a straight-line basis. In addition, minimum rents include $ 3.9 million, $ 3.8 million and $ 3.6 million for the years ended December 31, 2020, 2019 and 2018, respectively, to recognize the amortization of above and below market leases. The principal components of rental expenses are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Rental operating $ 38,194 $ 38,331 $ 37,322 Hotel operating 13,691 24,522 24,030 Repairs and maintenance 17,813 17,035 13,486 Marketing 2,023 2,538 2,108 Rent 3,955 3,372 3,216 Hawaii excise tax 2,479 4,160 4,333 Management fees 1,023 2,009 1,987 Total rental expenses $ 79,178 $ 91,967 $ 86,482 NOTE 15. OTHER INCOME (EXPENSE) The principal components of other income (expense), net are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Interest and investment income $ 436 $ 696 $ 238 Income tax benefit (expense) 9 ( 819 ) ( 327 ) Other non-operating income 2 1 4 Total other income (expense) $ 447 $ ( 122 ) $ ( 85 ) F-49 Table of Contents NOTE 16. RELATED PARTY TRANSACTIONS At Torrey Reserve Campus, we previously leased space to ICW, an entity owned and controlled by Ernest Rady. Rental revenue recognized on the leases of $ 0.0 million, $ 0.0 million and $ 0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, is included in rental income on the consolidated statements of comprehensive income.. During the first quarter of 2019, we terminated the lease agreement with American Assets, Inc. ("AAI"), an entity owned and controlled by Mr. Rady, and entered into a new lease agreement with AAI for office space at Torrey Reserve Campus. Rents commenced on March 1, 2019 for an initial lease term of three years at an average annual rental rate of $ 0.2 million. Rental revenue recognized on the leases of $ 0.2 million, $ 0.2 million and $ 0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, is included in rental income on the consolidated statements of comprehensive income. During the third quarter of 2020, we entered into a new lease with AAI for office space at Torrey Point to replace its existing lease at Torrey Reserve Campus. Rents are expected to begin in January 2021 for an initial lease term of ten years at an average annual rental rate of $ 0.2 million. At Torrey Reserve Campus, we lease space to EDisability, LLC, an entity majority owned and controlled by Ernest Rady. During the fourth quarter of 2020, we entered into a lease termination agreement with EDisability, LLC and entered into a new lease agreement for office space at Torrey Reserve Campus. Rents under the new lease agreement are expected to commence June 1, 2021 for an initial three years at an average rental rate of $ 0.1 million. Rent revenue recognized on the lease of $ 0.2 million, $ 0.2 million and $ 0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, is included in rental income on the consolidated statements of comprehensive income. On occasion, the company utilizes aircraft services provided by AAI Aviation, Inc. ("AAIA"), an entity owned and controlled by Ernest Rady. For the years ending December 31, 2020, 2019 and 2018, we incurred approximately $ 0.0 million, $ 0.2 million and $ 0.1 million, respectively, of expenses related to aircraft services of AAIA or reimbursement to Mr. Rady (or his trust) for use of the aircraft owned by AAIA. These expenses are recorded as general and administrative expenses in our consolidated statements of comprehensive income. As of December 31, 2020, Mr. Rady and his affiliates owned approximately 13.4 % of our outstanding common stock and 19.5 % of our outstanding common units, which together represent an approximate 33 % beneficial interest in our company on a fully diluted basis. The Waikiki Beach Walk entities have a 47.7 % investment in WBW CHP LLC, an entity that was formed to, among other things, construct a chilled water plant to provide air conditioning to the property and other adjacent facilities. The operating expenses of WBW CHP LLC are recovered through reimbursements from its members, and reimbursements to WBW CHP LLC of $ 1.0 million, $ 1.1 million and $ 1.1 million were made for the years ended December 31, 2020, 2019 and 2018, respectively, and included in rental expenses on the statements of income. NOTE 17. SEGMENT REPORTING Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We review operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. However, we have aggregated our properties into reportable segments as the properties share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies. We operate in four business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369 -room all-suite hotel. We evaluate the performance of our segments based on segment profit which is defined as property revenue less property expenses. We do not use asset information as a measure to assess performance and make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, F-50 Table of Contents interest expense, depreciation and amortization expense and other income and expense are not included in segment profit as our internal reporting addresses these items on a corporate level. Segment profit is not a measure of operating income or cash flows from operating activities as measured by GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate segment profit in the same manner. We consider segment profit to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our properties. The following table represents operating activity within our reportable segments (in thousands): Year Ended December 31, 2020 2019 2018 Total Office Property revenue 177,554 144,683 112,362 Property expense ( 47,424 ) ( 42,234 ) ( 33,860 ) Segment profit 130,130 102,449 78,502 Total Retail Property revenue $ 88,280 $ 107,604 $ 105,552 Property expense ( 27,374 ) ( 30,633 ) ( 30,078 ) Segment profit 60,906 76,971 75,474 Total Multifamily Property revenue 50,327 51,066 50,627 Property expense ( 22,074 ) ( 20,863 ) ( 20,441 ) Segment profit 28,253 30,203 30,186 Total Mixed-Use Property revenue 28,412 63,388 62,326 Property expense ( 24,247 ) ( 38,250 ) ( 37,076 ) Segment profit 4,165 25,138 25,250 Total segments’ profit $ 223,454 $ 234,761 $ 209,412 The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands): Year Ended December 31, 2020 2019 2018 Total segments' profit $ 223,454 $ 234,761 $ 209,412 General and administrative ( 26,581 ) ( 24,871 ) ( 22,784 ) Depreciation and amortization ( 108,292 ) ( 96,205 ) ( 107,093 ) Interest expense ( 53,440 ) ( 54,008 ) ( 52,248 ) Gain on sale of real estate — 633 — Other income (expense), net 447 ( 122 ) ( 85 ) Net income 35,588 60,188 27,202 Net income attributable to restricted shares ( 383 ) ( 381 ) ( 311 ) Net income attributable to unitholders in the Operating Partnership ( 7,545 ) ( 14,089 ) ( 7,205 ) Net income attributable to American Assets Trust, Inc. stockholders $ 27,660 $ 45,718 $ 19,686 F-51 Table of Contents The following table shows net real estate and secured note payable balances for each of the segments, along with their capital expenditures for each year (in thousands): December 31, 2020 December 31, 2019 Net real estate Office $ 1,317,107 $ 1,317,854 Retail 607,918 624,912 Multifamily 389,804 401,152 Mixed-Use 177,905 179,557 $ 2,492,734 $ 2,523,475 Secured Notes Payable (1) Office $ 111,000 $ 127,768 Retail — 34,235 $ 111,000 $ 162,003 Capital Expenditures (2) Office $ 52,882 $ 64,549 Retail 8,596 22,844 Multifamily 3,897 3,711 Mixed-Use 3,702 8,490 $ 69,077 $ 99,594 (1) Excludes unamortized debt issuance costs of $ 0.1 million and $ 0.1 million as of December 31, 2020 and 2019, respectively. (2) Capital expenditures represent cash paid for capital expenditures during the year and includes leasing commissions paid. F-52 NOTE 18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The tables below reflect selected American Assets Trust, Inc. quarterly information for 2020 and 2019 (in thousands, except per shares data): Three Months Ended December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Total revenue $ 81,347 $ 84,374 $ 82,109 $ 96,743 Operating income 16,415 20,323 22,995 28,848 Net income 3,788 6,490 9,826 15,484 Net income attributable to restricted shares ( 123 ) ( 87 ) ( 69 ) ( 104 ) Net income loss attributable to unitholders in the Operating Partnership ( 767 ) ( 1,365 ) ( 2,101 ) ( 3,312 ) Net income attributable to American Assets Trust, Inc. stockholders $ 2,898 $ 5,038 $ 7,656 $ 12,068 Net income per share attributable to common stockholders - basic and diluted $ 0.05 $ 0.08 $ 0.13 $ 0.20 Three Months Ended December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 Total revenue $ 98,947 $ 98,362 $ 84,113 $ 85,319 Operating income 29,993 30,384 24,487 28,821 Net income (loss) 16,485 16,519 11,941 15,243 Net (income) loss attributable to restricted shares ( 104 ) ( 92 ) ( 92 ) ( 93 ) Net (income) loss attributable to unitholders in the Operating Partnership ( 3,536 ) ( 3,565 ) ( 2,933 ) ( 4,055 ) Net income (loss) attributable to American Assets Trust, Inc. stockholders $ 12,845 $ 12,862 $ 8,916 $ 11,095 Net income (loss) per share attributable to common stockholders - basic and diluted $ 0.22 $ 0.22 $ 0.18 $ 0.24 F-53 The tables below reflect selected American Assets Trust, L.P. quarterly information for 2020 and 2019 (in thousands, except per shares data): Three Months Ended December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Total revenue $ 81,347 $ 84,374 $ 82,109 $ 96,743 Operating income 16,415 20,323 22,995 28,848 Net income 3,788 6,490 9,826 15,484 Net income attributable to restricted shares ( 123 ) ( 87 ) ( 69 ) ( 104 ) Net income attributable to American Assets Trust, L.P. unit holders $ 3,665 $ 6,403 $ 9,757 $ 15,380 Net income per unit attributable to unit holders - basic and diluted $ 0.05 $ 0.08 $ 0.13 $ 0.20 Three Months Ended December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 Total revenue $ 98,947 $ 98,362 $ 84,113 $ 85,319 Operating income 29,993 30,384 24,487 28,821 Net income (loss) 16,485 16,519 11,941 15,243 Net (income) loss attributable to restricted shares ( 104 ) ( 92 ) ( 92 ) ( 93 ) Net income (loss) attributable to American Assets Trust, L.P. unit holders $ 16,381 $ 16,427 $ 11,849 $ 15,150 Net income per unit attributable to common unit holders - basic and diluted $ 0.22 $ 0.22 $ 0.18 $ 0.24 F-54 NOTE 19. SUBSEQUENT EVENTS On January 26, 2021, we issued $ 500 million of fixed rate senior unsecured notes that mature on February 1, 2031 and bear interest at 3.375 % per annum. The notes were priced at 98.935 % of the principal amount with a yield to maturity of 3.502 %. The net proceeds from the note offering after net issuance discount, underwriting fees, and other costs were approximately $ 489.9 million, which were primarily used to prepay our $ 150 million Senior Guaranteed Notes, Series A, with a prepayment penalty of approximately $ 3.9 million, on January 26, 2021, repay our $ 100 million outstanding balance under Revolver Loan on January 26, 2021, fund the development of the La Jolla Commons III office building and for general corporate purposes. Table of Contents American Assets Trust, Inc. and American Assets Trust, L.P. SCHEDULE III—Consolidated Real Estate and Accumulated Depreciation (In Thousands) Encumbrance as of December 31, 2020 Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount at December 31, 2020 Accumulated Depreciation and Amortization Year Built/ Renovated Date Acquired Life on which depreciation in latest income statements is computed Description Land Building and Improvements Land Building and Improvements Alamo Quarry Market $ — $ 26,396 $ 109,294 $ 18,227 $ 26,816 $ 127,101 $ ( 64,168 ) 1997/1999 12/9/2003 35 years Carmel Country Plaza — 4,200 — 13,074 4,200 13,074 ( 9,006 ) 1991 1/10/1989 35 years Carmel Mountain Plaza — 22,477 65,217 38,934 31,034 95,594 ( 47,365 ) 1994/2014 3/28/2003 35 years Del Monte Center — 27,412 87,570 35,136 27,117 123,001 ( 70,136 ) 1967/1984/2006 4/8/2004 35 years Gateway Marketplace — 17,363 21,644 1,239 17,363 22,883 ( 2,889 ) 1997/2016 7/6/2017 35 years Geary Marketplace — 8,239 12,353 212 8,239 12,565 ( 3,190 ) 2012 12/19/2012 35 years Hassalo on Eighth - Retail — — — 28,529 597 27,932 ( 6,356 ) 2015 7/1/2011 35 years Lomas Santa Fe Plaza — 8,600 11,282 13,767 8,620 25,029 ( 17,927 ) 1972/1997 6/12/1995 35 years The Shops at Kalakaua — 13,993 10,817 144 14,006 10,948 ( 4,989 ) 1971/2006 3/31/2005 35 years Solana Beach Towne Centre — 40,980 38,842 4,287 40,980 43,129 ( 13,754 ) 1973/2000/2004 1/19/2011 35 years South Bay Marketplace — 4,401 — 12,513 4,401 12,513 ( 8,009 ) 1997 9/16/1995 35 years Waikele Center — 55,593 126,858 42,934 70,643 154,742 ( 66,820 ) 1993/2008 9/16/2004 35 years City Center Bellevue 111,000 25,135 190,998 53,599 25,135 244,597 ( 62,613 ) 1987 8/21/2012 40 years First & Main — 14,697 109,739 5,933 14,697 115,672 ( 34,125 ) 2010 3/11/2011 40 years The Landmark at One Market — 34,575 141,196 27,900 34,575 169,096 ( 40,885 ) 1917/2000 6/30/2010 40 years Lloyd District Portfolio — 18,660 61,401 101,072 11,845 169,288 ( 43,017 ) 1940-2015 7/1/2011 40 years One Beach Street — 15,332 18,017 4,192 15,332 22,209 ( 6,284 ) 1924/1972/1987/1992 1/24/2012 40 years Solana Beach Corporate Centre: Solana Beach Corporate Centre I-II — 7,111 17,100 7,514 7,111 24,614 ( 7,623 ) 1982/2005 1/19/2011 40 years Solana Beach Corporate Centre III-IV — 7,298 27,887 5,678 7,298 33,565 ( 9,616 ) 1982/2005 1/19/2011 40 years Solana Beach Corporate Centre Land — 487 — 60 547 — — N/A 1/19/2011 N/A Torrey Reserve Campus: Torrey Plaza — 4,095 — 56,586 5,408 55,273 ( 20,723 ) 1996-1997/2014 6/6/1989 40 years Pacific North Court — 3,263 — 26,645 4,309 25,599 ( 12,808 ) 1997-1998 6/6/1989 40 years Pacific South Court — 3,285 — 40,066 4,226 39,125 ( 16,498 ) 1996-1997 6/6/1989 40 years Pacific VC — 1,413 — 10,521 2,148 9,786 ( 5,651 ) 1998/2000 6/6/1989 40 years Pacific Torrey Daycare — 715 — 1,941 911 1,745 ( 984 ) 1996-1997 6/6/1989 40 years Torrey Reserve Building 6 — — — 8,012 682 7,330 ( 2,081 ) 2013 6/6/1989 40 years Torrey Reserve Building 5 — — — 4,012 1,017 2,995 ( 518 ) 2014 6/6/1989 40 years Torrey Reserve Building 13 & 14 — — — 16,138 2,188 13,950 ( 2,770 ) 2015 6/6/1989 40 years Torrey Point — 2,073 741 49,668 5,050 47,432 ( 3,346 ) 2018 5/9/1997 40 years La Jolla Commons La Jolla Commons I-II — 62,312 393,662 2,407 62,312 396,069 ( 21,227 ) 2008-2014 6/20/2019 40 years La Jolla Commons Land — 20,446 — 4,294 20,446 4,294 — N/A 6/20/2019 N/A Imperial Beach Gardens — 1,281 4,820 5,445 1,281 10,265 ( 8,425 ) 1959/2008 7/31/1985 30 years Loma Palisades — 14,000 16,570 29,900 14,052 46,418 ( 30,582 ) 1958/2001-2008 7/20/1990 30 years Mariner’s Point — 2,744 4,540 1,731 2,744 6,271 ( 3,949 ) 1986 5/9/2001 30 years Santa Fe Park RV Resort — 401 928 1,263 401 2,191 ( 1,562 ) 1971/2007-2008 6/1/1979 30 years Pacific Ridge Apartments — 47,971 178,497 2,062 47,971 180,559 ( 24,598 ) 2013 4/28/2017 30 years F-56 Table of Contents American Assets Trust, Inc. and American Assets Trust, L.P. SCHEDULE III—Consolidated Real Estate and Accumulated Depreciation (In Thousands) Encumbrance as of December 31, 2020 Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount at December 31, 2020 Accumulated Depreciation and Amortization Year Built/ Renovated Date Acquired Life on which depreciation in latest income statements is computed Description Land Building and Improvements Land Building and Improvements Hassalo on Eighth - Multifamily — — — 178,397 6,219 172,178 ( 31,629 ) 2015 7/1/2011 30 years Waikiki Beach Walk: Retail — 45,995 74,943 428 45,995 75,371 ( 22,940 ) 2006 1/19/2011 35 years Hotel — 30,640 60,029 13,886 30,640 73,915 ( 25,077 ) 2008/2020 1/19/2011 35 years $ 111,000 $ 593,583 $ 1,784,945 $ 868,346 $ 628,556 $ 2,618,318 $ ( 754,140 ) (1) For Federal tax purposes, the aggregate tax basis is approximately $ 2.3 billion as of December 31, 2020. F-57 Table of Contents American Assets Trust, Inc. and American Assets Trust, L.P. SCHEDULE III—Consolidated Real Estate and Accumulated Depreciation -(Continued) (In Thousands) Year Ended December 31, 2020 2019 2018 Real estate assets Balance, beginning of period $ 3,188,697 2,630,191 2,614,138 Additions: Property acquisitions — 476,421 — Improvements 64,997 101,285 62,790 Deductions: Cost of Real Estate Sold — ( 8,845 ) — Other (1) ( 6,820 ) ( 10,355 ) ( 46,737 ) Balance, end of period $ 3,246,874 $ 3,188,697 $ 2,630,191 Accumulated depreciation Balance, beginning of period $ 665,222 $ 590,338 $ 537,431 Additions—depreciation 95,738 85,428 99,644 Deductions: Cost of Real Estate Sold — ( 189 ) — Other (1) ( 6,820 ) ( 10,355 ) ( 46,737 ) Balance, end of period $ 754,140 $ 665,222 $ 590,338 (1) Other deductions for the years ended December 31, 2020, 2019 and 2018 represent the write-off of fully depreciated assets. F-58