What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-11 compared with 2021-02-16 · 157 added, 170 removed, 479 unchanged (41% of the section changed)

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As used in this section, unless the context otherwise requires, “we,” “us,” “our,” and “our company” mean American Assets Trust, Inc., a Maryland corporation and its consolidated subsidiaries, including American Assets Trust, L.P.

In statements regarding qualification as a REIT, such terms refer solely to American Assets Trust, Inc.

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.

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

As of December 31, 2020, our portfolio was comprised of nine office properties;

As of December 31, 2021, our portfolio was comprised of eleven office properties;

twelve retail shopping centers;

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and six multifamily properties.

Additionally, as of December 31, 2020, we owned land at three of our properties that we classified as held for development and construction in progress.

Our core markets include San Diego, the San Francisco Bay Area, Portland, Oregon, Bellevue, Washington and Oahu, Hawaii.

Additionally, as of December 31, 2021, we owned land at three of our properties that we classified as held for development or construction in progress.

Our core markets include San Diego, California;

San Francisco, California;

Portland, Oregon, Bellevue;

Washington and Oahu, Hawaii.

Our company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.8% of our Operating Partnership as of December 31, 2021.

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We evaluate our properties on an ongoing basis to identify these types of opportunities.

We intend to opportunistically pursue projects in our development pipeline including future phases of La Jolla Commons, Lloyd District Portfolio, as well as other redevelopments at Waikele Center.

We intend to opportunistically pursue projects in our development pipeline including future phases of La Jolla Commons and Lloyd Portfolio, as well as other redevelopments at Waikele Center.

The commencement of these developments is based on, among other things, market conditions and our evaluation of whether such opportunities would generate appropriate risk adjusted financial returns.

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Any growth from acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles.

Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance a property acquisition.

Generally, our acquisitions are initially financed by available

cash, mortgage loans and/or borrowings under our second amended and restated credit facility, which may be repaid later with funds raised through the issuance of new equity or new long-term debt.

We are closely monitoring the impact of COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our tenants and business partners.

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.

Changes in interest rates may affect our success in

achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance a property acquisition.

Generally, our acquisitions are initially financed by available cash, mortgage loans and/or borrowings under our credit facility, which may be repaid later with funds raised through the issuance of new equity or new long-term debt.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it has and will impact our tenants and business partners.

We are unable to predict the future 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 (including as the pandemic evolves due to future mutations of the COVID-19 virus), the ongoing governmental, business and individual actions taken to contain the pandemic or mitigate its impact, the availability and adoption of COVID-19 vaccines 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, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

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

The global impact of the pandemic continues to rapidly evolve.

Certain states and cities, including where we own properties, have development sites and where our principal place of business is located, have at various points in time, reacted by instituting quarantines, restrictions on travel, "stay-at-home" orders or “shelter in place” rules, social distancing measures, and restrictions on business operations and/or construction projects (including, required shut-downs in some instances).

It is unclear how customers’ concerns about COVID-19 transmission and sensitivities to the transmission of other diseases will impact their willingness to visit certain of our tenants' businesses.

As a result, the COVID-19 pandemic has negatively impacted almost every industry directly or indirectly, including industries in which the Company and our tenants operate, and may continue to do so.

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.

In addition, we cannot predict the impact that COVID-19 will have on our tenants and other business partners;

In addition, we cannot predict the impact that COVID-19 will ultimately have on our tenants and other business partners;

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

For the year ended December 31, 2020, we have collected to date approximately 99% of office rents, 78% of retail rents (including retail component of Waikiki Beach Walk) and 96% of multifamily rents that were due during the year ended December 31, 2020.

During the year ended December 31, 2020, we received and executed a significant amount of rent deferment requests from various tenants, primarily within the retail segment, as a result of COVID-19.

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

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

As of December 31, 2020, we have entered into lease modifications that resulted in COVID-19 adjustments (including rent deferrals and other monetary lease concessions) for approximately $13.4 million or 4% of the rent originally contracted for the year ended December 31, 2020.

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

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

For the fourth quarter of 2021, we have collected to date approximately 100% of office rents, 97% of retail rents (including retail component of Waikiki Beach Walk) and 97% of multifamily rents that were due during such period.

Additionally, for the fourth quarter of 2021, we collected approximately $0.5 million or 96% of the deferred rent repayments due during such period.

We believe our financial condition and liquidity are currently strong.

Although there is uncertainty related to the the COVID-19 pandemic’s impact on our future results, we believe our efficient business model and steps we have taken to strengthen our balance sheet will continue to allow us to manage our business through this evolving crisis.

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

Due to COVID-19, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity.

See Part II, Item 1A - “Risk Factors” - “The ongoing COVID-10 pandemic, and restrictions intended to prevent its spread, could adversely impact our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders."

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law to provide widespread emergency relief for the economy and to provide aid to corporations.

The CARES Act includes several significant provisions related to taxes, refundable payroll tax credits and deferment of social security payments.

We continue to evaluate the relief options available under the CARES Act.

We will continue to assess these options, and any subsequent legislation or other relief packages, including the accompanying restrictions on our business, as the pandemic continues to evolve.

Due to the constantly changing nature of the COVID-19 pandemic, we cannot reasonably estimate with any degree of certainty the future impact the pandemic may have on our results of operations, financial position, and liquidity.

We have provided certain information on a total portfolio, same-store and redevelopment same-store basis.

being compared, properties under development, properties classified as held for development and properties classified as discontinued operations.

Information provided on a same-store basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared, properties under development, properties classified as held for development and properties classified as discontinued operations.

Information provided on a redevelopment same-store basis includes the results of properties undergoing significant redevelopment for the entirety or portion of both periods being compared.

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Properties are deemed stabilized typically at the earlier of (1) reaching 90% occupancy or (2) four quarters following a property's inclusion in operating real estate.

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

We typically remove properties from same-store properties when the development, redevelopment or expansion has or

is expected to have a significant impact on the property's annualized base rent, occupancy and operating income within the calendar year.

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

In our determination of same-store and redevelopment same-store properties, Waikele Center and One Beach Street have been identified as a same-store redevelopment property due to significant construction activity.

Retail same-store net operating income decreased approximately 23.6% for the year ended December 31, 2020, respectively, compared to 2019.

Retail redevelopment same-store net operating income decreased approximately 20.6% for the year ended December 31, 2020, respectively, compared to 2019.

In our determination of same-store and redevelopment same-store properties, One Beach Street has been identified as a same-store redevelopment property due to significant construction activity.

Below is a summary of our same-store composition for the years ended December 31, 2021, 2020 and 2019.

For the year ended December 31, 2021, when compared to the designations for the year ended December 31, 2020, Waikele Center was reclassified to same-store properties as there is currently no redevelopment activity on the property.

Waikiki Beach Walk-Retail and Embassy Suites™ Hotel is classified as a non-same-store property due to significant spalling repair activity impacting the hotel portion of the property's operations, which was completed on September 30, 2020.

Eastgate Office Park is classified as a non-same-store property, as it was acquired on July 7, 2021.

Corporate Campus East III is also classified as a non-same-store property, as it was acquired on September 10, 2021.

For the year ended December 31, 2020, when compared to the designations for the year ended December 31, 2019, Torrey Point was reclassified to same-store properties as the property was placed into operations and became available for occupancy in August 2018.

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

For the year ended December 31, 2019, when compared to the designations for the year ended December 31, 2018, Pacific Ridge Apartments and Gateway Marketplace were reclassified to same-store properties as the entities were acquired on April 28, 2017 and July 6, 2017, respectively, and are comparable for the year ended December 31, 2019.

Waikiki Beach Walk Retail and Embassy Suites™ Hotel was reclassified to non-same-store properties when compared to the designation for the year ended December 31, 2018 due to spalling repair activity disrupting the hotel portion of the properties operations.

Additionally, Waikele Center was transferred out of same-store properties due to significant redevelopment activity for the year ended December 31, 2018.

Torrey Point was placed into operations and became available for occupancy in August 2018 and will be classified as a non-same-store property until it becomes stabilized and comparable.

2021 2020 2019

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Office Leases .

Our office portfolio included nine properties with a total of approximately 3.4 million rentable square feet available for lease as of December 31, 2020.

Our office portfolio included eleven properties with a total of approximately 3.9 million rentable square feet available for lease as of December 31, 2021.

As of December 31, 2021, these properties were 90.4% leased.

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Spaces at the RV resort can be rented at a daily, weekly, or monthly rate.

The average monthly base rent per leased unit as of December 31, 2020 was $2,238, compared to $2,099 at December 31, 2019.

The average monthly base rent per leased unit;

other than at our RV resort, as of December 31, 2021 was $2,201, compared to $2,238 at December 31, 2020.

Mixed-Use Property Revenue .

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Furthermore, we believe the locations of our properties and diversified portfolio will mitigate some of the potentially negative impact of the current economic environment.

However, in the short-term due to the COVID-19 pandemic, we have seen a meaningful negative impact on certain of our tenants operations and ability to pay rent, primarily in the retail sector;

In the short-term, however, due to the COVID-19 pandemic, we have seen a meaningful negative impact on certain of our tenants' operations and ability to pay rent, primarily in the retail sector;

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

During the twelve months ended December 31, 2020, we signed 42 office leases for a total of 338,062 square feet of office space including 297,739 square feet of comparable space leases, at an average rental rate increase of 18.6% on a cash

basis and an average rental increase of 21.9% on a straight-line basis.

During the twelve months ended December 31, 2021, we signed 52 office leases for a total of 255,485 square feet of office space including 189,531 square feet of comparable space leases, at an average rental rate increase of 8.2% on a cash basis and an average rental increase of 14.2% on a straight-line basis.

New office leases for comparable spaces were signed for 56,652 square feet at an average rental rate increase of 21.9% on a cash basis and an average rental rate increase of 32.4% on a straight-line basis.

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New retail leases for comparable spaces were signed for 60,983 square feet at an average rental rate decrease of 33.4% on a cash basis and an average rental rate decrease of 20.2% on a straight-line basis.

Renewals for comparable retail spaces were signed for 291,335 square feet at an average rental rate decrease of 7.1% on a cash basis and a decrease of 2.3% on a straight-line basis.

Renewals for comparable retail spaces were signed for 272,355 square feet at an average rental rate decrease of 4.1% on a cash basis and an increase of 1.7% on a straight-line basis.

Tenant improvements and incentives were $59.59 per square foot of retail space for comparable new leases for the twelve months ended December 31, 2021.

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Incentives include amounts paid to tenants as an inducement to sign a lease that do not represent building improvements.

The leases signed in 2020 generally become effective over the following year, though some may not become effective until 2022.

The leases signed in 2021 will typically become effective in 2022, though some may not become effective until 2023.

Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters.

However, we believe that these increases do provide information about the tenant/landlord relationship and the potential fluctuations we may achieve in rental income over time.

In 2021, we believe our leasing volume will be below our historical averages with overall decreases in rental income due to the COVID-19 pandemic.

However, changes in rental income associated with individual signed leases on comparable spaces may be positive or negative.

Critical Accounting Policies

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with 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.

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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.

Revenue from room rental is included in rental revenue on the statement of comprehensive income.

Revenue from other sales and services provided is included in other property income on the statement of comprehensive income.

We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which requires significant judgment by management.

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Any changes to our conclusion regarding these assessments of collectability would have a direct impact on our net 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.

During the year ended December 31, 2021, due to the impacts of the COVID-19 pandemic, we provided lease concessions to certain tenants, primarily within the retail segment, 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 COVID-19 adjustments (including rent deferrals and other monetary lease concessions) 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.

The FASB staff provided guidance that entities may elect to account for COVID-19-related lease concessions consistent with how those concessions would be accounted for under ASC 842 as though enforceable rights and obligations for such concessions existed in the existing lease contract.

We have elected to account for such COVID-19-related concessions as lease modifications.

As of December 31, 2021, we entered into lease modifications that resulted in COVID-19-related adjustments (including rent deferrals and other monetary lease concessions) for approximately $3.9 million, or 1% of the rent originally contracted for the year ended December 31, 2021.

Depreciation and maintenance costs relating to our properties constitute substantial costs for us.

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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.

We make assumptions and estimates related to below market

lease renewal options, which impact revenue in the period in which the renewal options are exercised and could result in significant increases to revenue if the renewal options are not exercised at which time the related below market lease liabilities would be written off as an increase to revenue.

We make assumptions and estimates related to below market lease renewal options, which impact revenue in the period in which the renewal options are exercised and could result in significant increases to revenue if the renewal options are not exercised at which time the related below market lease liabilities would be written off as an increase to revenue.

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.

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Total $ 40,272 $ 20,397 $ 60,669 $ 4,099 $ 4,309 $ 69,077

The decrease in maintenance capital expenditures in our retail portfolio was primarily related to the Safeway lease buildout at Waikele Center in the prior period.

The decrease in maintenance capital expenditures in our office portfolio was primarily related to The Landmark at One Market and Torrey Reserve Campus building renovations in the prior period, partially offset by building renovations at Torrey Point, Solana Crossing and Lloyd District Portfolio during 2020.

The increase in new development expenditures for the year ended December 31, 2020 was primarily related to costs incurred for the development of the La Jolla Commons development parcel.

Our capital expenditures during 2021 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of our development, held for development and construction in progress properties.

While the amount of future expenditures will depend on numerous factors, we expect expenditures incurred in 2021 will increase from 2020 in connection with our development activities at La Jolla Commons and renovations at One Beach Street, and completion of the Google LLC's tenant improvements at The Landmark at One Market.

The increase in tenant improvements and leasing commissions for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily related to tenant buildouts at The Landmark at One Market and First & Main, partially offset by tenant buildouts at Lloyd Portfolio, City Center Bellevue, La Jolla Commons and Torrey Plaza that were completed in the prior year.

The increase in new development expenditures for the year ended December 31, 2021 compared to the year ended December 21, 2020 was primarily related to costs incurred for the development of Tower 3 at La Jolla Commons.

The increase in redevelopment expenditures for the year ended December 31, 2021 compared to the year ended December 31, 2020, was primarily related to the modernization costs of One Beach Street.

Our capital expenditures during the year ending December 31, 2022 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of our held for development and construction in progress properties.

While the amount of future expenditures will depend on numerous factors, we expect expenditures incurred in the year ending December 31, 2022 to increase from the year ending December 31, 2021 in connection with our development activities at La Jolla Commons, renovations at One Beach Street, and completion of various tenant improvements.

Derivative Instruments

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The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in other comprehensive income which is included in accumulated other comprehensive income on our consolidated balance sheet and our consolidated statement of equity.

Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not 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 which includes reviewing debt ratings and financial performance.

However, management does not anticipate non-performance by the counterparty.

If a cash flow hedge is deemed

ineffective, 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.

If a cash flow hedge is deemed ineffective, 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.

Impairment of Long-Lived Assets

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2021 Acquisitions and Dispositions

On July 7, 2021, we acquired E astgate Office Park, consisting of an approximately 280,000 square feet, multi-tenant office campus in Bellevue, Washington.

The purchase price was approximately $125 million, excluding closing costs of approximately $0.2 million.

On September 10, 2021, we acquired Corporate Campus East III in Bellevue, Washington, consisting of an approximately 161,000 square feet, multi-tenant office campus.

The purchase price was approximately $84 million , less seller credits of (i) approximately $1.1 million of future rent abatement (ii) approximately $2.1 million of contractual tenant improvements and closing costs of approximately $0.1 million.

The properties were acquired with cash on hand.

During 2021, there were no dispositions.

2020 Acquisitions and Dispositions

During 2020, there were no acquisitions or dispositions.

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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 purchase price was 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 purchase price was 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, and(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 our Second Amended and Restated Credit Facility.

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Accordingly, we recorded a gain on sale of approximately $0.6 million for the year ended December 31, 2019.

2018 Acquisitions and Dispositions

During 2018, there were no acquisitions or dispositions.

Results of Operations

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

For our discussion related to the results of operations and liquidity and capital resources for fiscal year 2019 compared to fiscal year 2018 please refer to Part II, Item 7.

For our discussion related to the results of operations and liquidity and capital resources for the year ended December 31, 2020 compared to the year ended December 31, 2019 please refer to Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2020 Form 10-K, filed with the Securities and Exchange Commission on February 16, 2021.

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As of December 31, 2020, our operating portfolio was comprised of 28 office, retail, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of office and retail space (including mixed-use retail space), 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of December 31, 2019, we owned land at three of our properties that we classified as held for development and construction in progress.

The following table sets forth selected data from our consolidated statements of income for the years ended December 31, 2020 and 2019 (dollars in thousands):

Additionally, as of December 31, 2020, we owned land at three of our properties that we classified as held for development or construction in progress.

The following table sets forth selected data from our consolidated statements of comprehensive income for the years ended December 31, 2021 and 2020 (dollars in thousands):

Year Ended December 31,

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Interest expense (58,587) (53,440) (5,147) 10

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

Loss on early extinguishment of debt (4,271) — (4,271) 100 %

Other income (expense), net (418) 447 (865) (194)

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

Total property revenue decreased $22.2 million, or 6%, to $344.6 million for the year ended December 31, 2020, compared to $366.7 million for the year ended December 31, 2019.

Total property revenue increased $31.3 million, or 9%, to $375.8 million for the year ended December 31, 2021, compared to $344.6 million for the year ended December 31, 2020.

The percentage leased was as follows for each segment as of December 31, 2021 and 2020:

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

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

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

Rental revenues.

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

Rental revenue decreased $13.6 million, or 4%, to $330.3 million for the year ended December 31, 2020, compared to $343.9 million for the year ended December 31, 2019.

Rental revenue increased $29.9 million, or 9%, to $360.2 million for the year ended December 31, 2021, compared to $330.3 million for the year ended December 31, 2020.

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

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$ 360,208 $ 330,312 $ 29,896 9 % $ 317,441 $ 304,185 $ 13,256 4 %

(1) For this table and tables following, the same-store portfolio includes the 830 building at Lloyd District Portfolio which was placed into operations on August 1, 2019 after renovating the building.

The same-store portfolio excludes:

(i) Waikele Center due to significant redevelopment activity;

(ii) La Jolla Commons as it was acquired on June 20, 2019;

(iii) One Beach Street due to the renovation of the building;

(iv) Waikiki Beach Walk Retail and Embassy Suites TM Hotel due to significant spalling repair activity;

and (v) land held for development.

Total office rental revenue increased $34.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental rental revenue of approximately $22.2 million during the period.

(1) For this table and tables following, the same-store portfolio excludes (i) One Beach Street, due to significant redevelopment activity;

(ii) Eastgate Office Park which was acquired on July 7, 2021;

(iii) Corporate Campus East III which was acquired on September 10, 2021;

(iv) Waikiki Beach Walk-Embassy Suites TM and Waikiki Beach Walk Retail, due to significant spalling repair activity which was completed in September 2020 and (v) land held for development.

Total office rental revenue increased $10.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021, which had incremental rental revenue of approximately $7.0 million during the period.

The increase in total office rental revenue is partially offset by the decrease in rental revenue of approximately $1.6 million at One Beach Street due to the expiration of leases to allow for the modernization of the property.

Same-store office rental revenue increased $15.3 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, City Center Bellevue, Torrey Point and Torrey Reserve Campus.

The increase in same-store office rental revenue is partially offset by the decrease at First & Main primarily due to the increase in collectability related adjustments of straight-line rent receivables of approximately $0.8 million as the collectability was determined to be no longer probably for certain tenants.

Total retail rental revenue decreased $15.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the increase in collectability related adjustments of rent receivables of approximately $2.8 million and straight-line rent receivables of approximately $5.9 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, Del Monte Center, Waikele Center and The Shops at Kalakaua as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

Additionally, the decrease in total retail rental revenue is also attributable to rent concessions of approximately $3.1 million and a decrease in cost reimbursements of approximately $4.0 million due to a real estate tax refund at Alamo Quarry Market and decrease in rental expenses for the retail segment.

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

Multifamily rental revenue decreased $0.4 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the decrease in average occupancy to 88.5% for the year ended December 31, 2020 compared to 92.5% for the year ended December 31, 2019.

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

The decrease in average occupancy is partially offset by the increase in average base rent per unit to $2,166 for the year ended December 31, 2020 compared to $2,077 for the year ended December 31, 2019.

Mixed-use rental revenue decreased $32.1 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions during the second, third, and fourth quarters, which led to a decrease in average occupancy and revenue per available room to 51.3% and $127 for the year ended December 31, 2020 compared to 91.7% and $299 for year ended December 31, 2019.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental revenue at the hotel portion of the mixed-use property through the first half of 2021 or until the COVID-19 vaccine distribution is generally available to the public.

The decrease in mixed-use rental revenue is also attributed to the increase in collectability related adjustments of rent receivables of approximately $5.7 million and straight-line rent receivables of approximately $1.2 million as the collectability was determined to be no longer probable for certain tenants at the retail portion of our mixed-use property.

Same-store office rental revenue increased $4.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to higher annualized base rents at La Jolla Commons, The Landmark at One Market, City Center Bellevue and Torrey Point.

Total retail rental revenue increased $7.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to approximately $6.7 million related to tenants who were changed to alternate rent or to cash basis of revenue recognition during the year ended December 31, 2021 and 2020, as collectability was determined to be no longer probable for certain tenants at Carmel Mountain Plaza, Del Monte Center, Alamo Market Quarry and Waikele Center.

Some of these tenants have since reverted back to contractual basic monthly rent as compared to alternate rent as their gross sales have increased in the year ended December 31, 2021 compared to the year ended December 31, 2020, and their alternate rent periods came to an end.

Additionally, the increase in total retail rental revenue is also attributable to an increase in real estate cost reimbursements of approximately $0.5 million due to higher property taxes.

Multifamily rental revenue increased $1.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the increase in average occupancy to 92.1% for the year ended December 31, 2021 compared to 88.5% for the year ended December 31, 2020.

The increase in occupancy primarily related to Loma Palisades, Pacific Ridge Apartments, Imperial Beach Garden and Santa Fe Park RV Resort.

The increase in average occupancy is partially offset by a decrease in average base rent per unit to $2,160 for the year ended December 31, 2021 compared to $2,166 for the year ended December 31, 2020, primarily due to lower rents at Hassalo on Eighth - Residential.

Mixed-use rental revenue increased $11.3 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to $7.7 million related to the hotel potion of our mixed-use property.

The increase was due to higher rates of tourism in Hawaii during the year ended December 31, 2021, which led to an increase in average occupancy and revenue per available room to 66.4% and $185 for the year ended December 31, 2021 compared to 51.3% and $127 for the year ended December 31, 2020, respectively.

The retail portion of our mixed-use property had an increase in rental revenue of $3.5 million as tenants were changed to alternate rent or to cash basis of revenue recognition during the year ended December 31, 2020 as collectability was determined to be no longer probable for most tenants.

Other property income.

Other property income decreased $8.6 million, or 38%, to $14.3 million for the year ended December 31, 2020, compared to $22.9 million for the year ended December 31, 2019.

Other property income increased $1.4 million, or 10%, to $15.6 million for the year ended December 31, 2021, compared to $14.3 million for the year ended December 31, 2020.

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

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$ 15,620 $ 14,261 $ 1,359 10 % $ 8,872 $ 10,701 $ (1,829) (17) %

Office other property income decreased $1.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental other property income of approximately $0.3 million during the period.

Same-store office other property income decreased $2.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the decrease in parking garage income at City Center Bellevue, Lloyd District Portfolio and First & Main during the period as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic during the second quarter caused a substantial portion of our tenants employees and their guests to continue to partially work from home during the period.

Retail other property income decreased $3.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to non-cash lease termination fees recognized in connection with the termination of a ground lease, and the ground lessee's surrender of, the former Sears building at Carmel Mountain Plaza during the prior period.

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

Multifamily other property income decreased $0.4 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the decrease in parking garage income at Hassalo on Eighth - Residential and late fees.

Mixed-use other property income decreased $2.8 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy beginning in March 2020 which led to a decrease in excise tax and food & beverage revenue at the hotel portion of our mixed-use property and a decrease in parking garage income at the retail portion of our mixed-use property.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce mixed-use other property income through at least the first half of 2021 or until the COVID-19 vaccine distribution is generally available to the public.

Same-store office other property income decreased $1.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the decrease in parking garage income at City Center Bellevue and Lloyd Portfolio during the period as a substantial portion of our tenants employees and their guests continue to partially work from home during the period.

Additionally, there was a decrease in lease termination fees at Torrey Reserve Campus and City Center Bellevue received during the year ended December 31, 2020 and a decrease in tenant improvement management fees received at La Jolla Commons and Lloyd Portfolio in the year ended December 31, 2020.

Retail other property income decreased $0.7 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to lease termination fees received at Alamo Quarry Market and Carmel Country Plaza during the year ended December 31, 2020.

Multifamily other property income increased $0.4 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to an increase in security deposits earned at Pacific Ridge Apartments and Loma Palisades, parking garage income at Hassalo on Eighth - Residential and meter income at Loma Palisades and Sante Fe Park RV Resort.

Mixed-use other property income increased $2.8 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due increased tourism and hotel occupancy in the year ended December 31, 2021 which led to an increase in other room rental income and excise tax at the hotel portion of our mixed-use property and an increase in parking garage income at the retail portion of our mixed-use property.

Property Expenses

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

Total property expenses decreased by $10.9 million, or 8%, to $121.1 million for the year ended December 31, 2020, compared to $132.0 million for the year ended December 31, 2019.

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

Total property expenses increased by $8.7 million, or 7%, to $129.8 million for the year ended December 31, 2021, compared to $121.1 million for the year ended December 31, 2020.

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

Rental Expenses.

Rental expenses decreased $12.8 million, or 14%, to $79.2 million for the year ended December 31, 2020, compared to $92.0 million for the year ended December 31, 2019.

Rental expenses increased $7.8 million, or 10%, to $87.0 million for the year ended December 31, 2021, compared to $79.2 million for the year ended December 31, 2020.

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

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$ 86,980 $ 79,178 $ 7,802 10 % $ 60,286 $ 58,111 $ 2,175 4 %

Total office rental expenses increased $1.4 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had rental expenses of approximately $2.2 million during the period.

The increase in total office rental expense was partially offset by the decrease in rental expenses of approximately $0.3 million at One Beach Street due to the expiration of leases to allow for the modernization of the property.

Same-store office rental expenses decreased $0.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to utilities expense, janitorial services and supplies, and repairs and maintenance as the "stay-at home" order issued by state and local governments related to the COVID-19 pandemic during the second quarter caused a substantial portion of our tenants' employees to continue to work from home during the period.

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

Total retail rental expenses decreased $0.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to a decrease in utilities, day porter services, repairs and maintenance and trash services during the period as temporary store closures and restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused reduced demand for these rental expenses.

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

Multifamily rental expensed increased $1.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to personnel compensation expenses, utilities, janitorial services and supplies, security services and insurance expense during the period.

Mixed-use rental expenses decreased $14.5 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to a decrease in hotel room expenses, marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental expenses at the hotel portion of our mixed-use property through at least the first half of 2021 or until the COVID-19 vaccine distribution is generally available to the public.

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

Total office rental expenses increased $2.3 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021, which had incremental rental expenses of approximately $1.3 million during the period.

Same-store office rental expenses increased $1.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020

primarily due to increases in utilities, repairs and maintenance and insurance expenses as the "stay-at home" orders issued by state and local governments related to the COVID-19 pandemic were relaxed in early 2021 and our tenants' employees have started returning to the office in-person.

Additionally, there was also an increase in sublease expense related to the Annex Lease extension option exercised in September 2020.

Total retail rental expenses increased $0.2 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to increases in insurance expense, utilities expense and facilities services as restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic were eased earlier in 2021.

These increases were partially offset by lower marketing expense and repairs and maintenance expenses.

Multifamily rental expensed increased $0.9 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to an increase in day porter and facilities services, utilities expenses, insurance expenses and marketing expenses during such period.

Mixed-use rental expenses increased $4.4 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to an increase in hotel room expenses, sales and marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

These increases are due to the return of tourism and related increase in hotel occupancy as travel to Hawaii has increased during the year ended December 31, 2021.

Real Estate Taxes.

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$ 42,794 $ 41,941 $ 853 2 % $ 38,211 $ 37,153 $ 1,058 3 %

Total office real estate taxes increased $3.8 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental real estate taxes of approximately $3.2 million.

Same-store office real estate taxes increased $0.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to an increase in the assessed values of City Center Bellevue, The Landmark at One Market, Lloyd District Portfolio and Torrey Reserve Campus.

Retail real estate taxes decreased $2.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to a net real estate tax refund of approximately $2.3 million at Alamo Quarry Market for the tax assessment for 2016 - 2018.

The decrease in retail real estate taxes was partially offset by an increase in the assessed values of Waikele Center.

Total office real estate taxes increased $0.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021, which had incremental real estate taxes of approximately $0.5 million.

There was a decrease of $0.5 million at One Beach Street due to the capitalization of real estate taxes as the property is under redevelopment.

Same-store office real estate taxes increased $0.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to an increase in the assessed values of City Center Bellevue and First & Main.

Retail real estate taxes increased $0.4 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to higher assessed values for Alamo Quarry Market and Waikele Center.

Multifamily real estate taxes increased $0.2 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to an increase in assessed values at Pacific Ridge Apartments, Lomas Palisades and Hassalo on Eighth - Residential.

Mixed-use real estate taxes increased $0.5 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to an increase in assessed values for the hotel portion of our mixed-use property.

Mixed-use real estate taxes decreased $0.3 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the COVID-19 pandemic and its financial burden on the hospitality industry, as a result of which Honolulu County reduced the tax burden for hotels for the year ended December 31, 2021 through 2022.

Property Operating Income.

Property operating income decreased $11.3 million, or 5%, to $223.5 million for the year ended December 31, 2020, compared to $234.8 million for the year ended December 31, 2019.

Property operating income increased $22.6 million, or 10%, to $246.1 million for the year ended December 31, 2021, compared to $223.5 million for the year ended December 31, 2020.

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

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$ 246,054 $ 223,454 $ 22,600 10 % $ 227,816 $ 219,622 $ 8,194 4 %

Total office property operating income increased $27.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental property operating income of $17.0 million during the period.

Total office property operating income increased $6.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021, which had incremental property operating income of approximately $5.2 million during the period.

The increase in total office property operating income was partially offset by a decrease in property operating income of approximately $0.7 million at One Beach Street due to the expiration of leases to allow for the modernization of the property.

Same-store property operating income increased $13.2 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, City Center Bellevue, Torrey Point and Torrey Reserve Campus.

Retail property operating income decreased $16.1 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to an increase in collectability related adjustment of rent receivables of approximately $2.8 million and straight-line rent receivables of approximately $5.9 million as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, Del Monte Center, Waikele Center and The Shops at Kalakaua as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

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

Additionally, the decrease in total retail rental revenue is also attributable to rent concessions of approximately $3.1 million.

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

Multifamily property operating income decreased $2.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the decrease in average occupancy to 88.5% for the year ended December 31, 2020 compared to 92.5% for the year ended December 31, 2019, and increase in real estate tax assessments at Pacific Ridge, Lomas Palisades, and Hassalo on Eighth - Residential, and an increase in personnel compensation expenses, utilities, security services and insurance expense during the period.

Mixed-use property operating income decreased $21.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions during the second, third, and fourth quarters, which led to a decrease in average occupancy and revenue per available room to 51.3% and $127 for the year ended December 31, 2020 compared to 91.7% and $299 for year ended December 31, 2019.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce property operating income at the hotel portion of the mixed-use property through the first half of 2021 or until the COVID-19 vaccine distribution is generally available to the public.

The decrease in mixed-use property operating income is also attributed to the increase in collectability related adjustments of rent receivables of approximately $5.7 million and straight-line rent receivables of approximately $1.2 million as the collectability was determined to be no longer probable for certain tenants at the retail portion of our mixed-use property.

Same-store property operating income increased $1.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to higher annualized base rents at La Jolla Commons, The Landmark at One Market, City Center Bellevue and Torrey Point, offset by decreases in lease termination fees, tenant improvement management fees and increases in rental expenses as COVID-19 restrictions were relaxed in early 2021 and our tenants' employees returned to the office in-person.

Retail property operating income increased $5.8 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to approximately $6.7 million related to tenants who were changed to alternate rent or to cash basis of revenue recognition during the year ended December 31, 2021 and the year ended December 31, 2020, as collectability was determined to be no longer probable for certain tenants at Carmel Mountain Plaza, Del Monte Center, Alamo Market Quarry and Waikele Center.

Some of these tenants have since reverted back to basic monthly rent as compared to alternate rent as their gross sales have increased in the year ended December 31, 2021 compared to the year ended December 31, 2020, and their alternate rent periods came to an end.

This increase was partially offset by a decrease of $0.7 million related to lease termination fees received at Alamo Quarry Market and Carmel Country Plaza during 2020.

The increase was further offset by an increase in real estate taxes, insurance expense, utilities expense and facilities services of $0.6 million

Multifamily property operating income increased $0.9 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the increase in average occupancy to 92.1% for the year ended December 31, 2021 compared to 88.5% for the year ended December 31, 2020, primarily related to Loma Palisades, Pacific Ridge Apartments, Imperial Beach Garden and Santa Fe Park RV Resort.

This increase was partially offset by higher rental expenses due to an increase in day porter and facilities services, utilities expenses, insurance expenses and marketing expenses during the period.

Mixed-use property operating income increased $10.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the return of tourism and related increase in hotel occupancy as travel to Hawaii has increased during the year ended December 31, 2021.

This led to an increase in average occupancy and revenue per available room to 66.4% and $185 for the year ended December 31, 2021 compared to 51.3% and $127 for the year ended December 31, 2020, respectively.

This also led to an increase in other room rental income and excise tax at the hotel portion of our mixed-use property and an increase in parking garage income at the retail portion of our mixed-use property.

These increases were offset by higher hotel room expenses, sales and marketing expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

General and administrative.

General and administrative expenses increased $3.3 million, or 12%, to $29.9 million for the year ended December 31, 2021, compared to $26.6 million for the year ended December 31, 2020.

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

This increase was primarily due to an increase in employee related costs, including, without limitation, with respect to base pay for certain salaried and hourly workers, benefits, annual bonus and stock-based compensation, as well as an increase in insurance and legal costs relating to corporate and property matters.

Depreciation and amortization.

Depreciation and amortization expense increased $8.0 million, or 7%, to $116.3 million for the year ended December 31, 2021, compared to $108.3 million for the year ended December 31, 2020.

This increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had incremental depreciation and

amortization of $7.2 million during the period and higher depreciation and amortization at Lloyd District Portfolio, City Center Bellevue, Torrey Reserve Campus, Torrey Point, and Waikele Center due to tenant improvements that were put into service in 2019 and 2020.

This increase was primarily due to $5.3 million related to the new acquisitions of Eastgate Office Park and Corporate Campus East III acquired

during the third quarter of 2021.

Additionally, there was higher depreciation and amortization at Carmel Mountain Plaza, due to acceleration of assets related to tenant vacating space, and The Landmark at One Market due to new tenant improvements that were put into service in 2020 and 2021.

Interest expense.

Interest expense decreased $0.6 million, or 1%, to $53.4 million for the year ended December 31, 2020 compared with $54.0 million for the year ended December 31, 2019.

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

Gain on sale of real estate.

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

Interest expense increased $5.1 million, or 10%, to $58.6 million for the year ended December 31, 2021 compared with $53.4 million for the year ended December 31, 2020.

This increase was primarily due to the closing of our 3.375% Senior Notes offering on January 26, 2021 partially offset by a decrease in interest expense related to our repayment of the Series A Notes on January 26, 2021, a decrease in the weighted average interest rate for our Term Loan A, which became an unhedged variable rate loan when the interest rate swap expired on January 9, 2021, a decrease in the Revolver Loan interest expense and an increase in capitalized interest related to our development projects.

Loss on early extinguishment of debt .

Early extinguishment of debt expense increased $4.3 million for the year ended December 31, 2021 due to the repayment of the Senior Guaranteed Notes, Series A, with make-whole payments thereon, on January 26, 2021.

Other Income (Expense), Net.

Other (expense) income, net increased $0.6 million, or 466%, to other income, net of $0.4 million for the year ended December 31, 2020 compared to other expense, net of $0.1 million for the year ended December 31, 2019, primarily due to a decrease in income tax expense related to lower taxable income for our taxable REIT subsidiary partially offset by a decrease in interest and investment income attributed to lower weighted average interest rates on our money market balances.

Other expense, net increased $0.9 million, or 194%, to other expense, net of $0.4 million for the year ended December 31, 2021 compared to other income, net of $0.4 million for the year ended December 31, 2020, primarily due to an increase in income tax expense related to taxable income for our taxable REIT subsidiary and a decrease in interest and investment income attributed to lower weighted average interest rates on our money market balances.

Liquidity and Capital Resources of American Assets Trust, Inc.

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For the company to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains.

While historically the company has satisfied this distribution requirement by making cash distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited

circumstances, the company’s own stock.

While historically the company has satisfied this distribution requirement by making cash distributions to American Assets Trust, Inc.'s stockholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the company’s own stock.

As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can.

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Factors influencing the availability of additional financing include investor perception of our prospects and the general condition of the financial markets, among others.

On May 27, 2015, the company entered into a new at-the-market, or ATM, equity program with five sales agents under which the company may, from time to time, offer and sell shares of common stock having an aggregate offering price of up to $250.0 million (the "2015 ATM Program").

The sales of shares of the company's common stock made through the 2015 ATM Program were made in “at-the-market” offerings as defined in Rule 415 of the Securities Act.

As of December 31, 2020, the company has issued 6,930,002 shares of common stock at a weighted average price per share of $38.58 for gross cash proceeds of $267.4 million under the ATM equity program, in the aggregate.

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

On December 3, 2021, the company entered into a new at-the-market, or ATM, equity program with five sales agents under which the company may, from time to time, offer and sell shares of common stock having an aggregate offering price of up to $250.0 million, or the 2021 ATM Program.

The sales of shares of the company's common stock made through the 2021 ATM Program are to be made in “at-the-market” offerings as defined in Rule 415 of the Securities Act.

As of December 31, 2021, the company had not issued any shares of common stock under the 2021 ATM Program.

The company intends to use the net proceeds from any issuances of common stock under the 2021 ATM Program to fund development or redevelopment activities, repay amounts outstanding from time to time under our third amended and restated credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes.

As of December 31, 2021, the company had the capacity to issue up to an additional $250.0 million in shares of common stock under the 2021 ATM Program.

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The company has no obligation to sell the remaining shares available for sale under the 2021 ATM Program.

On June 14, 2019, we issued and sold 10,925,000 shares of common stock in an underwritten public offering at a price to the public of $44.75 per share.

We received net proceeds of approximately $472.6 million, after deducting underwriting discounts, commissions and offering expenses.

Liquidity and Capital Resources of American Assets Trust, L.P.

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

We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash and, if necessary, borrowings available under our second amended and restated credit facility.

Our long-term liquidity needs consist primarily of funds necessary to pay for the repayment of debt at maturity, property acquisitions, tenant improvements and capital improvements.

We expect to meet our long-term liquidity requirements to pay scheduled debt maturities and to fund property acquisitions and capital improvements with net cash from operations, long-term

secured and unsecured indebtedness and, if necessary, the issuance of equity and debt securities.

We also may fund property acquisitions and capital improvements using our second amended and restated credit facility pending permanent financing.

We expect to meet our long-term liquidity requirements to pay scheduled debt maturities and to fund property acquisitions and capital improvements with net cash from operations, long-term secured and unsecured indebtedness and, if necessary, the issuance of equity and debt securities.

We also may fund property acquisitions and capital improvements using our third amended and restated credit facility pending permanent financing.

We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt, noting that during the third quarter of 2015, the company obtained investment grade credit ratings from Moody’s Investors Service (Baa3), Standard & Poor’s Ratings Services (BBB-) and Fitch Ratings, Inc.

(BBB), and the issuance of additional equity.

(BBB), and the issuance

of additional equity.

However, we cannot be assured that this will be the case.

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Our overall capital requirements will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of developments.

Our capital investments will be funded on a short-term basis with cash on hand, cash flow from operations and/or our second amended and restated credit facility.

Our capital investments will be funded on a short-term basis with cash on hand, cash flow from operations and/or our third amended and restated credit facility.

We intend to operate with and maintain a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment grade debt ratings.

In the short and long term, we may seek to obtain funds through the issuance of additional equity, unsecured and/or secured debt financings, and property dispositions that are consistent with this conservative structure.

We currently believe that cash flows from operations, cash on hand, our ATM equity program, our revolving credit facility and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.

We currently believe that cash flows from operations, cash on hand, our 2021 ATM Program, our third amended and restated credit facility and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.

Contractual Obligations

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Principal payments on long-term indebtedness (1)

$ 1,661,000 $ 211,000 $ 150,000 $ 100,000 $ 200,000 $ — $ 1,000,000

Line of credit (1)

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Total $ 2,179,714 $ 400,333 $ 214,930 $ 152,162 $ 243,059 $ 41,289 $ 1,127,941

(1) The unsecured revolving line of credit has a capacity of $350 million plus 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.

The unsecured revolving line of credit initially matures on January 9, 2022 and we have two six-month options to extend its maturity to January, 9, 2023.

(1) On January 5, 2022, we entered into the third amended and restated credit facility, which provides for aggregate, unsecured borrowings of up to $500 million, consisting of a revolving line of credit of $400 million, or the 2022 Revolver Loan, and a term loan of $100 million, or the 2022 Term Loan A”).

The 2022 Revolver Loan initially matures on January 5, 2026, subject to two, six-month extension options.

The 2022 Term Loan A matures on January 5, 2027, with no further extension options.

Off-Balance Sheet Arrangements

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Total cash, cash equivalents, and restricted cash were $139.5 million and $139.0 million at December 31, 2021 and 2020, respectively.

Net cash provided by operating activities decreased $26.8 million to $127.0 million for the year ended December 31, 2020, compared to $153.8 million for the year ended December 31, 2019.

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

Net cash used in investing activities decreased $530.1 million to $69.1 million for the year ended December 31, 2020, compared to $599.2 million for the year ended December 31, 2019.

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

Net cash used in financing activities was $28.3 million for the year ended December 31, 2020, compared to net cash provided by financing activities of $497.5 million for the year ended December 31, 2019.

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

Net cash provided by operating activities increased $41.3 million to $168.3 million for the year ended December 31, 2021, compared to $127.0 million for the year ended December 31, 2020.

The increase in cash from operations was primarily due to an increase in rental revenue from our mixed-use and office properties, including the incremental increase from our two new office acquisitions during the third quarter of 2021.

Additionally, there was an increase in collections from our retail portfolio.

The change in interest payable related to the 3.375% Senior Notes and other liabilities further increased the cash from operations.

Net cash used in investing activities increased $243.2 million to $312.3 million for the year ended December 31, 2021, compared to $69.1 million for the year ended December 31, 2020.

The increase was primarily due to the acquisition of Eastgate Office Park on July 7, 2021 and Corporate Campus East III on September 10, 2021, and increase in capital expenditures at The Landmark at One Market, La Jolla Commons III and One Beach Street.

Net cash provided by financing activities was $144.4 million for the year ended December 31, 2021, compared to net cash used in financing activities of $28.3 million for the year ended December 31, 2020.

The increase in cash provided by financing activities was primarily due to the closing of our issuance of 3.375% Senior Notes on January 26, 2021, partially offset by the repayment of the outstanding balance on the revolving line of credit and the Senior Guaranteed Notes, Series A on January 26, 2021.

Net Operating Income

Net Operating Income, or NOI, is a non-GAAP financial measure of performance.

We define NOI as operating revenues (rental income, tenant reimbursements, lease termination fees, ground lease rental income and other property income) less property and related expenses (property expenses, ground lease expense, property marketing costs, real estate taxes and insurance).

We define NOI as operating revenues (rental income, tenant reimbursements, lease termination fees, ground lease rental income and other property income) less property and related expenses (property expenses, ground lease expenses, property marketing costs, real estate taxes and insurance).

NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expense, other non-property income and losses, gains and losses from property dispositions, extraordinary items, tenant improvements and leasing commissions.

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The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our retail, office, multifamily or mixed-use properties that result from use of the properties or changes in market conditions.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office, retail, multifamily or mixed-use properties that result from use of the properties or changes in market conditions.

While certain aspects of real property do decline in value over time in a manner that is intended to be captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time.

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Gain on sale of real estate — — 633

Loss on early extinguishment of debt (4,271) — —

Other income (expense), net (418) 447 (122)

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76,175,004 76,122,842 70,788,597

(1) For the years ended December 31, 2020, 2019 and 2018 the weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that are subject to time vesting, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted

shares, but is anti-dilutive for the computation of diluted EPS for the periods.

(1) For the years ended December 31, 2021, 2020 and 2019 the weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that are subject to time vesting, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted shares, but is anti-dilutive for the computation of diluted EPS for the periods.

Diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis