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, 2021. 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. 66 Changes in Internal Control over Financial Reporting There were no changes in American Assets Trust, Inc.'s internal control over financial reporting during the quarter ended December 31, 2021 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, 2021. 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, 2021 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. ITEMS 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 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 2022 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 2022 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 “Delinquent - Section 16(a) Reports” is included herein as Item 15. 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 2022 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 2022 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 2022 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 2022 Annual Meeting of Stockholders and is incorporated herein by reference ITEM 15. DELINQUENT SECTION 16(A) REPORTS Section 16(a) of the Exchange Act requires our named executive officers, directors and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. SEC regulations require us to identify anyone who failed to file a required report or filed a late report during the most recent fiscal year. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no Forms 5 were required for such persons, we believe that, during the fiscal year ended December 31, 2021, our named executive officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to them, except that Ernest Rady, our Chairman and Chief Executive Officer and a member of our Board of Directors, filed a Form 4 on April 7, 2021 for a transaction that occurred on March 3, 2021, due solely to Mr. Rady's broker failing to provide us timely notice of such transaction. 68 PART IV ITEM 16. 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 Am erican Assets Trust, Inc., American Assets Trust, L.P., 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 American Assets Trust, Inc., American Assets Trust, L.P., each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent. 10.32(14) First Amendment to Second Amended and Restated Credit Agreement dated January 9, 2019, by and among the American Assets Trust, Inc., American Assets Trust, L.P., Bank of America, N.A., as Administrative Agent, and other entities named therein. 10.33(15) Note Purchase Agreement, dated as of July 30, 2019, by and among American Assets Trust, Inc., American Assets Trust, L.P., and the purchasers named therein. 10.34(16) Equity Distribution Agreement, dated December 3, 2021, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Wells Fargo Securities, LLC 10.35(16) Equity Distribution Agreement, dated December 3, 2021, by and among American Assets Trust, Inc., American Assets Trust, L.P., and BofA Securities, Inc. 10.36(16) Equity Distribution Agreement, dated December 3, 2021, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Jefferies LLC 10.37(16) Equity Distribution Agreement, dated December 3, 2021, by and among American Assets Trust, Inc., American Assets Trust, L.P., and Mizuho Securities USA LLC 10.38(16) Equity Distribution Agreement, dated December 3, 2021, by and among American Assets Trust, Inc., American Assets Trust, L.P., and BTIG, LLC 10.39(17) Third Amended and Restated Credit Agreement dated January 5, 2022, by and among American Assets Trust, Inc., American Assets Trust, L.P., Bank of America, N.A., as Administrative Agent, and other entities 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. 71 (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. (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. (17) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 3, 2021. (18) 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 5, 2022. 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 11 th day of February, 2022. 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 and Chief Executive Officer Chairman 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 and Chief Executive Officer February 11, 2022 Ernest Rady /s/ ROBERT F. BARTON Executive Vice President, Chief Financial Officer and Treasurer February 11, 2022 Robert F. Barton /s/ JOY L. SCHAEFER Director February 11, 2022 Joy L. Schaefer /s/ NINA TRAN Director February 11, 2022 Nina Tran /s/ THOMAS S. OLINGER Director February 11, 2022 Thomas S. Olinger /s/ ROBERT S. SULLIVAN Director February 11, 2022 Robert S. Sullivan 73 Item 8 and Item 16(a) (1) and (2) Index to Consolidated Financial Statements and Schedule Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F- 2 American Assets Trust, Inc. Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 9 Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020, and 2019 F- 10 Consolidated Statements of Equity for the years ended December 31, 2021, 2020, and 2019 F- 11 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019 F- 13 American Assets Trust, L.P. Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 14 Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020, and 2019 F- 15 Consolidated Statements of Partners' Capital for the years ended December 31, 202 1 , 20 20 , and 201 9 F- 16 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019 F- 17 Notes to Consolidated Financial Statements of American Assets Trust, Inc. and American Assets Trust, L.P. F- 18 Schedule III—Consolidated Real Estate and Accumulated Depreciation F- 57 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, 2021 and 2020, the related consolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 16(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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 11, 2022 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 $2.68 billion as of December 31, 2021. 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, 2021. 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 indicators 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. 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. 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. F-3 Property asset acquisitions Description of the Matter During the year ended December 31, 2021, the Company completed the acquisitions of Eastgate Office Park and Corporate Campus East III for a purchase price of approximately $125 million, excluding closing costs of approximately $0.2 million, and $84 million, excluding closing costs of approximately $0.1 million, respectively. As discussed in Note 1 and Note 2 to the consolidated financial statements, the Company accounted for the purchases as asset acquisitions in accordance with the authoritative accounting guidance on acquisitions and business combinations. The Company’s methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed consists of use of the income, sales comparison and cost approaches. For acquired operating real estate properties, the purchase price is allocated to land and buildings, intangible assets such as in-place leases, and tangible assets and liabilities acquired, if any, based on their relative fair value. Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation required by management in determining the relative fair values of the acquired land and buildings and intangible assets such as in-place leases. The significant estimation was primarily due to the judgmental nature of inputs, including discount rates, capitalization rates and certain market assumptions such as market rental rates and market comparable prices for similar land parcels. 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 accounting for acquisitions process. For example, we tested controls over the valuation of acquired land, buildings and intangible assets, including the valuation models and underlying assumptions used to develop such estimates. Our testing of the Company’s accounting for its acquisitions included, among other procedures, reading the purchase agreements and testing the values allocated to the assets acquired and liabilities assumed by evaluating the valuation methods and significant assumptions used by management. For example, our real estate valuation specialists assisted us in evaluating the methodologies used by the Company and testing the consistency of the selected discount rates, capitalization rates and various market assumptions such as market rental rates and market comparable prices for similar land parcels with external market data sources. Additionally, we evaluated the completeness and accuracy of the underlying data supporting the determination of various inputs. Also, with the assistance of our specialists, we evaluated the incorporation of the key assumptions in the aforementioned models and tested such models for clerical accuracy. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2010. San Diego, California February 11, 2022 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, 2021, 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, 2021, 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, 2021 and 2020, the related consolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 16(a) and our report dated February 11, 2022 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 11, 2022 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, 2021 and 2020, the related consolidated statements of comprehensive income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 16(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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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 $2.68 billion as of December 31, 2021. 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, 2021. 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 indicators 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. 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. 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. F-7 Property asset acquisition Description of the Matter During the year ended December 31, 2021, the Company completed the acquisitions of Eastgate Office Park and Corporate Campus East III for a purchase price of approximately $125 million, excluding closing costs of approximately $0.2 million, and $84 million, excluding closing costs of approximately $0.1 million, respectively. As discussed in Note 1 and Note 2 to the consolidated financial statements, the Company accounted for the purchases as asset acquisitions in accordance with the authoritative accounting guidance on acquisitions and business combinations. The Company’s methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed consists of use of the income, sales comparison and cost approaches. For acquired operating real estate properties, the purchase price is allocated to land and buildings, intangible assets such as in-place leases, and tangible assets and liabilities acquired, if any, based on their relative fair value. Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation required by management in determining the relative fair values of the acquired land and buildings and intangible assets such as in-place leases. The significant estimation was primarily due to the judgmental nature of inputs, including discount rates, capitalization rates and certain market assumptions such as market rental rates and market comparable prices for similar land parcels. 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 accounting for acquisitions process. For example, we tested controls over the valuation of acquired land, buildings and intangible assets, including the valuation models and underlying assumptions used to develop such estimates. Our testing of the Company’s accounting for its acquisitions included, among other procedures, reading the purchase agreements and testing the values allocated to the assets acquired and liabilities assumed by evaluating the valuation methods and significant assumptions used by management. For example, our real estate valuation specialists assisted us in evaluating the methodologies used by the Company and testing the consistency of the selected discount rates, capitalization rates and various market assumptions such as market rental rates and market comparable prices for similar land parcels with external market data sources. Additionally, we evaluated the completeness and accuracy of the underlying data supporting the determination of various inputs. Also, with the assistance of our specialists, we evaluated the incorporation of the key assumptions in the aforementioned models and tested such models for clerical accuracy. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. San Diego, California February 11, 2022 F-8 American Assets Trust, Inc. Consolidated Balance Sheets (In Thousands, Except Share Data) December 31, 2021 December 31, 2020 ASSETS Real estate, at cost Operating real estate $ 3,389,726 $ 3,155,280 Construction in progress 139,098 91,047 Held for development 547 547 3,529,371 3,246,874 Accumulated depreciation ( 847,390 ) ( 754,140 ) Net real estate 2,681,981 2,492,734 Cash and cash equivalents 139,524 137,333 Restricted cash — 1,716 Accounts receivable, net 7,445 6,938 Deferred rent receivables, net 82,724 72,476 Other assets, net 106,253 106,112 TOTAL ASSETS $ 3,017,927 $ 2,817,309 LIABILITIES AND EQUITY LIABILITIES: Secured notes payable, net $ 110,965 $ 110,923 Unsecured notes payable, net 1,538,238 1,196,677 Unsecured line of credit, net — 99,151 Accounts payable and accrued expenses 64,531 59,262 Security deposits payable 7,855 6,590 Other liabilities and deferred credits 86,215 91,300 Total liabilities 1,807,804 1,563,903 Commitments and contingencies (Note 12) EQUITY: American Assets Trust, Inc. stockholders' equity Common stock, $ 0.01 par value, 490,000,000 shares authorized, 60,525,580 and 60,476,292 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively 605 605 Additional paid-in capital 1,453,272 1,445,644 Accumulated dividends in excess of net income ( 217,785 ) ( 176,560 ) Accumulated other comprehensive income 2,872 1,753 Total American Assets Trust, Inc. stockholders' equity 1,238,964 1,271,442 Noncontrolling interests ( 28,841 ) ( 18,036 ) Total equity 1,210,123 1,253,406 TOTAL LIABILITIES AND EQUITY $ 3,017,927 $ 2,817,309 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, 2021 2020 2019 REVENUE: Rental income $ 360,208 $ 330,312 $ 343,865 Other property income 15,620 14,261 22,876 Total revenue 375,828 344,573 366,741 EXPENSES: Rental expenses 86,980 79,178 91,967 Real estate taxes 42,794 41,941 40,013 General and administrative 29,879 26,581 24,871 Depreciation and amortization 116,306 108,292 96,205 Total operating expenses 275,959 255,992 253,056 OPERATING INCOME 99,869 88,581 113,685 Interest expense ( 58,587 ) ( 53,440 ) ( 54,008 ) Loss on early extinguishment of debt ( 4,271 ) — — Gain on sale of real estate — — 633 Other (expense) income, net ( 418 ) 447 ( 122 ) NET INCOME 36,593 35,588 60,188 Net income attributable to restricted shares ( 564 ) ( 383 ) ( 381 ) Net income attributable to unitholders in the Operating Partnership ( 7,653 ) ( 7,545 ) ( 14,089 ) NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS $ 28,376 $ 27,660 $ 45,718 EARNINGS PER COMMON SHARE, BASIC Basic income attributable to common stockholders per share $ 0.47 $ 0.46 $ 0.84 Weighted average shares of common stock outstanding - basic 59,990,740 59,806,309 54,110,949 EARNINGS PER COMMON SHARE, DILUTED Diluted income attributable to common stockholders per share $ 0.47 $ 0.46 $ 0.84 Weighted average shares of common stock outstanding - diluted 76,172,277 76,119,763 70,786,132 COMPREHENSIVE INCOME Net income $ 36,593 $ 35,588 $ 60,188 Other comprehensive gain (loss) - unrealized gain (loss) on swap derivatives during the period 2,723 ( 3,649 ) ( 5,571 ) Reclassification of amortization of forward starting swap included in interest expense ( 1,098 ) ( 1,330 ) ( 1,304 ) Reclassification of amortization of forward-starting swap realized gain included in loss on early extinguishment of debt ( 193 ) — — Comprehensive income 38,025 30,609 53,313 Comprehensive income attributable to noncontrolling interest ( 7,966 ) ( 6,496 ) ( 12,301 ) Comprehensive income attributable to American Assets Trust, Inc. $ 30,059 $ 24,113 $ 41,012 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, 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 income - change in value of interest rate swaps — — — — ( 4,482 ) ( 1,602 ) ( 6,084 ) Other comprehensive income - unrealized gain on forward-starting interest rate swaps — — — — 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 ) 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 Net income — — — 28,940 — 7,653 36,593 Issuance of restricted stock 229,819 2 ( 2 ) — — — — Forfeiture of restricted stock ( 155,390 ) ( 2 ) 2 — — — — Dividends declared and paid — — — ( 70,165 ) — ( 18,771 ) ( 88,936 ) Stock-based compensation — — 8,493 — — — 8,493 Shares withheld for employee taxes ( 25,141 ) — ( 865 ) — — — ( 865 ) Other comprehensive loss - change in value of interest rate swaps — — — — 2,135 588 2,723 F-11 Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 864 ) ( 234 ) ( 1,098 ) Reclassification of amortization of forward-starting swaps included in loss on early extinguishment of debt — — — — ( 152 ) ( 41 ) ( 193 ) Balance at December 31, 2021 60,525,580 $ 605 $ 1,453,272 $ ( 217,785 ) $ 2,872 $ ( 28,841 ) $ 1,210,123 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, 2021 2020 2019 OPERATING ACTIVITIES Net income $ 36,593 $ 35,588 $ 60,188 Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent revenue and amortization of lease intangibles ( 17,634 ) ( 31,242 ) ( 6,985 ) Depreciation and amortization 116,306 108,292 96,205 Amortization of debt issuance costs and debt fair value adjustments 2,753 1,477 1,467 Provision for uncollectable rental income ( 2,289 ) 18,427 1,751 Early extinguishment of debt 4,271 — — Gain on sale of real estate — — ( 633 ) Stock-based compensation expense 8,493 6,307 4,477 Settlement of forward interest rate swap agreement — — 513 Lease termination income — — ( 4,518 ) Other noncash interest expense ( 1,098 ) ( 1,330 ) ( 1,304 ) Other, net 1,314 ( 695 ) 4,746 Changes in operating assets and liabilities Change in accounts receivable 2,273 ( 4,940 ) ( 1,071 ) Change in other assets 109 141 ( 2,420 ) Change in accounts payable and accrued expenses 15,331 ( 2,108 ) 5,956 Change in security deposits payable 443 ( 1,726 ) ( 971 ) Change in other liabilities and deferred credits 1,464 ( 1,206 ) ( 3,585 ) Net cash provided by operating activities 168,329 126,985 153,816 INVESTING ACTIVITIES Acquisition of real estate, net ( 204,511 ) — ( 507,780 ) Capital expenditures ( 104,588 ) ( 63,488 ) ( 88,327 ) Proceeds from sale of real estate, net of selling costs — — 8,191 Leasing commissions ( 3,142 ) ( 5,589 ) ( 11,267 ) Purchase of marketable securities ( 47,760 ) — — Sale of marketable securities 47,723 — — Net cash used in investing activities ( 312,278 ) ( 69,077 ) ( 599,183 ) FINANCING ACTIVITIES Repayment of secured notes payable — ( 51,003 ) ( 20,762 ) Proceeds from unsecured line of credit — 100,000 59,000 Repayment of unsecured line of credit ( 100,000 ) — ( 123,000 ) Repayment of unsecured notes payable ( 155,375 ) — — Proceeds from issuance of unsecured notes payable 494,675 — 150,000 Debt issuance costs ( 5,075 ) ( 125 ) ( 1,103 ) Proceeds from issuance of common stock, net — — 515,354 Dividends paid to common stock and unitholders ( 88,936 ) ( 76,510 ) ( 80,605 ) Shares withheld for employee taxes ( 865 ) ( 672 ) ( 1,338 ) Net cash provided by (used in) financing activities 144,424 ( 28,310 ) 497,546 Net increase in cash, cash equivalents and restricted cash 475 29,598 52,179 Cash, cash equivalents and restricted cash, beginning of year 139,049 109,451 57,272 Cash, cash equivalents and restricted cash, end of year $ 139,524 $ 139,049 $ 109,451 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, 2021 2020 2019 Cash and cash equivalents $ 139,524 $ 137,333 $ 99,303 Restricted cash — 1,716 10,148 Total cash, cash equivalents and restricted cash shown in Statement of Cash Flows $ 139,524 $ 139,049 $ 109,451 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, 2021 2020 ASSETS Real estate, at cost Operating real estate $ 3,389,726 $ 3,155,280 Construction in progress 139,098 91,047 Held for development 547 547 3,529,371 3,246,874 Accumulated depreciation ( 847,390 ) ( 754,140 ) Net real estate 2,681,981 2,492,734 Cash and cash equivalents 139,524 137,333 Restricted cash — 1,716 Accounts receivable, net 7,445 6,938 Deferred rent receivables, net 82,724 72,476 Other assets, net 106,253 106,112 TOTAL ASSETS $ 3,017,927 $ 2,817,309 LIABILITIES AND CAPITAL LIABILITIES: Secured notes payable, net $ 110,965 $ 110,923 Unsecured notes payable, net 1,538,238 1,196,677 Unsecured line of credit, net — 99,151 Accounts payable and accrued expenses 64,531 59,262 Security deposits payable 7,855 6,590 Other liabilities and deferred credits 86,215 91,300 Total liabilities 1,807,804 1,563,903 Commitments and contingencies (Note 12) CAPITAL: Limited partners' capital, 16,181,537 and 16,181,537 units issued and outstanding as of December 31, 2021 and December 31, 2020, respectively ( 30,138 ) ( 19,020 ) General partner's capital, 60,525,580 and 60,476,292 units issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 1,236,092 1,269,689 Accumulated other comprehensive income 4,169 2,737 Total capital 1,210,123 1,253,406 TOTAL LIABILITIES AND CAPITAL $ 3,017,927 $ 2,817,309 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, 2021 2020 2019 REVENUE: Rental income $ 360,208 $ 330,312 $ 343,865 Other property income 15,620 14,261 22,876 Total revenue 375,828 344,573 366,741 EXPENSES: Rental expenses 86,980 79,178 91,967 Real estate taxes 42,794 41,941 40,013 General and administrative 29,879 26,581 24,871 Depreciation and amortization 116,306 108,292 96,205 Total operating expenses 275,959 255,992 253,056 OPERATING INCOME 99,869 88,581 113,685 Interest expense ( 58,587 ) ( 53,440 ) ( 54,008 ) Loss on early extinguishment of debt ( 4,271 ) — — Gain on sale of real estate — — 633 Other (expense) income, net ( 418 ) 447 ( 122 ) NET INCOME 36,593 35,588 60,188 Net income attributable to restricted shares ( 564 ) ( 383 ) ( 381 ) NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P. $ 36,029 $ 35,205 $ 59,807 EARNINGS PER UNIT - BASIC Earnings per unit, basic $ 0.47 $ 0.46 $ 0.84 Weighted average units outstanding, basic 76,172,277 76,119,763 70,786,132 EARNINGS PER UNIT - DILUTED Earnings per unit, diluted $ 0.47 $ 0.46 $ 0.84 Weighted average units outstanding, diluted 76,172,277 76,119,763 70,786,132 DISTRIBUTIONS PER UNIT $ 1.16 $ 1.00 $ 1.14 COMPREHENSIVE INCOME Net income $ 36,593 $ 35,588 $ 60,188 Other comprehensive gain (loss) - unrealized gain (loss) on swap derivatives during the period 2,723 ( 3,649 ) ( 5,571 ) Reclassification of amortization of forward starting swaps included in interest expense ( 1,098 ) ( 1,330 ) ( 1,304 ) Reclassification of amortization of forward-starting swap realized gain included in loss on early extinguishment of debt ( 193 ) — — Comprehensive income 38,025 30,609 53,313 Comprehensive income attributable to Limited Partners ( 7,966 ) ( 6,496 ) ( 12,301 ) Comprehensive income attributable to General Partner $ 30,059 $ 24,113 $ 41,012 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, 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 income - change in value of interest rate swaps — — — — ( 6,084 ) ( 6,084 ) Other comprehensive income - unrealized gain on forward-starting interest rate swaps — — — — 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 ) 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 Net income — 7,653 — 28,940 — 36,593 Issuance of restricted units — — 229,819 — — — Forfeiture of restricted units — — ( 155,390 ) — — — Distributions — ( 18,771 ) — ( 70,165 ) — ( 88,936 ) Stock-based compensation — — — 8,493 — 8,493 Units withheld for employee taxes — — ( 25,141 ) ( 865 ) — ( 865 ) Other comprehensive loss - change in value of interest rate swaps — — — — 2,723 2,723 Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 1,098 ) ( 1,098 ) Reclassification of amortization of forward-starting swaps included in loss on early extinguishment of debt — — — — ( 193 ) ( 193 ) Balance at December 31, 2021 16,181,537 $ ( 30,138 ) 60,525,580 $ 1,236,092 $ 4,169 $ 1,210,123 (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-16 American Assets Trust, L.P. Consolidated Statements of Cash Flows (In Thousands) Year Ended December 31, 2021 2020 2019 OPERATING ACTIVITIES Net income $ 36,593 $ 35,588 $ 60,188 Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent revenue and amortization of lease intangibles ( 17,634 ) ( 31,242 ) ( 6,985 ) Depreciation and amortization 116,306 108,292 96,205 Amortization of debt issuance costs and debt fair value adjustments 2,753 1,477 1,467 Provision for uncollectable rental income ( 2,289 ) 18,427 1,751 Early extinguishment of debt 4,271 — — Gain on sale of real estate — — ( 633 ) Stock-based compensation expense 8,493 6,307 4,477 Settlement of forward interest rate swap agreement — — 513 Lease termination income — — ( 4,518 ) Other noncash interest expense ( 1,098 ) ( 1,330 ) ( 1,304 ) Other, net 1,314 ( 695 ) 4,746 Changes in operating assets and liabilities Change in accounts receivable and deferred rent receivables 2,273 ( 4,940 ) ( 1,071 ) Change in other assets 109 141 ( 2,420 ) Change in accounts payable and accrued expenses 15,331 ( 2,108 ) 5,956 Change in security deposits payable 443 ( 1,726 ) ( 971 ) Change in other liabilities and deferred credits 1,464 ( 1,206 ) ( 3,585 ) Net cash provided by operating activities 168,329 126,985 153,816 INVESTING ACTIVITIES Acquisition of real estate, net ( 204,511 ) — ( 507,780 ) Capital expenditures ( 104,588 ) ( 63,488 ) ( 88,327 ) Proceeds from sale of real estate, net of selling costs — — 8,191 Leasing commissions ( 3,142 ) ( 5,589 ) ( 11,267 ) Purchase of marketable securities ( 47,760 ) — — Sale of marketable securities 47,723 — — Net cash used in investing activities ( 312,278 ) ( 69,077 ) ( 599,183 ) FINANCING ACTIVITIES Repayment of secured notes payable — ( 51,003 ) ( 20,762 ) Proceeds from unsecured line of credit — 100,000 59,000 Repayment of unsecured line of credit ( 100,000 ) — ( 123,000 ) Repayment of unsecured notes payable ( 155,375 ) — — Proceeds from issuance of unsecured notes payable 494,675 — 150,000 Debt issuance costs ( 5,075 ) ( 125 ) ( 1,103 ) Contributions from American Assets Trust, Inc. — — 515,354 Distributions ( 88,936 ) ( 76,510 ) ( 80,605 ) Shares withheld for employee taxes ( 865 ) ( 672 ) ( 1,338 ) Net cash provided by (used in) financing activities 144,424 ( 28,310 ) 497,546 Net increase in cash, cash equivalents and restricted cash 475 29,598 52,179 Cash, cash equivalents and restricted cash, beginning of year 139,049 109,451 57,272 Cash, cash equivalents and restricted cash, end of year $ 139,524 $ 139,049 $ 109,451 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, 2021 2020 2019 Cash and cash equivalents $ 139,524 $ 137,333 $ 99,303 Restricted cash — 1,716 10,148 Total cash, cash equivalents and restricted cash shown in Statement of Cash Flows $ 139,524 $ 139,049 $ 109,451 The accompanying notes are an integral part of these consolidated financial statements. F-17 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 208 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, 2021, we owned or had a controlling interest in 30 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of December 31, 2021, 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 Corporate Campus East III Torrey Reserve Campus First & Main Torrey Point Lloyd Portfolio Solana Crossing City Center Bellevue The Landmark at One Market Eastgate Office Park 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 Held for Development and Construction in Progress La Jolla Commons - Construction in Progress Solana Crossing – Land Lloyd Portfolio – Construction in Progress F-18 Table of Contents Basis of Presentation Our consolidated financial statements include the accounts of the company, our Operating Partnership and our subsidiaries. The equity interests of other investors in our Operating Partnership are reflected as noncontrolling interests. The Company follows the Financial Accounting Standards Board (the "FASB") guidance for determining whether an entity is a variable interest entity (“VIE”) and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity would be required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. American Assets Trust, Inc. has concluded that the Operating Partnership is a VIE, and because American Assets Trust, Inc. has both the power and the rights to control the Operating Partnership, American Assets Trust, Inc. is the primary beneficiary and is required to continue to consolidate the Operating Partnership. Substantially all of the assets and liabilities of the Company are related to the operating partnership VIE. All intercompany transactions and balances are eliminated in consolidation. 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 Company cannot predict if previously placed governmental restrictions or social distancing measures will be reinstated in the future. With the rise in cases related to COVID-19 variants, the willingness of customers to visit certain of out tenants' businesses may be reduced due to 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-19 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, 2021 2020 2019 Supplemental cash flow information Total interest costs incurred $ 61,578 $ 54,510 $ 54,636 Interest capitalized $ 2,991 $ 1,070 $ 628 Interest expense $ 58,587 $ 53,440 $ 54,008 Cash paid for interest, net of amounts capitalized $ 50,970 $ 53,467 $ 51,975 Cash paid for income taxes $ 356 $ 844 $ 971 Supplemental schedule of noncash investing and financing activities Accounts payable and accrued liabilities for construction in progress $ 18,697 $ 22,884 $ 25,413 Accrued leasing commissions $ 2,628 $ 555 $ 3,345 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 $ 2.5 million, $ 2.3 million and $ 3.5 million for the years ended December 31, 2021, 2020 and 2019, 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-20 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 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. 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, 2021 and December 31, 2020, our allowance for doubtful accounts was $ 4.6 million and $ 10.0 million, respectively. Total collectability related adjustments for rental income, which includes the allowance for doubtful accounts and deferred rent receivables, was $ 2.3 million, $ 18.4 million and $ 1.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. 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. We assess each lease concession and determine whether it represents a lease modifications under Accounting Standards Codification Topic 842, Leases ("ASC 842"). The Company has elected to account for such COVID-19-related concessions as lease modifications. 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, 2021, 2020 and 2019, real estate depreciation expense was $ 102.0 million, $ 95.8 million and $ 85.3 million, respectively. 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 comprehensive 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 comprehensive 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 F-21 Table of Contents 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, 2021 or December 31, 2020. There were no impairment charges during the years ended December 31, 2021, 2020 and 2019. 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-22 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 or Secured Overnight Financing 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, 2021 and December 31, 2020, we had $ 62.2 million and $ 33.0 million, respectively, in excess of the FDIC insured limit. At December 31, 2021 and December 31, 2020, we had $ 70.8 million and $ 97.8 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, 2021 and 2020, we had $ 0.0 million and $ 1.7 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 comprehensive 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, 2021 and December 31, 2020 we had no investments in real estate joint ventures, and no other interests in VIEs to be evaluated for consolidated. F-23 Table of Contents 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. For the grants of market-based restricted stock awards in December 2019 (the “2019 grant”) and December 2020 grant (the “2020 grant”), 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. For the grants of performance and market-based restricted stock awards in December 2021 (the “2021 grant”), we measure stock-based compensation expense based on the fair value of the award on the grant date, adjusted for changes to probabilities of achieving performance targets, and recognize expense ratably over the vesting period. 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 award measured immediately before its terms are modified. For the year ended December 31, 2021 and 2020, we incurred incremental compensation cost of approximately $ 2.6 million and $ 1.2 million, respectively, related to the discretionary vesting of previously granted restricted stock awards that did not meet the original vesting criteria. For the year ended December 31, 2019, 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 ended 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. 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 F-24 Table of Contents 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 March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) , which 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 generally only available through December 31, 2022. In January 2021, the FASB issued Accounting Standards Update 2021-01, “Reference Rate Reform (Topic 848): Scope” (“ASU 2021-01”), which clarified the scope and application of the original guidance. We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients. F-25 Table of Contents NOTE 2. REAL ESTATE A summary of our real estate investments is as follows (in thousands): Retail Office Multifamily Mixed-Use Total December 31, 2021 Land $ 254,016 $ 284,263 $ 72,668 $ 76,635 $ 687,582 Buildings 527,262 1,270,131 393,713 129,226 2,320,332 Land improvements 47,425 14,269 7,764 2,606 72,064 Tenant improvements 89,520 218,639 — 2,366 310,525 Furniture, fixtures, and equipment 1,098 5,003 18,039 15,416 39,556 Construction in progress (1) 7,160 87,340 4,448 364 99,312 926,481 1,879,645 496,632 226,613 3,529,371 Accumulated depreciation ( 335,374 ) ( 343,433 ) ( 115,317 ) ( 53,266 ) ( 847,390 ) Net real estate $ 591,107 $ 1,536,212 $ 381,315 $ 173,347 $ 2,681,981 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 (1) 5,170 43,595 1,831 663 51,259 922,528 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 (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 $ 0.0 million , $ 0.0 million and $ 0.6 million for the years ended December 31, 2021, 2020, and 2019, 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. 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. The property was acquired with cash on hand. F-26 Table of Contents 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 property was acquired with cash on hand. The financial information set forth below summarizes the company’s purchase price allocation for each of Eastgate Office Park and Corporate Campus East III during the year ended December 31, 2021 (in thousands): Eastgate Office Park Corporate Campus East III Land $ 35,822 $ 23,203 Building 76,692 52,234 Land improvements 1,740 667 Furniture, fixtures, and equipment 4,305 3,091 Total real estate 118,559 79,195 Lease intangibles 7,023 5,341 Prepaid expenses and other assets 8 13 Assets acquired $ 125,590 $ 84,549 Accounts payable and accrued expenses $ ( 31 ) $ ( 9 ) Security deposits payable ( 513 ) ( 310 ) Other liabilities and deferred credits ( 535 ) ( 3,844 ) Liabilities assumed $ ( 1,079 ) $ ( 4,163 ) 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, 2021, is 3.2 years and 5.2 years for Eastgate Office Park and Corporate Campus East III, respectively. The following table summarizes the operating results for each of Eastgate Office Park and Corporate Campus East III included in the company's historical consolidated statement of operations for the period of acquisition through December 31, 2021 (in thousands): Eastgate Office Park Corporate Campus East III Total Revenues $ 5,139 $ 1,909 $ 7,048 Operating expenses $ ( 5,235 ) $ ( 2,131 ) $ ( 7,366 ) Operating loss $ ( 96 ) $ ( 222 ) $ ( 318 ) Net loss attributable to American Assets Trust, Inc. $ ( 99 ) $ ( 222 ) $ ( 321 ) F-27 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, 2021 December 31, 2020 In-place leases $ 67,215 $ 60,965 Accumulated amortization ( 38,130 ) ( 34,758 ) Above market leases 2,532 5,389 Accumulated amortization ( 2,383 ) ( 5,268 ) Acquired lease intangible assets, net $ 29,234 $ 26,328 Below market leases $ 58,655 $ 56,677 Accumulated accretion ( 36,253 ) ( 35,219 ) Acquired lease intangible liabilities, net $ 22,402 $ 21,458 The value allocated to in-place leases is amortized over the related lease term as depreciation and amortization expense in the statement of comprehensive 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 comprehensive income. Rental income (loss) includes net amortization from acquired above and below market leases of $ 3.2 million, $ 3.9 million and $ 3.8 million in 2021, 2020 and 2019, respectively. The remaining weighted-average amortization period as of December 31, 2021, is 5.8 years, 3.7 years and 10.5 years for in-place leases, above market leases and below market leases, respectively. Below market leases include $ 11.5 million related to below market renewal options, and the weighted-average period prior to the commencement of the renewal options is 7.7 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, 2021 2020 2019 Amortization of in-place leases $ ( 6,664 ) $ ( 5,018 ) $ ( 4,762 ) Amortization of above market leases ( 34 ) ( 62 ) ( 345 ) Amortization of below market leases 3,271 3,994 4,131 $ ( 3,427 ) $ ( 1,086 ) $ ( 976 ) As of December 31, 2021, 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, 2022 $ 6,734 $ 41 $ 3,171 2023 4,456 41 2,896 2024 4,146 38 2,581 2025 3,580 25 2,169 2026 3,287 4 1,767 Thereafter 6,882 — 9,818 $ 29,085 $ 149 $ 22,402 F-28 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 The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs. We measure the fair value of this liability based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques. The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contract at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2021 we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative. As a result, we have determined that our derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy. A summary of our financial liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy is as follows (in thousands): December 31, 2021 December 31, 2020 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Deferred compensation liability $ — $ 2,503 $ — $ 2,503 $ — $ 2,059 $ — $ 2,059 Interest rate swap liability $ — $ 1,807 $ — $ 1,807 $ — $ 4,531 $ — $ 4,531 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 2.1 % to 3.7 %. F-29 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, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value Secured notes payable $ 110,965 $ 113,207 $ 110,923 $ 114,074 Unsecured term loan $ 249,654 $ 250,000 $ 249,233 $ 250,000 Unsecured senior guaranteed notes $ 797,953 $ 832,795 $ 947,444 $ 1,017,378 Senior unsecured notes, net $ 490,631 $ 503,000 $ — $ — Unsecured line of credit $ — $ — $ 99,151 $ 100,000 NOTE 5. OTHER ASSETS Other assets consist of the following (in thousands): December 31, 2021 December 31, 2020 Leasing commissions, net of accumulated amortization of $ 40,595 and $ 35,167 , respectively $ 38,589 $ 38,173 Acquired above market leases, net 149 121 Acquired in-place leases, net 29,085 26,207 Lease incentives, net of accumulated amortization of $ 913 and $ 802 , respectively 595 994 Other intangible assets, net of accumulated amortization of $ 1,382 and $ 1,213 , respectively 2,445 2,565 Right-of-use lease asset, net 26,254 29,350 Prepaid expenses, deposits and other 9,136 8,702 Total other assets $ 106,253 $ 106,112 Lease incentives are amortized over the term of the related lease and included as a reduction of rental income in the statement of comprehensive income. NOTE 6. OTHER LIABILITIES AND DEFERRED CREDITS Other liabilities and deferred credits consist of the following (in thousands): December 31, 2021 December 31, 2020 Acquired below market leases, net $ 22,402 $ 21,458 Prepaid rent and deferred revenue 16,309 14,518 Interest rate swap liability 1,807 4,531 Straight-line rent liability 14,274 18,049 Deferred rent expense and lease intangible 3 16 Deferred compensation 2,503 2,059 Deferred tax liability 967 570 Lease liability 27,917 30,060 Other liabilities 33 39 Total other liabilities and deferred credits, net $ 86,215 $ 91,300 F-30 Table of Contents Straight-line rent liability relates to leases which have rental payments that decrease over time or one-time upfront payments for which the rental revenue is deferred and recognized on a straight-line basis. NOTE 7. DEBT Debt of American Assets Trust, Inc. American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's Third Amended and Restated Credit Facility (see note 19. Subsequent Events), 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, 2021 and December 31, 2020 (in thousands): Description of Debt Principal Balance as of Stated Interest Rate Stated Maturity Date December 31, 2021 December 31, 2020 as of December 31, 2021 City Center Bellevue (1) 111,000 111,000 3.98 % November 1, 2022 111,000 111,000 Debt issuance costs, net of accumulated amortization of $ 387 and $ 345 , respectively ( 35 ) ( 77 ) Total Secured Notes Payable $ 110,965 $ 110,923 (1) Interest only. Certain loans require us to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2021, we were in compliance with all loan covenants. F-31 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, 2021 and December 31, 2020 (in thousands): Description of Debt Principal Balance as of Stated Interest Rate Stated Maturity Date December 31, 2021 December 31, 2020 as of December 31, 2021 Term Loan A $ 100,000 $ 100,000 Variable (1) January 9, 2022 (2) Senior Guaranteed Notes, Series A (3) — 150,000 4.04 % (4) October 31, 2021 Term Loan B 100,000 100,000 Variable (5) March 1, 2023 Term Loan C 50,000 50,000 Variable (6) March 1, 2023 Senior Guaranteed Notes, Series F 100,000 100,000 3.78 % (7) 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 % (8) March 1, 2027 Senior Guaranteed Notes, Series E 100,000 100,000 4.24 % (9) May 23, 2029 Senior Guaranteed Notes, Series G 150,000 150,000 3.91 % (10) July 30, 2030 3.375% Senior Unsecured Notes 500,000 — 3.38 % February 1, 2031 1,550,000 1,200,000 Debt discount and issuance costs, net of accumulated amortization of $ 9,462 and $ 8,856 , respectively ( 11,762 ) ( 3,323 ) Total Unsecured Notes Payable $ 1,538,238 $ 1,196,677 (1) As of December 31, 2021, the interest rate associated with Term Loan A was variable. However, on January 14, 2022, the Operating Partnership entered into an interest rate swap agreement that is intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.80 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio. (2) On January 5, 2022, we extended the 2022 Term Loan A to a maturity date of January 5, 2027 with no further extension options. (3) Notes prepaid in full, with make-whole penalty thereon of approximately $ 3.9 million, on January 26, 2021. (4) 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 and the related swap contract was fully amortized and terminated. (5) 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 2.65 %, subject to adjustments based on our consolidated leverage ratio. (6) 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 2.64 %, subject to adjustments based on our consolidated leverage ratio. (7) 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. (8) 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. (9) 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. (10) 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. F-32 Table of Contents On January 26, 2021, the Operating Partnership issued $ 500 million of senior unsecured notes (the "3.375% Senior Notes") that mature February 1, 2031 and bear interest at 3.375 % per annum. The 3.375% Senior Notes were priced at 98.935 % of the principal amount with a yield to maturity of 3.502 %. The net proceeds of the 3.375% Senior Notes, after the issuance discount, underwriting fees, and other costs were approximately $ 489.7 million, which were primarily used to (i) prepay our $ 150 million Senior Guaranteed Notes, Series A, with a make-whole payment (as defined in the Note Purchase Agreement for the Series A Notes) thereon of approximately $ 3.9 million, on January 26, 2021, (ii) repay our $ 100 million then outstanding balance under our Revolver Loan on January 26, 2021, (iii) fund the development of the La Jolla Commons III office building and (iv) for general corporate purposes. 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 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 $ 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 F-33 Table of Contents 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 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, 2021, the Operating Partnership was in compliance with all loan covenants. F-34 Table of Contents Scheduled principal payments on secured and unsecured notes payable as of December 31, 2021 are as follows (in thousands): 2022 (1) $ 211,000 2023 150,000 2024 100,000 2025 200,000 2026 — Thereafter 1,000,000 $ 1,661,000 (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. 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 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, F-35 Table of Contents • 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 provided 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 had an accordion feature that would have allowed 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, 2021, there were no amounts outstanding balance under the Revolver Loan and the related debt issuance costs were fully amortized. Borrowings under the Second Amended and Restated Credit Facility had 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 were more favorable than previously contained in the Prior Credit Facility in place as of December 31, 2017. For the year-ended December 31, 2021, the weighted average interest rate on the Revolver Loan was 1.14 %. The Revolver Loan initially matured 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 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 were 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 included 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, F-36 Table of Contents • 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 provided 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, 2021, the Operating Partnership was in compliance with all then in-place Second Amended and Restated Credit Facility covenants. 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 (the “2022 Revolver Loan”) and a term loan of $ 100 million (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. Borrowings under the Third Amended and Restated Credit Agreement bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) the applicable Secured Overnight Financing Rate (“ SOFR ”), plus the applicable SOFR Adjustment and a spread which ranges from (a) 1.05 %- 1.50 % (with respect to the 2022 Revolver Loans) and (b) 1.20 % to 1.70 % (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate , (b) the federal funds rate plus 50 bps, (c) the Term SOFR Screen Rate with a term of one month plus 100 bps and (d) 1.00 %, plus a spread which ranges from (i) 0.10 %- 0.50 % (with respect to 2022 Revolver Loan) and (ii) 0.20 % to 0.70 % (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio. Note that on January 14, 2022, the Operating Partnership entered into an interest rate swap agreement that is intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.80 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio. 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. On January 14, 2022, we entered into two separate interest rate swap contracts, one with Wells Fargo Bank, National Association and one with Bank of America, National Association, to reduce the interest rate variability exposure of the interest cash flows of the 2022 Term Loan A. Each of the two five year swap contracts have a notional amount of $ 50 million, a termination date of January 5, 2027 , a fixed pay rate of 2.8 % (both swaps combined), and a receive rate equal to the one-month SOFR, with fixed rate payments due monthly commencing February 1, 2022, floating payments due monthly commencing February 1, 2022, and floating reset dates two days prior to the first day of each calculation period. The five-year swap contracts accrual period, January 14, 2022 to January 5, 2027, was designed to match the tenor of our 2022 Term Loan A, which successfully closed on January 5, 2022. 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. F-39 Table of Contents The following is a summary of the terms of the interest rate swaps as of December 31, 2021 (dollars in thousands): Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value U.S. Bank N.A. $ 100,000 3/1/2016 3/1/2023 $ ( 1,206 ) Wells Fargo Bank, N.A. $ 50,000 5/2/2016 3/1/2023 $ ( 601 ) 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 $ 1.1 million will be reclassified as a decrease to interest expense. 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, 2021, 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, 2021. The remaining 21.2 % 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, 2021, 2020 and 2019, approximately 0 , 209,011 and 787,060 , 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 December 3, 2021, we entered into a new ATM equity program, our only current 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 sale 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, 2021, 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, 2021, we had the capacity to issue up to an additional $ 250.0 million in shares of our common stock under our current ATM equity program. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs. As of December 31, 2021, 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, 2021. 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. F-41 Table of Contents 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, 2021, 2020 and 2019: Period Amount per Share/Unit Period Covered Dividend Paid Date 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 First Quarter 2021 $ 0.28 January 1, 2021 to March 31, 2021 March 25, 2021 Second Quarter 2021 $ 0.28 April 1, 2021 to June 30, 2021 June 24, 2021 Third Quarter 2021 $ 0.30 July 1, 2021 to September 30, 2021 September 23, 2021 Fourth Quarter 2021 $ 0.30 October 1, 2021 to December 31, 2021 December 23, 2021 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, 2021 2020 2019 Per Share % Per Share % Per Share % Ordinary income $ 0.73 62.6 % $ 0.66 66.0 % $ 1.09 95.6 % Capital gain — — % — — % — — % Return of capital 0.43 37.4 % 0.34 34.0 % 0.05 4.4 % Total $ 1.16 100.0 % $ 1.00 100.0 % $ 1.14 100.0 % Stock-Based Compensation The company has established the 2011 Equity Incentive Award 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 (the "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, 2021, 2,402,848 shares of common stock remain available for future issuance. F-42 Table of Contents The following shares of restricted common stock have been issued as of December 31, 2021: Grant Fair Value at Grant Date Number June 11, 2019 (1) $ 45.35 4,412 December 9, 2019 (2) $ 28.06 - $ 30.97 168,596 June 9, 2020 (1) $ 33.29 6,008 December 4, 2020 (3) $ 19.02 - $ 20.83 311,566 June 8, 2021 (1) 38.59 5,184 December 9, 2021 (4) $ 24.27 - $ 25.17 224,635 (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, 2020, 2021 and 2022, 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, 2021, 2022 and 2023, 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, 2022, 2023 and 2024, subject to the employee's continued employment on those dates. For the 2019 grants and 2020 grants, 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 2021 grants, the fair value of the awards was estimated using a Monte Carlo Simulation model. For the 2021 grants vesting is subject to multiple vesting conditions as follows: (1) a service condition which requires continued employment of the employee as of each vesting date during the three-year vesting term for the employee to be eligible for vesting, (2) a performance condition with respect to our FFO per share for the FFO performance periods and (3) a market condition with respect to our relative total shareholder return performance over a one-year, two-year and three-year performance period ending on November 30, 2022, 2023 and 2024 as compared to a pre-determined index. On each measurement date the performance condition and market condition performance will determine the number of shares that vest. We measure stock-based compensation expense based on the fair value of the award on the grant date, adjusted for changes to probabilities of achieving performance targets, and recognize expense over the vesting period. For the restricted stock grants that are time-vesting, issued to our non-employee directors, we estimate the stock compensation expense based on the fair value of the stock at the grant date. F-43 Table of Contents The following table summarizes the activity of non-vested restricted stock awards during the year ended December 31, 2021: 2021 Units Weighted Average Grant Date Fair Value Balance at beginning of year 491,957 $ 23.53 Granted 229,819 25.04 Vested ( 78,989 ) 25.00 Forfeited ( 155,390 ) 24.25 Balance at end of year 487,397 $ 23.78 We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 8.5 million, $ 6.3 million and $ 4.5 million in noncash compensation expense for the years ended December 31, 2021, 2020 and 2019, respectively, each of which is included in general and administrative expense on the statement of comprehensive income. Unrecognized compensation expense was $ 8.2 million at December 31, 2021, 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, 2021, 2020 and 2019, we had a weighted average of approximately 485,202 shares, 357,048 shares and 330,197 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, 2021, 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, 2021, 2020 and 2019 does not include 485,202 , 357,048 , and 330,197 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-44 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, 2021 2020 2019 NUMERATOR Net income $ 36,593 $ 35,588 $ 60,188 Less: Net income attributable to restricted shares ( 564 ) ( 383 ) ( 381 ) Less: Income attributable to unitholders in the Operating Partnership ( 7,653 ) ( 7,545 ) ( 14,089 ) Net income attributable to common stockholders—basic $ 28,376 $ 27,660 $ 45,718 Income attributable to American Assets Trust, Inc. common stockholders—basic $ 28,376 $ 27,660 $ 45,718 Plus: Income attributable to unitholders in the Operating Partnership 7,653 7,545 14,089 Net income attributable to common stockholders—diluted $ 36,029 $ 35,205 $ 59,807 DENOMINATOR Weighted average common shares outstanding—basic 59,990,740 59,806,309 54,110,949 Effect of dilutive securities—conversion of Operating Partnership units 16,181,537 16,313,454 16,675,183 Weighted average common shares outstanding—diluted 76,172,277 76,119,763 70,786,132 Earnings per common share, basic $ 0.47 $ 0.46 $ 0.84 Earnings per common share, diluted $ 0.47 $ 0.46 $ 0.84 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 ended December 31, 2011. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders. 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 $ 1.0 million and $ 0.6 million as of December 31, 2021 and 2020, respectively, in relation to real estate asset basis differences and prepaid expenses for our TRS. The income tax provision included in other (expense) income on the consolidated statement of comprehensive income is as follows (in thousands): Year Ended December 31, 2021 2020 2019 Current: Federal $ — $ ( 542 ) $ 48 State 483 412 625 Deferred: Federal 118 ( 80 ) 237 State 137 201 ( 91 ) Provision for income taxes (benefit) $ 738 $ ( 9 ) $ 819 F-45 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 tenants' operations at our properties. 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 $ 4.0 million based on operating performance through December 31, 2021. F-46 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, 2021, 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 43.0 % of our total revenue for the year ended December 31, 2021, 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 11.3 % of total revenues for the year ended December 31, 2021. Tenants in the office industry accounted for 49.6 % and 51.5 % of total revenues for the years December 31, 2021 and 2020, 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. Tenants in the retail industry accounted for 25.2 % and 25.6 % of total revenues for the years December 31, 2021 and 2020, 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 9.1 % of total revenues for the years ended December 31, 2021 and 2020, respectively. For the years ended December 31, 2021 and 2020, no tenant accounted for more than 10.0 % of our total rental revenue. At December 31, 2021, Google LLC at The Landmark at One Market accounted for 9.6 % of total annualized base rent. Four other tenants (LPL Holdings, Inc., Autodesk, Inc., Smartsheet, Inc., and VMware, Inc) comprise 16.8 % of our total annualized base rent at December 31, 2021, 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, 2021 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. F-47 Table of Contents 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 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, 2021, our office, retail and mixed-use properties are located in five states: California, Oregon, Hawaii, Washington and Texas. At December 31, 2021, we had approximately 874 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 1,910 leases with residential tenants at December 31, 2021, excluding Santa Fe Park RV Resort. As of December 31, 2021, 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): 2022 $ 235,625 2023 221,814 2024 190,860 2025 167,588 2026 152,488 Thereafter 370,926 Total $ 1,339,301 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. 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-48 Table of Contents Current annual payments under the operating leases are as follows, as of December 31, 2021 (in thousands): Year Ending December 31, 2022 $ 3,232 2023 3,328 2024 3,428 2025 3,531 2026 3,584 Thereafter 16,126 Total lease payments $ 33,229 Imputed interest ( 5,312 ) Present value of lease liability $ 27,917 Lease costs under the operating leases are as follows (in thousands): Year Ended December 31, 2021 2020 Operating lease cost $ 3,926 $ 3,902 Sublease income ( 3,634 ) ( 4,297 ) Total lease (income) cost $ 292 $ ( 395 ) Weighted-average remaining lease term - operating leases (in years) 9.5 Weighted-average discount rate - operating leases 3.19 % Supplemental cash flow information and non-cash activity related to our operating leases are as follow (in thousands): Year Ended December 31, 2021 2020 Operating cash flow information: Cash paid for amounts included in the measurement of lease liabilities $ 2,791 $ 3,422 Non-cash activity: Right-of-use assets obtained in exchange for operating lease obligations $ — $ 27,321 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) subleased a portion of the building to Quiksilver under an operating lease effective through December 31, 2021. The operating lease and sublease were terminated, without penalty as of June 30, 2021. F-49 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, 2021 2020 2019 Minimum rents Office $ 180,704 $ 170,853 $ 136,118 Retail 89,326 82,176 99,601 Multifamily 48,654 47,071 47,448 Mixed-Use 9,901 7,302 15,702 Percentage rent 4,337 3,516 2,476 Hotel revenue 24,935 17,209 40,297 Other 2,351 2,185 2,223 Total rental income $ 360,208 $ 330,312 $ 343,865 Minimum rents include $ 14.0 million, $ 18.9 million and $ 3.2 million for the years ended December 31, 2021, 2020 and 2019, respectively, to recognize minimum rents on a straight-line basis. In addition, minimum rents include $ 3.2 million, $ 3.9 million and $ 3.8 million for the years ended December 31, 2021, 2020 and 2019, 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, 2021 2020 2019 Rental operating $ 41,488 $ 38,194 $ 38,331 Hotel operating 17,518 13,691 24,522 Repairs and maintenance 18,113 17,813 17,035 Marketing 1,779 2,023 2,538 Rent 4,023 3,955 3,372 Hawaii excise tax 2,792 2,479 4,160 Management fees 1,267 1,023 2,009 Total rental expenses $ 86,980 $ 79,178 $ 91,967 NOTE 15. OTHER (EXPENSE) INCOME The principal components of other (expense) income, net are as follows (in thousands): Year Ended December 31, 2021 2020 2019 Interest and investment income $ 324 $ 436 $ 696 Income tax (expense) benefit ( 738 ) 9 ( 819 ) Other non-operating (expense) income ( 4 ) 2 1 Total other (expense) income $ ( 418 ) $ 447 $ ( 122 ) F-50 Table of Contents NOTE 16. RELATED PARTY TRANSACTIONS 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. 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 commenced on March 1, 2021 for an initial lease term of ten years at an average annual rental rate of $ 0.2 million. Rental revenue recognized on the leases of $ 0.3 million, $ 0.2 million and $ 0.2 million for the years ended December 31, 2021, 2020 and 2019, respectively, is included in rental income on the consolidated statements of comprehensive income. At Torrey Reserve Campus, we lease space to EDisability, LLC, an entity majority owned and controlled by Mr. 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 commenced on June 1, 2021 for an initial three years at an average rental rate of $ 0.1 million. Rent revenue recognized on the lease of $ 0.1 million, $ 0.2 million and $ 0.2 million for the years ended December 31, 2021, 2020 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 Mr. Rady. For the years ending December 31, 2021, 2020 and 2019, we incurred approximately $ 0.2 million, $ 0.0 million and $ 0.2 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, 2021, Mr. Rady and his affiliates owned approximately 14.4 % of our outstanding common stock and 19.5 % of our outstanding common units, which together represent an approximate 33.9 % 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, $ 1.0 million and $ 1.1 million were made for the years ended December 31, 2021, 2020 and 2019, respectively, and included in rental expenses on the statements of comprehensive 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, 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. F-51 Table of Contents 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, 2021 2020 2019 Total Office Property revenue $ 186,366 $ 177,554 $ 144,683 Property expense ( 50,233 ) ( 47,424 ) ( 42,234 ) Segment profit 136,133 130,130 102,449 Total Retail Property revenue 94,662 88,280 107,604 Property expense ( 27,983 ) ( 27,374 ) ( 30,633 ) Segment profit 66,679 60,906 76,971 Total Multifamily Property revenue 52,315 50,327 51,066 Property expense ( 23,211 ) ( 22,074 ) ( 20,863 ) Segment profit 29,104 28,253 30,203 Total Mixed-Use Property revenue 42,485 28,412 63,388 Property expense ( 28,347 ) ( 24,247 ) ( 38,250 ) Segment profit 14,138 4,165 25,138 Total segments’ profit $ 246,054 $ 223,454 $ 234,761 The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands): Year Ended December 31, 2021 2020 2019 Total segments' profit $ 246,054 $ 223,454 $ 234,761 General and administrative ( 29,879 ) ( 26,581 ) ( 24,871 ) Depreciation and amortization ( 116,306 ) ( 108,292 ) ( 96,205 ) Interest expense ( 58,587 ) ( 53,440 ) ( 54,008 ) Loss on early extinguishment of debt ( 4,271 ) — — Gain on sale of real estate — — 633 Other (expense) income, net ( 418 ) 447 ( 122 ) Net income 36,593 35,588 60,188 Net income attributable to restricted shares ( 564 ) ( 383 ) ( 381 ) Net income attributable to unitholders in the Operating Partnership ( 7,653 ) ( 7,545 ) ( 14,089 ) Net income attributable to American Assets Trust, Inc. stockholders $ 28,376 $ 27,660 $ 45,718 F-52 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, 2021 December 31, 2020 Net real estate Office $ 1,536,212 $ 1,317,107 Retail 591,107 607,918 Multifamily 381,315 389,804 Mixed-Use 173,347 177,905 $ 2,681,981 $ 2,492,734 Secured Notes Payable (1) Office $ 111,000 $ 111,000 Retail — — $ 111,000 $ 111,000 Capital Expenditures (2) Office $ 93,116 $ 52,882 Retail 7,232 8,596 Multifamily 5,841 3,897 Mixed-Use 1,541 3,702 $ 107,730 $ 69,077 (1) Excludes unamortized debt issuance costs of $ 0.0 million and $ 0.1 million as of December 31, 2021 and 2020, respectively. (2) Capital expenditures represent cash paid for capital expenditures during the year and includes leasing commissions paid. F-53 NOTE 18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The tables below reflect selected American Assets Trust, Inc. quarterly information for 2021 and 2020 (in thousands, except per shares data): Three Months Ended December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Total revenue $ 101,747 $ 98,286 $ 91,809 $ 83,986 Operating income 25,715 27,669 26,423 20,062 Net income 10,478 12,895 11,487 1,733 Net income attributable to restricted shares ( 147 ) ( 145 ) ( 135 ) ( 137 ) Net income attributable to unitholders in the Operating Partnership ( 2,194 ) ( 2,709 ) ( 2,411 ) ( 339 ) Net income attributable to American Assets Trust, Inc. stockholders $ 8,137 $ 10,041 $ 8,941 $ 1,257 Net income per share attributable to common stockholders - basic and diluted $ 0.14 $ 0.17 $ 0.15 $ 0.02 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 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 F-54 The tables below reflect selected American Assets Trust, L.P. quarterly information for 2021 and 2020 (in thousands, except per shares data): Three Months Ended December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Total revenue $ 101,747 $ 98,286 $ 91,809 $ 83,986 Operating income 25,715 27,669 26,423 20,062 Net income 10,478 12,895 11,487 1,733 Net income attributable to restricted shares ( 147 ) ( 145 ) ( 135 ) ( 137 ) Net income attributable to American Assets Trust, L.P. unit holders $ 10,331 $ 12,750 $ 11,352 $ 1,596 Net income per unit attributable to unit holders - basic and diluted $ 0.14 $ 0.17 $ 0.15 $ 0.02 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 common unit holders - basic and diluted $ 0.05 $ 0.08 $ 0.13 $ 0.20 F-55 NOTE 19. SUBSEQUENT EVENTS 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, the 2022 Revolver Loan, and a term loan of $ 100 million, 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. Additionally, on January 14, 2022, the company entered into an interest rate swap agreement that is intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.80 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio. 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, 2021 Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount at December 31, 2021 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 $ 21,557 $ 26,816 $ 130,431 $ ( 68,138 ) 1997/1999 12/9/2003 35 years Carmel Country Plaza — 4,200 — 13,235 4,200 13,235 ( 9,361 ) 1991 1/10/1989 35 years Carmel Mountain Plaza — 22,477 65,217 37,619 31,034 94,279 ( 50,201 ) 1994/2014 3/28/2003 35 years Del Monte Center — 27,412 87,570 34,958 27,117 122,823 ( 73,187 ) 1967/1984/2006 4/8/2004 35 years Gateway Marketplace — 17,363 21,644 1,239 17,363 22,883 ( 3,767 ) 1997/2016 7/6/2017 35 years Geary Marketplace — 8,239 12,353 227 8,239 12,580 ( 3,593 ) 2012 12/19/2012 35 years Hassalo on Eighth - Retail — — — 29,044 597 28,447 ( 7,821 ) 2015 7/1/2011 35 years Lomas Santa Fe Plaza — 8,600 11,282 14,081 8,620 25,343 ( 18,707 ) 1972/1997 6/12/1995 35 years The Shops at Kalakaua — 13,993 10,817 144 14,006 10,948 ( 5,342 ) 1971/2006 3/31/2005 35 years Solana Beach Towne Centre — 40,980 38,842 4,577 40,980 43,419 ( 15,212 ) 1973/2000/2004 1/19/2011 35 years South Bay Marketplace — 4,401 — 12,653 4,401 12,653 ( 8,383 ) 1997 9/16/1995 35 years Waikele Center — 55,593 126,858 43,617 70,644 155,424 ( 71,661 ) 1993/2008 9/16/2004 35 years City Center Bellevue 111,000 25,135 190,998 57,802 25,135 248,800 ( 73,173 ) 1987 8/21/2012 40 years Eastgate Office Park — 35,822 82,737 490 35,822 83,227 ( 1,854 ) 1985 7/7/2021 40 years Corporate Campus East III — 23,203 55,992 11 23,203 56,003 ( 681 ) 1986 9/10/2021 40 years First & Main — 14,697 109,739 11,260 14,697 120,999 ( 37,427 ) 2010 3/11/2011 40 years The Landmark at One Market — 34,575 141,196 32,405 34,575 173,601 ( 47,420 ) 1917/2000 6/30/2010 40 years Lloyd Portfolio — 18,660 61,401 104,807 11,845 173,023 ( 50,452 ) 1940-2015 7/1/2011 40 years One Beach Street — 15,332 18,017 20,378 15,332 38,395 ( 4,456 ) 1924/1972/1987/1992 1/24/2012 40 years Solana Crossing: Solana Crossing I-II — 7,111 17,100 8,166 7,111 25,266 ( 8,342 ) 1982/2005 1/19/2011 40 years Solana Crossing III-IV — 7,298 27,887 6,271 7,298 34,158 ( 10,859 ) 1982/2005 1/19/2011 40 years Solana Crossing Land — 487 — 60 547 — — N/A 1/19/2011 N/A Torrey Reserve Campus: Torrey Plaza — 4,095 — 59,936 5,408 58,623 ( 23,260 ) 1996-1997/2014 6/6/1989 40 years Pacific North Court — 3,263 — 28,599 4,309 27,553 ( 13,860 ) 1997-1998 6/6/1989 40 years Pacific South Court — 3,285 — 40,015 4,226 39,074 ( 17,795 ) 1996-1997 6/6/1989 40 years Pacific VC — 1,413 — 10,637 2,148 9,902 ( 6,076 ) 1998/2000 6/6/1989 40 years Pacific Torrey Daycare — 715 — 1,963 911 1,767 ( 1,040 ) 1996-1997 6/6/1989 40 years Torrey Reserve Building 6 — — — 8,012 682 7,330 ( 2,372 ) 2013 6/6/1989 40 years Torrey Reserve Building 5 — — — 4,012 1,017 2,995 ( 678 ) 2014 6/6/1989 40 years Torrey Reserve Building 13 & 14 — — — 16,139 2,188 13,951 ( 3,566 ) 2015 6/6/1989 40 years Torrey Point — 2,073 741 49,779 5,050 47,543 ( 5,496 ) 2018 5/9/1997 40 years La Jolla Commons La Jolla Commons I-II — 62,312 393,662 2,507 62,312 396,169 ( 34,627 ) 2008-2014 6/20/2019 40 years La Jolla Commons Land — 20,446 — 37,003 20,446 37,003 — N/A 6/20/2019 N/A Imperial Beach Gardens — 1,281 4,820 6,085 1,281 10,905 ( 8,692 ) 1959/2008 7/31/1985 30 years Loma Palisades — 14,000 16,570 34,101 14,052 50,619 ( 31,846 ) 1958/2001 - 2008/2021 7/20/1990 30 years Mariner’s Point — 2,744 4,540 1,902 2,744 6,442 ( 4,236 ) 1986 5/9/2001 30 years Santa Fe Park RV Resort — 401 928 1,460 401 2,388 ( 1,613 ) 1971/2007-2008 6/1/1979 30 years F-57 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, 2021 Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount at December 31, 2021 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 Pacific Ridge Apartments — 47,971 178,497 2,831 47,971 181,328 ( 31,341 ) 2013 4/28/2017 30 years Hassalo on Eighth - Multifamily — — — 178,503 6,219 172,284 ( 37,589 ) 2015 7/1/2011 30 years Waikiki Beach Walk: Retail — 45,995 74,943 971 45,995 75,914 ( 25,065 ) 2006 1/19/2011 35 years Hotel — 30,640 60,029 14,033 30,640 74,062 ( 28,201 ) 2008/2014/2020 1/19/2011 35 years $ 111,000 $ 652,608 $ 1,923,674 $ 953,089 $ 687,582 $ 2,841,789 $ ( 847,390 ) (1) For Federal tax purposes, the aggregate tax basis is approximately $ 2.5 billion as of December 31, 2021. F-58 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, 2021 2020 2019 Real estate assets Balance, beginning of period $ 3,246,874 3,188,697 2,630,191 Additions: Property acquisitions 197,754 — 476,421 Improvements 93,455 64,997 101,285 Deductions: Cost of Real Estate Sold — — ( 8,845 ) Other (1) ( 8,712 ) ( 6,820 ) ( 10,355 ) Balance, end of period $ 3,529,371 $ 3,246,874 $ 3,188,697 Accumulated depreciation Balance, beginning of period $ 754,140 $ 665,222 $ 590,338 Additions—depreciation 101,962 95,738 85,428 Deductions: Cost of Real Estate Sold — — ( 189 ) Other (1) ( 8,712 ) ( 6,820 ) ( 10,355 ) Balance, end of period $ 847,390 $ 754,140 $ 665,222 (1) Other deductions for the years ended December 31, 2021, 2020 and 2019 represent the write-off of fully depreciated assets. F-59