What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2021-10-29 · 143 added, 309 removed, 316 unchanged (59% of the section changed)

1 unchanged sentence

Forward-Looking Statements

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.

We make statements in this report that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act).

We make statements in this report that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, ("the Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, ("the Exchange Act").

In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements.

Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements.

You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters.

Currently, one of the most significant risk factors, is the potential adverse effect of the current COVID-19 pandemic on our financial condition, results of operations, cash flows and performance or that of, our tenants and guests, the real estate market and the global economy and financial markets.

The extent to which the COVID-19 pandemic impacts us, our tenants and guests will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including 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.

Likewise, our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements.

You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters.

You can also identify forward-looking statements by discussions of strategy, plans or intentions.

3 unchanged sentences

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

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

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

• adverse economic or real estate developments in our markets;

11 unchanged sentences

• financial market fluctuations;

• risks that affect the general retail, office, multifamily and mixed-use environment;

• risks that affect the general office, retail, multifamily and mixed-use environment;

• the competitive environment in which we operate;

4 unchanged sentences

• other factors affecting the real estate industry generally;

• limitations imposed on our business and our ability to satisfy complex rules in order for us to continue to qualify as a real estate investment trust, or REIT, for U.S.

• limitations imposed on our business and our ability to satisfy complex rules in order for American Assets Trust, Inc.

to continue to qualify as a REIT, for U.S.

federal income tax purposes;

5 unchanged sentences

References to “we,” “our,” “us” and “our company” refer to American Assets Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including American Assets Trust, L.P., a Maryland limited partnership, of which we are the sole general partner and which we refer to in this report as our Operating Partnership.

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

As of September 30, 2021, our portfolio was comprised of twelve retail shopping centers;

eleven office properties;

As of March 31, 2022, our portfolio was comprised of twelve retail shopping centers;

twelve office properties;

a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center;

and six multifamily properties.

Additionally, as of September 30, 2021, we owned land at three of our properties that we classified as held for development and/or construction in progress.

Additionally, as of March 31, 2022, we owned land at three of our properties that we classified as held for development and/or construction in progress.

Our core markets include San Diego, California;

the San Francisco Bay Area, California;

Portland, Oregon;

Bellevue, Washington;

and Oahu, Hawaii.

Portland, Oregon and Oahu, Hawaii.

We are a Maryland corporation formed on July 16, 2010 to acquire the entities owning various controlling and noncontrolling interests in real estate assets owned and/or managed by Ernest S.

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

Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.8% of our Operating Partnership as of September 30, 2021.

Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.8% of our Operating Partnership as of March 31, 2022.

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

On July 7, 2021, we acquired Eastgate Office Park, consisting of an approximately 280,000 square foot, multi-tenant office campus in the premier I-90 corridor submarket of Bellevue, Washington.

The purchase price was approximately $125 million, excluding closing costs and prorations.

On September 10, 2021, we acquired Corporate Campus East III, consisting of approximately 161,000 square foot, multi-tenant office campus, less than five minutes away from downtown Bellevue, Washington.

The purchase price was approximately $84 million, excluding closing costs and prorations.

We acquired Eastgate Office Park and Corporate Campus East III with cash on hand.

On March 8, 2022, we acquired Bel-Spring 520 in Bellevue, Washington, consisting of an approximately 93,000 square feet, multi-tenant office campus.

The purchase price was $45.5 million, excluding closing costs and prorations.

We acquired the property with cash on hand.

Critical Accounting Policies

14 unchanged sentences

In consideration of these measures, we generally remove properties from same-store properties when we see a decline in a property's annualized base rent, occupancy and operating income within the calendar year as a direct result of ongoing redevelopment, development or expansion activity.

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

Below is a summary of our same-store composition for the three and nine months ended September 30, 2021 and 2020.

For the three months ended September 30, 2021, Waikele Center was reclassified to same-store properties when compared to the designation for the three months ended September 30, 2020 as redevelopment activity at the property is on hold for the near future and is comparable for the three months ended September 30, 2021.

Acquired properties are classified

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

Below is a summary of our same-store composition for the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022, when compared to the designations for the three months ended March 31, 2021, Waikele Center was reclassified to same-store properties as there is currently no redevelopment activity at the property.

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

One Beach Street is classified as a non-same-store property due to redevelopment activity to renovate the property.

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

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

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

For the nine months ended September 30, 2021, One Beach Street was reclassified to non-same-store properties when compared to the designation for the nine months ended September 30, 2020 due to redevelopment activity to renovate the property.

Waikele Center was reclassified to same-store properties as redevelopment activity is on hold for the near future.

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

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

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

In our determination of same-store and redevelopment same-store properties for the nine months ended September 30, 2021, One Beach Street have been identified as same-store redevelopment properties due to significant redevelopment activity.

Retail same-store net operating income increased approximately 3.1% for the nine months ended September 30, 2021 compared to the same period in 2020.

Office same-store net operating income increased 0.7% for the nine months ended September 30, 2021 compared to the same period in 2020.

Office redevelopment same-store net operating income increased 0.1% for the nine months ended September 30, 2021 compared to the same period in 2020.

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

2021 2020 2021 2020

Bel-Spring 520 is also classified as a non-same-store property, as it was acquired on March 8, 2022.

In our determination of same-store and redevelopment same-store properties for the three months ended March 31, 2022, One Beach Street has been identified as a same-store redevelopment property due to significant redevelopment activity.

Retail same-store net operating income increased approximately 19.4% for the three months ended March 31, 2022 compared to the same period in 2021.

Office same-store net operating income increased 0.4% for the three months ended March 31, 2022 compared to the same period in 2021.

Office redevelopment same-store net operating income decreased (0.1)% for the three months ended March 31, 2022 compared to the same period in 2021.

Three Months Ended March 31,

Same-Store 27 25

5 unchanged sentences

growth in our same-store portfolio, growth in our portfolio from property development and redevelopments and expansion of our portfolio through property acquisitions.

Our properties are located in some of the nation's most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington and Hawaii, which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration and/or retenanting.

Our properties are located in some of the nation's most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Washington, Oregon and Hawaii, which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration and/or retenanting.

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

We intend to opportunistically pursue the development of future phases of Lloyd Portfolio and La Jolla Commons and the redevelopment of One Beach Street based on, among other things, market conditions and our evaluation of whether such opportunities would generate appropriate risk-adjusted financial returns.

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

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

Our redevelopment and development opportunities are subject to various factors, including market conditions and may not ultimately come to fruition.

7 unchanged sentences

We are unable to predict the future impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties.

These uncertainties include the scope, severity and duration of the pandemic (including future mutations of the COVID-19 virus), the ongoing actions taken to contain the pandemic or mitigate its impact, the availability and adoption of COVID-19 vaccines and the direct and indirect economic effects of the pandemic and containment measures, among others.

These uncertainties include the scope, severity and duration of the pandemic (including as the pandemic evolves due to future mutations of the COVID-19 virus), the ongoing governmental, business and individual actions taken to contain the pandemic or mitigate its impact, the availability and adoption of COVID-19 vaccines and the direct and indirect economic effects of the pandemic and containment measures, among others.

The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets.

The global impact of the pandemic continues to rapidly evolve.

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

Though certain restrictions have expired in our markets, the Company cannot predict when remaining restrictions or social distancing measures currently in place will expire.

Even after certain of such restrictions are lifted or reduced, it is unclear how lingering concerns of COVID-19 transmission and sensitivities to the transmission of other diseases will impact the willingness of customers to visit certain of our tenants' businesses.

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

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

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

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

Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown.

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

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

For the third quarter of 2021, we have collected to date approximately 99% of office rents, 94% of retail rents (including retail component of Waikiki Beach Walk) and 93% of multifamily rents that were due during the third quarter of 2021.

Additionally, for the third quarter of 2021, we collected approximately $0.8 million or 96% of the deferred rent repayments due during the period.

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

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

We believe our financial condition and liquidity are currently strong.

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

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

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

We remain encouraged by our portfolio’s increasing rent collection percentages as well as the broader macroeconomic conditions related to the ongoing transition back to a fully opened economy.

While we continue to monitor the COVID-19 vaccination response and economic initiatives undertaken by the Biden administration, we are hopeful that a continued reopening of the economy in the fourth quarter of 2021 and through 2022 will result in both job growth and an increase in gross domestic product as compared to 2020.

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

Our same-store growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in portfolio occupancy.

3 unchanged sentences

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

During the three months ended September 30, 2021, we signed 6 office leases for a total of 13,064 square feet of office space including 9,269 square feet of comparable renewal office space leases (leases for which there was a prior tenant), at an average rental rate increase on a cash and GAAP basis of 8.4% and 13.5%, respectively.

During the three months ended March 31, 2022, we signed 19 office leases for a total of 169,848 square feet of office space including 103,941 square feet of comparable renewal office space leases (leases for which there was a prior tenant), at an average rental rate increase on a cash and GAAP basis of 12.5% and 17.6%, respectively.

New office leases for comparable spaces were signed for 13,086 square feet at an average rental rate increase on a cash and GAAP basis of 2.3% and 30.1%, respectively.

Renewals for comparable office spaces were signed for 90,855 square feet at an average rental rate increase on a cash and GAAP basis of 13.7% and 16.4%, respectively.

Tenant improvements and incentives were $39.17 per square foot of office space for comparable new leases for the three months ended September 30, 2021, mainly due to tenants at Lloyd Portfolio.

During the three months ended September 30, 2021, we signed 30 retail leases for a total of 129,325 square feet of retail space including 116,877 square feet of comparable renewal retail space leases (leases for which there was a prior tenant), at an average rental rate decrease on a cash basis of (2.2)% and increase on a GAAP basis of 6.7%, respectively.

New retail leases for comparable spaces were signed for 7,000 square feet at an average rental rate increase on a cash and GAAP basis of 34.6% and 74.6%, respectively.

Tenant improvements and incentives were $45.18 per square foot of office space for comparable new leases for the three months ended March 31, 2022, mainly due to tenants at Torrey Reserve Campus.

During the three months ended March 31, 2022, we signed 20 retail leases for a total of 87,903 square feet of retail space including 77,708 square feet of comparable renewal retail space leases (leases for which there was a prior tenant), at an average rental rate decrease on a cash basis of (5.8)% and increase on a GAAP basis of 13.5%, respectively.

New retail leases for comparable spaces were signed for 5,500 square feet at an average rental rate increase on a cash basis of 51.2%.

Renewals for comparable retail spaces were signed for 72,208 square feet at an average rental rate decrease on a cash basis of (8.8)% and increase on a GAAP basis of 2.4%, respectively.

Tenant improvements and incentives were $215.00 per square foot of retail space for comparable new leases for the three months ended September 30, 2021, mainly due to tenants at Alamo Quarry Market.

Tenant improvements and incentives were $32.00 per square foot of retail space for comparable new leases for the three months ended March 31, 2022, mainly due to tenants at Alamo Quarry Market.

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

2 unchanged sentences

The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, capital investment made in the space and the specific lease structure.

Tenant improvements and incentives include the total dollars

committed for the improvement of a space as it relates to a specific lease, but may also include base-building costs (i.e.

Tenant improvements and incentives include the total dollars committed for the improvement of a space as it relates to a specific lease, but may also include base-building costs (i.e.

expansion, escalators or new entrances) which are required to make the space leasable.

3 unchanged sentences

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

Through the remainder of 2021, we believe our leasing volume will be below our historical averages and result in overall decreases in rental income due to the COVID-19 pandemic.

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

Capitalized Costs

4 unchanged sentences

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

We capitalized external and internal costs related to both development and redevelopment activities combined of $14.8 million and $1.4 million for the three months ended September 30, 2021 and 2020, respectively.

We capitalized external and internal costs related to both development and redevelopment activities combined of $34.6 million and $4.2 million for the nine months ended September 30, 2021 and 2020, respectively.

We capitalized external and internal costs related to other property improvements combined of $8.8 million and $9.0 million for the three months ended September 30, 2021 and 2020, respectively.

We capitalized external and internal costs related to other property improvements totaling $31.7 million and $42.3 million for the nine months ended September 30, 2021 and 2020, respectively.

We capitalized external and internal costs related to both development and redevelopment activities combined of $22.7 million and $3.9 million for the three months ended March 31, 2022 and 2021, respectively.

We capitalized external and internal costs related to other property improvements combined of $8.9 million and $9.3 million for the three months ended March 31, 2022 and 2021, respectively.

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

2 unchanged sentences

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

We capitalized interest costs related to development activities of $0.8 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively.

We capitalized interest costs related to development activities of $2.0 million and $0.8 million for the nine months ended September 30, 2021 and 2020, respectively.

We capitalized interest costs related to development activities of $1.2 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively.

Results of Operations

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

Comparison of the three months ended September 30, 2021 to the three months ended September 30, 2020

The following summarizes our consolidated results of operations for the three months ended September 30, 2021 compared to our consolidated results of operations for the three months ended September 30, 2020.

As of September 30, 2021, our operating portfolio was comprised of 30 retail, office, multifamily and mixed-use properties with an aggregate of approximately 7.1 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of September 30, 2021, we owned land at three of our properties that we classified as held for development and/or construction in progress.

As of September 30, 2020, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property,

2,112 residential units (including 122 RV spaces) and a 369-room hotel.

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

The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended September 30, 2021 and 2020 (dollars in thousands):

Three Months Ended September 30, Change %

Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021

The following summarizes our consolidated results of operations for the three months ended March 31, 2022 compared to our consolidated results of operations for the three months ended March 31, 2021.

As of March 31, 2022, our operating portfolio was comprised of 31 retail, office, multifamily and mixed-use properties with an aggregate of approximately 7.2 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel.

Additionally, as of March 31, 2022, we owned land at three of our properties that we classified as held for development and/or construction in progress.

As of March 31, 2021, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential

units (including 122 RV spaces) and a 369-room hotel.

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

The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended March 31, 2022 and 2021 (dollars in thousands):

Three Months Ended March 31, Change %

Rental income $ 96,986 $ 81,130 $ 15,856 20 %

8 unchanged sentences

Interest expense (14,666) (14,005) (661) 5

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

Other (expense) income, net (162) (53) (109) 206

7 unchanged sentences

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

Total property revenue increased $13.9 million, or 16%, to $98.3 million for the three months ended September 30, 2021 compared to $84.4 million for the three months ended September 30, 2020.

The percentage leased was as follows for each segment as of September 30, 2021 and 2020:

Total property revenue increased $17.5 million, or 21%, to $101.5 million for the three months ended March 31, 2022 compared to $84.0 million for the three months ended March 31, 2021.

The percentage leased was as follows for each segment as of March 31, 2022 and 2021:

Percentage Leased (1)

September 30,

Office 91.5 % 91.4 %

3 unchanged sentences

94.3 % 88.2 %

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of September 30, 2021 or 2020, as applicable.

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of March 31, 2022 or 2021, as applicable.

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

The increase in total property revenue was attributable primarily to the increase in collections, increase in occupancy at Waikiki Beach Walk Embassy Suites™ Hotel and factors discussed below.

The increase in total property revenue was attributable primarily to the new acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520, the increase in collections, increase in occupancy and rate at Waikiki Beach Walk Embassy Suites™ and factors discussed below.

Rental revenues .

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

Rental revenue increased $13.0 million, or 16%, to $93.8 million for the three months ended September 30, 2021 compared to $80.8 million for the three months ended September 30, 2020.

Rental revenue increased $15.9 million, or 20%, to $97.0 million for the three months ended March 31, 2022 compared to $81.1 million for the three months ended March 31, 2021.

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

Total Portfolio Same-Store Portfolio (1)

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

Three Months Ended March 31, Change % Three Months Ended March 31, Change %

2022 2021 2022 2021

6 unchanged sentences

(i) One Beach Street, due to significant redevelopment activity;

(ii) Waikiki Beach Walk - Embassy Suites™ and Waikiki Beach Walk - Retail, due to significant spalling repair activity;

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

(iv) Corporate Campus East III which was acquired on September 10, 2021 and (iv) land held for development.

Total office rental revenue increased $2.7 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III, which accounted for $2.8 million of the increase.

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

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

(iv) Bel-Spring 520, which was acquired on March 8, 2022 and (v) land held for development.

Total office rental revenue increased $4.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520, which accounted for $4.3 million of the increase.

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

Same store office rental revenue increased by $0.6 million due to higher annualized base rents at La Jolla Commons, City Center Bellevue and Torrey Point.

Total retail rental revenue increased $4.3 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to approximately $4.6 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza, Del Monte Center and The Shops at Kalakaua.

This increase was offset by a decrease in cost recoveries of $0.2 million as these same tenants changed to alternate rent or had lease modifications.

Multifamily revenue increased $0.4 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to an overall increase in occupancy of 94.7% for the three months ended September 30, 2021 compared to 87.2% for the three months ended September 30, 2020.

This increase in rental revenue due to higher occupancy is offset by a decrease in average monthly base rent of $2,090 for the three months ended September 30, 2021 compared to $2,193 for the three months ended September 30, 2020, primarily due to decreases at Hassalo on Eighth - Residential.

Total mixed-use rental revenue increased $5.6 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the lifting of COVID-19 travel restrictions late during the first quarter of 2021, which led to an increase in average occupancy and revenue per available room to 78% and $240 for the three months ended September 30, 2021, respectively, compared to 66% and $138 for three months ended September 30, 2020, respectively.

We expect to see a steady increase in tourism and hotel occupancy in Oahu once the COVID-19 vaccine is available more globally and travel restrictions are lifted.

The increase in total mixed-use rental revenue is also attributed to approximately $2.1 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 as the collectability was determined to be no longer probable for certain tenants at the retail portion of our mixed-use property.

Same-store office rental revenue increased by $0.1 million due to higher occupancy at First & Main and Torrey Reserve Campus.

Total retail rental revenue increased $3.0 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to approximately $2.3 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 and 2021 as the collectability was determined to be no longer probable for certain tenants at Alamo Quarry Market, Carmel Mountain Plaza and Del Monte Center.

Additionally, there was an increase in cost recoveries of $0.8 million as rent concessions were provided during 2020 and 2021.

Multifamily revenue increased $1.2 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 95.1% and $2,217, respectively for the three months ended March 31, 2022 compared to 89.3% and $2,174, respectively for the three months ended March 31, 2021.

Total mixed-use rental revenue increased $6.9 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to lifting of COVID-19 travel restrictions, which led to an increase in average occupancy and revenue per available room to 72.8% and $243 for the three months ended March 31, 2022, respectively, compared to 47.5% and $99 for three months ended March 31, 2021, respectively.

The retail portion of our mixed-use property had an increase in rental revenue of $2.1 million as tenants were changed to alternate rent or to cash basis of revenue recognition during 2020 and 2021 as collectability was determined to be no longer probable for certain tenants.

Other property income .

Other property income increased $0.9 million, or 24%, to $4.5 million for the three months ended September 30, 2021 compared to $3.6 million for the three months ended September 30, 2020.

Other property income increased $1.6 million, or 57%, to $4.5 million for the three months ended March 31, 2022 compared to $2.9 million for the three months ended March 31, 2021.

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

Total Portfolio Same-Store Portfolio

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

Three Months Ended March 31, Change % Three Months Ended March 31, Change %

2022 2021 2022 2021

4 unchanged sentences

$ 4,484 $ 2,856 $ 1,628 57 % $ 4,413 $ 2,831 $ 1,582 56 %

Office other property income decreased $0.1 million for the three months ended September 30, 2021 primarily due to a decrease in lease termination fees received at City Center Bellevue.

This decrease was offset by an increase in parking garage income at First & Main and Lloyd Portfolio.

Retail other property income decreased $0.4 million for the three months ended September 30, 2021 primarily due to a decrease in lease termination fees received at Carmel Country Plaza and Del Monte Center during 2020.

Multifamily other property income increased by $0.1 million for the three months ended September 30, 2021 primarily due to an increase in parking garage income at Hassalo on Eighth - Residential, meter and laundry income at Loma Palisades and credit check fees at Pacific Ridge Apartments and Hassalo on Eighth - Residential.

Mixed-use other property income increased $1.3 million for the three months ended September 30, 2021 primarily due an increase in room rental income and excise tax at the hotel portion and an increase in parking garage income at the retail portion of our mixed-use property.

These increase are due to tourism and an increase in hotel occupancy as the COVID-19 vaccine has become more widely available and travel restrictions to Hawaii have been relaxed.

Office other property income increased $0.3 million for the three months ended March 31, 2022 primarily due to an increase in parking garage income at City Center Bellevue, First & Main and Lloyd Portfolio.

Multifamily other property income increased by $0.2 million for the three months ended March 31, 2022 primarily due to an increase in parking garage income at Hassalo on Eighth - Residential and meter income at Loma Palisades and Santa Fe Park RV Resort.

Mixed-use other property income increased $1.1 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to increased tourism and hotel occupancy which led to an increase in other room rental income and excise tax at the hotel portion of our mixed-use property and an increase in parking garage income at the retail portion of our mixed-use property.

Property Expenses

1 unchanged sentence

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

Total property expenses increased $2.4 million, or 8%, to $33.1 million, for the three months ended September 30, 2021 compared to $30.7 million for the three months ended September 30, 2020.

Total property expenses increased $6.0 million, or 20%, to $35.6 million, for the three months ended March 31, 2022 compared to $29.6 million for the three months ended March 31, 2021.

Rental Expenses.

Rental expenses increased $4.3 million, or 22%, to $23.5 million for the three months ended September 30, 2021 compared to $19.2 million for the three months ended September 30, 2020.

Rental expenses increased $5.9 million, or 32%, to $24.1 million for the three months ended March 31, 2022 compared to $18.2 million for the three months ended March 31, 2021.

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

Total Portfolio Same-Store Portfolio

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

Three Months Ended March 31, Change % Three Months Ended March 31, Change %

2022 2021 2022 2021

4 unchanged sentences

$ 24,145 $ 18,246 $ 5,899 32 % $ 23,150 $ 18,037 $ 5,113 28 %

Office rental expense increased $1.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to $0.4 million related to the acquisition of Eastgate Office Park and Corporate Campus East III.

Same-store office rental expenses increased $0.8 million due to an increase in utilities, facility services, repairs and maintenance and insurance expenses as the "stay-at home" orders issued by state and local governments related to the COVID-19 pandemic were relaxed in early 2021 and our tenants' employees have started returning to the office in-person.

Retail rental expense decreased $0.1 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to a decrease in repairs and maintenance and marketing expenses in the period, partially offset by an increase in insurance expense, and facilities services as restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic were eased earlier in 2021.

Multifamily rental expense increased $0.6 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to an increase in repairs and maintenance, day porter and facilities services, utilities expenses and insurance expense.

Mixed-use rental expense increased $2.6 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to an increase in hotel room expenses, personnel expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

These increases are due to tourism and an increase in hotel occupancy as the COVID-19 vaccine has become more widely available and travel restrictions to Hawaii have been relaxed.

Office rental expense increased $1.6 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to $0.8 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Same-store office rental expenses increased $0.8 million due to an increase in utilities expenses and facility services, as the "stay-at home" orders issued by state and local governments related to the COVID-19 pandemic were relaxed in early 2021 and our tenants' employees have started returning to the office in-person.

Retail rental expense increased $0.5 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in repairs and maintenance, facilities services and marketing expenses in the period, as restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic were eased during the first half of 2021.

Multifamily rental expense increased $0.5 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in repairs and maintenance, day porter and facilities services, utilities expenses and insurance expense.

Mixed-use rental expense increased $3.3 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in hotel room expenses and general excise tax expenses at the hotel portion of our mixed-use property during the period.

These increases are in line with increased tourism and higher hotel occupancy as travel restrictions to Hawaii have been relaxed.

Real Estate Taxes.

Real estate taxes increased $1.8 million, or 16%, to $9.6 million for the three months ended September 30, 2021 compared to $11.5 million for the three months ended September 30, 2020.

Real estate taxes increased $0.1 million, or 1%, to $11.4 million for the three months ended March 31, 2022 compared to $11.4 million for the three months ended March 31, 2021.

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

Total Portfolio Same-Store Portfolio

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

Three Months Ended March 31, Change % Three Months Ended March 31, Change %

2022 2021 2022 2021

4 unchanged sentences

$ 11,429 $ 11,354 $ 75 1 % $ 11,058 $ 11,296 $ (238) (2) %

Office real estate taxes increased $0.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the acquisition of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021.

Same-store office real estate taxes increased $0.1 million primarily due to higher tax assessments at City Center Bellevue, Landmark and First & Main during the period.

Retail real estate taxes decreased $1.9 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to a real estate tax refund received during the third quarter of 2021 for approximately $1.6 million at Alamo Quarry Market for the tax assessments for 2019 through 2020.

Additionally, there was a decrease in the overall tax bill of $0.4 million at Alamo Quary Market for the year 2021.

These decreases were offset by $0.2 million in 2021 real estate tax consultant fees.

Mixed-use real estate taxes decreased $0.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the COVID-19 pandemic and its financial burden on the hospitality industry, as a result of which the Honolulu County reduced the tax burden for hotels for 2021 through 2022.

Office real estate taxes increased $0.4 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to $0.3 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Same-store office real estate taxes increased $0.1 million primarily due to higher tax assessments at City Center Bellevue and First & Main during the period.

Retail real estate taxes decreased $0.2 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to prior year tax assessment reconciliations which led to a decrease in the overall tax bill at Alamo Quarry Market.

Mixed-use real estate taxes decreased $0.2 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to the COVID-19 pandemic and its financial burden on the hospitality industry, as a result of which the Honolulu County reduced the tax burden for hotels for 2021 through 2022.

Property Operating Income

Property operating income increased $11.5 million, or 21%, to $65.2 million for the three months ended September 30, 2021, compared to $53.7 million for the three months ended September 30, 2020.

Property operating income increased $11.5 million, or 21%, to $65.9 million for the three months ended March 31, 2022, compared to $54.4 million for the three months ended March 31, 2021.

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

Total Portfolio Same-Store Portfolio

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

Three Months Ended March 31, Change % Three Months Ended March 31, Change %

2022 2021 2022 2021

4 unchanged sentences

$ 65,896 $ 54,386 $ 11,510 21 % $ 62,912 $ 54,410 $ 8,502 16 %

Total office property operating income increased $1.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III, offset by the decrease in rental revenue at One Beach Street due to expiration of leases to allow for the modernization of the property.

Same-store office property operating income decreased by $0.6 million due to a decrease in lease termination fees, higher rental expenses as the stay-at-home orders issued by state and local governments related to the COVID-19 pandemic were relaxed in early 2021 and an increase in real estate taxes due to higher tax assessments.

Total retail property operating income increased $6.0 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to an increase of $4.6 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 as the collectability was determined to be no longer probable for certain tenants, and a decrease in real estate taxes of $1.9 million primarily due to a real estate tax refund received during the third quarter of 2021 at Alamo Quarry Market for the tax assessments for 2019 through 2020.

Total mixed-use property operating income increased $4.4 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the lifting of COVID-19 travel restrictions late during the first quarter of 2021, which led to an increase in average occupancy and revenue per available room to 78% and $240 for the three months ended September 30, 2021, respectively, compared to 66% and $138 for three months ended September 30, 2020, respectively.

Total office property operating income increased $3.1 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to the recent acquisitions of Eastgate Office Park, Corporate Campus East III, Bel-Spring 520, which had incremental property operating income of approximately $3.2 million during the period.

The increase in total office property operating income was partially offset by a decrease in property operating income of approximately $0.2 million at One Beach Street due to the expiration of leases to allow for the modernization of the property.

Same-store property operating income increased $0.1 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to higher occupancy at First & Main and Torrey Reserve Campus.

Total retail property operating income increased $2.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase of $2.3 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 and 2021 as the collectability was determined to be no longer probable for certain tenants.

Additionally, there was an increase in cost recoveries of $0.8 million as lease modifications providing rent concessions were executed during 2020 and 2021.

This increase in revenue was partially offset by an increase in rental expenses of $0.3 million related to repairs and maintenance and facilities services.

Total multifamily property operating income increased $0.7 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 95.1% and $2,217, respectively for the three months ended March 31, 2022 compared to 89.3% and $2,174, respectively for the three months ended March 31, 2021.

Total mixed-use property operating income increased $4.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to the return of tourism and related increase in hotel occupancy as travel to Hawaii has increased through 2021.

This led to an increase in average occupancy and revenue per available room to 72.8% and $243, respectively, for the three months ended March 31, 2022, compared to 47.5% and $99, respectively, for three months ended March 31, 2021.

This also led to an increase in other room rental income and excise tax at the hotel portion of

our mixed-use property and an increase in parking garage income at the retail portion of our mixed-use property.

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

These increases in mixed-use property operating income were partially offset by an increase in hotel room expenses, personnel expenses, and general excise tax expenses at the hotel portion of our mixed-use property during the period.

These increases are due to tourism and an increase in hotel occupancy as the COVID-19 vaccine has become more widely available and travel restrictions to Hawaii have been relaxed.

General and Administrative.

General and administrative expenses increased to $6.8 million for the three months ended September 30, 2021, compared to $6.4 million for the three months ended September 30, 2020.

This increase was primarily due to an increase in employee-related costs and corporate legal expenses.

Depreciation and Amortization.

Depreciation and amortization expense increased to $30.7 million for the three months ended September 30, 2021, compared to $26.9 million for the three months ended September 30, 2020.

This increase was primarily due to $2.3 million related to the new acquisitions of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021.

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

Interest Expense.

Interest expense increased $1.4 million, or 11%, to $14.7 million for the three months ended September 30, 2021, compared to $13.3 million for the three months ended September 30, 2020.

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

Other (Expense) Income, Net.

Other (expense) income, net decreased $0.5 million, or 90%, to other expense, net of $0.1 million for the three months ended September 30, 2021, compared to other expense, net of $0.5 million for the three months ended September 30, 2020 primarily due to the decrease in income tax benefit for our taxable REIT subsidiary.

Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

The following summarizes our consolidated results of operations for the nine months ended September 30, 2021 compared to our consolidated results of operations for the nine months ended September 30, 2020.

The following table sets forth selected data from our unaudited consolidated statements of income for the nine months ended September 30, 2021 and 2020 (dollars in thousands):

Nine Months Ended September 30, Change %

Rental income $ 262,573 $ 252,059 $ 10,514 4 %

Other property income 11,508 11,167 341 3

Total property revenues 274,081 263,226 10,855 4

Rental expenses 61,916 58,757 3,159 5

Real estate taxes 31,610 31,497 113 —

Total property expenses 93,526 90,254 3,272 4

Total property income 180,555 172,972 7,583 4

General and administrative (20,574) (19,937) (637) 3

Depreciation and amortization (85,827) (80,869) (4,958) 6

Interest expense (43,589) (40,105) (3,484) 9

Early extinguishment of debt (4,271) — (4,271) 100

Other (expense) income, net (179) (261) 82 (31)

Net income 26,115 31,800 (5,685) (18)

Net income attributable to restricted shares (417) (260) (157) 60

Net income attributable to unitholders in the Operating Partnership

(5,459) (6,778) 1,319 (19)

Net income attributable to American Assets Trust, Inc.

$ 20,239 $ 24,762 $ (4,523) (18) %

Total property revenues .

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

Total property revenue increased $10.9 million, or 4%, to $274.1 million for the nine months ended September 30, 2021 compared to $263.2 million for the nine months ended September 30, 2020.

The percentage leased was as follows for each segment as of September 30, 2021 and 2020:

Percentage Leased (1)

September 30,

Office 90.2 % 93.8 %

Retail 91.7 % 95.0 %

Multifamily 97.1 % 87.5 %

Mixed-Use (2)

86.6 % 87.8 %

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of September 30, 2021 or September 30, 2020, as applicable.

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

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

Rental revenues .

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

Rental revenue increased $10.5 million, or 4%, to $262.6 million for the nine months ended September 30, 2021 compared to $252.1 million for the nine months ended September 30, 2020.

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

Total Portfolio Same-Store Portfolio (1)

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

2021 2020 2021 2020

Office $ 133,092 $ 128,714 $ 4,378 3 $ 130,681 $ 127,696 $ 2,985 2

Retail 68,183 66,226 1,957 3 68,183 66,226 1,957 3

Multifamily 35,864 35,525 339 1 35,864 35,525 339 1

Mixed-Use 25,434 21,594 3,840 18 — — — —

$ 262,573 $ 252,059 $ 10,514 4 % $ 234,728 $ 229,447 $ 5,281 2 %

(1) The same-store portfolio excludes:

(i) One Beach Street, due to significant redevelopment activity;

(ii) Waikiki Beach Walk - Embassy Suites™ and Waikiki Beach Walk - Retail, due to significant spalling repair activity;

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

(iv) Corporate Campus East III which was acquired on September 10, 2021 and (iv) land held for development.

Total office rental revenue increased $4.4 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to the new acquisitions of Eastgate Office Park and Corporate Campus East III, which accounted for $2.8 million of the increase.

This was offset by a decrease in rental revenue at One Beach Street due to expiration of leases to allow for modernization of the property.

Same store office rental revenue increased by $3.0 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to higher annualized base rents at La Jolla Commons, City Center Bellevue, and Torrey Point, offset by a decrease at First & Main due to delay in timing of tenant possession of leased space.

Retail rental revenue increased $2.0 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to approximately $2.4 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 as the collectability was determined to be no longer probable for certain tenants at Carmel Mountain Plaza, Hassalo on Eighth - Retail, Solana Beach Towne Centre, Del Monte Center and Geary Marketplace, as the temporary store closures or restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic caused the financial condition of certain tenants to deteriorate.

This increase was offset by a decrease in cost recoveries of $0.4 million as these same tenants changed to alternate rent or had lease modifications.

Multifamily revenue increased $0.3 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an overall increase in occupancy of 90.6% for the nine months ended September 30, 2021 compared to 89.4% for the nine months ended September 30, 2020 .

Additionally, average monthly base rent increased to $2,149 for the nine months ended September 30, 2021 compared to $2,140 for the nine months ended September 30, 2020 , primarily due to increases at San Diego multifamily properties.

Mixed-use rental revenue increased $3.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase of $3.7 million related to the Waikiki Beach Walk hotel portion of our mixed use property.

This increase was due to the lifting of COVID-19 travel restrictions late during the first quarter of 2021, which led to an increase in average occupancy and revenue per available room to 64.3% and $175 for the nine months ended September 30, 2021, respectively, compared to 52.8% and $138 for the nine months ended September 30, 2020, respectively.

Waikiki Beach Walk retail portion increased $0.2 million as tenants were changed to alternate rent or to cash basis of revenue recognition during 2020 as the collectability was determined to be no longer probable for certain tenants.

Other property income .

Other property income increased $0.3 million, or 3%, to $11.5 million for the nine months ended September 30, 2021 compared to $11.2 million for the nine months ended September 30, 2020.

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

Total Portfolio Same-Store Portfolio

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

2021 2020 2021 2020

Office $ 3,375 $ 4,496 $ (1,121) (25) $ 3,030 $ 4,476 $ (1,446) (32)

Retail 1,113 1,713 (600) (35) 1,113 1,713 (600) (35)

Multifamily 2,512 2,327 185 8 2,512 2,327 185 8

Mixed-Use 4,508 2,631 1,877 71 — — — —

$ 11,508 $ 11,167 $ 341 3 % $ 6,655 $ 8,516 $ (1,861) (22) %

Office other property income decreased $1.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to decrease in parking garage income at Lloyd Portfolio and City Center Bellevue and a decrease in tenant improvement management fees received at La Jolla Commons and Lloyd Portfolio in 2020.

Retail other property income decreased $0.6 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the lease termination fees received at Alamo Quarry Market and Carmel Country Plaza during 2020.

Multifamily other property income increased $0.2 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily to an increase in security deposits earned at Pacific Ridge Apartments and Loma Palisades, parking garage income at Hassalo on Eighth - Residential and credit check fees at Pacific Ridge Apartments and Hassalo on Eighth - Residential.

Total mixed-use other property income increased $1.9 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in other room rental income and rent excise tax at the hotel portion and an increase in parking garage income at the retail portion of our mixed-use property.

We expect to see a steady increase in tourism and hotel occupancy in Oahu once the COVID-19 vaccine is available more globally and travel restrictions are lifted.

Property Expenses

Total Property Expenses.

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

Total property expenses increased by $3.3 million, or 4%, to $93.5 million for the nine months ended September 30, 2021, compared to $90.3 million for the nine months ended September 30, 2020.

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

Rental Expenses.

Rental expenses increased $3.2 million, or 5%, to $61.9 million for the nine months ended September 30, 2021, compared to $58.8 million for the nine months ended September 30, 2020.

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

Total Portfolio Same-Store Portfolio

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

2021 2020 2021 2020

Office $ 21,457 $ 20,560 $ 897 4 $ 20,427 $ 19,896 $ 531 3

Retail 11,005 11,026 (21) — 11,005 11,026 (21) —

Multifamily 12,043 11,386 657 6 12,044 11,386 658 6

Mixed-Use 17,411 15,785 1,626 10 — — — —

$ 61,916 $ 58,757 $ 3,159 5 % $ 43,476 $ 42,308 $ 1,168 3 %

Office rental expenses increased $0.9 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in sublease expense related to the Annex Lease extension option exercised in March 2020, property insurance expense, and utilities expenses as the "stay-at-home" orders issued by the state and local governments related to the COVID-19 pandemic were relaxed in early 2021 and our tenants' employees have started returning to the office in-person.

Multifamily rental expenses increased $0.7 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in day porter and facilities services, utilities expenses and insurance expense, as restrictions on business operations from orders issued by state and local governments related to the COVID-19 pandemic were eased during this period.

Total mixed-use rental expenses increased $1.6 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in hotel room expenses and personnel expenses at the hotel portion of our mixed-use property during the period.

These increases are due to tourism and an increase in hotel occupancy as the COVID-19 vaccine has become more widely available and travel restrictions to Hawaii have been relaxed.

Real Estate Taxes.

Real estate tax expense increased $0.1 million, or 0%, to $31.6 million for the nine months ended September 30, 2021 compared to $31.5 million for the nine months ended September 30, 2020.

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

Total Portfolio Same-Store Portfolio

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

2021 2020 2021 2020

Office $ 14,572 $ 14,429 $ 143 1 $ 14,197 $ 13,899 $ 298 2

Retail 8,917 9,007 (90) (1) 8,917 9,007 (90) (1)

Multifamily 5,154 5,040 114 2 5,153 5,040 113 2

Mixed-Use 2,967 3,021 (54) (2) — — — —

$ 31,610 $ 31,497 $ 113 — % $ 28,267 $ 27,946 $ 321 1 %

Same-store office real estate taxes increased $0.3 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in tax assessments at City Center Bellevue, Landmark and First & Main during the period.

Multifamily real estate taxes increased $0.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in tax assessments for Loma Palisades, Pacific Ridge Apartments, and Hassalo on Eighth - Residential.

Property Operating Income

Property operating income increased $7.6 million, or 4%, to $180.6 million for the nine months ended September 30, 2021, compared to $173.0 million for the nine months ended September 30, 2020.

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

Total Portfolio Same-Store Portfolio

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

2021 2020 2021 2020

Office $ 100,438 $ 98,221 $ 2,217 2 $ 99,087 $ 98,377 $ 710 1

Retail 49,374 47,906 1,468 3 49,374 47,906 1,468 3

Multifamily 21,179 21,426 (247) (1) 21,179 21,426 (247) (1)

Mixed-Use 9,564 5,419 4,145 76 — — — —

$ 180,555 $ 172,972 $ 7,583 4 % $ 169,640 $ 167,709 $ 1,931 1 %

Total office property operating income increased $2.2 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the new acquisitions of Eastgate Office Park and Corporate Campus East III, offset by the decrease in rental revenue at One Beach Street due to expiration of leases to allow for the modernization of the property.

Same-store property operating income increased by $0.7 million due to higher annualized base rents at La Jolla Commons, City Center Bellevue and Torrey Point.

These increases were offset by a decrease in parking garage income and higher rental expenses as the stay-at-home orders issued by state and local governments related to the COVID-19 pandemic were relaxed in early 2021 and an increase in real estate taxes due to higher tax assessments.

Total retail property operating income increased $1.5 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase of $2.4 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 as the collectability was determined to be no longer probable for certain tenants, partially offset by a $0.7 million decrease in lease termination fees received in 2021 compared to 2020 and a $0.4 million decrease in expense recoveries.

Total mixed-use property operating income increased $4.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the lifting of COVID-19 travel restrictions late during the first quarter of 2021, which led to an increase in average occupancy and revenue per available room to 64% and $175 for the nine months ended September 30, 2021, respectively, compared to 53% and $138 for the nine months ended September 30, 2020, respectively.

Additionally, there was an increase of $1.9 million in other property income as related to other room rental income and rent excise tax at the hotel portion and an increase in parking garage income at the retail portion of our mixed-use property.

These increases were offset by $1.6 million in higher rental expenses due to an increase in hotel room expenses and personnel expenses at the hotel portion of our mixed-use property during the period

General and Administrative.

General and administrative expenses increased $0.6 million, or 3%, to $20.6 million for the nine months ended September 30, 2021, compared to $19.9 million for the nine months ended September 30, 2020.

This increase was primarily due to employee related costs.

General and administrative expenses increased to $7.1 million for the three months ended March 31, 2022, compared to $6.8 million for the three months ended March 31, 2021.

This increase was primarily due to an increase in employee-related costs, including, without limitation, with respect to base pay for certain salaried and

hourly workers and benefits.

Depreciation and Amortization.

Depreciation and amortization expense increased $5.0 million, or 6%, to $85.8 million for the nine months ended September 30, 2021, compared to $80.9 million for the nine months ended September 30, 2020.

This increase was primarily due to a $2.3 million increase related to the new acquisitions of Eastgate Office Park and Corporate Campus East III during the third quarter of 2021.

Additionally, there was an increase in depreciation and amortization at Embassy Suites TM Hotel and The Landmark at One Market due to building and tenant improvements that were put into service in 2020 and 2021.

Additionally, higher depreciation and amortization at Carmel Mountain Plaza, due to acceleration of depreciation on assets related to tenant vacating space.

These increases were offset by lower depreciation and amortization at First & Main due to decreased capital expenditures in 2020.

Depreciation and amortization expense increased to $30.4 million for the three months ended March 31, 2022, compared to $27.5 million for the three months ended March 31, 2021.

This increase was primarily due to $3.0 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Additionally, there was higher depreciation and amortization at The Landmark at One Market due to new tenant improvements that were put into service in 2021.

This increase was offset by a decrease at One Beach Street due to acceleration of certain assets during the first quarter of 2021 related to the modernization of the building.

Interest Expense.

Interest expense increased $3.5 million, or 9%, to $43.6 million for the nine months ended September 30, 2021 compared to $40.1 million for the nine months ended September 30, 2020.

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

Early Extinguishment of Debt.

Early extinguishment of debt expense increased $4.3 million for the nine months ended September 30, 2021 due to the repayment of the Senior Guaranteed Notes, Series A, with make-whole payments thereon, on January 26, 2021.

Interest expense increased $0.7 million, or 5%, to $14.7 million for the three months ended March 31, 2022, compared to $14.0 million for the three months ended March 31, 2021.

This increase was primarily due to the closing of our 3.375% Senior Notes offering on January 26, 2021, and the renewal of the 2022 Term Loan on January 5, 2022.

These increases were partially offset by an increase in capitalized interest related to our development projects.

Loss on early extinguishment of debt .

Loss on early extinguishment of debt decreased $4.3 million for the three months ended March 31, 2022 due to the repayment of the Senior Guaranteed Notes, Series A, with make-whole payments thereon, on

January 26, 2021.

Other (Expense) Income, Net.

Other (expense) income, net decreased $0.1 million, or 31%, to other expense, net of $0.2 million for the nine months ended September 30, 2021, compared to other expense, net of $0.3 million for the nine months ended September 30, 2020 primarily due to the decrease in interest and investment income attributed to the lower yield on our average cash balance during the period and a decrease in income tax benefit related for our taxable REIT subsidiary.

Other expense, net increased $0.1 million, or 206%, to other expense, net of $0.2 million for the three months ended March 31, 2022, compared to other expense, net of $0.1 million for the three months ended March 31, 2021 primarily due to an increase in income tax for our taxable REIT subsidiary.

Liquidity and Capital Resources of American Assets Trust, Inc.

7 unchanged sentences

However, all debt is held directly or indirectly by the Operating Partnership.

The company’s principal funding requirement is the payment of dividends on its common stock.

The company’s principal funding

requirement is the payment of dividends on its common stock.

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

As of September 30, 2021, the company owned an approximate 78.8% partnership interest in the Operating Partnership.

As of March 31, 2022, the company owned an approximate 78.8% partnership interest in the Operating Partnership.

The remaining approximately 21.2% are owned by non-affiliated investors and certain of the company's directors and executive officers.

8 unchanged sentences

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

As of September 30, 2021, the company has determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months.

As of March 31, 2022, the company has determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months.

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

1 unchanged sentence

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

During the nine months of 2021, we continued to receive rent deferment and other rent concession requests from some tenants and have been negotiating and executing lease modifications for the deferment of rent and other rent concessions.

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

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

15 unchanged sentences

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

In May 2015, we entered into an ATM equity program with five sales agents in 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.

On March 2, 2018, we amended certain of these equity programs, terminated one such program and entered into a new equity program with one new sales agent.

The sales of shares of the company's common stock made through the ATM equity program, as amended, are made in “at-the-market” offerings as defined in Rule 415 of the Securities Act.

As of September 30, 2021, we had the capacity to issue up to an additional $132.6 million in shares of common stock under the ATM equity program upon filing an updated prospectus supplement with the SEC.

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

The 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 three months ended March 31, 2022, no shares of common stock were sold through the ATM equity program.

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

11 unchanged sentences

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

As of September 30, 2021, we held $171.9 million in cash and cash equivalents.

As of March 31, 2022, we held $73.6 million in cash and cash equivalents.

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

20 unchanged sentences

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

Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020

Cash, cash equivalents, and restricted cash were $173.6 million and $156.6 million at September 30, 2021 and 2020, respectively.

Net cash provided by operating activities increased $20.5 million to $129.6 million for the nine months ended September 30, 2021 compared to $109.1 million for the nine months ended September 30, 2020.

The increase in cash from operations was related to a change in accounts payable due to the timing of accruals and payables, primarily real estate taxes, an increase in depreciation and amortization from the acquisitions made in the quarter, and the early extinguishment of debt in January 2021.

These increases were partially offset by a decrease in tenant receivable reserves during the year.

Net cash used in investing activities increased $209.8 million to $263.3 million for the nine months ended September 30, 2021 compared to $53.6 million for the nine months ended September 30, 2020.

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

Net cash provided by financing activities increased $176.8 million to $168.3 million for the nine months ended September 30, 2021 compared to cash used in financing activities of $8.5 million for the nine months ended September 30, 2020.

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

Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021

Cash, cash equivalents, and restricted cash were $73.6 million and $382.2 million at March 31, 2022 and 2021, respectively.

Net cash provided by operating activities decreased $3.4 million to $39.1 million for the three months ended March 31, 2022 compared to $42.5 million for the three months ended March 31, 2021.

The decrease in cash from operations was related to a change in accounts payable due to the timing of accruals and payables, primarily expense recoveries and interest payable related to the 3.375% Senior Notes.

Net cash used in investing activities increased $65.1 million to $77.3 million for the three months ended March 31, 2022 compared to $12.2 million for the three months ended March 31, 2021.

The increase was primarily due to our newest acquisition of Bel-Spring 520 on March 8, 2022, and capital expenditures at La Jolla Commons III and One Beach Street.

Net cash used in financing activities increased $240.6 million to $27.8 million for the three months ended March 31, 2022 compared to cash provided by financing activities of $212.8 million for the three months ended March 31, 2021.

The increase in cash used in financing activities was primarily due to quarterly dividends for the first quarter of 2022 and debt issuance costs related to our Third Amended and Restated Credit Facility.

Whereas, the cash provided by financing activities during the first quarter of 2021 was related to the issuance of the 3.375% Senior Notes on January 26, 2021, partially offset by the repayment of the outstanding balance on the revolving line of credit and the Senior Guaranteed Notes, Series A on January 26, 2021.

Net Operating Income

17 unchanged sentences

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

The following is a reconciliation of our NOI to net income for the three and nine months ended September 30, 2021 and 2020 computed in accordance with GAAP (in thousands):

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

2021 2020 2021 2020

The following is a reconciliation of our NOI to net income for the three months ended March 31, 2022 and 2021 computed in accordance with GAAP (in thousands):

Three Months Ended March 31,

Net operating income $ 65,896 $ 54,386

3 unchanged sentences

Interest expense (14,666) (14,005)

Early extinguishment of debt — — (4,271) —

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

Other (expense) income, net (162) (53)

1 unchanged sentence

Funds from Operations

We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT.

We calculate funds from operations ("FFO"), in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT").

FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment losses, real-estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.

8 unchanged sentences

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

The following table sets forth a reconciliation of our FFO for the three and nine months ended September 30, 2021 to net income, the nearest GAAP equivalent (in thousands, except per share and share data):

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

The following table sets forth a reconciliation of our FFO for the three months ended March 31, 2022 to net income, the nearest GAAP equivalent (in thousands, except per share and share data):

Three Months Ended March 31,

Funds from Operations (FFO)

6 unchanged sentences

Weighted average number of common shares and units, diluted (1)

76,173,444 76,169,626

(1) The weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that are subject to time vesting, which were excluded from the computation of diluted EPS, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted share but is anti-dilutive for the computation of diluted EPS for the period.

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis