What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-29 compared with 2022-04-29 · 253 added, 103 removed, 356 unchanged (50% of the section changed)

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

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

As of June 30, 2022, our portfolio was comprised of twelve retail shopping centers;

twelve office properties;

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and six multifamily properties.

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.

Additionally, as of June 30, 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;

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

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

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 June 30, 2022.

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

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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.

Below is a summary of our same-store composition for the three and six months ended June 30, 2022 and 2021.

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.

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

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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,

In our determination of same-store and redevelopment same-store properties for the six months ended June 30, 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 11.3% for the six months ended June 30, 2022 compared to the same period in 2021.

Office same-store net operating income increased 0.4% for the six months ended June 30, 2022 compared to the same period in 2021.

Office redevelopment same-store net operating income increased 0.3% for the six months ended June 30, 2022 compared to the same period in 2021.

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

2022 2021 2022 2021

Same-Store 27 26 27 26

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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 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.

During the three months ended June 30, 2022, we signed 15 office leases for a total of 148,677 square feet of office space including 128,335 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 21.1% and 20.7%, respectively.

New office leases for comparable spaces were signed for 12,365 square feet at an average rental rate increase on a cash and GAAP basis of 15.1% and 48.9%, respectively.

Renewals for comparable office spaces were signed for 115,970 square feet at an average rental rate increase on a cash and GAAP basis of 21.8% and 18.3%, 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.

Tenant improvements and incentives were $91.28 per square foot of office space for comparable new leases for the three months ended June 30, 2022, mainly due to tenants at Torrey Reserve Campus.

During the three months ended June 30, 2022, we signed 21 retail leases for a total of 77,201 square feet of retail space including 67,209 square feet of comparable renewal retail space leases (leases for which there was a prior tenant), at an average rental rate increase on a cash basis of 5.7% and increase on a GAAP basis of 20.2%, respectively.

New retail leases for comparable spaces were signed for 4,004 square feet at an average rental rate increase on a cash basis of 5.1%.

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 $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.

Renewals for comparable retail spaces were signed for 63,205 square feet at an average rental rate increase on a cash basis of 5.8% and increase on a GAAP basis of 11.9%, respectively.

Tenant improvements and incentives were $44.89 per square foot of retail space for comparable new leases for the three months ended June 30, 2022, mainly due to tenants at Carmel Mountain Plaza.

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

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

We capitalized external and internal costs related to both development and redevelopment activities combined of $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.

We capitalized external and internal costs related to both development and redevelopment activities combined of $22.8 million and $15.9 million for the three months ended June 30, 2022 and 2021, respectively, and $45.5 million and $19.8 million for the six months ended June 30, 2022 and 2021, respectively.

We capitalized external and internal costs related to other property improvements combined of $10.2 million and $13.5 million for the three months ended June 30, 2022 and 2021, respectively, and $19.1 million and $22.9 million for the six months ended June 30, 2022 and 2021, respectively.

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

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

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

We capitalized interest costs related to development activities of $1.4 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $2.6 million and $1.2 million for the six months ended June 30, 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 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 %

Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021

The following summarizes our consolidated results of operations for the three months ended June 30, 2022 compared to our consolidated results of operations for the three months ended June 30, 2021.

As of June 30, 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 June 30, 2022, we owned land at three of our properties that we classified as held for development and/or construction in progress.

As of June 30, 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 June 30, 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 June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended June 30, Change %

Rental income $ 99,016 $ 87,639 $ 11,377 13 %

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Interest expense (14,547) (14,862) 315 (2)

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

Other (expense) income, net (181) (74) (107) 145

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

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:

Total property revenue increased $12.3 million, or 13%, to $104.2 million for the three months ended June 30, 2022 compared to $91.8 million for the three months ended June 30, 2021.

The percentage leased was as follows for each segment as of June 30, 2022 and 2021:

Percentage Leased (1)

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94.9 % 89.2 %

(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.

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

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 occupancy and rate at Waikiki Beach Walk Embassy Suites™, the increase in occupancy and annualized base rent in our multifamily portfolio and factors discussed below.

Rental revenues .

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

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 increased $11.4 million, or 13%, to $99.0 million for the three months ended June 30, 2022 compared to $87.6 million for the three months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio (1)

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

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

2022 2021 2022 2021

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(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.

Total office rental revenue increased $6.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520, which accounted for $4.7 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 $0.1 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.

Same-store office rental revenue increased by $1.1 million due to higher occupancy at La Jolla Commons and Torrey Reserve Campus, and higher annualized base rent at La Jolla Commons and The Landmark at One Market.

Total retail rental revenue increased $1.5 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to approximately $1.0 million for new tenant leases and previous tenants on alternate rent reverting back to basic monthly rent.

Additionally, there was an increase in cost recoveries of $0.5 million as COVID-related rent concessions were provided during 2020 and 2021.

Multifamily revenue increased $1.4 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 93.2% and $2,297, respectively for the three months ended June 30, 2022 compared to 87.8% and $2,187, respectively for the three months ended June 30, 2021.

Total mixed-use rental revenue increased $2.5 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to lifting of COVID-19 travel restrictions, which led to an increase in average occupancy and revenue per available room to 78.8% and $280 for the three months ended June 30, 2022, respectively, compared to 67.2% and $184 for three months ended June 30, 2021, respectively.

The retail portion of our mixed-use property had a decrease in revenue of $0.8 million due to the termination of the Quicksilver lease during the second quarter of 2021 and alternate rent provided to certain tenants.

Other property income .

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 increased $1.0 million, or 23%, to $5.1 million for the three months ended June 30, 2022 compared to $4.2 million for the three months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

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

2022 2021 2022 2021

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$ 5,139 $ 4,170 $ 969 23 % $ 5,058 $ 4,023 $ 1,035 26 %

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.

Same-Store Office other property income increased $0.1 million for the three months ended June 30, 2022 primarily due to an increase in parking garage income at City Center Bellevue, First & Main and Lloyd Portfolio, partially offset by lease termination fees received at City Center Bellevue during 2021.

Retail other property income decreased by $0.2 million for the three months ended June 30, 2022 primarily due to lease settlement and termination fees received during 2021 at Alamo Quarry Market and Del Monte Center.

Multifamily other property income increased by $0.1 million for the three months ended June 30, 2022 primarily due to an increase in parking garage income at Hassalo on Eighth - Residential and meter income at Loma Palisades, Pacific Ridge Apartments and Santa Fe Park RV Resort.

Mixed-use other property income increased by $1.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 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

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

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.

Total property expenses increased $6.3 million, or 21%, to $37.1 million, for the three months ended June 30, 2022 compared to $30.8 million for the three months ended June 30, 2021.

Rental Expenses.

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 expenses increased $5.6 million, or 28%, to $25.9 million for the three months ended June 30, 2022 compared to $20.2 million for the three months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

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

2022 2021 2022 2021

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$ 25,853 $ 20,204 $ 5,649 28 % $ 24,675 $ 20,013 $ 4,662 23 %

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.

Office rental expense increased $2.1 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to $1.0 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Same-store office rental expenses increased $1.1 million due to an increase in repairs and maintenance services, 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 2021 and our tenants' employees have started returning to the office in-person.

Retail rental expense increased $0.2 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to an increase in repairs and maintenance and facilities services 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 $0.7 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to an increase in repairs and maintenance, landscaping and facilities services.

Additionally there was an increase in property personnel compensation expenses.

Mixed-use rental expense increased $2.7 million for the three months ended June 30, 2022 compared to the three months ended June 30, 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 $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 taxes increased $0.7 million, or 6%, to $11.3 million for the three months ended June 30, 2022 compared to $10.6 million for the three months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

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

2022 2021 2022 2021

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$ 11,287 $ 10,612 $ 675 6 % $ 10,868 $ 10,555 $ 313 3 %

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.

Office real estate taxes increased $0.3 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to $0.3 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Retail real estate taxes increased $0.5 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to a 2021 catch-up for prior year tax assessment reconciliations which led to a decrease in the overall taxes owed at Alamo Quarry Market, which was recorded in June 2021.

Mixed-use real estate taxes decreased $0.2 million for the three months ended June 30, 2022 compared to the three months ended June 30, 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 $65.9 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 increased $6.0 million, or 10%, to $67.0 million for the three months ended June 30, 2022, compared to $61.0 million for the three months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

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

2022 2021 2022 2021

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$ 67,015 $ 60,993 $ 6,022 10 % $ 63,858 $ 61,308 $ 2,550 4 %

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.

Total office property operating income increased $3.6 million for the three months ended June 30, 2022 compared to the three months ended June 30, 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 $3.4 million during the period.

Same-store property operating income increased $0.1 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to higher occupancy at La Jolla Commons and Torrey Reserve Campus, and higher annualized base rent at La Jolla Commons and The Landmark at One Market.

Total retail property operating income increased $0.7 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to approximately $1.0 million for new tenant leases and previous tenants on alternate rent reverting back to basic monthly rent.

Additionally, there was an increase in cost recoveries of $0.5 million as COVID-related rent concessions were provided during 2020 and 2021.

This increase in revenue was partially offset by an

increase in rental expenses of $0.2 million related to repairs and maintenance and facilities services, and an increase in real estate taxes of $0.5 million related to prior year tax assessment reconciliations.

Total multifamily property operating income increased $0.7 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 93.2% and $2,297, respectively, for the three months ended June 30, 2022 compared to 87.8% and $2,187, respectively for the three months ended June 30, 2021.

This increase in revenue was partially offset by an increase in rental expenses related to repairs and maintenance, landscaping and facilities services.

Total mixed-use property operating income increased $1.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 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 78.8% and $280, respectively, for the three months ended June 30, 2022, compared to 67.2% and $184, respectively, for three months ended June 30, 2021.

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

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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.

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.

General and Administrative.

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.

General and administrative expenses increased to $7.6 million for the three months ended June 30, 2022, compared to $6.9 million for the three months ended June 30, 2021.

This increase was primarily due to an increase in stock-based compensation expense and 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 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.

Depreciation and amortization expense increased to $31.1 million for the three months ended June 30, 2022, compared to $27.6 million for the three months ended June 30, 2021.

This increase was primarily due to $2.9 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.

Additionally, there was higher depreciation and amortization at The Landmark at One Market and Alamo Quarry 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 $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.

Interest expense decreased by $0.3 million, or 2%, to $14.5 million for the three months ended June 30, 2022, compared to $14.9 million for the three months ended June 30, 2021.

This decrease was primarily due to an increase in capitalized interest related to our development projects, partially offset by an increase in interest expense related to our Term Loan A, which changed from an unhedged variable interest rate to a fixed interest rate at the beginning of 2022 as we entered into two interest rate swaps agreements to lock the rate against future fluctuations.

Other (Expense) Income, Net.

Other expense, net increased $0.1 million, or 145%, to other expense, net of $0.2 million for the three months ended June 30, 2022, compared to other expense, net of $0.1 million for the three months ended June 30, 2021 primarily due to the decrease in interest and investment income attributed to the lower yield on our average cash balance during the period.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

The following summarizes our consolidated results of operations for the six months ended June 30, 2022 compared to our consolidated results of operations for the six months ended June 30, 2021.

The following table sets forth selected data from our unaudited consolidated statements of income for the six months ended June 30, 2022 and 2021 (dollars in thousands):

Six Months Ended June 30, Change %

Rental income $ 196,002 $ 168,769 $ 27,233 16 %

Other property income 9,623 7,026 2,597 37

Total property revenues 205,625 175,795 29,830 17

Rental expenses 49,998 38,450 11,548 30

Real estate taxes 22,716 21,966 750 3

Total property expenses 72,714 60,416 12,298 20

Total property income 132,911 115,379 17,532 15

General and administrative (14,754) (13,747) (1,007) 7

Depreciation and amortization (61,499) (55,147) (6,352) 12

Interest expense (29,213) (28,867) (346) 1

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

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 (343) (127) (216) 170

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.

Net income 27,102 13,220 13,882 105

Net income attributable to restricted shares (309) (272) (37) 14

Net income attributable to unitholders in the Operating Partnership

(5,688) (2,750) (2,938) 107

Net income attributable to American Assets Trust, Inc.

$ 21,105 $ 10,198 $ 10,907 107 %

Total property revenues .

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

Total property revenue increased $29.8 million, or 17%, to $205.6 million for the six months ended June 30, 2022 compared to $175.8 million for the six months ended June 30, 2021.

The percentage leased was as follows for each segment as of June 30, 2022 and 2021:

Percentage Leased (1)

Office 91.0 % 90.3 %

Retail 92.5 % 91.1 %

Multifamily 92.0 % 87.8 %

Mixed-Use (2)

94.9 % 89.2 %

(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of June 30, 2022 or June 30, 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 factors discussed below.

Rental revenues .

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

Rental revenue increased $27.2 million, or 16%, to $196.0 million for the six months ended June 30, 2022 compared to $168.8 million for the six months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio (1)

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

2022 2021 2022 2021

Office $ 97,702 $ 86,918 $ 10,784 12 $ 88,750 $ 86,914 $ 1,836 2

Retail 48,552 44,009 4,543 10 48,552 44,009 4,543 10

Multifamily 26,199 23,640 2,559 11 26,199 23,640 2,559 11

Mixed-Use 23,549 14,202 9,347 66 23,549 14,202 9,347 66

$ 196,002 $ 168,769 $ 27,233 16 % $ 187,050 $ 168,765 $ 18,285 11 %

(1) For this table and the tables following, the same-store portfolio excludes:

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

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

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

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

Total office rental revenue increased $10.8 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to the new acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520 which accounted for $9 million of the increase.

Same store office rental revenue increased by $1.8 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to higher annualized base rents at The Landmark at One Market and higher occupancy at Torrey Reserve Campus.

Additionally, there was an increase of $0.7 million related to cost recoveries at La Jolla Commons, First & Main and The Landmark at One Market.

Retail rental revenue increased $4.5 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to approximately $2.4 million for tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 and 2021as the collectability of rent was determined to be no longer probable for certain tenants.

There was also an increase of $0.8 million for new tenant leases signed and tenants previously on alternate rent reverting back to basic monthly rent.

Additionally, there was an increase in cost recoveries of $1.3 million as COVID-related rent concessions were provided during 2020 and 2021.

Multifamily revenue increased $2.6 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 94.2% and $2,257, respectively for the six months ended June 30, 2022 compared to 88.6% and $2,181, respectively for the six months ended June 30, 2021.

Mixed-use rental revenue increased $9.3 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase of $8 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, which led to an increase in average occupancy and revenue per available room to 75.8% and $262 for the six months ended June 30, 2022, respectively, compared to 57.4% and $142 for the six months ended June 30, 2021, respectively.

Waikiki Beach Walk retail portion increased $1.3 million as tenants were changed to alternate rent or to cash basis of revenue recognition during 2020 and 2021 as the collectability of rent was determined to be no longer probable for certain tenants.

Other property income .

Other property income increased $2.6 million, or 37%, to $9.6 million for the six months ended June 30, 2022 compared to $7.0 million for the six months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

2022 2021 2022 2021

Office $ 2,460 $ 2,116 $ 344 16 $ 2,308 $ 1,944 $ 364 19

Retail 627 746 (119) (16) 627 746 (119) (16)

Multifamily 1,904 1,651 253 15 1,904 1,651 253 15

Mixed-Use 4,632 2,513 2,119 84 4,632 2,513 2,119 84

$ 9,623 $ 7,026 $ 2,597 37 % $ 9,471 $ 6,854 $ 2,617 38 %

Office other property income increased $0.3 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase in parking garage income at Lloyd Portfolio, City Center Bellevue and First & Main, partially offset by lease termination and settlement fees received at One Beach and City Center Bellevue during 2021.

Retail other property income decreased $0.1 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to the lease termination fees received at Alamo Quarry Market and Del Monte Center during 2021.

Multifamily other property income increased $0.3 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily to an increase in parking garage income at Hassalo on Eighth - Residential and an increase in meter income at Loma Palisades and Santa Fe Park RV Resort.

Total mixed-use other property income increased $2.1 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 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 $12.3 million, or 20%, to $72.7 million for the six months ended June 30, 2022, compared to $60.4 million for the six months ended June 30, 2021.

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

Rental Expenses.

Rental expenses increased $11.5 million, or 30%, to $50.0 million for the six months ended June 30, 2022, compared to $38.5 million for the six months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

2022 2021 2022 2021

Office $ 17,151 $ 13,497 $ 3,654 27 $ 14,978 $ 13,097 $ 1,881 14

Retail 7,913 7,240 673 9 7,913 7,240 673 9

Multifamily 8,773 7,574 1,199 16 8,773 7,574 1,199 16

Mixed-Use 16,161 10,139 6,022 59 16,161 10,139 6,022 59

$ 49,998 $ 38,450 $ 11,548 30 % $ 47,825 $ 38,050 $ 9,775 26 %

Office rental expenses increased $3.7 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to $1.8 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Same-store office rental expenses increased $1.9 million due to an increase in repairs and maintenance services, 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 2021 and our tenants' employees have started returning to the office in-person.

Retail rental expenses increased $0.7 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase in repairs and maintenance, facilities services, utilities expenses 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 expenses increased $1.2 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase in utilities expenses and repairs and maintenance, related to landscaping, plumbing and painting services.

Additionally, there was an increase in property-level personnel compensation expenses.

Total mixed-use rental expenses increased $6.0 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 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 $0.8 million, or 3%, to $22.7 million for the six months ended June 30, 2022 compared to $22.0 million for the six months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

2022 2021 2022 2021

Office $ 10,242 $ 9,515 $ 727 8 $ 9,452 $ 9,400 $ 52 1

Retail 7,245 6,937 308 4 7,245 6,937 308 4

Multifamily 3,527 3,410 117 3 3,527 3,410 117 3

Mixed-Use 1,702 2,104 (402) (19) 1,702 2,104 (402) (19)

$ 22,716 $ 21,966 $ 750 3 % $ 21,926 $ 21,851 $ 75 — %

Office real estate taxes increased $0.7 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to $0.7 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Retail real estate taxes increased $0.3 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to a 2021 catch-up for prior year tax assessment reconciliations which led to a decrease in the overall taxes owed at Alamo Quarry Market, which was recorded in June 2021.

Multifamily real estate taxes increased $0.1 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase in tax assessments for Hassalo on Eighth - Residential.

Mixed-use real estate taxes decreased $0.4 million for the six months ended June 30, 2022 compared to the six months ended June 30, 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 $17.5 million, or 15%, to $132.9 million for the six months ended June 30, 2022, compared to $115.4 million for the six months ended June 30, 2021.

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

Total Portfolio Same-Store Portfolio

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

2022 2021 2022 2021

Office $ 72,769 $ 66,022 $ 6,747 10 $ 66,628 $ 66,361 $ 267 —

Retail 34,021 30,578 3,443 11 34,021 30,578 3,443 11

Multifamily 15,803 14,307 1,496 10 15,803 14,307 1,496 10

Mixed-Use 10,318 4,472 5,846 131 10,318 4,472 5,846 131

$ 132,911 $ 115,379 $ 17,532 15 % $ 126,770 $ 115,718 $ 11,052 10 %

Total office property operating income increased $6.7 million during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to the recent acquisitions of Eastgate Office Park, Corporate Campus East III, and Bel-Spring 520, which had incremental property operating income of approximately $6.5 million during the period.

Same-store property operating income increased $0.3 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to higher occupancy at La Jolla Commons and Torrey Reserve Campus, and higher annualized base rent at La Jolla Commons and The Landmark at One Market.

Total retail property operating income increased $3.4 million during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 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 and 2021 as the collectability of rent was determined to be no longer probable for certain tenants.

Additionally, there was an increase in cost recoveries of $1.3 million as COVID-related rent concessions were provided during 2020 and 2021.

These increases were partially offset by higher repairs and maintenance expense, facilities services, utilities expenses 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.

Total multifamily property operating income increased $1.5 million during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 94.2% and $2,257, respectively, for the six months ended June 30, 2022 compared to 88.6% and $2,181, respectively for the six months ended June 30, 2021.

These increases were partially offset by higher utilities expenses and repairs and maintenance.

Total mixed-use property operating income increased $5.8 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase of $3.9 million related to the Waikiki Beach Walk hotel portion of our mixed use property.

Additionally, there was an increase of $1.9 million at the retail portion of our mixed-use property related to parking garage income and tenants who were changed to alternate rent or to cash basis of revenue recognition during 2020 and 2021 as the collectability of rent was determined to be no longer probable for certain tenants.

General and Administrative.

General and administrative expenses increased $1.0 million, or 7%, to $14.8 million for the six months ended June 30, 2022, compared to $13.7 million for the six months ended June 30, 2021.

This increase was primarily due to stock-based compensation expense and 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 $6.4 million, or 12%, to $61.5 million for the six months ended June 30, 2022, compared to $55.1 million for the six months ended June 30, 2021.

This increase was primarily due to a $5.9 million increase related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

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

These increases were offset by lower depreciation and amortization at One Beach due to the modernization of the property and depreciation of assets, which was accelerated in 2021.

Interest Expense.

Interest expense increased $0.3 million, or 1%, to $29.2 million for the six months ended June 30, 2022 compared to $28.9 million for the six months ended June 30, 2021.

This increase was primarily due to the closing of our 3.375% Senior Notes offering on January 26, 2021.

Additionally, an increase in interest expense related to our Term Loan A, which changed from an unhedged variable interest rate to a fixed interest rate at the beginning of 2022, as we entered into two interest rate swaps agreements to lock the rate against future fluctuation.

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

Loss on Early Extinguishment of Debt.

Early extinguishment of debt expense decreased $4.3 million for the six months ended June 30, 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, net increased $0.2 million, or 170%, to other expense, net of $0.3 million for the six months ended June 30, 2022, compared to other expense, net of $0.1 million for the six months ended June 30, 2021 primarily due to the decrease in interest and investment income attributed to the lower yield on our average cash balance during the period and an increase in income tax for our taxable REIT subsidiary.

Liquidity and Capital Resources of American Assets Trust, Inc.

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The company’s business is operated primarily through the Operating Partnership, of which the company is the parent company and sole general partner, and which it consolidates for financial reporting purposes.

Because the company operates on a consolidated basis with the Operating Partnership, the section entitled “Liquidity and Capital Resources of American Assets Trust, L.P.” should be read in conjunction with this section to understand the liquidity and capital resources of the company on a consolidated basis and how the company is operated as a whole.

Because the company operates on a consolidated basis with the Operating Partnership, the section entitled “Liquidity and Capital Resources of American Assets

Trust, L.P.” should be read in conjunction with this section to understand the liquidity and capital resources of the company on a consolidated basis and how the company is operated as a whole.

The company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the Operating Partnership.

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

As of June 30, 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.

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

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

As of June 30, 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.

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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.

For the three months ended June 30, 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.

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

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

As of June 30, 2022, we held $60.8 million in cash and cash equivalents.

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

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

Comparison of the 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.

Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021

Cash, cash equivalents, and restricted cash were $60.8 million and $370.0 million at June 30, 2022 and 2021, respectively.

Net cash provided by operating activities increased $9.3 million to $86.1 million for the six months ended June 30, 2022 compared to $76.7 million for the six months ended June 30, 2021.

The increase in cash from operations was primarily due to the increase in rental revenue from the hotel portion of our mixed-use property, our recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520 and changes in operating assets and liabilities.

Net cash used in investing activities increased $75.4 million to $112.5 million for the six months ended June 30, 2022 compared to $37.1 million for the six months ended June 30, 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 cash used in financing activities increased $243.7 million to $52.4 million for the six months ended June 30, 2022 compared to cash provided by financing activities of $191.3 million for the six months ended June 30, 2021.

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

Whereas, the cash provided by financing activities through the second 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

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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 months ended March 31, 2022 and 2021 computed in accordance with GAAP (in thousands):

Three Months Ended March 31,

The following is a reconciliation of our NOI to net income for the three and six months ended June 30, 2022 and 2021 computed in accordance with GAAP (in thousands):

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

2022 2021 2022 2021

Net operating income $ 67,015 $ 60,993 $ 132,911 $ 115,379

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

The following table sets forth a reconciliation of our FFO for the three 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,

The following table sets forth a reconciliation of our FFO for the three and six months ended June 30, 2022 to net income, the nearest GAAP equivalent (in thousands, except per share and share data):

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

Funds from Operations (FFO)

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

76,222,271 76,221,747

(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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis