What changed in this filing

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Item 1. Financial Statements

2022-10-28 compared with 2022-07-29 · 167 added, 125 removed, 902 unchanged (24% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

June 30, December 31,

September 30, December 31,

Real estate, at cost

13 unchanged sentences

Unsecured notes payable, net 1,538,986 1,538,238

Unsecured line of credit, net 33,895 —

Accounts payable and accrued expenses 72,355 64,531

5 unchanged sentences

stockholders’ equity

Common stock, $ 0.01 par value, 490,000,000 shares authorized, 60,528,115 and 60,525,580 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.01 par value, 490,000,000 shares authorized, 60,528,115 and 60,525,580 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,458,748 1,453,272

10 unchanged sentences

(In Thousands, Except Shares and Per Share Data)

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

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

2022 2021 2022 2021

57 unchanged sentences

Stock-based compensation — — 2,001 — — — 2,001

Shares withheld for employee taxes — — — — — — —

Other comprehensive income - change in value of interest rate swaps — — — — 2,610 704 3,314

1 unchanged sentence

Balance at June 30, 2022 60,528,115 605 1,456,747 ( 235,107 ) 9,457 ( 31,734 ) 1,199,968

Net income — — 12,927 3,442 16,369

Dividends declared and paid — — — ( 19,369 ) — ( 5,178 ) ( 24,547 )

Stock-based compensation — — 2,001 — — — 2,001

Other comprehensive income - change in value of interest rate swaps — — — — 3,314 893 4,207

Reclassification of amortization of forward-starting swap included in interest expense — — — — ( 217 ) ( 58 ) ( 275 )

Balance at September 30, 2022 60,528,115 $ 605 $ 1,458,748 $ ( 241,549 ) $ 12,554 $ ( 32,635 ) $ 1,197,723

American Assets Trust, Inc.

22 unchanged sentences

Balance at June 30, 2021 60,474,866 $ 605 $ 1,448,612 $ ( 199,955 ) $ 2,122 $ ( 24,238 ) $ 1,227,146

Net income — — 10,186 2,709 12,895

Forfeiture of restricted stock ( 2,801 ) — — — — — —

Dividends declared and paid — — — ( 18,141 ) — ( 4,854 ) ( 22,995 )

Stock-based compensation — — 1,484 — — — 1,484

Other comprehensive income - change in value of interest rate swaps — — — — 342 93 435

Reclassification of amortization of forward-starting swap included in interest expense — — — — ( 216 ) ( 58 ) ( 274 )

Balance at September 30, 2021 60,472,065 $ 605 $ 1,450,096 $ ( 207,910 ) $ 2,248 $ ( 26,348 ) $ 1,218,691

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(In Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES

7 unchanged sentences

Stock-based compensation expense 5,491 4,452

Unearned rents ( 1,714 ) ( 2,540 )

Other noncash interest expense ( 825 ) ( 824 )

Other, net 684 ( 927 )

14 unchanged sentences

FINANCING ACTIVITIES

Issuance of secured notes payable 75,000 —

Repayment of secured notes payable ( 111,000 ) —

Proceeds from unsecured line of credit 36,000 —

Repayment of unsecured line of credit — ( 100,000 )

9 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:

Six Months Ended June 30,

Nine Months Ended September 30,

Cash and cash equivalents $ 63,431 171,923

5 unchanged sentences

(In Thousands, Except Unit Data)

June 30, December 31,

September 30, December 31,

Real estate, at cost

13 unchanged sentences

Unsecured notes payable, net 1,538,986 1,538,238

Unsecured line of credit, net 33,895 —

Accounts payable and accrued expenses 72,355 64,531

3 unchanged sentences

Commitments and contingencies (Note 12)

Limited partners' capital, 16,181,537 and 16,181,537 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Limited partners' capital, 16,181,537 and 16,181,537 units issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

( 36,542 ) ( 30,138 )

General partner's capital, 60,528,115 and 60,525,580 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

General partner's capital, 60,528,115 and 60,525,580 units issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

1,217,804 1,236,092

6 unchanged sentences

(In Thousands, Except Shares and Per Unit Data)

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

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

2022 2021 2022 2021

51 unchanged sentences

Issuance of restricted units — — 6,072 — — —

Forfeiture of restricted units — — — — — —

Distributions — ( 5,178 ) — ( 19,369 ) — ( 24,547 )

3 unchanged sentences

Balance at June 30, 2022 16,181,537 ( 34,806 ) 60,528,115 1,222,245 12,529 1,199,968

Net income — 3,442 — 12,927 — 16,369

Distributions — ( 5,178 ) — ( 19,369 ) — ( 24,547 )

Stock-based compensation — — — 2,001 — 2,001

Other comprehensive income - change in value of interest rate swap — — — — 4,207 4,207

Other comprehensive income - unrealized gain on forward-starting interest rate swaps — — — — — —

Reclassification of amortization of forward-starting swap included in interest expense — — — — ( 275 ) ( 275 )

Balance at September 30, 2022 16,181,537 $ ( 36,542 ) 60,528,115 $ 1,217,804 $ 16,461 $ 1,197,723

Limited Partners' Capital (1)

17 unchanged sentences

Other comprehensive income - change in value of interest rate swap — — — — 475 475

Reclassification of amortization of forward-starting swap included in loss on early extinguishment of debt — — — — ( 275 ) ( 275 )

Reclassification of amortization of forward-starting swap realized gains included in interest expense — — — — ( 275 ) ( 275 )

Balance at June 30, 2021 16,181,537 $ ( 25,332 ) 60,474,866 $ 1,249,262 $ 3,216 $ 1,227,146

Net income — 2,709 — 10,186 — 12,895

Forfeiture of restricted units — — ( 2,801 ) — — —

Distributions — ( 4,854 ) — ( 18,141 ) — ( 22,995 )

Stock-based compensation — — — 1,484 — 1,484

Other comprehensive income - change in value of interest rate swap — — — — 435 435

Reclassification of amortization of forward-starting swap included in interest expense — — — — ( 274 ) ( 274 )

Balance at September 30, 2021 16,181,537 $ ( 27,477 ) 60,472,065 $ 1,242,791 $ 3,377 $ 1,218,691

(1) Consists of limited partnership interests held by third parties.

4 unchanged sentences

(Unaudited, In Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES

7 unchanged sentences

Stock-based compensation expense 5,491 4,452

Unearned rents ( 1,714 ) ( 2,540 )

Other noncash interest expense ( 825 ) ( 824 )

Other, net 684 ( 927 )

14 unchanged sentences

FINANCING ACTIVITIES

Issuance of secured notes payable 75,000 —

Repayment of secured notes payable ( 111,000 ) —

Proceeds from unsecured line of credit 36,000 —

Repayment of unsecured line of credit — ( 100,000 )

9 unchanged sentences

Six Months Ended June 30,

Nine Months Ended September 30,

Cash and cash equivalents $ 63,431 $ 171,923

5 unchanged sentences

Notes to Consolidated Financial Statements

June 30, 2022

September 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 unchanged sentences

We are a full service, vertically integrated, and self-administered REIT with approximately 212 employees providing substantial in-house expertise in asset management, property management, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing.

As of June 30, 2022, we owned or had a controlling interest in 31 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate.

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

As of September 30, 2022, we owned or had a controlling interest in 31 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate.

Additionally, as of September 30, 2022, we owned land at three of our properties that we classify as held for development and/or construction in progress.

A summary of the properties owned by us is as follows:

22 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Basis of Presentation

18 unchanged sentences

The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental cash flow information

10 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no changes to our significant accounting policies during the six months ended June 30, 2022.

There have been no changes to our significant accounting policies during the nine months ended September 30, 2022.

Segment Information

1 unchanged sentence

We operate in four business segments:

the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate.

The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental.

the acquisition, redevelopment, ownership and management of office real estate, retail real estate, multifamily real estate and mixed-use real estate.

The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental.

The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental.

The products for our multifamily segment include rental of apartments and other tenant services.

6 unchanged sentences

The collectability of receivables is affected by numerous different factors including current economic conditions, the impact of tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communications between our operating personnel and tenants, the extent of security deposits and letters of credit held with respect to tenants, and the ability of tenants to perform under the terms of their lease agreement.

The provision for doubtful accounts at June 30, 2022 and December 31, 2021 was approximately $ 3.7 million and $ 4.6 million, respectively.

The provision for doubtful accounts at September 30, 2022 and December 31, 2021 was approximately $ 2.8 million and $ 4.6 million, respectively.

Rent Concessions – COVID-19

In 2021, we provided lease concessions to certain tenants, primarily within the retail segment, as a result of the COVID-19 pandemic, in the form of rent deferrals and abatements.

From 2020 through 2022, we provided lease concessions to certain tenants, primarily within the retail segment, as a result of the COVID-19 pandemic, in the form of rent deferrals and abatements.

These lease concessions generally included an increase in our rights as a lessor.

We assess each lease concession and determine whether it represents a lease modifications under Accounting Standards Codification Topic 842, Leases ("ASC 842").

During the second quarter of 2022, we provided an immaterial amount of lease concessions to certain tenants that continued being impacted by the COVID-19 pandemic.

During the third quarter of 2022, we provided an immaterial amount of lease concessions to certain tenants that were previously impacted by and/or continued being impacted by the COVID-19 pandemic.

Recent Accounting Pronouncements

8 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Property Asset Acquisitions

3 unchanged sentences

The property was acquired with cash on hand.

The financial information set forth below summarizes the Company’s purchase price allocation for Bel-Spring 520 during the six months ended June 30, 2022 (in thousands):

The financial information set forth below summarizes the Company’s purchase price allocation for Bel-Spring 520 during the nine months ended September 30, 2022 (in thousands):

Bel-Spring 520

12 unchanged sentences

The value allocated to lease intangibles is amortized over the related lease term as depreciation and amortization expense in the statement of income.

The remaining weighted average amortization period as of June 30, 2022, is 3.5 .

The following table summarizes the operating results for Bel-Spring 520 included in the Company's historical consolidated statement of operations for the period of acquisition through June 30, 2022 (in thousands):

The remaining weighted average amortization period as of September 30, 2022, is 3.3 .

Bel-Spring 520

6 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES

The following summarizes our acquired lease intangibles and leasing costs, which are included in other assets and other liabilities and deferred credits, as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

The following summarizes our acquired lease intangibles and leasing costs, which are included in other assets and other liabilities and deferred credits, as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

In-place leases $ 58,119 $ 67,215

24 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of June 30, 2022 we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative.

However, as of September 30, 2022 we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative.

As a result, we have determined that our derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

8 unchanged sentences

A summary of the carrying amount and fair value of our secured financial instruments, all of which are based on Level 2 inputs, is as follows (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Carrying Value Fair Value Carrying Value Fair Value

3 unchanged sentences

Senior unsecured notes, net $ 491,405 $ 403,500 $ 490,631 $ 503,000

Unsecured line of credit, net $ 33,895 $ 36,000 $ — $ —

DERIVATIVE AND HEDGING ACTIVITIES

2 unchanged sentences

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The following is a summary of the terms of our outstanding interest rate swaps as of June 30, 2022 (dollars in thousands):

American Assets Trust, Inc.

and American Assets Trust, L.P.

Notes to Consolidated Financial Statements—(Continued)

September 30, 2022

The following is a summary of the terms of our outstanding interest rate swaps as of September 30, 2022 (dollars in thousands):

Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value

6 unchanged sentences

$ 50,000 1/14/2022 1/5/2027 $ 4,791

American Assets Trust, Inc.

and American Assets Trust, L.P.

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

which the hedged forecasted transaction affects earnings for as long as hedged cash flows remain probable.

The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings for as long as hedged cash flows remain probable.

During the next twelve months, we estimate the cash flow hedges in place will reduce interest expense by approximately $ 1.1 million.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative.

This analysis reflects the contractual terms of the derivative, including the period to maturity, counter party credit risk and uses observable market-based inputs, including interest rate curves, and implied volatilities.

This analysis reflects the contractual terms of the derivative, including the period to maturity and, counterparty credit risk and uses observable market-based inputs, including interest rate curves, and implied volatilities.

The fair value of the interest rate swap is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).

1 unchanged sentence

Other assets consist of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Leasing commissions, net of accumulated amortization of $ 41,197 and $ 40,595 , respectively

5 unchanged sentences

Other intangible assets, net of accumulated amortization of $ 1,456 and $ 1,382 , respectively

Debt issuance costs, net of accumulated amortization of $ 2,394 and $ 2,070 , respectively

Right-of-use lease asset, net 24,512 26,254

1 unchanged sentence

Total other assets $ 112,421 $ 106,253

American Assets Trust, Inc.

and American Assets Trust, L.P.

Notes to Consolidated Financial Statements—(Continued)

September 30, 2022

OTHER LIABILITIES AND DEFERRED CREDITS

Other liabilities and deferred credits consist of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Acquired below market leases, net $ 20,485 $ 22,402

12 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Debt of American Assets Trust, Inc.

6 unchanged sentences

Secured notes payable

The following table is a summary of our total secured notes payable outstanding as of June 30, 2022 and December 31, 2021 (in thousands):

The following table is a summary of our total secured notes payable outstanding as of September 30, 2022 and December 31, 2021 (in thousands):

Principal Balance as of Stated Interest Rate Stated Maturity Date

Description of Debt June 30, 2022 December 31, 2021 as of June 30, 2022

Description of Debt September 30, 2022 December 31, 2021 as of September 30, 2022

City Center Bellevue (1)

— 111,000 3.98 % November 1, 2022

City Center Bellevue (1)

$ 75,000 $ — 5.08 % October 1, 2027

75,000 111,000

3 unchanged sentences

(1) Interest only.

Additionally, the Operating Partnership has provided a carve-out guarantee on the property-level mortgage debt at City Center Bellevue.

On September 16, 2022, the Operating Partnership repaid in full, without premium or penalty, the $ 111 million principal balance of the mortgage on City Center Bellevue.

Concurrent therewith, the Operating Partnership entered into a new $ 75 million non-recourse mortgage on City Center Bellevue.

The new five-year mortgage has a maturity date of October 1, 2027, bears interest at a fixed rate per annum of 5.08 % (interest only) and is secured by a first-priority deed of trust on City Center Bellevue and an assignment of all leases, rents and security deposits related to City Center Bellevue.

Additionally, the Operating Partnership has provided a carve-out guarantee on the new mortgage at City Center Bellevue.

Certain loans require the Operating Partnership to comply with various financial covenants.

As of June 30, 2022, the Operating Partnership was in compliance with these financial covenants.

As of September 30, 2022, the Operating Partnership was in compliance with these financial covenants.

American Assets Trust, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Unsecured notes payable

The following table is a summary of the Operating Partnership's total unsecured notes payable outstanding as of June 30, 2022 and December 31, 2021 (in thousands):

The following table is a summary of the Operating Partnership's total unsecured notes payable outstanding as of September 30, 2022 and December 31, 2021 (in thousands):

Description of Debt Principal Balance as of Stated Interest Rate Stated Maturity Date

June 30, 2022 December 31, 2021 as of June 30, 2022

September 30, 2022 December 31, 2021 as of September 30, 2022

Term Loan A $ 100,000 $ 100,000 Variable (1)

13 unchanged sentences

July 30, 2030

3.375% Senior Unsecured Notes 500,000 500,000 3.38 % February 1, 2031

3.375 % Senior Unsecured Notes

500,000 500,000 3.38 % February 1, 2031

1,550,000 1,550,000

23 unchanged sentences

Certain unsecured loans and notes require the Operating Partnership to comply with various financial covenants.

As of June 30, 2022, the Operating Partnership was in compliance with these financial covenants.

As of September 30, 2022, the Operating Partnership was in compliance with these financial covenants.

American Assets Trust, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Amended Term Loan Agreement

16 unchanged sentences

On January 14, 2022, the Operating Partnership entered into two interest rate swap agreements that are intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.70 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio.

At June 30, 2022, there were no amounts outstanding under the 2022 Revolver Loan and we had incurred approximately $ 2.3 million of debt issuance costs, net, which are recorded in other assets,

At September 30, 2022, there was $ 36 million outstanding under the 2022 Revolver Loan.

Approximately $ 2.1 million of net debt issuance costs are included in the unsecured line of credit, net on the

American Assets Trust, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

net on the consolidated balance sheets.

For the six months ended June 30, 2022, the weighted average interest rate on the 2022 Revolver Loan was 1.45 %

September 30, 2022

balance sheet.

For the nine months ended September 30, 2022, the weighted average interest rate on the 2022 Revolver Loan was 2.26 %

Additionally, the Third Amended and Restated Credit Facility includes a number of customary financial covenants, including:

7 unchanged sentences

If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.

As of June 30, 2022, the Operating Partnership was in compliance with the financial covenants in the Third Amended and Restated Credit Facility.

As of September 30, 2022, the Operating Partnership was in compliance with the financial covenants in the Third Amended and Restated Credit Facility.

PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P.

Noncontrolling interests in our Operating Partnership are interests in the Operating Partnership that are not owned by us.

Noncontrolling interests consisted of 16,181,537 common units (the “noncontrolling common units”), and represented approximately 21.2 % of the ownership interests in our Operating Partnership at June 30, 2022.

Common units and shares of our common stock have essentially the same economic characteristics in that common units and shares of our common stock share equally in the total net income or loss distributions of our Operating Partnership.

Investors who own common units have the right to cause our Operating Partnership to redeem any or all of their common units for cash equal to the then-current market value of one share of our common stock, or, at our election, shares of our common stock on a one -for-one basis.

During the six months ended June 30, 2022, no common units were converted into shares of our common stock.

During the nine months ended September 30, 2022, no common units were converted into shares of our common stock.

Earnings Per Unit of the Operating Partnership

2 unchanged sentences

The impact of unvested Operating Partnership unit awards on EPU has been calculated using the two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested Operating Partnership units’ participation rights in undistributed earnings.

The calculation of diluted EPU for the three months ended June 30, 2022 and 2021 does not include the weighted average of 483,110 and 486,035 unvested outstanding Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.

The calculation of diluted EPU for the six months ended June 30, 2022 and 2021 does not include the weighted average of 484,295 and 487,895 unvested Operating Partnership units,

respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.

The calculation of diluted EPU for the three months ended September 30, 2022 and 2021 does not include the weighted average of 483,110 and 481,966 unvested outstanding Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.

The calculation of diluted EPU for the nine months ended September 30, 2022 and 2021 does not include the weighted average of 483,895 and 485,897 unvested Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.

American Assets Trust, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

EQUITY OF AMERICAN ASSETS TRUST, INC.

2 unchanged sentences

The sales of shares of our 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 of 1933, as amended.

For the six months ended June 30, 2022, no shares of common stock were sold through the ATM equity program.

For the nine months ended September 30, 2022, no shares of common stock were sold through the ATM equity program.

We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes.

As of June 30, 2022, we had the capacity to issue up to $ 250 million in shares of our common stock under our current ATM equity program.

As of September 30, 2022, we had the capacity to issue up to $ 250 million in shares of our common stock under our current ATM equity program.

Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs.

As of June 30, 2022, we have no obligation to sell the remaining shares available for sale under the ATM equity program.

The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the six months ended June 30, 2022:

As of September 30, 2022, we have no obligation to sell the remaining shares available for sale under the ATM equity program.

The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the nine months ended September 30, 2022:

Period Amount per

2 unchanged sentences

Second Quarter 2022 $ 0.32 April 1, 2022 to June 30, 2022 June 23, 2022

Third Quarter 2022 $ 0.32 July 1, 2022 to September 30, 2022 September 22, 2022

Taxability of Dividends

3 unchanged sentences

The guidance also defines a fair value-based method of accounting for an employee stock award or similar equity instrument.

The following table summarizes the activity of restricted stock awards during the six months ended June 30, 2022:

The following table summarizes the activity of restricted stock awards during the nine months ended September 30, 2022:

Units Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 3,121 ) 23.18

Nonvested at June 30, 2022 483,998 $ 23.74

We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 2.0 million and $ 1.5 million in noncash compensation expense for the three months ended June 30, 2022 and 2021, respectively, which is included in general and administrative expenses on the consolidated statements of comprehensive income.

We recognized $ 3.5 million and $ 3.0 million in noncash compensation expense for the six months ended June 30, 2022 and 2021, respectively.

Unrecognized compensation expense was $ 7.2 million at June 30, 2022.

Nonvested at September 30, 2022 483,998 $ 23.74

We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 2.0 million and $ 1.5 million in noncash compensation expense for the three months ended September 30, 2022 and 2021, respectively, which is included in general and administrative expenses on the consolidated statements of comprehensive

American Assets Trust, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

We recognized $ 5.5 million and $ 4.5 million in noncash compensation expense for the nine months ended September 30, 2022 and 2021, respectively.

Unrecognized compensation expense was $ 5.2 million at September 30, 2022.

Earnings Per Share

1 unchanged sentence

The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings.

The weighted average unvested shares outstanding, which are considered participating securities, were 483,110 and 486,035 for the three months ended June 30, 2022 and 2021, respectively, and 484,295 and 487,895 for the six months ended June 30, 2022 and 2021, respectively.

The weighted average unvested shares outstanding, which are considered participating securities, were 483,110 and 481,966 for the three months ended September 30, 2022 and 2021, respectively, and 483,895 and 485,897 for the nine months ended September 30, 2022 and 2021, respectively.

Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares as these unvested shares have nonforfeitable dividend equivalent rights.

Diluted EPS is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method.

For the three and six months ended June 30, 2022 and 2021, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.

For the three and nine months ended September 30, 2022 and 2021, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.

Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive for all periods presented, and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.

The computation of basic and diluted EPS is presented below (dollars in thousands, except share and per share amounts):

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

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

2022 2021 2022 2021

21 unchanged sentences

Taxable income from non-REIT activities managed through our TRS is subject to federal and state income taxes.

We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes.

We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future

American Assets Trust, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases.

September 30, 2022

We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes.

We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases.

Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic 740, Income Taxes .

A deferred tax liability is included in the other liabilities and deferred credits, net on our consolidated balance sheets of $ 1.0 million and $ 1.0 million as of June 30, 2022 and December 31, 2021, respectively, in relation to real estate asset basis differences of property subject to state taxes based on income and certain prepaid expenses of our TRS.

A deferred tax liability is included in the other liabilities and deferred credits, net on our consolidated balance sheets of $ 1.0 million and $ 1.0 million as of September 30, 2022 and December 31, 2021, respectively, in relation to real estate asset basis differences of property subject to state taxes based on income and certain prepaid expenses of our TRS.

Income tax expense is recorded in other (expense) income, net on our consolidated statements of comprehensive income.

For the three and six months ended June 30, 2022, we recorded income tax expense of $ 0.2 million and $ 0.4 million .

For the three and six months ended June 30, 2021, we recorded income tax expense of $ 0.2 million and $ 0.3 million.

For the three and nine months ended September 30, 2022, we recorded income tax expense of $ 0.2 million and $ 0.6 million.

For the three and nine months ended September 30, 2021, we recorded income tax expense of $ 0.2 million and $ 0.5 million.

COMMITMENTS AND CONTINGENCIES

24 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

A wholly owned subsidiary of our Operating Partnership, WBW Hotel Lessee LLC, entered into a franchise license agreement with Embassy Suites Franchise LLC, the franchisor of the brand “Embassy Suites™,” to obtain the non-exclusive right to operate the hotel under the Embassy Suites TM brand for 20 years.

2 unchanged sentences

In addition, we must pay to Embassy Suites Franchise LLC a monthly franchise royalty fee equal to 4.0 % of the hotel's gross room revenue through December 2022 and 5.0 % of the hotel's gross room revenue thereafter, as well as a monthly program fee equal to 4.0 % of the hotel's gross room revenue.

If the franchise license is terminated due to our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment, which could be as high as $ 4.8 million based on operating performance through June 30, 2022.

If the franchise license is terminated due to our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment, which could be as high as $ 5.4 million based on operating performance through September 30, 2022.

Our Del Monte Center property has ongoing environmental remediation related to ground water contamination.

8 unchanged sentences

Fifteen of our consolidated properties are located in Southern California, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio.

Tenants in the retail industry accounted for 23.9 % of total revenues for the six months ended June 30, 2022.

Tenants in the retail industry accounted for 23.6 % of total revenues for the nine months ended September 30, 2022.

This makes us susceptible to demand for retail rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the retail industry.

Furthermore, tenants in the office industry accounted for 48.7 % of total revenues for the six months ended June 30, 2022.

Furthermore, tenants in the office industry accounted for 48.4 % of total revenues for the nine months ended September 30, 2022.

This makes us susceptible to demand for office rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the office industry.

For the six months ended June 30, 2022 and 2021, no tenant accounted for more than 10 % of our total rental revenue.

For the nine months ended September 30, 2022 and 2021, no tenant accounted for more than 10% of our total rental revenue.

Lessor Operating Leases

10 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

Leases at our office and retail properties and the retail portion of our mixed-use property may contain lease extension options, at our lessee's discretion.

4 unchanged sentences

However, the residual value of a real estate property is still subject to various market-specific, asset-specific, and tenant-specific risks and characteristics.

As of June 30, 2022, minimum future rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our office and retail properties and the retail portion of our mixed-use property are as follows (in thousands):

As of September 30, 2022, minimum future rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our office and retail properties and the retail portion of our mixed-use property are as follows (in thousands):

Year Ending December 31,

2022 (six months ending December 31, 2022) $ 95,859

2022 (three months ending December 31, 2022) $ 56,119

Thereafter 440,435

13 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

Current annual payments under the operating leases are as follows, as of June 30, 2022 (in thousands):

September 30, 2022

Current annual payments under the operating leases are as follows, as of September 30, 2022 (in thousands):

Year Ending December 31,

2022 (six months ending December 31, 2022) $ 1,640

2022 (three months ending December 31, 2022) $ 820

Thereafter 16,126

3 unchanged sentences

Lease costs under the operating leases are as follows (in thousands):

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

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

2022 2021 2022 2021

5 unchanged sentences

Supplemental cash flow information and non-cash activity related to our operating leases are as follow (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Operating cash flow information:

5 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

COMPONENTS OF RENTAL INCOME AND EXPENSE

The principal components of rental income are as follows (in thousands):

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

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

2022 2021 2022 2021

8 unchanged sentences

Total rental income $ 105,468 $ 93,804 $ 301,470 $ 262,573

Lease rental income includes $ 0.1 million and $ 1.9 million for the three months ended June 30, 2022 and 2021, respectively, and $ 3.8 million and $ 7.0 million for the six months ended June 30, 2022 and 2021, respectively, to recognize lease rental income on a straight-line basis.

In addition, net amortization of above and below market leases included in lease rental income was $ 0.8 million and $ 0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 1.7 million and $ 1.5 million for the six months ended June 30, 2022 and 2021, respectively.

Lease rental income includes $ 2.5 million and $ 3.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 6.3 million and $ 10.8 million for the nine months ended September 30, 2022 and 2021, respectively, to recognize lease rental income on a straight-line basis.

In addition, net amortization of above and below market leases included in lease rental income was $ 0.8 million and $ 0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 2.5 million and $ 2.4 million for the nine months ended September 30, 2022 and 2021, respectively.

The principal components of rental expenses are as follows (in thousands):

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

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

2022 2021 2022 2021

9 unchanged sentences

The principal components of other expense, net, are as follows (in thousands):

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

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

2022 2021 2022 2021

5 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

RELATED PARTY TRANSACTIONS

4 unchanged sentences

Rents commenced on March 1, 2021 for an initial lease term of ten years at an average annual rental rate of $ 0.2 million.

Rental revenue recognized on the AAI leases of $ 0.1 million and $ 0.1 million for the six months ended June 30, 2022 and 2021, respectively, is included in rental income on the statements of comprehensive income.

Rental revenue recognized on the AAI leases of $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2022 and 2021, respectively, is included in rental income on the statements of comprehensive income.

the company utilizes aircraft services provided by AAI Aviation, Inc.

("AAIA"), an entity owned and controlled by Mr.

For the six months ended June 30, 2022 and 2021, we incurred approximately $ 0.1 million and $ 0.1 million of expenses, respectively, related to aircraft services of AAIA or reimbursement to Mr.

For the nine months ended September 30, 2022 and 2021, we incurred approximately $ 0.2 million and $ 0.2 million of expenses, respectively, related to aircraft services of AAIA or reimbursement to Mr.

Rady (or his trust) for use of the aircraft owned by AAIA.

1 unchanged sentence

The Waikiki Beach Walk entities have a 47.7 % investment in WBW CHP LLC, an entity that was formed to, among other things, construct a chilled water plant to provide air conditioning to the property and other adjacent facilities.

The operating expenses of WBW CHP LLC are recovered through reimbursements from its members, and reimbursements to WBW CHP LLC of $ 0.5 million and $ 0.5 million for the six months ended June 30, 2022 and 2021, respectively, are included in rental expenses on the consolidated statements of comprehensive income.

The operating expenses of WBW CHP LLC are recovered through reimbursements from its members, and reimbursements to WBW CHP LLC of $ 0.9 million and $ 0.8 million for the nine months ended September 30, 2022 and 2021, respectively, are included in rental expenses on the consolidated statements of comprehensive income.

SEGMENT REPORTING

1 unchanged sentence

We operate in four business segments:

the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate.

The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental.

the acquisition, redevelopment, ownership and management of office real estate, retail real estate, multifamily real estate and mixed-use real estate.

The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental.

The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental.

The products for our multifamily segment include rental of apartments and other tenant services.

11 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

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

September 30, 2022

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

2022 2021 2022 2021

15 unchanged sentences

The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands):

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

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

2022 2021 2022 2021

13 unchanged sentences

Notes to Consolidated Financial Statements—(Continued)

June 30, 2022

September 30, 2022

The following table shows net real estate and secured note payable balances for each of the segments (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Net Real Estate

7 unchanged sentences

$ 75,000 $ 111,000

(1) Excludes debt issuance costs of $ 0.01 million and $ 0.04 million for each of the periods ended June 30, 2022 and December 31, 2021, respectively.

Capital expenditures for each segment for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):

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

(1) Excludes debt issuance costs of $ 0.45 million and $ 0.04 million for each of the periods ended September 30, 2022 and December 31, 2021, respectively.

Capital expenditures for each segment for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

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

2022 2021 2022 2021

7 unchanged sentences

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 1. Financial Statements