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Item 7. Management’s Discussion and Analysis

2023-02-10 compared with 2022-02-11 · 112 added, 127 removed, 509 unchanged (32% of the section changed)

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Risk Factors” and “Forward-Looking Statements.”

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

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

As of December 31, 2022, our portfolio was comprised of twelve office properties;

twelve retail shopping centers;

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Our core markets include San Diego, California;

San Francisco, California;

Portland, Oregon, Bellevue;

Washington and Oahu, Hawaii.

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

the San Francisco Bay Area, California;

Portland, Oregon, and Oahu, Hawaii.

American Assets Trust, Inc., as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.8% of our Operating Partnership as of December 31, 2022.

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

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

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

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

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

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

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

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

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

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

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

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

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

The global impact of the pandemic continues to rapidly evolve.

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

The global impact of COVID-19 continues to rapidly evolve.

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

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

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

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

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

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

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

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

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

We believe our financial condition and liquidity are currently strong.

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

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

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

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

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

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

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

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

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

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

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

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Below is a summary of our same-store composition for the years ended December 31, 2022, 2021 and 2020.

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

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

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

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

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

One Beach Street was reclassified to non-same-store properties when compared to the designations for the year ended December 31, 2019 due to redevelopment activity to renovate the property.

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

Waikele Center is classified as a non-same-store property due to significant redevelopment activity.

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

For the year ended December 31, 2022, when compared to the designations for the year ended December 31, 2021, Waikiki Beach Walk-Retail and Embassy Suites™ Hotel is reclassified to same-store due to significant spalling repair activity impacting the hotel portion of the property's operations, which was completed on September 30, 2020.

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

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

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

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

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

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

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

2022 2021 2020

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Office Leases .

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

Our office portfolio included twelve properties with a total of approximately 4.1 million rentable square feet available for lease as of December 31, 2022.

As of December 31, 2022, these properties were 88.9% leased.

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The full amount of the expenses for this lease type, to the extent they are paid by the landlord, is reflected in operating expenses, and the reimbursement is reflected as rental income in the statements of operations.

During the year ended December 31, 2021, we signed 105 retail leases for 408,397 square feet with an average rent of $40.30 per square foot during the initial year of the lease term, including leases signed for the retail portion of our mixed-use property.

Of the leases, 85 represent comparable leases where there was a prior tenant, with an decrease of 11.2% in cash basis rent and an decrease of 5.4% in straight-line rent compared to the prior leases.

During the year ended December 31, 2022, we signed 91 retail leases for 390,425 square feet with an average rent of $32.96 per square foot during the initial year of the lease term, including leases signed for the retail portion of our mixed-use

Of the leases, 69 represent comparable leases where there was a prior tenant, with an increase of 5.1% in cash basis rent and an increase of 17.2% in straight-line rent compared to the prior leases.

Multifamily Leases .

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

The average monthly base rent per leased unit;

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

The average monthly base rent per leased unit as of December 31, 2022 was $2,483, compared to $2,201 at December 31, 2021.

Mixed-Use Property Revenue .

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

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

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

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

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

During the twelve months ended December 31, 2022, we signed 64 office leases for a total of 475,401 square feet of office space including 352,925 square feet of comparable space leases, at an average rental rate increase of 17.1% on a cash basis and an average rental increase of 21.7% on a straight-line basis.

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There were $11.39 per square foot of office space of tenant improvement or incentives for comparable renewal leases for the twelve months ended December 31, 2022.

During the twelve months ended December 31, 2021, we signed 105 retail leases for a total of 408,397 square feet of retail space including 333,338 square feet of comparable space leases (leases for which there was a prior tenant), a decrease of 11.2% on a cash basis and a decrease of 5.4% on a straight-line basis.

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

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

During the twelve months ended December 31, 2022, we signed 91 retail leases for a total of 390,425 square feet of retail space including 319,660 square feet of comparable space leases, at an average rental rate increase of 5.1% on a cash basis and an average rental increase of 17.2% on a straight-line basis.

New retail leases for comparable spaces were signed for 14,511 square feet at an average rental rate increase of 16.0% on a cash basis and an average rental rate increase of 701.9% (due to the modification of prior tenants' rent to cash-basis, which precluded straight-line rent for comparison) on a straight-line basis.

Renewals for comparable retail spaces were signed for 305,149 square feet at an average rental rate increase of 4.5% on a cash basis and an increase of 9.3% on a straight-line basis.

Tenant improvements and incentives were $32.87 per square foot of retail space for comparable new leases for the twelve months ended December 31, 2022.

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In some instances, management exercises judgment as to how to most effectively reflect the comparability of spaces reported in this calculation.

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

investment made in the space and the specific lease structure.

Tenant improvements and incentives include the total dollars committed for the improvement of a space as it relates to a specific lease, but may also include base building costs (i.e., expansion, escalators or new entrances) which are required to make the space leasable.

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

The collectability of receivables is affected by numerous different factors including current economic trends, including the impact of the COVID-19 pandemic on tenant's businesses and changes in tenants' payment patterns, tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communications between our operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenant to perform under the terms of their lease agreement when evaluating the adequacy of the allowance for doubtful accounts.

The collectability of receivables is affected by numerous different factors including current economic trends, including the continued impact of COVID-19 on tenant's businesses and changes in tenants' payment patterns, tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communications between our operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenant to perform under the terms of their lease agreement when evaluating the adequacy of the allowance for doubtful accounts.

If our assessment of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.

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

During the year ended December 31, 2021, due to the impacts of the COVID-19 pandemic, we provided lease concessions to certain tenants, primarily within the retail segment, in the form of rent deferrals and abatements.

Since the onset of COVID-19 in 2020, we have provided lease concessions to certain tenants, primarily within the retail segment, in the form of rent deferrals and abatements in recognition of the adverse impact that COVID-19 had on such tenants, although the concessions provided during the year ended December 31, 2022 were immaterial to us.

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

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

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

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

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

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

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Total $ 44,098 $ 20,008 $ 64,106 $ 16,637 $ 26,987 $ 107,730

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

The decrease in tenant improvements and leasing commissions for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily related to tenant buildouts at The Landmark at One Market and First & Main completed in the year ended December 31, 2021, partially offset by new tenant buildouts at Torrey Reserve Campus, Carmel Mountain Plaza and Corporate Campus East III during the year ended December 31, 2022.

The increase in new development expenditures for the year ended December 31, 2022 compared to the year ended December 21, 2021 was primarily related to costs incurred for the development of Tower 3 at La Jolla Commons.

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Our capital expenditures during the year ending December 31, 2023 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of our held for development and construction in progress properties.

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

While the amount of future expenditures will depend on numerous factors, we expect expenditures incurred in the year ending December 31, 2023 to decrease from the year ending December 31, 2022 as we near completion of development activities at La Jolla Commons and renovations at One Beach Street.

Derivative Instruments

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2022 Acquisitions and Dispositions

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

The purchase price was approximately $45.5 million, less seller credits of approximately $0.1 million of future rent abatement, approximately $0.6 million of contractual tenant improvements and closing costs of approximately $0.1 million.

The property was acquired with cash on hand.

During 2022, there were no dispositions.

2021 Acquisitions and Dispositions

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

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

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

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

The properties were acquired with cash on hand.

During 2021, there were no dispositions.

2020 Acquisitions and Dispositions

During 2020, there were no acquisitions or dispositions.

During the year ended December 31, 2021, there were no dispositions.

2020 Acquisitions and Dispositions

On June 20, 2019, we acquired La Jolla Commons, consisting of two office towers totaling approximately 724,000 square feet, an entitled development parcel and two parking structures, located in San Diego, California.

The purchase price was approximately $525 million, less seller credits of (i) approximately $11.5 million for speculative lease-up, (ii) approximately $4.2 million for assumed contractual liabilities, and(iii) and approximately $1.7 million for closing prorations, excluding closing costs of approximately $0.2 million.

The property was acquired with proceeds from an underwritten public offering and borrowings under our Second Amended and Restated Credit Facility.

On May 22, 2019, we sold Solana Beach - Highway 101.

The property is located in San Diego, California and was previously included in our retail segment.

The sales price of this property of approximately $9.4 million, less costs to sell, resulted in net proceeds to the company of approximately $9.4 million.

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

During the year ended December 31, 2020, there were no acquisitions or dispositions.

Results of Operations

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As of December 31, 2022, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 7.2 million rentable square feet of office and retail space (including mixed-use retail space), 2,110 residential units (including 120 RV spaces) and a 369-room hotel.

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

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

As of December 31, 2021, our operating portfolio was comprised of 30 office, retail, multifamily and mixed-use properties with an aggregate of approximately 7.1 million rentable square feet of office and retail space (including mixed-use retail space), 2,110 residential units (including 120 RV spaces) and a 369-room hotel.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(iv) Bel-Spring 520 which was acquired on March 8, 2022;

(v) the 710 building at Lloyd District Portfolio which was placed into operations on November 1, 2022, approximately one year after completing renovations of the building and (vi) land held for development.

Total office rental revenue increased $16.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to the new acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520 which accounted for $11 million of the increase.

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

Same-store office rental revenue increased $5.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher annualized base rents at La Jolla Commons and Landmark at One Market and higher occupancy at La Jolla Commons and Torrey Reserve Campus.

Additionally, there was an increase of $1.7 million related to cost recoveries at La Jolla Commons, First & Main and The Landmark at One Market and an increase of $1 million related to accelerated revenue recognition of tenant improvement overages due to tenants vacating their space sooner than original lease terms.

Total retail rental revenue increased $6.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to approximately $4.2 million for new tenant leases signed and tenants previously on alternate rent reverting back to basic monthly rent.

This includes certain tenants who were changed to alternate rent or to cash basis of revenue recognition during the years ended December 31, 2020 and 2021 as collectability of rent was determined to be no longer probable.

Additionally, there was an increase in cost recoveries of approximately $2.1 million as COVID-related rent concessions were provided during the years ended December 31, 2020 and 2021.

Multifamily rental revenue increased $5.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 92.9% and $2,349, respectively, for the year ended December 31, 2022, compared to 92.1% and $2,160, respectively, for the year ended December 31, 2021.

Mixed-use rental revenue increased $14.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase of $13.2 million related to the Waikiki Beach Walk hotel portion of our mixed use property.

This increase was due to the lifting of COVID-19-related travel restrictions, which led to an increase in average occupancy and revenue per available room to 76.9% and $283 for the year ended December 31, 2022, respectively, compared to 66.4% and $185 for the year ended December 31, 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 the years ended December 31, 2020 and 2021 as collectability of rent was determined to be no longer probable for certain tenants.

Other property income.

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$ 20,141 $ 15,620 $ 4,521 29 % $ 19,783 $ 15,210 $ 4,573 30 %

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

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

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

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

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

Same-store office other property income increased $0.8 million for the year ended December 31, 2022 compared to the year ended December 31, 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 amounts received at One Beach and City Center Bellevue during the year ended December 31, 2021.

Retail other property income decreased $0.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to the lease termination fees received at Carmel Mountain Plaza and Del Monte Center during the year ended December 31, 2021.

Multifamily other property income increased $0.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily to an increase in parking garage income at Hassalo on Eighth - Residential, an increase in meter income at Loma Palisades and Pacific Ridge Apartments, and an increase in security deposits applied at Pacific Ridge Apartments.

Mixed-use other property income increased $3.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in other room rental income and rent excise tax at the hotel portion of our mixed-use property and an increase in parking garage income and rent excise tax at the retail portion of our mixed-use property.

Property Expenses

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$ 107,645 $ 86,980 $ 20,665 24 % $ 102,966 $ 84,815 $ 18,151 21 %

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

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

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

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

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

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

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

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

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

Total office rental expenses increased $6.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to $2.5 million related to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

Same-store office rental expenses increased $4.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in repairs and maintenance services, utilities expenses, facility services and other operating expenses as the "stay-at home" orders issued by state and local governments related to COVID-19 were relaxed in 2021 and our tenants' employees have started returning to the office in person.

Total retail rental expenses increased $1.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in repairs and maintenance, facilities services, insurance expenses and marketing expenses in 2022, as restrictions on business operations from orders issued by state and local governments related to COVID-19 were eased during the first half of 2021.

Multifamily rental expensed increased $2.9 million for the year ended December 31, 2022 compared to the year ended December 31, 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 and insurance expenses in 2022.

Mixed-use rental expenses increased $10.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in hotel room expenses, personnel expenses and excise tax expenses at the hotel portion of our mixed-use property during the period.

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

Real Estate Taxes.

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$ 44,788 $ 42,794 $ 1,994 5 % $ 43,263 $ 42,029 $ 1,234 3 %

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

Total office real estate taxes increased $0.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to the recent acquisitions of Eastgate Office Park, Corporate Campus East III and Bel-Spring 520.

There was a decrease of $0.1 million at One Beach Street due to the capitalization of real estate taxes as the property is under redevelopment.

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

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

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

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

Same-store office real estate taxes for the year ended December 31, 2022 compared to the year ended December 31, 2021 remained flat.

Retail real estate taxes increased $1.4 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to a one-time real estate tax refund received during the year ended December 31, 2021 for approximately $1.6 million at Alamo Quarry Market for the tax assessments for 2019 through 2020.

This was partially offset by higher tax consulting fees of $0.2 million incurred during the year ended December 31, 2021.

Multifamily real estate taxes increased $0.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in tax assessments for Hassalo on Eighth - Residential.

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

Property Operating Income.

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$ 270,215 $ 246,054 $ 24,161 10 % $ 258,121 $ 241,954 $ 16,167 7 %

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

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

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

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

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

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

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

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

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

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

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

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

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

Total office property operating income increased $9.8 million for the year ended December 31, 2022 compared to the year ended December 31, 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 $7.8 million during the period.

The increase in total office property operating income is partially offset by the decrease at One Beach Street of $0.3 million due to expiration of leases to allow for the modernization of the property.Same-store property operating income increased $1.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher cost recoveries and higher occupancy at La Jolla Commons and Torrey Reserve Campus, higher annualized base rent at La Jolla Commons and an increase of $1.0 million related to accelerated revenue recognition of tenant improvement overages due to tenants vacating their space prior to the original expiration dates.

These increases were partially offset by higher operating expenses as more of our tenants' employees have returned to the office in-person.

Retail property operating income increased $3.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to approximately $4.2 million related to new leases executed and tenants that were previously on alternate rent (due to COVID-19 related rent concessions) reverting back to basic monthly rent, including certain tenants who were changed to alternate rent or to cash basis of revenue recognition during the years ended December 31, 2020 and 2021 as the collectability of rent was determined to be no longer probable.

Additionally, there was an increase in cost recoveries of $2.1 million as COVID-19 related rent concessions were provided during the years ended December 31, 2020 and 2021.

These increases were partially offset by comparatively higher real estate taxes related to a one-time real estate tax refund of approximately $1.6 million for Alamo Quarry Market received during the third quarter of 2021 relating to the calendar years 2019 through 2020, and an overall increase in rental expenses of $1.0 million related to repairs and maintenance and facilities services.

Multifamily property operating income increased $2.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an overall increase in occupancy and average monthly base rent of 92.9% and $2,349, respectively, for the year ended December 31, 2022 compared to 92.1% and $2,160, respectively for the year ended December 31, 2021.

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

Mixed-use property operating income increased $7.7 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase of $6.3 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 76.9% and $283 for the year ended December 31, 2022, respectively, compared to 66.4% and $185 for the year ended December 31, 2021, respectively.

Additionally, there was an increase of $1.4 million at the retail portion of our mixed-use property related to parking garage income and certain tenants who were changed to alternate rent or to cash basis of revenue recognition during the years ended December 31, 2020 and 2021 as the collectability of rent was determined to be no longer probable for them.

General and administrative.

General and administrative expenses increased $2.3 million, or 8%, to $32.1 million for the year ended December 31, 2022, compared to $29.9 million for the year ended December 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, benefits, annual bonus and stock-based compensation, as well as an increase in insurance and legal costs relating to corporate and property matters.

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 $7.0 million, or 6%, to $123.3 million for the year ended December 31, 2022, compared to $116.3 million for the year ended December 31, 2021.

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

during the third quarter of 2021.

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

This increase was primarily due to a $5.3 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 and an increase in depreciation at City Center Bellevue

due to the acceleration of depreciation related to tenants vacating space in 2022.

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

Interest expense.

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

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

Interest expense decreased $0.4 million, or 1%, to $58.2 million for the year ended December 31, 2022 compared with $58.6 million for the year ended December 31, 2021.

This decrease was primarily due to an increase in capitalized interest related to our development projects.

This decrease was offset by higher interest related to the closing of our 3.375% Senior Notes offering on January 26, 2021, and an increase in interest expense related to our Term Loan A, which changed from an unhedged variable interest rate at the beginning of 2021 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.

Loss on early extinguishment of debt .

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Other Income (Expense), Net.

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

Other expense, net increased $0.2 million, or 50%, to other expense, net of $0.6 million for the year ended December 31, 2022 compared to other income, net of $0.4 million for the year ended December 31, 2021, primarily due to an increase in income tax for our taxable REIT subsidiary and a decrease in interest and investment income attributed to the lower yield on our average cash balance during the period.

Liquidity and Capital Resources of American Assets Trust, Inc.

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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 December 31, 2021, the company has determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months.

As of December 31, 2022, the company has

determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months.

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

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is our sole general partner and consolidates our results of operations for financial reporting purposes.

Because we operate on a consolidated basis with American Assets Trust, Inc., the section entitled “Liquidity and Capital Resources of American Assets Trust, Inc.” should be read in conjunction with this section to understand our liquidity and capital resources on a consolidated basis.

Because we operate on a consolidated basis with

American Assets Trust, Inc., the section entitled “Liquidity and Capital Resources of American Assets Trust, Inc.” should be read in conjunction with this section to understand our liquidity and capital resources on a consolidated basis.

Due to the nature of our business, we typically generate significant amounts of cash from operations.

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

(BBB), and the issuance

of additional equity.

(BBB), and the issuance of additional equity.

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

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Total $ 2,155,977 $ 288,935 $ 263,579 $ 248,945 $ 47,852 $ 461,105 $ 845,561

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

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

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

(1) On January 5, 2023, our term loan agreement was amended and restated to, among other things, (1) increase the fully-drawn borrowings from $150 million to $225 million, (2) extend the maturity date from March 1, 2023 to January 5, 2025 (with one, twelve-month extension option) and (3) transition borrowings to the Secured Overnight Financing Rate (SOFR), and away from LIBOR.

The $225 million term loan is unsecured.

(2) On January 6, 2023, we repaid in full the $36 million outstanding balance on our revolving line of credit under our Third Amended and Restated Credit Facility.

Off-Balance Sheet Arrangements

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Net cash provided by operating activities increased $10.7 million to $179.1 million for the year ended December 31, 2022, compared to $168.3 million for the year ended December 31, 2021.

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

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

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

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

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

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

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

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 decreased $146.0 million to $166.3 million for the year ended December 31, 2022, compared to $312.3 million for the year ended December 31, 2021.

The decrease in cash used was primarily due to our recent acquisition of Bel-Spring 520 on March 8, 2022, and increased capital expenditures at La Jolla Commons III and One Beach Street, compared to the cash used for the year ended December 31, 2021 related to our acquisitions of Eastgate Office Park and Corporate Campus East III.

Net cash used by financing activities was $102.7 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $144.4 million for the year ended December 31, 2021.

The increase in cash used in financing activities was primarily due to quarterly dividends for 2022 and debt issuance costs related to our third amended and restated credit facility.

The cash provided by financing activities for the year ended December 31, 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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Interest expense (58,232) (58,587) (53,440)

Gain on sale of real estate — — 633

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

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Real estate depreciation and amortization 123,338 116,306 108,292

Gain on sale of real estate — — (633)

Funds from operations, as defined by NAREIT $ 179,215 $ 152,899 $ 143,880

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

What changed 10-K

Item 7. Management’s Discussion and Analysis