What changed in this filing

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Item 9A. Controls and Procedures

2023-02-10 compared with 2022-02-11 · 156 added, 196 removed, 1686 unchanged (17% of the section changed)

3 unchanged sentences

American Assets Trust, Inc.

maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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SEC regulations require us to identify anyone who failed to file a required report or filed a late report during the most recent fiscal year.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no Forms 5 were required for such persons, we believe that, during the fiscal year ended December 31, 2021, our named executive officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to them, except that Ernest Rady, our Chairman and Chief Executive Officer and a member of our Board of Directors, filed a Form 4 on April 7, 2021 for a transaction that occurred on March 3, 2021, due solely to Mr.

Rady's broker failing to provide us timely notice of such transaction.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no Forms 5 were required for such persons, we believe that, during the fiscal year ended December 31, 2022, our named executive officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to them, except that Ernest Rady, our Chairman and Chief Executive Officer and a member of our Board of Directors, filed a Form 4/A on October 4, 2022 for a transaction that occurred on August 30, 2022, due to a scrivener's error solely due to Mr.

Rady's broker failing to provide us with the correct number of shares purchased.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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and the purchasers named therein.

10.25(13) Second Amended and Restated Credit Agreement dated January 9, 2018, by and among Am erican Assets Trust, Inc., American Assets Trust, L.P., Bank of America, N.A., as Administrative Agent, and other entities named therein.

10.25(13) Second Amended and Restated Credit Agreement dated January 9, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., Bank of America, N.A., as Administrative Agent, and other entities named therein.

10.26(13) Third Amendment to Term Loan Agreement dated January 9, 2018, by and among the American Assets Trust, Inc., American Assets Trust, L.P., each lender from time to time party thereto, and U.S.

8 unchanged sentences

10.39(17) Third Amended and Restated Credit Agreement dated January 5, 2022, by and among American Assets Trust, Inc., American Assets Trust, L.P., Bank of America, N.A., as Administrative Agent, and other entities named therein.

10.39(18) Amended and Restated Term Loan Agreement dated January 5, 202 3 , by and among American Assets Trust, Inc., American Assets Trust, L.P., each lender from time- to-time party thereto, and U.S.

Bank National A ssoc i ation , as Administrative Agen t .

21.1* List of Subsidiaries of American Assets Trust, Inc.

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(13) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 9, 2018.

(14) Incorporated herein by reference to American Assets Trust, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 5, 2018.

(14) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 9, 2019.

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(17) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2022.

(18) Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2023.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrants have duly caused this Report to be signed on their behalf by the undersigned thereunto duly authorized this 10 th day of February, 2023.

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Description of the Matter

During the year ended December 31, 2021, the Company completed the acquisitions of Eastgate Office Park and Corporate Campus East III for a purchase price of approximately $125 million, excluding closing costs of approximately $0.2 million, and $84 million, excluding closing costs of approximately $0.1 million, respectively.

As discussed in Note 1 and Note 2 to the consolidated financial statements, the Company accounted for the purchases as asset acquisitions in accordance with the authoritative accounting guidance on acquisitions and business combinations.

The Company’s methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed consists of use of the income, sales comparison and cost approaches.

During the year ended December 31, 2022, the Company completed the acquisition of Bel-Spring 520 for a purchase price of approximately $45.5 million.

As discussed in Note 1 and Note 2 to the consolidated financial statements, the Company accounted for the purchase as an asset acquisition in accordance with the authoritative accounting guidance on acquisitions and business combinations.

The Company’s methodology of allocating the cost of the acquisition to the assets acquired and liabilities assumed consists of use of the income, sales comparison and cost approaches.

For acquired operating real estate properties, the purchase price is allocated to land and buildings, intangible assets such as in-place leases, and tangible assets and liabilities acquired, if any, based on their relative fair value.

Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation required by management in determining the relative fair values of the acquired land and buildings and intangible assets such as in-place leases.

The significant estimation was primarily due to the judgmental nature of inputs, including discount rates, capitalization rates and certain market assumptions such as market rental rates and market comparable prices for similar land parcels.

Auditing the Company’s accounting for its acquisition was complex due to the significant estimation required by management in determining the relative fair values of the acquired land and buildings and intangible assets such as in-place leases.

The significant estimation was primarily due to the judgmental nature of inputs, including discount rates, capitalization rates and certain market assumptions such as market rental rates.

How We Addressed the Matter in Our Audit

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For example, we tested controls over the valuation of acquired land, buildings and intangible assets, including the valuation models and underlying assumptions used to develop such estimates.

Our testing of the Company’s accounting for its acquisitions included, among other procedures, reading the purchase agreements and testing the values allocated to the assets acquired and liabilities assumed by evaluating the valuation methods and significant assumptions used by management.

For example, our real estate valuation specialists assisted us in evaluating the methodologies used by the Company and testing the consistency of the selected discount rates, capitalization rates and various market assumptions such as market rental rates and market comparable prices for similar land parcels with external market data sources.

Our testing of the Company’s accounting for its acquisition included, among other procedures, reading the purchase agreement and testing the values allocated to the assets acquired and liabilities assumed by evaluating the valuation methods and significant assumptions used by management.

Additionally, we evaluated the completeness and accuracy of the underlying data supporting the determination of various inputs.

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Description of the Matter

The Company’s methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed consists of use of the income, sales comparison and cost approaches.

During the year ended December 31, 2022, the Company completed the acquisition of Bel-Spring 520 for a purchase price of approximately $45.5 million.

The Company’s methodology of allocating the cost of the acquisition to assets acquired and liabilities assumed consists of use of the income, sales comparison and cost approaches.

The significant estimation was primarily due to the judgmental nature of inputs, including discount rates, capitalization rates and certain market assumptions such as market rental rates.

How We Addressed the Matter in Our Audit

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For example, we tested controls over the valuation of acquired land, buildings and intangible assets, including the valuation models and underlying assumptions used to develop such estimates.

Additionally, we evaluated the completeness and accuracy of the underlying data supporting the determination of various inputs.

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Cash and cash equivalents 49,571 139,524

Restricted cash — 1,716

Accounts receivable, net 7,848 7,445

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OPERATING INCOME 114,734 99,869 88,581

Interest expense ( 58,587 ) ( 53,440 ) ( 54,008 )

Interest expense, net ( 58,232 ) ( 58,587 ) ( 53,440 )

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

Gain on sale of real estate — — 633

Other (expense) income, net ( 625 ) ( 418 ) 447

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Other comprehensive gain (loss) - unrealized gain (loss) on swap derivatives during the period 11,319 2,723 ( 3,649 )

Reclassification of amortization of forward starting swap included in interest expense ( 1,098 ) ( 1,330 ) ( 1,304 )

Reclassification of amortization of forward starting swap included in interest expense, net ( 1,477 ) ( 1,098 ) ( 1,330 )

Reclassification of amortization of forward-starting swap realized gain included in loss on early extinguishment of debt — ( 193 ) —

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Net income — — — 28,043 — 7,545 35,588

Common shares issued

11,871,552 118 515,236 — — — 515,354

Issuance of restricted stock

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( 23,435 ) — ( 672 ) — — — ( 672 )

Other comprehensive income - change in value of interest rate swaps — — — — ( 4,482 ) ( 1,602 ) ( 6,084 )

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

— — — — 392 121 513

Other comprehensive loss - change in value of interest rate swaps — — — — ( 2,885 ) ( 764 ) ( 3,649 )

Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 1,045 ) ( 285 ) ( 1,330 )

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( 155,390 ) ( 2 ) 2 — — — —

Conversion of operating partnership units

209,011 2 ( 12,003 ) — 3 11,998 —

Dividends declared and paid

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Shares withheld for employee taxes ( 25,141 ) — ( 865 ) — — — ( 865 )

( 23,435 ) — ( 672 ) — — — ( 672 )

Other comprehensive loss - change in value of interest rate swaps — — — — ( 2,885 ) ( 764 ) ( 3,649 )

Other comprehensive income - change in values of interest rate swaps — — — — 2,135 588 2,723

Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 864 ) ( 234 ) ( 1,098 )

Reclassification of amortization of forward-starting swaps included in loss on early extinguishment of debt — — — — ( 152 ) ( 41 ) ( 193 )

Balance at December 31, 2021 60,525,580 605 1,453,272 ( 217,785 ) 2,872 ( 28,841 ) 1,210,123

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( 25,813 ) — ( 759 ) — — — ( 759 )

Other comprehensive loss - change in value of interest rate swaps — — — — 2,135 588 2,723

Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 864 ) ( 234 ) ( 1,098 )

Reclassification of amortization of forward-starting swaps included in loss on early extinguishment of debt — — — — ( 152 ) ( 41 ) ( 193 )

Other comprehensive income - change in value of interest rate swaps — — — — 8,916 2,403 11,319

Reclassification of amortization of forward-starting swaps included in interest expense, net — — — — ( 1,164 ) ( 313 ) ( 1,477 )

Balance at December 31, 2022 60,718,653 $ 607 $ 1,461,201 $ ( 251,167 ) $ 10,624 $ ( 35,740 ) $ 1,185,525

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Early extinguishment of debt — 4,271 —

Gain on sale of real estate — — ( 633 )

Stock-based compensation expense 8,690 8,493 6,307

Settlement of forward interest rate swap agreement — — 513

Lease termination income — — ( 4,518 )

Other noncash interest expense ( 1,477 ) ( 1,098 ) ( 1,330 )

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Capital expenditures ( 113,781 ) ( 104,588 ) ( 63,488 )

Proceeds from sale of real estate, net of selling costs — — 8,191

Leasing commissions ( 7,374 ) ( 3,142 ) ( 5,589 )

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FINANCING ACTIVITIES

Issuance of secured notes payable 75,000 — —

Repayment of secured notes payable ( 111,000 ) — ( 51,003 )

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Debt issuance costs ( 3,697 ) ( 5,075 ) ( 125 )

Proceeds from issuance of common stock, net — — 515,354

Dividends paid to common stock and unitholders ( 98,248 ) ( 88,936 ) ( 76,510 )

Shares withheld for employee taxes ( 759 ) ( 865 ) ( 672 )

Net cash provided by (used in) financing activities 144,424 ( 28,310 ) 497,546

Net increase in cash, cash equivalents and restricted cash 475 29,598 52,179

Net cash (used in) provided by financing activities ( 102,704 ) 144,424 ( 28,310 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 89,953 ) 475 29,598

Cash, cash equivalents and restricted cash, beginning of year 139,524 139,049 109,451

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Cash and cash equivalents 49,571 139,524

Restricted cash — 1,716

Accounts receivable, net 7,848 7,445

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OPERATING INCOME 114,734 99,869 88,581

Interest expense ( 58,587 ) ( 53,440 ) ( 54,008 )

Interest expense, net ( 58,232 ) ( 58,587 ) ( 53,440 )

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

Gain on sale of real estate — — 633

Other (expense) income, net ( 625 ) ( 418 ) 447

15 unchanged sentences

Other comprehensive gain (loss) - unrealized gain (loss) on swap derivatives during the period 11,319 2,723 ( 3,649 )

Reclassification of amortization of forward starting swaps included in interest expense ( 1,098 ) ( 1,330 ) ( 1,304 )

Reclassification of amortization of forward starting swaps included in interest expense, net ( 1,477 ) ( 1,098 ) ( 1,330 )

Reclassification of amortization of forward-starting swap realized gain included in loss on early extinguishment of debt — ( 193 ) —

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Net income — 7,545 — 28,043 — 35,588

Contributions from American Assets Trust, Inc.

— — 11,871,552 515,354 — 515,354

Conversion of operating partnership units ( 209,011 ) 12,001 209,011 ( 12,001 ) — —

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Units withheld for employee taxes — — ( 23,435 ) ( 672 ) — ( 672 )

Other comprehensive income - change in value of interest rate swaps — — — — ( 6,084 ) ( 6,084 )

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

— — — — 513 513

Other comprehensive loss - change in value of interest rate swaps — — — — ( 3,649 ) ( 3,649 )

Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 1,330 ) ( 1,330 )

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Net income — 7,653 — 28,940 — 36,593

Conversion of operating partnership units ( 209,011 ) 12,001 209,011 ( 12,001 ) — —

Issuance of restricted units — — 229,819 — — —

3 unchanged sentences

Units withheld for employee taxes — — ( 25,141 ) ( 865 ) — ( 865 )

Other comprehensive loss - change in value of interest rate swaps — — — — ( 3,649 ) ( 3,649 )

Other comprehensive income - change in value of interest rate swaps — — — — 2,723 2,723

Reclassification of amortization of forward starting swaps included in interest expense — — — — ( 1,098 ) ( 1,098 )

Reclassification of amortization of forward-starting swaps included in loss on early extinguishment of debt — — — — ( 193 ) ( 193 )

Balance at December 31, 2021 16,181,537 ( 30,138 ) 60,525,580 1,236,092 4,169 1,210,123

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Units withheld for employee taxes — — ( 25,813 ) ( 759 ) — ( 759 )

Other comprehensive loss - change in value of interest rate swaps — — — — 2,723 2,723

Reclassification of amortization of forward-starting swaps included in interest expense — — — — ( 1,098 ) ( 1,098 )

Reclassification of amortization of forward-starting swaps included in loss on early extinguishment of debt — — — — ( 193 ) ( 193 )

Other comprehensive income - change in value of interest rate swaps — — — — 11,319 11,319

Reclassification of amortization of forward-starting swaps included in interest expense, net — — — — ( 1,477 ) ( 1,477 )

Balance at December 31, 2022 16,181,537 $ ( 39,127 ) 60,718,653 $ 1,210,641 $ 14,011 $ 1,185,525

15 unchanged sentences

Early extinguishment of debt — 4,271 —

Gain on sale of real estate — — ( 633 )

Stock-based compensation expense 8,690 8,493 6,307

Settlement of forward interest rate swap agreement — — 513

Lease termination income — — ( 4,518 )

Other noncash interest expense ( 1,477 ) ( 1,098 ) ( 1,330 )

10 unchanged sentences

Capital expenditures ( 113,781 ) ( 104,588 ) ( 63,488 )

Proceeds from sale of real estate, net of selling costs — — 8,191

Leasing commissions ( 7,374 ) ( 3,142 ) ( 5,589 )

3 unchanged sentences

FINANCING ACTIVITIES

Issuance of secured notes payable 75,000 — —

Repayment of secured notes payable ( 111,000 ) — ( 51,003 )

4 unchanged sentences

Debt issuance costs ( 3,697 ) ( 5,075 ) ( 125 )

Contributions from American Assets Trust, Inc.

Distributions ( 98,248 ) ( 88,936 ) ( 76,510 )

Shares withheld for employee taxes ( 759 ) ( 865 ) ( 672 )

Net cash provided by (used in) financing activities 144,424 ( 28,310 ) 497,546

Net increase in cash, cash equivalents and restricted cash 475 29,598 52,179

Net cash (used in) provided by financing activities ( 102,704 ) 144,424 ( 28,310 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 89,953 ) 475 29,598

Cash, cash equivalents and restricted cash, beginning of year 139,524 139,049 109,451

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La Jolla Commons One Beach Street Corporate Campus East III

Torrey Reserve Campus First & Main

Torrey Reserve Campus First & Main Bel-Spring 520

Torrey Point Lloyd Portfolio

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Impact of COVID-19

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

These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others.

We are unable to predict the impact that COVID-19 and its variants 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 virus, the actions taken to contain it or to mitigate its impact, 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 Company cannot predict if previously placed governmental restrictions or social distancing measures will be reinstated in the future.

With the rise in cases related to COVID-19 variants, the willingness of customers to visit certain of out tenants' businesses may be reduced due to concerns regarding the continued risk of COVID-19 transmission and heightened sensitivity to risks associated with the transmission of other diseases.

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

The Company cannot predict if previously placed governmental restrictions or social distancing measures will be reinstated in the future or if more restrictive measures will be imposed.

Further, the willingness of customers to visit certain of out tenants' businesses may be reduced due to concerns regarding the continued risk of COVID-19 transmission and heightened sensitivity to risks associated with the transmission of other diseases.

As a result, COVID-19 is negatively impacting almost every industry directly or indirectly, including industries in which the Company and our tenants operate.

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

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Interest capitalized $ 5,765 $ 2,991 $ 1,070

Interest expense $ 58,587 $ 53,440 $ 54,008

Interest expense, net $ 58,232 $ 58,587 $ 53,440

Cash paid for interest, net of amounts capitalized $ 56,060 $ 50,970 $ 53,467

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Accrued leasing commissions $ 2,442 $ 2,628 $ 555

Building recorded in termination of ground lease $ — $ — $ 4,518

Revenue Recognition and Accounts Receivable

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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 impact of the 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 that it is no longer probable that we will be able to collect substantially all rents, we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.

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Total collectability related adjustments for rental income, which includes the allowance for doubtful accounts and deferred rent receivables, was $ 2.3 million, $ 2.3 million and $ 18.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

Due to the impacts of COVID-19, in 2020 through 2022 we provided lease concessions to certain tenants, primarily within the retail segment, in the form of rent deferrals and abatements.

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

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Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

As discussed above, as a result of the COVID-19 pandemic, certain of the our tenants may be unable to operate their businesses, maintain profitability and make timely rental payments under their leases.

As discussed above, as a result of COVID-19, certain of the our tenants may be unable to operate their businesses, maintain profitability and make timely rental payments under their leases.

Accordingly, the reduction of estimated future cash flows could result in the recognition of an impairment charge on certain of our long-lived assets.

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Restricted cash consists of amounts held by lenders to provide for future real estate tax expenditures, insurance expenditures and reserves for capital improvements.

At December 31, 2021 and 2020, we had $ 0.0 million and $ 1.7 million, respectively, in restricted cash.

As of December 31, 2022 and 2021, we had no restricted cash.

Other assets consist primarily of lease costs, lease incentives, acquired in-place leases and acquired above market leases.

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For the grants of market-based restricted stock awards in December 2019 (the “2019 grant”) and December 2020 grant (the “2020 grant”), we measure stock-based compensation expense based on the fair value of the award on the grant date and recognize the expense ratably over the vesting period.

For the grants of performance and market-based restricted stock awards in December 2021 (the “2021 grant”), we measure stock-based compensation expense based on the fair value of the award on the grant date, adjusted for changes to probabilities of achieving performance targets, and recognize expense ratably over the vesting period.

For the grants of performance and market-based restricted stock awards in December 2021 (the “2021 grant”) and December 2022 (the "2022 grant"), we measure stock-based compensation expense based on the fair value of the award on the grant date, adjusted for changes to probabilities of achieving performance targets, and recognize expense ratably over the vesting period.

Modifications of stock-based compensation awards are treated as an exchange of the original award for a new award with the resulting total compensation cost equal to the grant-date fair value of the original award plus the incremental value of the modification to the award.

The calculation of the incremental value is based on the excess of the fair value of the new (modified) award based on current circumstances over the fair value of the original award measured immediately before its terms are modified.

For the year ended December 31, 2021 and 2020, we incurred incremental compensation cost of approximately $ 2.6 million and $ 1.2 million, respectively, related to the discretionary vesting of previously granted restricted stock awards that did not meet the original vesting criteria.

For the year ended December 31, 2019, there were no modifications of stock-based compensation awards.

For the year ended December 31, 2022, 2021 and 2020, we incurred incremental compensation cost of approximately $ 1.4 million, $ 2.6 million and $ 1.2 million respectively, related to the discretionary vesting of previously granted restricted stock awards that did not meet the original vesting criteria.

Deferred Compensation

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We operate in four reportable segments:

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

the acquisition, redevelopment, ownership and management of office real estate, retail 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.

7 unchanged sentences

For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract.

This guidance can be applied immediately, however, is generally only available through December 31, 2022.

In January 2021, the FASB issued Accounting Standards Update 2021-01, “Reference Rate Reform (Topic 848):

Scope” (“ASU 2021-01”), which clarified the scope and application of the original guidance.

This guidance can be applied immediately, however, is generally only available with a newly proposed sunset date of December 31, 2024.

We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients.

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(1) Land related to held for development and construction in progress is included in the Held for Development and Construction in Progress classifications on the consolidated balance sheets.

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

The property is located in Solana Beach, California and was previously included in our retail segment.

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

Accordingly, we recorded a gain on sale of approximately $ 0.0 million , $ 0.0 million and $ 0.6 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Property Asset Acquisitions

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

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

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

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

4 unchanged sentences

The property was acquired with cash on hand.

The financial information set forth below summarizes the company’s purchase price allocation for each of Eastgate Office Park and Corporate Campus East III during the year ended December 31, 2021 (in thousands):

Eastgate Office Park Corporate Campus East III

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

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

Additionally, closing costs were approximately $ 0.1 million.

The financial information set forth below summarizes the company’s purchase price allocation for Bel-Spring 520 during the year ended December 31, 2022 (in thousands):

Bel-Spring 520

Land $ 13,744

13 unchanged sentences

The remaining weighted average amortization period as of December 31,

2021, is 3.2 years and 5.2 years for Eastgate Office Park and Corporate Campus East III, respectively.

The following table summarizes the operating results for each of Eastgate Office Park and Corporate Campus East III

included in the company's historical consolidated statement of operations for the period of acquisition through December 31,

2021 (in thousands):

Eastgate Office Park Corporate Campus East III Total

2022, is 3 years.

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 December 31, 2022 (in thousands):

Bel-Spring 520

Revenues $ 2,512

Operating expenses 2,417

Operating loss $ ( 96 ) $ ( 222 ) $ ( 318 )

Net loss attributable to American Assets Trust, Inc.

$ ( 99 ) $ ( 222 ) $ ( 321 )

Operating income 95

Net income attributable to American Assets Trust, Inc.

ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES

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Level 3 Inputs—unobservable inputs

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued

liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments.

certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, for

disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is

significant to the fair value measurement.

We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred

credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs.

We measure the fair value of this liability

based on prices provided by independent market participants that are based on observable inputs using market-based valuation

The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to

terminate the contract at the reporting date and are determined using interest rate pricing models and interest rate related

observable inputs.

The changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in

accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings during the period in which

the hedged forecasted transaction affects earnings.

We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the

respective counterparty’s non-performance risk in the fair value measurements.

In adjusting the fair value of our derivative

contracts for the effect of non-performance risk, we considered the impact of netting and any applicable credit enhancements,

such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair

value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of

current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of December 31, 2021

we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative

position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs.

We measure the fair value of this liability based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques.

The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contract at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs.

The changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements.

In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

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

However, as of December 31, 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.

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Deferred compensation liability $ — $ 2,411 $ — $ 2,411 $ — $ 2,503 $ — $ 2,503

Interest rate swap asset $ — $ 9,986 $ — $ 9,986 $ — $ — $ — $ —

Interest rate swap liability $ — $ 196 $ — $ 196 $ — $ 1,807 $ — $ 1,807

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The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments.

The carrying values of our line of credit and term loan set forth below are deemed to be at fair value since the outstanding debt is directly tied to monthly LIBOR contracts.

The carrying values of our line of credit and term loan set forth below are deemed to be at fair value since the outstanding debt is directly tied to monthly LIBOR or SOFR contracts.

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

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$ 38,436 $ 38,589

Interest rate swap asset

Acquired above market leases, net 107 149

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Straight-line rent liability 12,746 14,274

Deferred rent expense and lease intangible 3 16

Deferred compensation 2,411 2,503

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however, American Assets Trust, Inc.

has guaranteed the Operating Partnership's Third Amended and Restated Credit Facility (see note 19.

Subsequent Events), term loan and carve-out guarantees on property-level debt.

has guaranteed the Operating Partnership's obligations under the (i) amended and restated credit facility, (ii) term loans, (iii) senior guaranteed notes, and (iv) senior unsecured notes.

Debt of American Assets Trust, L.P.

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— 111,000 3.98 % November 1, 2022

City Center Bellevue (1)

75,000 — 5.08 % October 1, 2027

75,000 111,000

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(1) Interest only.

Certain loans require us to comply with various financial covenants, including the maintenance of minimum debt coverage ratios.

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 December 31, 2022, the Operating Partnership was in compliance with these financial covenants.

Certain loans require the Operating Partnership to comply with various financial covenants, including the maintenance of minimum debt coverage ratios.

As of December 31, 2022, we were in compliance with all loan covenants.

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January 5, 2027

Senior Guaranteed Notes, Series A (3)

— 150,000 4.04 % (4)

October 31, 2021

Term Loan B 100,000 100,000 Variable (3)

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July 30, 2030

3.375% Senior Unsecured Notes 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

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Total Unsecured Notes Payable $ 1,539,453 $ 1,538,238

(1) As of December 31, 2021, the interest rate associated with Term Loan A was variable.

However, on January 14, 2022, the Operating Partnership entered into an interest rate swap agreement that is intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.80 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio.

(2) On January 5, 2022, we extended the 2022 Term Loan A to a maturity date of January 5, 2027 with no further extension options.

(3) Notes prepaid in full, with make-whole penalty thereon of approximately $ 3.9 million, on January 26, 2021.

(4) The company entered into a one month forward-starting seven years swap contract on August 19, 2014, which was settled on September 19, 2014 at a gain of approximately $ 1.6 million (see Note 8).

The forward-starting seven-year swap contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88 % per annum.

On January 26, 2021, we prepaid the entirety of the Senior Guaranteed Notes, Series A with make-whole premium thereon and the related swap contract was fully amortized and terminated.

(1) The Operating Partnership has entered into two interest rate swap agreements that are intended to fix the interest rate associated with Term Loan A at approximately 2.70 % through its maturity date, subject to adjustments based on our consolidated leverage ratio.

(2) On January 5, 2023, we extended Term Loan B and Term Loan C to a maturity date of January 5, 2025 with one , twelve-month extension option and increased the fully drawn borrowings thereunder to $ 150 million and $ 75 million, respectively.

(3) The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan B at approximately 3.15 % through its maturity date, subject to adjustments based on our consolidated leverage ratio.

Effective March 1, 2018, the effective interest rate associated with Term Loan B is approximately 2.65 %, subject to adjustments based on our consolidated leverage ratio.

Effective March 1, 2018, the effective interest rate associated with Term Loan B is approximately 2.65 % through November 30, 2022, subject to adjustments based on our consolidated leverage ratio.

The interest rate swap agreement was terminated as of November 30, 2022.

As such, the variable interest paid from December 1, 2022 through December 31, 2022 was 5.32 %.

(4) The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan C at approximately 3.14 % through its maturity date, subject to adjustments based on our consolidated leverage ratio.

Effective March 1, 2018, the effective interest rate associated with Term Loan C is approximately 2.64 %, subject to adjustments based on our consolidated leverage ratio.

Effective March 1, 2018, the effective interest rate associated with Term Loan C is approximately 2.64 % through November 30, 2022, subject to adjustments based on our consolidated leverage ratio.

The interest rate swap agreement was terminated as of November 30, 2022.

As such, the variable interest paid from December 1, 2022 through December 31, 2022 was 5.32 %.

(5) The Operating Partnership entered into a treasury lock contract on May 31, 2017, which was settled on June 23, 2017 at a loss of approximately $ 0.5 million.

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The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88 % per annum.

Senior Unsecured Notes

On January 26, 2021, the Operating Partnership issued $ 500 million of senior unsecured notes (the " 3.375 % Senior Notes") that mature February 1, 2031 and bear interest at 3.375 % per annum.

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The net proceeds of the 3.375 % Senior Notes, after the issuance discount, underwriting fees, and other costs were approximately $ 489.7 million, which were primarily used to (i) prepay our $ 150 million Senior Guaranteed Notes, Series A, with a make-whole payment (as defined in the Note Purchase Agreement for the Series A Notes) thereon of approximately $ 3.9 million, on January 26, 2021, (ii) repay our $ 100 million then outstanding balance under our Revolver Loan on January 26, 2021, (iii) fund the development of the La Jolla Commons III office building and (iv) for general corporate purposes.

Term Loan Agreement

On March 1, 2016, the Operating Partnership entered into a Term Loan Agreement with each lender from time to time party thereto, and U.S.

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Additionally, the Operating Partnership may elect for borrowings to bear interest based on a ratings-based pricing grid as per the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Term Loan Agreement.

On January 5, 2023, we entered into the Amended and Restated Term Loan Agreement, which increased the aggregate unsecured borrowings from $ 150 million to $ 225 million and extended the maturity date of Term Loan B and Term Loan C from March 1, 2023 to January 5, 2025, with one , twelve-month extension option, subject to certain conditions.

Borrowings under the Amended and Restated Term Loan Agreement bear interest at floating rates equal to, at the Operating Partnership’s

option, either (1) the applicable Secured Overnight Financing Rate (“SOFR”), plus a SOFR adjustment and a spread (based on the Operating Partnership’s consolidated leverage ratio and applicable year of Term Loan B and Term Loan C) ranging from 1.20 % to 1.90 %, or (2) a base rate equal to the highest of (a) 0 %, (b) the prime rate, (c) the federal funds rate plus 50 bps and (d) the one-month SOFR, plus a SOFR adjustment and 100 bps, plus, in each case, a spread (based on the Operating Partnership’s consolidated leverage ratio and applicable year of the Term Loan B and Term Loan C) ranging from 0.20 % to 0.90 %.

Additionally, the Operating Partnership may elect for borrowings to bear interest based on a ratings-based pricing grid based on the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Amended and Restated Term Loan Agreement.

Prior to entering into the Amended and Restated Term Loan Agreement, the Operating Partnership entered into interest rate swaps that are intended to fix the interest rate associated with Term Loan B and Term Loan C at approximately (1) 5.47 % for the first year of Term Loan B and Term Loan C and (2) 5.57 % for the second year of Term Loan B and Term Loan C, subject to adjustments based on the Company’s consolidated leverage ratio.

Senior Guaranteed Notes

On October 31, 2014, the Operating Partnership entered into a note purchase agreement (the "Note Purchase Agreement") with a group of institutional purchasers that provided for the private placement of an aggregate of $ 350 million of senior guaranteed notes, of which (i) $ 150 million are designated as 4.04 % Senior Guaranteed Notes, Series A, due October 31, 2021 (the “Series A Notes”), (ii) $ 100 million are designated as 4.45 % Senior Guaranteed Notes, Series B, due February 2, 2025 (the “Series B Notes”) and (iii) $ 100 million are designated as 4.50 % Senior Guaranteed Notes, Series C, due April 1, 2025 (the “Series C Notes”).

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The Series A Notes, the Series B Notes and the Series C Notes will pay interest quarterly on the last day of January, April, July and October until their respective maturities.

On January 26, 2021, we

repaid the entirety of the $ 150.0 million Series A Notes with a make-whole payment (as defined in the Note Purchase Agreement) of approximately $ 3.9 million.

On January 26, 2021, we repaid the entirety of the $ 150.0 million Series A Notes with a make-whole payment (as defined in the Note Purchase Agreement) of approximately $ 3.9 million.

On March 1, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $ 250 million of 4.29 % Senior Guaranteed Notes, Series D, due March 1, 2027 (the "Series D Notes").

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Thereafter 750,000

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

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

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

(1) On January 5, 2023, we entered into a $ 225 million Amended and Restated Term Loan Agreement, which increased the aggregate unsecured borrowings from $ 150 million to $ 225 million and extended the maturity date of the Term Loans B & C from March 1, 2023 to January 5, 2025, with one , twelve-month extension option, subject to certain conditions.

Credit Facility

On January 9, 2014, the company and the Operating Partnership entered into an amended and restated credit agreement (the "Prior Credit Facility"), or the amended and restated credit facility, which amended and restated the then in-place credit facility.

The amended and restated credit facility provides for aggregate, unsecured borrowing of $ 350 million, consisting of a revolving line of credit of $ 250 million (the "Prior Revolver Loan") and a term loan of $ 100 million (the "Term Loan A").

The Prior Credit Facility had an accordion feature that allowed the Operating Partnership to increase the availability thereunder up to an additional $ 250 million, subject to meeting specified requirements and obtaining additional commitments from lenders.

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The Prior Revolver Loan initially matured on January 9, 2018, subject to the Operating Partnership's option to extend the Prior Revolver Loan up to two times, with each such extension for a six months period.

The Term Loan initially matured on January 9, 2016, subject to our option to extend the Term Loan A up to three times, with each such extension for a 12 -month period.

Term Loan A initially matured on January 9, 2016, subject to our option to extend Term Loan A up to three times, with each such extension for a 12 -month period.

The foregoing extension options were exercisable by us subject to the satisfaction of certain conditions.

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Concurrent with the closing of the Prior Credit Facility, the Operating Partnership drew down on the entirety of the $ 100 million Term Loan, which remains outstanding and is included in unsecured notes payable as discussed above.

Additionally, the Prior Credit Facility included a number of financial covenants, including:

• A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60 %,

• A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 40 %,

• A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x,

• A minimum unsecured interest coverage ratio of 1.75x,

• A maximum unsecured leverage ratio of 60 %,

• A minimum tangible net worth of $ 721.16 million, and 75 % of the net proceeds of any additional equity issuances (other than additional equity issuances in connection with any dividend reinvestment program), and

• Recourse indebtedness at any time cannot exceed 15 % of total asset value.

The Prior Credit Facility provided that American Assets Trust, Inc.'s annual distributions may not exceed the greater of (1) 95 % of our funds from operations (“FFO”) or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax.

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

If certain events of default exist or would result from a

distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.

American Assets Trust, Inc.

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The Second Amended and Restated Credit Facility had an accordion feature that would have allowed us to increase the availability thereunder up to an additional $ 250 million, subject to meeting specified requirements and obtaining additional commitments from lenders.

At December 31, 2021, there were no amounts outstanding balance under the Revolver Loan and the related debt issuance costs were fully amortized.

Borrowings under the Second Amended and Restated Credit Facility had interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from (a) 1.05 % to 1.50 % (with respect to the Revolver Loan) and (b) 1.30 % to 1.90 % (with respect to Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) LIBOR plus 100 bps, plus a spread which ranges from (i) 0.10 % to 0.50 % (with respect to the Revolver Loan) and (ii) 0.30 % to 0.90 % (with respect to Term Loan A), in each case based on our consolidated leverage ratio.

The foregoing rates were more favorable than previously contained in the Prior Credit Facility in place as of December 31, 2017.

For the year-ended December 31, 2021, the weighted average interest rate on the Revolver Loan was 1.14 %.

The Revolver Loan initially matured on January 9, 2022, subject to our option to extend the Revolver Loan up to two times, with each such extension for a six months period.

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The foregoing rates were more favorable than previously contained in the Second Amended and Restated Credit Facility (prior to entry into the First Amendment) with respect to Term Loan A.

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

On January 5, 2022, we entered into the Third Amended and Restated Credit Facility, which provides for aggregate, unsecured borrowings of up to $ 500 million, consisting of a revolving line of credit of $ 400 million (the “2022 Revolver Loan”) and a term loan of $ 100 million (the “2022 Term Loan A”).

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

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

Borrowings under the Third Amended and Restated Credit Agreement bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) the applicable Secured Overnight Financing Rate (“SOFR”), plus the applicable SOFR Adjustment and a spread which ranges from (a) 1.05 %- 1.50 % (with respect to the 2022 Revolver Loans) and (b) 1.20 % to 1.70 % (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps, (c) the Term SOFR Screen Rate with a term of one month plus 100 bps and (d) 1.00 %, plus a spread which ranges from (i) 0.10 %- 0.50 % (with respect to 2022 Revolver Loan) and (ii) 0.20 % to 0.70 % (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio.

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

At December 31, 2022, there was $ 36 million outstanding under the 2022 Revolver Loan.

Approximately $ 1.9 million of net debt issuance costs are included in the unsecured line of credit, net on the balance sheet.

For the year ended December 31, 2022, the weighted average interest rate on the 2022 Revolver Loan was 4.38 %.

Additionally, the Third Amended and Restated Credit Facility included a number of customary financial covenants that were unchanged from the Second Amended and Restated Credit Facility, including:

• A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60 %,

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• Recourse indebtedness at any time cannot exceed 15 % of total asset value.

The Second Amended and Restated Credit Facility provided that our annual distributions may not exceed the greater of (1) 95 % of our FFO or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax.

Consistent with the Second Amended and Restated Credit Facility, the Third Amended and Restated Credit Facility provided that our annual distributions may not exceed the greater of (1) 95 % of our FFO or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax.

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

As of December 31, 2021, the Operating Partnership was in compliance with all then in-place Second Amended and Restated Credit Facility covenants.

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

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

Borrowings under the Third Amended and Restated Credit Agreement bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) the applicable Secured Overnight Financing Rate (“ SOFR ”), plus the applicable SOFR Adjustment and a spread which ranges from (a) 1.05 %- 1.50 % (with respect to the 2022 Revolver Loans) and (b) 1.20 % to 1.70 % (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate , (b) the federal funds rate plus 50 bps, (c) the Term SOFR Screen Rate with a term of one month plus 100 bps and (d) 1.00 %, plus a spread which ranges from (i) 0.10 %- 0.50 % (with respect to 2022 Revolver Loan) and (ii) 0.20 % to 0.70 % (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio.

Note that on January 14, 2022, the Operating Partnership entered into an interest rate swap agreement that is intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.80 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio.

As of December 31, 2022, the Operating Partnership was in compliance with all then in-place Third Amended and Restated Credit Facility covenants.

DERIVATIVE AND HEDGING ACTIVITIES

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The treasury lock contract has been deemed to be a highly effective cash flow hedge and we elected to designate the treasury lock contract as an accounting hedge.

The forward-starting interest rate swap contracts have been deemed to be highly effective cash flow hedges and we elected to designate all the forward-starting swap contracts as accounting hedges.

On August 11, 2020, we entered into a treasury lock contract (the "August 2020 Treasury Lock") with Wells Fargo Bank, N.A., to reduce the interest rate variability exposure of the projected interest cash flows of a then prospective future financing.

The treasury lock contract had a notional amount of $ 200 million, termination date of November 12, 2020, a fixed pay rate of 0.7115 %, and a receive rate equal to the ten years treasury rate on the settlement date.

We determined that there was no compelling reason from a capital requirement perspective to move forward with the prospective financing at prevailing rates and, as a result, on October 1, 2020, we settled the August 2020 Treasury Lock, resulting in no gain or loss.

On January 14, 2022, we entered into two separate interest rate swap contracts, one with Wells Fargo Bank, National Association and one with Bank of America, National Association, to reduce the interest rate variability exposure of the interest cash flows of the 2022 Term Loan A.

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The five-year swap contracts accrual period, January 14, 2022 to January 5, 2027, was designed to match the tenor of our 2022 Term Loan A, which successfully closed on January 5, 2022.

On November 30, 2022, we terminated the $ 100 million and $ 50 million forward-starting interest rate swaps entered into on January 29, 2016 and March 23, 2016, respectively, resulting in an aggregate gain of approximately $ 1.1 million.

This gain is included in accumulated other comprehensive income and will be amortized to interest expense, net through March 1, 2023, the original maturity of the forward-starting interest rate swaps.

The forward-starting interest rate swap contracts have been deemed to be highly effective cash flow hedges and we elected to designate all the forward-starting swap contracts as accounting hedges.

Concurrent therewith on November 30, 2022 we entered into two separate forward-starting interest rate swap contracts, one with Wells Fargo Bank, National Association and one with Mizuho Capital Markets LLC, to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective $ 225 million two-year amended and restated term loan.

The forward-starting two years swap contract had a notional amount of $ 225 million, a termination date of January 5, 2025, a fixed pay rate of 4.17 % (both swaps combined), and a receive rate equal to the one-month SOFR, with fixed rate payments due monthly commencing February 6, 2023, floating payments due monthly commencing February 1, 2023, and floating reset dates two days prior to the first day of each calculation period.

The forward-starting two-year swap contract accrual period, January 5, 2023 to January 5, 2025, was designed to match the expected tenor of our then prospective $ 225 million two-year term loan, which successfully closed on January 5, 2023.

The following is a summary of the terms of the interest rate swaps as of December 31, 2022 (dollars in thousands):

Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value

Bank of America, N.A.

$ 50,000 1/14/2022 1/5/2027 $ 4,468

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$ 50,000 1/14/2022 1/5/2027 $ 4,476

Wells Fargo Bank, N.A.

$ 150,000 1/5/2023 1/5/2025 $ 1,042

Mizuho Capital Markets LLC $ 75,000 1/5/2023 1/5/2025 $ ( 196 )

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

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Stockholders' Equity

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

On December 3, 2021, we entered into a new ATM equity program, with five sales agents under which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $ 250 million.

The sale of shares of our common stock made through the ATM equity program are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended.

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

As of December 31, 2021, we had the capacity to issue up to an additional $ 250.0 million in shares of our common stock under our current ATM equity program.

As of December 31, 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 December 31, 2022, we have no obligation to sell the remaining shares available for sale under the active ATM equity program.

In June 2019, we issued and sold 10,925,000 shares of common stock in an underwritten public offering.

The shares of

common stock that we issued and sold included the full exercise of the underwriters' option to purchase 1,425,000 additional

We received net proceeds of approximately $ 472.6 million, after deducting underwriting discounts, commissions and

offering expenses.

Preferred Stock Authorized Shares

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June 8, 2021 (1)

$ 33.29 6,008

December 9, 2021 (3)

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The expected growth rate of the stock prices over the “derived service period” of the employee is determined with consideration of the risk free rate as of the grant date.

For the 2021 grants, the fair value of the awards was estimated using a Monte Carlo Simulation model.

For the 2021 grants vesting is subject to multiple vesting conditions as follows:

(1) a service condition which requires continued employment of the employee as of each vesting date during the three-year vesting term for the employee to be eligible for vesting, (2) a performance condition with respect to our FFO per share for the FFO performance periods and (3) a market condition with respect to our relative total shareholder return performance over a one-year, two-year and three-year performance period ending on November 30, 2022, 2023 and 2024 as compared to a pre-determined index.

For the 2021 grants and 2022 grants, the fair value of the awards was estimated using a Monte Carlo Simulation model.

For the 2021 and 2022 grants vesting is subject to multiple vesting conditions as follows:

(1) a service condition which requires continued employment of the employee as of each vesting date during the three-year vesting term for the employee to be eligible for vesting, (2) a performance condition with respect to our FFO per share for the FFO performance periods and (3) a market condition with respect to our relative total shareholder return performance over a one-year , two-year and three-year performance as compared to a pre-determined index.

On each measurement date the performance condition and market condition performance will determine the number of shares that vest.

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Balance at end of year 574,044 $ 20.98

We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 8.5 million, $ 6.3 million and $ 4.5 million in noncash compensation expense for the years ended December 31, 2021, 2020 and 2019, respectively, each of which is included in general and administrative expense on the statement of comprehensive income.

We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 8.7 million, $ 8.5 million and $ 6.3 million in noncash compensation expense for the years ended December 31, 2022, 2021 and

2020, respectively, each of which is included in general and administrative expense on the statement of comprehensive income.

Unrecognized compensation expense was $ 9.4 million at December 31, 2022, which will be recognized over a weighted-average period of 1.52 years .

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

A deferred tax liability is included in our consolidated balance sheets of $ 1.0 million and $ 0.6 million as of December 31, 2021 and 2020, respectively, in relation to real estate asset basis differences and prepaid expenses for our TRS.

A deferred tax asset is included in our consolidated balance sheets of $ 0.7 million and $ 0.6 million, and a deferred tax liability is included in our consolidated balance sheets of $ 0.9 million and $ 1.0 million as of December 31, 2022 and 2021, respectively, in relation to real estate asset basis differences and prepaid expenses for our TRS.

The income tax provision included in other (expense) income on the consolidated statement of comprehensive income is as follows (in thousands):

26 unchanged sentences

The hotel management agreement may not be terminated by us or by Outrigger without cause.

Additionally, we have entered into a management agreement with Outrigger pursuant to which Outrigger manages our Waikele Center and Shops at Kalakaua.

In connection with such management agreement, we pay Outrigger a fixed management fee of $ 12,000 per month in the aggregate plus additional amounts for any lease renewal services provided by Outrigger at our request.

This management agreement may be terminated by us at any time and for any reason on at least 30 days' notice without payment of any cancellation or termination fees.

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

12 unchanged sentences

Concentrations of Credit Risk

Our properties are located in Southern California, Northern California, Hawaii, Oregon, Texas and Washington.

Our properties are located in Southern California, Northern California, Washington, Oregon, Texas and Hawaii.

The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate.

8 unchanged sentences

At December 31, 2022, Google LLC at The Landmark at One Market accounted for 9.4 % of total annualized base rent.

Four other tenants (LPL Holdings, Inc., Autodesk, Inc., Smartsheet, Inc., and VMware, Inc) comprise 16.8 % of our total annualized base rent at December 31, 2021, in the aggregate.

Three other tenants (LPL Holdings, Inc., Autodesk, Inc., and Smartsheet, Inc.) comprise 14.3 % of our total annualized base rent at December 31, 2022, in the aggregate.

No other tenants represent greater than 2.0 % of our total annualized base rent.

16 unchanged sentences

At December 31, 2022, our office, retail and mixed-use properties are located in five states:

California, Oregon, Hawaii, Washington and Texas.

California, Washington, Oregon, Texas and Hawaii.

At December 31, 2022, we had approximately 894 leases with office and retail tenants, including the retail portion of our mixed-use property.

32 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities $ 3,232 $ 2,791

Non-cash activity:

Right-of-use assets obtained in exchange for operating lease obligations $ — $ 27,321

At The Landmark at One Market, we (as sublandlord) sublease the Annex Lease building under operating leases effective through December 31, 2029.

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

Gain on sale of real estate — — 633

Other (expense) income, net ( 625 ) ( 418 ) 447

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SUBSEQUENT EVENTS

On January 5, 2022, we entered into the Third Amended and Restated Credit Facility, which provides for aggregate, unsecured borrowings of up to $ 500 million, consisting of a revolving line of credit of $ 400 million, the 2022 Revolver Loan, and a term loan of $ 100 million, the 2022 Term Loan A.

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

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

Additionally, on January 14, 2022, the company entered into an interest rate swap agreement that is intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.80 % through January 5, 2027, subject to adjustments based on our consolidated leverage ratio.

On January 3, 2023, we entered into a settlement agreement relating to certain building systems at our Hassalo on Eighth in which we received a net settlement payment of approximately $ 6.3 million.

On January 5, 2023, we entered into the Amended and Restated Term Loan Agreement, which increased the aggregate, unsecured borrowings from $ 150 million to $ 225 million and extended the maturity date of Term Loan B and Term Loan C from March 1, 2023 to January 5, 2025, with one , twelve-month extension option, subject to certain conditions.

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.

American Assets Trust, Inc.

24 unchanged sentences

Corporate Campus East III — 23,203 55,992 2,918 23,203 58,910 ( 2,612 ) 1986 9/10/2021 40 years

Bel-Spring 520 — 13,744 30,339 22 13,744 30,361 ( 1,007 ) 1983 3/8/2022 40 years

First & Main — 14,697 109,739 11,565 14,697 121,304 ( 41,405 ) 2010 3/11/2011 40 years

22 unchanged sentences

Mariner’s Point — 2,744 4,540 2,250 2,744 6,790 ( 4,513 ) 1986 5/9/2001 30 years

Santa Fe Park RV Resort — 401 928 1,460 401 2,388 ( 1,613 ) 1971/2007-2008 6/1/1979 30 years

American Assets Trust, Inc.

9 unchanged sentences

Improvements Land Building and

Santa Fe Park RV Resort — 401 928 1,539 401 2,467 ( 1,687 ) 1971/2007-2008 6/1/1979 30 years

Pacific Ridge Apartments — 47,971 178,497 3,479 47,971 181,976 ( 38,188 ) 2013 4/28/2017 30 years

26 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-K

Item 9A. Controls and Procedures