American Assets Trust, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements We make statements in this report that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: • adverse economic or real estate developments in our markets; • defaults on, early terminations of or non-renewal of leases by tenants, including significant tenants; • decreased rental rates or increased vacancy rates; • our failure to generate sufficient cash flows to service our outstanding indebtedness; • fluctuations in interest rates and increased operating costs; • our failure to obtain necessary outside financing; • our inability to develop or redevelop our properties due to market conditions; • investment returns from our developed properties may be less than anticipated; • general economic conditions, including the impact of tariffs and other trade restrictions; • financial market fluctuations; • risks that affect the general office, retail, multifamily and mixed-use environment; • the competitive environment in which we operate; • system failures or security incidents through cyberattacks; • the impact of epidemics, pandemics, or other outbreaks of illness, disease or virus and the actions taken by government authorities and others related thereto, including the ability of our company, our properties and our tenants to operate; • difficulties in identifying properties to acquire and completing acquisitions; • our failure to successfully operate acquired properties and operations; • risks related to joint venture arrangements; • potential litigation; • difficulties in completing dispositions; • conflicts of interests with our officers or directors; • lack or insufficient amounts of insurance; • environmental uncertainties and risks related to adverse weather conditions and natural disasters; • other factors affecting the real estate industry generally; • limitations imposed on our business and our ability to satisfy complex rules in order for American Assets Trust, Inc. to continue to qualify as a REIT for U.S. federal income tax purposes; and • changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs. 31 Table of Contents While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled “Item 1A. Risk Factors” contained herein and in our annual report on Form 10-K for the year ended December 31, 2023. Overview References to “we,” “our,” “us” and “our company” refer to American Assets Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including American Assets Trust, L.P., a Maryland limited partnership, of which we are the sole general partner and which we refer to in this report as our Operating Partnership. We are a full service, vertically integrated and self-administered REIT that owns, operates, acquires and develops high quality retail, office, multifamily and mixed-use properties in attractive, high-barrier-to-entry markets in Southern California, Northern California, Washington, Oregon, Texas and Hawaii. As of March 31, 2025, our portfolio was comprised of twelve office properties; eleven retail shopping centers a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center; and seven multifamily properties. Additionally, as of March 31, 2025, we owned land at three of our properties that we classified as held for development and/or construction in progress. Our core markets include San Diego, California; the San Francisco Bay Area, California; Bellevue, Washington; Portland, Oregon and Oahu, Hawaii. We are a Maryland corporation formed on July 16, 2010 to acquire the entities owning various controlling and noncontrolling interests in real estate assets owned and/or managed by Ernest S. Rady or his affiliates, including the Ernest Rady Trust U/D/T March 13, 1983, or the Rady Trust, and did not have any operating activity until the consummation of our initial public offering on January 19, 2011. Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.9% of our Operating Partnership as of March 31, 2025. Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership. Acquisitions On February 28, 2025, we acquired Genesee Park in San Diego, California, consisting of a 192-unit apartment community. The purchase price was $67.9 million, excluding closing costs and prorations. We acquired the property with cash on hand, primarily from the proceeds received from the sale of Del Monte Center . Dispositions On February 25, 2025, we sold Del Monte Center, which is located in Monterey, California and was previously included in our retail segment. The sale price of this property of approximately $123.5 million, less closing costs and prorations, resulted in net proceeds of approximately $117.8 million. Accordingly, we recorded a gain on the sale of approximately $44.5 million for the three months ended March 31, 2025. Critical Accounting Policies We identified certain critical accounting policies that affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2024. We have not made any material changes to these policies during the periods covered by this report. Same-store We have provided certain information on a total portfolio, same-store and redevelopment same-store basis. Information provided on a same-store basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared, properties under development, properties classified as held for development and properties classified as discontinued operations. Information provided on a redevelopment same-store basis includes the results of properties undergoing significant redevelopment for the entirety or portion of both periods being compared. Same-store and redevelopment same-store are considered by management to be important measures because they assist in eliminating disparities due to the development, acquisition or disposition of properties during the particular period presented, and thus provide a more consistent performance measure for the comparison of the company's stabilized and redevelopment properties, as applicable. Additionally, redevelopment same-store is considered by management to be an important measure because it assists in evaluating the timing of the start and stabilization of our redevelopment opportunities and the impact that these redevelopments have in enhancing our operating performance. 32 Table of Contents While there is judgment surrounding changes in designations, we typically reclassify significant development, redevelopment or expansion properties into same-store properties once they are stabilized. Properties are deemed stabilized typically at the earlier of (i) reaching 90% occupancy or (ii) 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. Our evaluation of significant impact related to development, redevelopment or expansion activity is based on quantitative and qualitative measures including, but not limited to, the following: the total budgeted cost of planned construction activity compared to the property’s annualized base rent, occupancy and property operating income within the calendar year; percentage of development, redevelopment or expansion square footage to total property square footage; and the ability to maintain historic occupancy and rental rates. In consideration of these measures, we generally remove properties from same-store properties when we see a decline in a property's annualized base rent, occupancy and operating income within the calendar year as a direct result of ongoing redevelopment, development or expansion activity. Acquired properties are classified into same-store properties once we have owned such properties for the entirety of comparable period(s) and the properties are not under significant development or expansion. Below is a summary of our same-store and redevelopment same-store composition for the three months ended March 31, 2025 and 2024. One Beach Street continues to be identified as a same-store redevelopment property due to significant redevelopment activity. Additionally, this property was placed into operations on August 1, 2024, approximately one year after completing renovations. Del Monte Center was removed as a same-store and redevelopment same-store property when compared to the designations for the three months ended March 31, 2024, as it was sold on February 25, 2025. Genesee Park is classified as a non-same-store property, as it was acquired on February 28, 2025. Retail same-store net operating income increased approximately 5.0% for the three months ended March 31, 2025 compared to the same period in 2024. Office same-store net operating income decreased 2.9% for the three months ended March 31, 2025 compared to the same period in 2024. Three Months Ended March 31, 2025 2024 Same-Store 29 30 Non-Same-Store 2 1 Total Properties 31 31 Redevelopment Same-Store 30 31 Total Development Properties 3 3 Outlook We seek growth in earnings, funds from operations and cash flows primarily through a combination of the following: 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, Washington, Oregon and Hawaii, which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration and/or retenanting. We evaluate our properties on an ongoing basis to identify these types of opportunities. We intend to opportunistically pursue projects in our development pipeline, including future phases of Lloyd Portfolio, other redevelopments at Waikele Center, as well as multifamily development opportunities within our existing portfolio, namely at Lomas Santa Fe Plaza, Solana Beach Towne Centre, Carmel Mountain Plaza and Genesee Park. The commencement of these developments is based on, among other things, market conditions and our evaluation of whether such opportunities would generate appropriate risk-adjusted financial returns. Our redevelopment and development opportunities are subject to various factors, including market conditions and may not ultimately come to fruition. 33 Table of Contents We continue to review acquisition opportunities in our primary markets that would complement our portfolio and provide long-term growth opportunities. Some of our acquisitions do not initially contribute significantly to earnings growth; however, we believe they provide long-term re-leasing growth, redevelopment opportunities and other strategic opportunities. Any growth from acquisitions is contingent upon our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance a property acquisition. Generally, our acquisitions are initially financed by available cash, mortgage loans and/or borrowings under our revolving line of credit, which may be repaid later with funds raised through the issuance of new equity or new long-term debt. Leasing Our same-store growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in portfolio occupancy. Over the long-term, we believe that the infill nature and strong demographics of our properties provide us with a strategic advantage, allowing us to maintain relatively high occupancy and increase rental rates. Furthermore, we believe the locations of our properties and diversified portfolio will mitigate some of the potentially negative impact of the current economic environment. During the three months ended March 31, 2025, we signed 19 office leases for a total of 139,616 square feet of office space including 44,422 square feet of comparable space leases, at an average rental rate increase on a cash and GAAP basis of 7.8% and 15.2%, respectively. New office leases for comparable spaces were signed for 1,913 square feet at an average rental rate increase on a cash and GAAP basis of 4.4% and 0.6%, respectively. Renewals for comparable office spaces were signed for 42,509 square feet at an average rental rate increase on a cash and GAAP basis of 8.0% and 16.0%, respectively. There were no new tenant improvements or incentives on office space for comparable new leases during the three months ended March 31, 2025. During the three months ended March 31, 2025, we signed 16 retail leases for a total of 157,644 square feet of retail space including 155,944 square feet of renewals for comparable space leases, at an average rental rate increase on a cash and GAAP basis of 13.3% and 21.0%, respectively. There were no new retail leases, tenant improvements, or incentives on retail space for comparable new leases during the three months ended March 31, 2025. The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent paid on the expiring lease and minimum rent to be paid on the new lease. 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. 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. Incentives include amounts paid to tenants as an inducement to sign a lease that do not represent building improvements. The leases signed in 2025 generally become effective over the following year, though some may not become effective until 2026 and beyond. Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters. Capitalized Costs Certain external and internal costs directly related to the development and redevelopment of real estate, including pre-construction costs, real estate taxes, insurance, interest, construction costs and salaries and related costs of personnel directly involved, are capitalized. We capitalize costs under development until construction is substantially complete and the property is held available for occupancy. The determination of when a development project is substantially complete and when capitalization must cease involves a degree of judgment. We consider a construction project as substantially complete and held available for occupancy upon the completion of landlord-owned tenant improvements or when the lessee takes possession of the unimproved space for construction of its own improvements, but not later than one year from cessation of major construction activity. We cease capitalization on the portion substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with any remaining portion under construction. 34 Table of Contents We capitalized external and internal costs related to both development and redevelopment activities combined of $2.0 million and $3.5 million for the three months ended March 31, 2025 and 2024, respectively. We capitalized external and internal costs related to other property improvements combined of $12.3 million and $9.6 million for the three months ended March 31, 2025 and 2024, respectively. Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use as noted above. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income. If the time period for capitalizing interest is extended, however, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period. We capitalized interest costs related to development activities of $1.4 million and $2.1 million for the three months ended March 31, 2025 and 2024, respectively. Results of Operations For our discussion of results of operations, we have provided information on a total portfolio and same-store basis. Comparison of the three months ended March 31, 2025 to the three months ended March 31, 2024 The following summarizes our consolidated results of operations for the three months ended March 31, 2025 compared to our consolidated results of operations for the three months ended March 31, 2024. As of March 31, 2025, our operating portfolio was comprised of 31 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,302 residential units (including 120 RV spaces) and a 369-room hotel. As of March 31, 2024, our operating portfolio was comprised of 31 retail, office, multifamily and mixed-use properties with an aggregate of approximately 7.2 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,110 residential units (including 120 RV spaces) and a 369-room hotel. Additionally, as of March 31, 2025 and March 31, 2024, we owned land at three of our properties that we classified as held for development and/or construction in progress. 35 Table of Contents The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended March 31, 2025 and 2024 (dollars in thousands): Three Months Ended March 31, Change % 2025 2024 Revenues Rental income $ 102,951 $ 105,021 $ (2,070) (2) % Other property income 5,656 5,674 (18) — Total property revenues 108,607 110,695 (2,088) (2) Expenses Rental expenses 30,300 29,841 459 2 Real estate taxes 11,005 11,246 (241) (2) Total property expenses 41,305 41,087 218 1 Net operating income 67,302 69,608 (2,306) (3) General and administrative (9,312) (8,842) (470) 5 Depreciation and amortization (30,494) (30,217) (277) 1 Interest expense, net (18,780) (16,255) (2,525) 16 Gain on sale of real estate 44,476 — 44,476 100 Other income, net 915 10,329 (9,414) (91) Net income 54,107 24,623 29,484 120 Net income attributable to restricted shares (203) (196) (7) 4 Net income attributable to unitholders in the Operating Partnership (11,369) (5,167) (6,202) 120 Net income attributable to American Assets Trust, Inc. stockholders $ 42,535 $ 19,260 $ 23,275 121 % Revenue Total property revenues . Total property revenue consists of rental revenue and other property income. Total property revenue decreased $2.1 million to $108.6 million for the three months ended March 31, 2025 compared to $110.7 million for the three months ended March 31, 2024. The percentage leased was as follows for each segment as of March 31, 2025 and 2024: Percentage Leased (1) March 31, 2025 2024 Office 85.5 % 86.4 % Retail 97.4 % 94.4 % Multifamily 90.0 % 92.8 % Mixed-Use (2) 89.3 % 95.4 % (1) The percentage leased for our retail and office segments and the retail portion of the mixed-use segment includes square footage under leases, including leases which may not have commenced as of March 31, 2025 or 2024, as applicable. Percentage leased for our multifamily properties includes total units rented and occupied as of March 31, 2025 or 2024, as applicable. (2) Includes the retail portion of the mixed-use property only. 36 Table of Contents The decrease in total property revenue was attributable primarily to the factors discussed below. Rental revenues . Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents. Rental revenue decreased $2.1 million, or 2%, to $103.0 million for the three months ended March 31, 2025 compared to $105.0 million for the three months ended March 31, 2024. Rental revenue by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio (1) Three Months Ended March 31, Change % Three Months Ended March 31, Change % 2025 2024 2025 2024 Office $ 49,188 $ 50,005 $ (817) (2) $ 49,113 $ 50,005 $ (892) (2) Retail 24,425 25,783 (1,358) (5) 22,776 22,300 476 2 Multifamily 15,921 15,375 546 4 15,564 15,375 189 1 Mixed-Use 13,417 13,858 (441) (3) 13,417 13,858 (441) (3) $ 102,951 $ 105,021 $ (2,070) (2) % $ 100,870 $ 101,538 $ (668) (1) % (1) For this table and tables following, the same-store portfolio excludes: (i) One Beach Street (office) due to significant redevelopment; (ii) Del Monte Center (retail), which was sold on February 25, 2025; (iii) Genesee Park (multifamily), which was acquired on February 28, 2025 and (iv) land held for development. Total office rental revenue decreased $0.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to lower occupancy and annualized base rents at Torrey Reserve Campus, lower occupancy at Lloyd Portfolio, and a decrease in cost recoveries of $0.2 million due to changes in tenant base years, a decrease in recoverable property expenses, and prior year tax refunds received that were passed back to tenants. Same-store retail rental revenue increased $0.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to new tenant leases and scheduled rent increases at Alamo Quarry Market and Solana Beach Towne Center. Additionally, there was an increase of $0.2 million in cost recoveries. Same-store multifamily revenue increased $0.2 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to an overall increase in average monthly base rent and a slight decrease in occupancy. Same-store average monthly base rent and occupancy was $2,777 and 90.5%, for the three months ended March 31, 2025, respectively, compared to $2,681 and 92.3%, for the three months ended March 31, 2024, respectively. Total mixed-use rental revenue decreased $0.4 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to a decrease in tourism, which led to a decrease in average occupancy and revenue per available room to 84.6% and $298 for the three months ended March 31, 2025, respectively, compared to 89.8% and $320 for the three months ended March 31, 2024, respectively. This decrease was partially offset by an increase in rental revenue at the retail portion of our mixed-use property, primarily due to new tenant leases commencing at higher base rents. Other property income . Other property income stayed flat at $5.7 million for the three months ended March 31, 2025 and March 31, 2024. Other property income by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Three Months Ended March 31, Change % Three Months Ended March 31, Change % 2025 2024 2025 2024 Office $ 1,693 $ 1,677 $ 16 1 $ 1,674 $ 1,670 $ 4 — Retail 223 243 (20) (8) 231 241 (10) (4) Multifamily 910 924 (14) (2) 907 924 (17) (2) Mixed-Use 2,830 2,830 — — 2,830 2,830 — — $ 5,656 $ 5,674 $ (18) — % $ 5,642 $ 5,665 $ (23) — % Property Expenses Total Property Expenses. Total property expenses consist of rental expenses and real estate taxes. Total property expenses increased $0.2 million, or 1%, to $41.3 million, for the three months ended March 31, 2025 compared to $41.1 million for the three months ended March 31, 2024. 37 Table of Contents Rental Expenses. Rental expenses increased $0.5 million, or 2%, to $30.3 million for the three months ended March 31, 2025 compared to $29.8 million for the three months ended March 31, 2024. Rental expense by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Three Months Ended March 31, Change % Three Months Ended March 31, Change % 2025 2024 2025 2024 Office $ 10,874 $ 10,135 $ 739 7 $ 10,310 $ 9,883 $ 427 4 Retail 4,186 4,728 (542) (11) 3,365 3,736 (371) (10) Multifamily 5,349 5,150 199 4 5,202 5,150 52 1 Mixed-Use 9,891 9,828 63 1 9,891 9,828 63 1 $ 30,300 $ 29,841 $ 459 2 % $ 28,768 $ 28,597 $ 171 1 % Office rental expense increased $0.7 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to a $0.3 million increase at La Jolla Commons Tower III related to new operations and amenities and a $0.4 million increase related to higher utilities expense and insurance expense. Retail rental expense decreased $0.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to $0.5 million written off in the first quarter of 2024 for non-recurring costs relating to construction in progress for then-prospective construction at Waikele Center and a $0.2 million decrease due to the sale of Del Monte Center in the first quarter of 2025. These decreases were partially offset by an increase in facilities services and utilities expense. Multifamily rental expense increased $0.2 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to the acquisition of Genesee Park and an overall increase in insurance expense across our other multifamily properties. Mixed-use rental expense increased $0.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to an increase in repairs and maintenance expense and facilities services at the retail portion of our mixed-use property. Real Estate Taxes. Real estate taxes decreased $0.2 million, or 2%, to $11.0 million for the three months ended March 31, 2025 compared to $11.2 million for the three months ended March 31, 2024. Real estate tax expense by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Three Months Ended March 31, Change % Three Months Ended March 31, Change % 2025 2024 2025 2024 Office $ 4,826 $ 4,857 $ (31) (1) $ 4,581 $ 4,807 $ (226) (5) Retail 3,229 3,573 (344) (10) 3,311 3,253 58 2 Multifamily 1,908 1,831 77 4 1,880 1,831 49 3 Mixed-Use 1,042 985 57 6 1,042 985 57 6 $ 11,005 $ 11,246 $ (241) (2) % $ 10,814 $ 10,876 $ (62) (1) % Same-store office real estate taxes decreased $0.2 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to a decrease in property tax assessments at City Center Bellevue, 14Acres and Timber Ridge, partially offset by an increase at First & Main due to real estate tax refunds received during the three months ended March 31, 2024. Retail real estate taxes decreased $0.3 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to real estate tax refunds received at Del Monte Center during the three months ended March 31, 2024. Multifamily real estate taxes increased $0.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to the acquisition of Genesee Park and an increase in property tax assessments at Pacific Ridge Apartments. Mixed-use real estate taxes increased $0.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to an increase in property tax assessments. 38 Table of Contents Property Net Operating Income Property net operating income decreased $2.3 million, or 3%, to $67.3 million for the three months ended March 31, 2025, compared to $69.6 million for the three months ended March 31, 2024. Property operating income by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Three Months Ended March 31, Change % Three Months Ended March 31, Change % 2025 2024 2025 2024 Office $ 35,181 $ 36,690 $ (1,509) (4) $ 35,896 $ 36,985 $ (1,089) (3) Retail 17,233 17,725 (492) (3) 16,331 15,552 779 5 Multifamily 9,574 9,318 256 3 9,389 9,318 71 1 Mixed-Use 5,314 5,875 (561) (10) 5,314 5,875 (561) (10) $ 67,302 $ 69,608 $ (2,306) (3) % $ 66,930 $ 67,730 $ (800) (1) % Total office net operating income decreased $1.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to a decrease of $0.8 million in rental revenue driven primarily by lower occupancy and annualized base rents at Torrey Reserve Campus, lower occupancy at Lloyd Portfolio, a decrease in cost recoveries, and an increase in rental expenses related to the operations and amenities at La Jolla Commons Tower III and overall increase in utilities expense and insurance expense. Same-store retail net operating income increased $0.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to new tenant leases and scheduled rent increases at Alamo Quarry Market and Solana Beach Towne Center and an increase in cost recoveries. Additionally there was a decrease in rental expenses due to $0.5 million written off in the first quarter of 2024 for non-recurring costs relating to construction in progress for then-prospective construction at Waikele Center, partially offset by an increase in facilities and utilities expenses. Same-store multifamily net operating income increased $0.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to an overall increase in average monthly base rent and a slight decrease in occupancy. Same-store average monthly base rent and occupancy was $2,777 and 90.5%, for the three months ended March 31, 2025, respectively, compared to $2,681 and 92.3%, for the three months ended March 31, 2024, respectively. These increases were offset by higher insurance expense across our same-store multifamily properties. Total mixed-use net operating income decreased $0.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to a decrease in tourism, which led to a decrease in average occupancy and revenue per available room to 84.6% and $298 for the three months ended March 31, 2025, respectively, compared to 89.8% and $320 for the three months ended March 31, 2024, respectively. This decrease was partially offset by an increase in rental revenue at the retail portion of our mixed-use property, primarily due to new tenant leases commencing at higher base rents. Other General and Administrative. General and administrative expenses increased $0.5 million, or 5%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This increase was primarily due to higher employee-related costs, including, without limitation, with respect to base pay and benefits for certain salaried and hourly workers. Depreciation and Amortization. Depreciation and amortization expense increased $0.3 million, or 1%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This was due to the new building improvement assets at One Beach Street placed into operations as of August 1, 2024 and the building improvement assets at 14Acres completed at the end of 2024. These increases were partially offset by lower depreciation expense at Del Monte Center, which was sold on February 25, 2025. Interest Expense, net. Interest expense increased $2.5 million, or 16%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This increase was primarily due to the closing of our 6.150% Senior Notes on September 17, 2024 and partially offset by a decrease in interest expense related to the maturity and repayment of our Series F Notes on July 19, 2024, Term Loan B and Term Loan C on January 2, 2025 and Series C Notes on February 3, 2025. Gain on sale of real estate. Gain on sale of real estate of $44.5 million during the period relates to our sale of Del Monte Center on February 25, 2025. 39 Table of Contents Other Income, net. Other income, net decreased $9.4 million, or 91%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This decrease was primarily due to the net settlement payment of approximately $10 million received during the first quarter of 2024 relating to building specifications for one of the existing buildings at our office project in University Town Center (San Diego). This decrease was partially offset by an increase in interest and investment income attributed to a higher yield on our average cash balance during the period. Liquidity and Capital Resources of American Assets Trust, Inc. In this “Liquidity and Capital Resources of American Assets Trust, Inc.” section, the term the “company” refers only to American Assets Trust, Inc. on an unconsolidated basis, and excludes the Operating Partnership and all other subsidiaries. The company’s business is operated primarily through the Operating Partnership, of which the company is the parent company and sole general partner, and which it consolidates for financial reporting purposes. Because the company operates on a consolidated basis with the Operating Partnership, the section entitled “Liquidity and Capital Resources of American Assets Trust, L.P.” should be read in conjunction with this section to understand the liquidity and capital resources of the company on a consolidated basis and how the company is operated as a whole. The company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the Operating Partnership. The company itself does not have any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. Therefore, the consolidated assets and liabilities and the consolidated revenues and expenses of the company and the Operating Partnership are the same on their respective financial statements. However, all debt is held directly or indirectly by the Operating Partnership. The company’s principal funding requirement is the payment of dividends on its common stock. The company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership. As of March 31, 2025, the company owned an approximate 78.9% partnership interest in the Operating Partnership. The remaining approximately 21.1% are owned by non-affiliated investors and certain of the company's directors and executive officers. As the sole general partner of the Operating Partnership, American Assets Trust, Inc. has the full, exclusive and complete authority and control over the Operating Partnership’s day-to-day management and business, can cause it to enter into certain major transactions, including acquisitions, dispositions and refinancings, and can cause changes in its line of business, capital structure and distribution policies. The company causes the Operating Partnership to distribute such portion of its available cash as the company may in its discretion determine, in the manner provided in the Operating Partnership’s partnership agreement. The liquidity of the company is dependent on the Operating Partnership’s ability to make sufficient distributions to the company. The primary cash requirement of the company is its payment of dividends to its stockholders. The company also guarantees some of the Operating Partnership’s debt, as discussed further in Note 8 of the Notes to Consolidated Financial Statements included elsewhere herein. If the Operating Partnership fails to fulfill certain of its debt requirements, which trigger the company’s guarantee obligations, then the company will be required to fulfill its cash payment commitments under such guarantees. However, the company’s only significant asset is its investment in the Operating Partnership. We believe the Operating Partnership’s sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured line of credit, are adequate for it to make its distribution payments to the company and, in turn, for the company to make its dividend payments to its stockholders. As of March 31, 2025, 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. The unavailability of capital could adversely affect the Operating Partnership’s ability to pay its distributions to the company, which would in turn, adversely affect the company’s ability to pay cash dividends to its stockholders. Our short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to the company’s stockholders, operating expenses and other expenditures directly associated with our properties, interest expense and scheduled principal payments on outstanding indebtedness, general and administrative expenses, funding construction projects, capital expenditures, tenant improvements and leasing commissions. 40 Table of Contents The company may from time to time seek to repurchase or redeem the Operating Partnership’s outstanding debt, the company’s shares of common stock or other securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or redemptions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. For the company to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains. While historically the company has satisfied this distribution requirement by making cash distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the company’s own stock. As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. The company may need to continue to raise capital in the equity markets to fund the operating partnership’s working capital needs, acquisitions and developments. Although there is no intent at this time, if market conditions deteriorate, the company may also delay the timing of future development and redevelopment projects as well as limit future acquisitions, reduce the Operating Partnership’s operating expenditures, or re-evaluate its dividend policy. The company is a well-known seasoned issuer. As circumstances warrant, the company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. When the company receives proceeds from preferred or common equity issuances, it is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership. The Operating Partnership may use the proceeds to repay debt, to develop new or existing properties, to acquire properties or for general corporate purposes. In December 2023, the company, together with the Operating Partnership, filed a universal shelf registration statement on Form S-3ASR with the SEC, which became effective upon filing and which replaced the prior Form S-3ASR that was filed with the SEC in January 2021. The universal shelf registration statement may permit the company from time to time to offer and sell equity securities of the company. However, there can be no assurance that the company will be able to complete any such offerings of securities. Factors influencing the availability of additional financing include investor perception of our prospects and the general condition of the financial markets, among others. On December 3, 2021, we entered into a new ATM equity program with five sales agents under which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $250.0 million. The sale of shares of our common stock made through the ATM equity program are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. We intend to use the net proceeds to fund development or redevelopment activities, repay amounts outstanding from time to time under our amended and restated credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of the company's common stock and the company's capital needs. For the three months ended March 31, 2025, no shares of common stock were sold through the ATM equity program. We have no obligation to sell the remaining shares available for sale under the ATM equity program. Liquidity and Capital Resources of American Assets Trust, L.P. In this “Liquidity and Capital Resources of American Assets Trust, L.P.” section, the terms “we,” “our” and “us” refer to the Operating Partnership together with its consolidated subsidiaries, or the Operating Partnership and American Assets Trust, Inc. together with their consolidated subsidiaries, as the context requires. American Assets Trust, Inc. 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. Due to the nature of our business, we typically generate significant amounts of cash from operations. The cash generated from operations is used for the payment of operating expenses, capital expenditures, debt service and dividends to American Assets Trust, Inc.'s stockholders and our unitholders. As a REIT, American Assets Trust, Inc. must generally make annual distributions to its stockholders of at least 90% of its net taxable income. As of March 31, 2025, we held $143.9 million in cash and cash equivalents. Our short-term liquidity requirements consist primarily of operating expenses and other expenditures associated with our properties, regular debt service requirements, dividend payments to American Assets Trust, Inc.'s stockholders required to maintain its REIT status, distributions to our unitholders, capital expenditures and, potentially, acquisitions. We expect to meet 41 Table of Contents our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash and, if necessary, borrowings available under our credit facility. Our long-term liquidity needs consist primarily of funds necessary to pay for the repayment of debt at maturity, property acquisitions, tenant improvements and capital improvements. We expect to meet our long-term liquidity requirements to pay scheduled debt maturities and to fund property acquisitions and capital improvements with net cash from operations, long-term secured and unsecured indebtedness and, if necessary, the issuance of equity and debt securities. We also may fund property acquisitions and capital improvements using our amended and restated credit facility pending permanent financing. We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However, we cannot be assured that this will be the case. Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about our company. Our overall capital requirements for the remainder of 2025 will depend upon acquisition opportunities and the level of improvements and redevelopments on existing properties. Our capital investments will be funded on a short-term basis with, among other sources of capital, cash on hand, cash flow from operations and/or our revolving line of credit. On a long-term basis, our capital investments may be funded with additional long-term debt, including, without limitation, mortgage debt and unsecured notes. Our ability to incur additional debt will be dependent on a number of factors, including, without limitation, our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our capital investments may also be funded by issuing additional equity including, without limitation, shares issued by American Assets Trust, Inc. under its ATM equity program or through an underwritten public offering. Although there is no intent at this time, if market conditions deteriorate or fail to improve, we may also delay the timing of future development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy. In December 2023, the Operating Partnership, together with American Assets Trust, Inc., filed a universal shelf registration statement on Form S-3ASR with the SEC, which became effective upon filing and which replaced the prior Form S-3ASR that was filed with the SEC in January 2021. The universal shelf registration statement may permit the company from time to time to offer and sell equity securities of the company. However, there can be no assurance that the company will be able to complete any such offerings of securities. Factors influencing the availability of additional financing include investor perception of our prospects and the general condition of the financial markets, among others. Off-Balance Sheet Arrangements We currently do not have any off-balance sheet arrangements. Cash Flows Comparison of the three months ended March 31, 2025 to the three months ended March 31, 2024 Cash, cash equivalents, and restricted cash were $143.9 million and $98.6 million at March 31, 2025 and 2024, respectively. Net cash provided by operating activities decreased $17.9 million to $36.9 million for the three months ended March 31, 2025 compared to $54.8 million for the three months ended March 31, 2024. The decrease in cash from operations was primarily due to the net settlement received during the first quarter of 2024 relating to the building specifications for one of the existing buildings at our office project in University Town Center (San Diego), and a decrease in rental revenue and changes in operating assets and liabilities. Net cash provided by investing activities increased $46.0 million to $32.7 million for the three months ended March 31, 2025 compared to cash used in investing activities of $13.3 million for the three months ended March 31, 2024. The increase in cash provided was primarily due to the proceeds from the sale of Del Monte Center, offset by the use of cash for the acquisition of Genesee Park and an increase in capital expenditures related to new office tenant improvement projects and continuous efforts to build out La Jolla Commons. Net cash used in financing activities increased $325.5 million to $351.3 million for the three months ended March 31, 2025 compared to $25.8 million for the three months ended March 31, 2024. The increase in cash used in financing activities was primarily due to the repayment of the $225 million aggregate outstanding balance on our Term Loan B and Term Loan C on January 2, 2025 and the repayment of the $100 million outstanding balance on our Series C Notes, on February 3, 2025. 42 Table of Contents Net Operating Income Net Operating Income, or NOI, is a non-GAAP financial measure of performance. We define NOI as operating revenues (rental income, tenant reimbursements, lease termination fees, ground lease rental income and other property income) less property and related expenses (property expenses, ground lease expense, property marketing costs, real estate taxes and insurance). NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expense, other non-property income and losses, gains and losses from property dispositions, extraordinary items, tenant improvements, and leasing commissions. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to the NOIs of other REITs. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds of the property owner, (2) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (3) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our retail, office, multifamily or mixed-use properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is intended to be captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale, which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness. NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in “Management's Discussion and Analysis of Financial Condition and Results of Operations” regarding the components of net income that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do. The following is a reconciliation of our NOI to net income for the three months ended March 31, 2025 and 2024 computed in accordance with GAAP (in thousands): Three Months Ended March 31, 2025 2024 Net operating income $ 67,302 $ 69,608 General and administrative (9,312) (8,842) Depreciation and amortization (30,494) (30,217) Interest expense, net (18,780) (16,255) Gain on sale of real estate 44,476 — Other income, net 915 10,329 Net income $ 54,107 $ 24,623 43 Table of Contents Funds from Operations We calculate funds from operations (“FFO”), in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment losses, real-estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real-estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. FFO also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. The following table sets forth a reconciliation of our net income for the three months ended March 31, 2025 to FFO, the nearest GAAP equivalent (in thousands, except per share and share data): Three Months Ended March 31, 2025 Funds from Operations (FFO) Net income $ 54,107 Plus: Real estate depreciation and amortization 30,494 Less: Gain on sale of real estate (44,476) Funds from operations 40,125 Less: Nonforfeitable dividends on incentive restricted stock awards (180) FFO attributable to common stock and units $ 39,945 FFO per diluted share/unit $ 0.52 Weighted average number of common shares and units, diluted (1) 76,719,191 (1) The weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that are subject to time vesting, which were excluded from the computation of diluted EPS, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted share but is anti-dilutive for the computation of diluted EPS for the period. Diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.