What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-06 compared with 2025-02-12 · 141 added, 108 removed, 463 unchanged (35% of the section changed)

11 unchanged sentences

As of December 31, 2025, our portfolio was comprised of twelve office properties;

twelve retail shopping centers;

eleven retail shopping centers;

a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center;

and six multifamily properties.

Additionally, as of December 31, 2024, we owned land at three of our properties that we classified as held for development or construction in progress.

and seven multifamily properties.

Additionally, as of December 31, 2025, we owned land at two of our properties that we classified as held for development or construction in progress.

La Jolla Commons - Land, related to the development of La Jolla Commons III, was previously classified as held for development.

The development of La Jolla Commons III is now complete and the building, inclusive of the land, was placed in operations as of April 1, 2025.

Our core markets include San Diego, California;

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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 and Carmel Mountain Plaza.

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.

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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 is considered by management to be an important measure because it assists in eliminating disparities due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the company's stabilized and redevelopment properties, as applicable.

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.

While there is judgment surrounding changes in designations, we typically reclassify significant development, redevelopment or expansion properties to same-store properties once they are stabilized.

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 (1) reaching 90% occupancy or (2) four quarters following a property's inclusion in operating real estate.

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

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

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 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 composition for the years ended December 31, 2025, 2024 and 2023.

For the year ended December 31, 2024, when compared to the designations for the year ended December 31, 2023, Timber Springs is classified as a same-store property for the year ended December 31, 2024, because the property was acquired on March 8, 2022.

The 710 building within the Lloyd Portfolio is classified as a same-store property when compared to the designation for the year ended December 31, 2023, because the property has been in operation for a full year since it was placed in service in November 2022.

One Beach Street continues to be identified as a same-store redevelopment property due to significant redevelopment activity.

One Beach Street is identified as a non-same-store property for the years ended December 31, 2025 and 2024, due to significant redevelopment activity.

Additionally, this property was placed into operations on August 1, 2024, approximately one year after completing renovations.

For the year ended December 31, 2023, when compared to the designations for the year ended December 31, 2022, 14Acres and Timber Ridge were reclassified to same-store properties because these properties were acquired on July 7, 2021 and September 10, 2021, respectively.

Timber Springs is classified as non-same store since it was acquired on March 8, 2022.

One Beach Street continues to be identified as a same-store redevelopment property due to significant construction activity.

Del Monte Center was removed as a same-store property when compared to the designations for the year ended December 31, 2024, as it was sold on February 25, 2025.

Genesee Park is classified as a non-same-store property because it was acquired on February 28, 2025, and thus has not been owned for the comparable period.

La Jolla Commons III is classified as a non-same store property when compared to the designations for the year ended December 31, 2024, as it was placed in operations on April 1, 2025.

La Jolla Commons III is a part of the La Jolla Commons office project, and not a stand-alone property.

For the year ended December 31, 2024, when compared to the designations for the year ended December 31, 2023, Timber Springs was classified as a same-store property for the year ended December 31, 2024, because the property was acquired on March 8, 2022.

The 710 building within the Lloyd Portfolio was classified as a same-store property when compared to the designation for the year ended December 31, 2023, because the property had been in operation for a full year since it was placed in service in November 2022.

One Beach Street is identified as a non-same-store property for the years ended December 31, 2024 and 2023, due to significant redevelopment activity.

Additionally, this property was placed into operations on August 1, 2024, approximately one year after completing renovations.

2025 2024 2023

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Total Properties 31 31 31

Redevelopment Same-Store 31 30 28

Total Development Properties 2 3 3

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Retail Leases .

Our retail portfolio included twelve properties with a total of approximately 3.1 million rentable square feet available for lease as of December 31, 2024.

Our retail portfolio included eleven properties with a total of approximately 2.4 million rentable square feet available for lease as of December 31, 2025.

As of December 31, 2025, these properties were 97.7% leased.

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Our multifamily portfolio included six apartment properties, as well as an RV resort, with a total of 2,302 units (including 120 RV spaces) available for lease as of December 31, 2025.

As of December 31, 2024, these properties were 91.8% leased.

As of December 31, 2025, these properties were 91.1% occupied.

For the year ended December 31, 2025, the multifamily segment contributed 15.8% of our total revenue.

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

The average monthly base rent per leased unit as of December 31, 2024 was $2,683, compared to $2,619 at December 31, 2023.

The average monthly base rent per occupied unit as of December 31, 2025 was $2,684, compared to $2,683 at December 31, 2024.

Mixed-Use Property Revenue .

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

During the twelve months ended December 31, 2024, we signed 67 office leases for a total of 398,506 square feet of office space including 247,551 square feet of comparable space leases, at an average rental rate increase of 6.0% on a cash basis and an average rental increase of 13.0% on a straight-line basis.

New office leases for comparable spaces were signed for 84,435 square feet at an average rental rate increase of 8.0% on a cash basis and an average rental rate increase of 18.5% on a straight-line basis.

Renewals for comparable office spaces were signed for 163,116 square feet at an average rental rate increase of 5.0% on a cash basis and increase of 10.4% on a straight-line basis.

Tenant improvements and incentives were $37.05 per square foot of office space for comparable new leases for the twelve months ended December 31, 2024.

During the twelve months ended December 31, 2025, we signed 82 office leases for a total of 616,680 square feet of office space including 370,619 square feet of comparable space leases (leases for which there was a previous tenant), at an average rental rate increase on a cash and GAAP basis of 6.4% and 13.8%, respectively.

New office leases for comparable spaces were signed for 119,206 square feet at an average rental rate increase on a cash and GAAP basis of 3.4% and 16.3%, respectively.

Renewals for comparable office spaces were signed for 251,413 square feet at an average rental rate increase on a cash and GAAP basis of 7.7% and 12.8%, respectively.

Tenant improvements and incentives were $28.33 per square foot of office space for comparable new leases for the twelve months ended December 31, 2025, mainly due to new tenants at City Center Bellevue, Lloyd Portfolio and 14Acres.

There were $21.47 per square foot of office space of tenant improvement or incentives for comparable renewal leases for the twelve months ended December 31, 2025.

During the twelve months ended December 31, 2024, we signed 95 retail leases for a total of 428,981 square feet of retail space including 392,350 square feet of comparable space leases, at an average rental rate increase of 4.5% on a cash basis and an average rental increase of 25.0% on a straight-line basis.

New retail leases for comparable spaces were signed for 9,294 square feet at an average rental rate increase of 16.0% on a cash basis and an average rental rate increase of 669.3% on a straight-line basis (due to the modification of prior tenants' rent to cash-basis, which precluded straight-line rent for comparison).

Renewals for comparable retail spaces were signed for 383,056 square feet at an average rental rate increase of 4.0% on a cash basis and an increase of 18.1% on a straight-line basis.

Tenant improvements and incentives were $32.36 per square foot of retail space for comparable new leases for the twelve months ended December 31, 2024.

During the twelve months ended December 31, 2025, we signed 91 retail leases for a total of 546,406 square feet of retail space including 509,924 square feet of comparable space leases, at an average rental rate increase on a cash and GAAP basis of 7.1% and 21.8%, respectively.

New retail leases for comparable spaces were signed for 25,372 square feet at an average rental rate increase on a cash and GAAP basis of 9.9% and 436.8% (due to the modification of prior tenants' rent to cash-basis, which precluded straight-line rent for comparison), respectively.

Renewals for comparable retail spaces were signed for 484,552 square feet at an average rental rate increase on a cash and GAAP basis of 6.9% and 15.6%, respectively.

Tenant improvements and incentives were $42.85 per square foot of retail space for comparable new leases for the twelve months ended December 31, 2025, mainly due to new tenants at Gateway Marketplace, Alamo Quarry Market, Lomas Santa Fe Plaza and Carmel Country Plaza.

There were $5.78 per square foot of retail space of tenant improvement or incentives for comparable renewal leases for the twelve months ended December 31, 2025.

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

When we enter into a transaction to sell a property or a portion of a property, we evaluate the recognition of the sale under ASC 610-20, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets,” to determine whether and when control transfers and how to measure the associated gain or loss.

We determine the transaction price based on the consideration we expect to receive.

Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of a gain recognized will not occur.

We analyze the risk of a significant gain reversal and if necessary, limit the amount of variable consideration recognized in order to mitigate this risk.

The estimation of variable consideration may require us to make assumptions and apply significant judgment.

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

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The value of the leases associated with below market lease renewal options that are likely to be exercised are amortized to rental income over the respective renewal periods.

We make assumptions and estimates related to below market

lease renewal options, which impact revenue in the period in which the renewal options are exercised and could result in significant increases to revenue if the renewal options are not exercised at which time the related below market lease liabilities would be written off as an increase to revenue.

We make assumptions and estimates related to below market lease renewal options, which impact revenue in the period in which the renewal options are exercised and could result in significant increases to revenue if the renewal options are not exercised at which time the related below market lease liabilities would be written off as an increase to revenue.

Transaction costs related to the acquisition of a business, such as broker fees, transfer taxes, legal, accounting, valuation, and other professional and consulting fees, are expensed as incurred and included in “general and administrative expenses” in our consolidated statements of comprehensive income.

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

We capitalized external and internal costs related to both development and redevelopment activities combined of $16.3 million and $24.0 million for the years ended December 31, 2024 and 2023, respectively.

We capitalized external and internal costs related to new development, redevelopment, expansion and repositioning activities combined of $22.7 million and $16.3 million for the years ended December 31, 2025 and 2024, respectively.

We capitalized external and internal costs related to other property improvements combined of $55.5 million and $52.2 million for the years ended December 31, 2025 and 2024, respectively.

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Year Ended December 31, 2025

Segment Tenant Improvements and Leasing Commissions Capital Expenditures Total Tenant Improvements, Leasing Commissions and Capital Expenditures Redevelopment and Expansions New Development Total Capital Expenditures

Segment Tenant Improvements and Leasing Commissions Capital Expenditures Total Tenant Improvements, Leasing Commissions and Capital Expenditures Redevelopment, Expansions and Repositioning (1)

New Development Total Capital Expenditures

Office Portfolio $ 27,315 $ 14,133 $ 41,448 $ 6,587 $ 13,475 $ 61,510

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Total $ 32,631 $ 29,433 $ 62,064 $ 1,979 $ 13,364 $ 77,407

The increase in tenant improvements and leasing commissions for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to tenant buildouts at La Jolla Commons, Lloyd Portfolio, Del Monte Center, City Center Bellevue and Alamo Quarry Market during the year ended December 31, 2024, partially offset by tenant buildouts completed at Torrey Reserve Campus, Torrey Point and Carmel Mountain Plaza during the year ended December 31, 2023.

The decrease in capital expenditures for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to the renovations completed at City Center Bellevue and La Jolla Commons during the year ended December 31, 2023, partially offset by an increase at Alamo Quarry Market during the year ended December 31, 2024.

The decrease in new development expenditures for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to costs incurred for the development of Tower 3 at La Jolla Commons during the year ended December 31, 2023.

The decrease in redevelopment expenditures for the year ended December 31, 2024 compared to the year ended December 31, 2023, was primarily related to the majority completion of the One Beach Street redevelopment during the year ended December 31, 2023.

(1) Beginning with the three months ended June 30, 2025, this capital expenditures category includes spending related to repositioning initiatives at operating properties, as well as planned capital expenditures identified at the time of acquisition.

The increase in tenant improvements and leasing commissions for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to new tenant build-outs at Coastal Collection at Torrey Reserve, Solana Crossing, 14 Acres, Timber Ridge and Carmel Country Plaza during the year ended December 31, 2025, partially offset by tenant build-outs completed at La Jolla Commons, City Center Bellevue and Alamo Quarry Market during the year ended December 31, 2024.

Additionally, the decrease in retail tenant improvements and leasing commissions is due to the sale of Del Monte Center during the first quarter of 2025.

The decrease in capital expenditures for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to the renovations completed at Imperial Beach, 14 Acres and Lloyd Portfolio during the year ended December 31, 2024, partially offset by an increase at La Jolla Commons I and II, First & Main and Alamo Quarry Market during the year ended December 31, 2025.

Beginning with the second quarter of 2025, this capital expenditures category includes spending related to repositioning initiatives at operating properties, as well as planned capital expenditures identified at the time of acquisition.

The increase in redevelopment, expansions and repositioning expenditures for the year ended December 31, 2025 compared to the year ended December 31, 2024, is primarily due to the costs incurred at 14 Acres, Timber Springs, Timber Springs, Genesee Park and La Jolla Commons during the year ended December 31, 2025, partially offset by a decrease in redevelopment expenditures related to the completion of One Beach Street during the year ended December 31, 2024.

New development expenditures for the year ended December 31, 2025 includes the cost related to first generation tenant build-outs at La Jolla Commons III, compared to the costs incurred for the development of La Jolla Commons III during the year ended December 31, 2024.

Our capital expenditures for the year ending December 31, 2026 will depend upon acquisition opportunities, the level of improvements and renovations on existing properties and the timing and cost of development of our held for development and construction in progress properties.

While the amount of future expenditures will depend on numerous factors, we expect expenditures incurred in the year ending December 31, 2025 to decrease from the year ending December 31, 2024 as we reached completion of the development activities at La Jolla Commons in the year ended December 31, 2024.

While the amount of future expenditures will depend on numerous factors, we expect expenditures incurred in the year ending December 31, 2026 to increase from the year ending December 31, 2025 as we continue our renovations at Genesee Park, build-out amenities and speculative suites at One Beach Street and incur first generation tenant improvements at La Jolla Commons III.

Derivative Instruments

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The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in other comprehensive income which is included in accumulated other comprehensive income on our consolidated balance sheet and our consolidated statement of equity.

Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not match, such as notional amounts, settlement dates, reset dates, calculation periods and the use of SOFR.

In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness of the counterparty which includes reviewing debt ratings and financial performance.

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2025 Acquisitions and Dispositions

During the year ended December 31, 2024, there were no acquisitions or dispositions.

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 .

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, resulting in net proceeds of approximately $117.8 million.

Accordingly, we recorded a gain on the sale of approximately $44.5 million for the year ended December 31, 2025.

2024 Acquisitions and Dispositions

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2023 Acquisitions and Dispositions

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

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

The property was acquired with cash on hand.

During the year ended December 31, 2022, there were no dispositions.

During the year ended December 31, 2023, there were no acquisitions or dispositions.

Results of Operations

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As of December 31, 2025, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 6.8 million rentable square feet of office and retail space (including mixed-use retail space), 2,302 residential units (including 120 RV spaces) and a 369-room hotel.

Additionally, as of December 31, 2024, we owned land at three of our properties that we classified as held for development or construction in progress.

Additionally, as of December 31, 2025, we owned land at two of our properties that we classified as held for development or construction in progress.

As of December 31, 2024, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 7.3 million rentable square feet of office and retail space (including mixed-use retail space), 2,110 residential units (including 120 RV spaces) and a 369-room hotel.

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Total property expenses 169,595 167,727 1,868 1

Net operating income 290,128 277,207 12,921 5

Total property operating income 266,609 290,128 (23,519) (8)

General and administrative (37,841) (35,468) (2,373) 7

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Interest expense, net (78,120) (74,527) (3,593) 5

Gain on sale of real estate 44,476 — 44,476 100

Other income, net 3,558 18,147 (14,589) 80

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

Total property revenue increased $16.7 million, or 4%, to $457.9 million for the year ended December 31, 2024, compared to $441.2 million for the year ended December 31, 2023.

Total property revenue decreased $21.7 million, or 5%, to $436.2 million for the year ended December 31, 2025, compared to $457.9 million for the year ended December 31, 2024.

The percentage leased was as follows for each segment as of December 31, 2025 and 2024:

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(1) The percentage leased includes the square footage under lease, including leases which may not have commenced as of December 31, 2025 or December 31, 2024, as applicable.

Leased units for our multifamily properties include total units leased and occupied as of the applicable date.

(2) Includes the retail portion of the mixed-use property only.

The increase in total property revenue was attributable primarily to the factors discussed below.

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 increased $4.2 million, or 1%, to $423.6 million for the year ended December 31, 2024, compared to $419.4 million for the year ended December 31, 2023.

Rental revenue decreased $13.1 million, or 3%, to $410.5 million for the year ended December 31, 2025, compared to $423.6 million for the year ended December 31, 2024.

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

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$ 410,493 $ 423,611 $ (13,118) (3) % $ 404,006 $ 407,723 $ (3,717) (1) %

(1) For this table and tables following, the same-store portfolio excludes One Beach Street due to significant redevelopment and land held for development.

Total office rental revenue decreased $3.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease of $1.8 million in cost recoveries due to changes in tenant base years, a decrease in recoverable property expenses, prior year tax refunds received that were refunded to tenants, and a decrease in rental revenue driven primarily by tenant move-outs at Lloyd Portfolio and Timber Springs and lower occupancy at Solana Crossing.

Total retail rental revenue increased $4.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to new tenant leases signed, scheduled rent increases and tenants previously on alternate rent reverting back to basic monthly rent.

These increases are primarily related to Carmel Mountain Plaza, Solana Beach Towne Center, Alamo Quarry Market and Del Monte Center.

Additionally, there was an increase of $1.5 million in cost recoveries.

Multifamily rental revenue increased $3.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an overall increase in average monthly base rent and an increase in occupancy.

Average monthly base rent and occupancy was $2,718 and 91.0% for the year ended December 31, 2024, compared to $2,581 and 90.0% for the year ended December 31, 2023.

Mixed-use rental revenue increased $0.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in rental revenue at the retail portion of our mixed-use property, largely attributable to an increase in cost recoveries and new tenant leases commencing at higher base rents.

Additionally, there was a minimal increase in rental revenue at the Waikiki Beach Walk hotel portion of our mixed-use property, due to a slight increase in average occupancy to 85.9% for the year ended December 31, 2024 compared to 85.2% for the year ended December 31, 2023.

(1) For this table and the 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, (iv) La Jolla Commons III (office), which was placed into operations on April 1, 2025 and (v) land held for development (office).

Total office rental revenue decreased $1.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to lower occupancy at Coastal Collection at Torrey Reserve and First & Main.

This decrease was partially offset by an increase in occupancy and annualized base rents at City Center Bellevue and Timber Ridge.

Additionally, with new tenant lease commencements at La Jolla Commons III, we recognized $1.0 million in non-same store rental revenue.

Total retail rental revenue decreased $13.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to the sale of Del Monte Center on February 25, 2025.

Same-store retail rental revenue increased $0.8 million due to new tenant leases and scheduled rent increases at Carmel Mountain Plaza and Alamo Quarry Market.

Multifamily rental revenue increased $3.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to the acquisition of Genesee Park on February 28, 2025.

Same-store multifamily rental revenue decreased $0.3 million due to a decrease in occupancy and a slight increase in average monthly base rent.

Same-store average monthly base rent and occupancy was $2,775 and 89.5% for the year ended December 31, 2025, compared to $2,718 and 91.0% for the year ended December 31, 2024.

Mixed-use rental revenue decreased $2.1 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a decrease in tourism, which led to a decrease in average occupancy and revenue per available room to 82.3% and $296 for the year ended December 31, 2025 compared to 85.9% and $319 for the year ended December 31, 2024.

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 and an increase in cost recoveries.

Other property income.

Other property income increased $12.5 million, or 57%, to $34.2 million for the year ended December 31, 2024, compared to $21.8 million for the year ended December 31, 2023.

Other property income decreased $8.5 million, or 25%, to $25.7 million for the year ended December 31, 2025, compared to $34.2 million for the year ended December 31, 2024.

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

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$ 25,711 $ 34,244 $ (8,533) (25) % $ 25,621 $ 34,220 $ (8,599) (25) %

Total office other property income increased $11.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an approximately $11.0 million lease termination fee and and an approximately $0.6 million lease settlement fee received at Torrey Reserve Campus.

Retail other property income increased $0.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to lease termination fees received at Alamo Quarry Market and Solana Beach Towne Center in 2024, offset by lease termination fees received at Carmel Mountain Plaza and Southbay Marketplace in 2023.

Multifamily other property income increased $0.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in utilities meter income, partially offset by lower security deposits earned.

Mixed-use other property income increased $0.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in other room rental income at the hotel portion of our mixed-use property and an increase in parking garage income at the retail portion of our mixed-use property.

Total office other property income decreased $8.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to lease termination fees received at Coastal Collection at Torrey Reserve in 2024.

This decrease was partially offset by lease termination fees received at 14Acres and Timber Ridge in 2025 and an increase in parking garage income at City Center Bellevue, First & Main and Lloyd Portfolio.

Retail other property income decreased $0.5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to lease termination fees received at Alamo Quarry Market and Solana Beach Towne Center in 2024.

Mixed-use other property income increased $0.5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase in parking income and lease settlement fees received at the retail portion of our mixed-use property.

Property Expenses

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$ 124,601 $ 123,503 $ 1,098 1 % $ 118,912 $ 117,464 $ 1,448 1 %

Total office rental expenses increased $2.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in facilities services, repairs and maintenance services, utilities expenses and insurance expenses.

Total retail rental expenses increased $0.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in facilities services, utilities expenses and insurance expenses.

Multifamily rental expenses increased $0.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in facilities services, utilities expenses, insurance expenses and an increase in property-level personnel compensation expenses.

Mixed-use rental expenses increased $0.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase of $0.4 million in hotel room expenses, personnel expenses and excise tax expenses at the hotel portion of our mixed-use property during the period.

There was also an increase in rental expenses of $0.4 million at the retail portion of our mixed-use property related to excise taxes, employee costs and facilities expenses.

Total office rental expenses increased $3.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a $1.5 million increase at La Jolla Commons Tower III related to new operations and amenities.

Same-store office rental expense increased $1.6 million due to higher utilities expense, facilities services expense and repairs and maintenance expense.

Total retail rental expenses decreased $3.8 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a $3.6 million decrease related to the sale of Del Monte Center in the first quarter of 2025.

Same-store retail rental expenses decreased due to $0.5 million written off during the first quarter of 2024 for non-recurring costs related to construction in progress for then-prospective construction at Waikele Center.

These decreases were offset by an increase in facilities services expense and repairs and maintenance expense.

Multifamily rental expenses increased $2.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a $1.8 million increase related to the acquisition of Genesee Park in the first quarter of 2025.

Same-store multifamily rental expenses increased due to an overall increase in insurance expense, facilities services expense and repairs and maintenance expense across most of our other multifamily properties.

Mixed-use rental expenses decreased $0.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a decrease in room-related expenses at the hotel portion of our mixed-use property, partially offset by an increase in utilities expense and facilities services expense at the retail portion of our mixed-use property.

Real Estate Taxes.

Real estate tax expense decreased $0.9 million, or 2%, to $44.2 million for the year ended December 31, 2024, compared to $45.2 million for the year ended December 31, 2023.

Real estate tax expense increased $0.8 million, or 2%, to $45.0 million for the year ended December 31, 2025, compared to $44.2 million for the year ended December 31, 2024.

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

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$ 44,994 $ 44,224 $ 770 2 % $ 42,373 $ 42,693 $ (320) (1) %

Total office real estate taxes decreased $1.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to real estate tax refunds received at La Jolla Commons and First & Main, offset by higher tax consultant fees incurred in connection with obtaining these refunds.

Retail real estate taxes increased $0.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in property tax assessment at Alamo Quarry Market and real estate tax refunds received at Carmel Mountain Plaza during 2023.

Multifamily real estate taxes decreased $0.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a tax refund received at Pacific Ridge Apartments during 2024, partially offset by higher property tax assessments across all multifamily properties.

Mixed-use real estate taxes increased $0.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in property tax assessment.

Total office real estate taxes increased $1.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase at La Jolla Commons III and One Beach Street since we stopped capitalizing real estate taxes when the buildings were placed into service on April 1, 2025 and August 1, 2024, respectively.

Additionally, there was an increase at La Jolla Commons I and II due to real estate tax refunds received during the year ended December 31, 2024.

These increases were offset by a decrease in property tax assessments at City Center Bellevue, 14Acres and Timber Ridge.

Retail real estate taxes decreased $2.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to the sale of Del Monte Center on February 25, 2025 and a decrease in property tax assessments at Alamo Quarry Market and real estate tax refunds received at Alamo Quarry Market and Carmel Mountain Plaza in 2025.

Multifamily real estate taxes increased $1.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to $0.6 million related to the acquisition of Genesee Park on February 28, 2025, and an increase in property tax assessments mainly at Pacific Ridge Apartments, Loma Palisades and Hassalo on Eighth - Multifamily.

Mixed-use real estate taxes increased $0.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase in property tax assessments.

Property Operating Income.

Property operating income increased $12.9 million, or 5%, to $290.1 million for the year ended December 31, 2024, compared to $277.2 million for the year ended December 31, 2023.

Property operating income decreased $23.5 million, or 8%, to $266.6 million for the year ended December 31, 2025, compared to $290.1 million for the year ended December 31, 2024.

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

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$ 266,609 $ 290,128 $ (23,519) (8) % $ 268,342 $ 281,786 $ (13,444) (5) %

Total office property operating income increased $7.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an approximately $11.0 million lease termination fee received at Torrey Reserve Campus and lower real estate taxes due to tax refunds received at La Jolla Commons and First & Main.

These increases were offset by a decrease in rental revenue driven by lower rental rates at Lloyd Portfolio and Timber Springs, lower occupancy at Solana Crossing, a decrease in cost recoveries, and an increase in rental expenses related to utilities expenses, insurance expenses and repairs and maintenance expenses.

Retail property operating income increased $3.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to new tenant leases signed, scheduled rent increases and tenants previously on alternate rent reverting back to basic monthly rent.

These increases were partially offset by an increase in rental expenses related to facilities services, utilities expenses and insurance expenses.

Multifamily property operating income increased $2.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an overall increase in average occupancy and monthly base rent of 91.0% and $2,718, respectively for the year ended December 31, 2024 compared to 90.0% and $2,581, respectively for the year ended December 31, 2023.

These increases were partially offset by higher utilities expenses, insurance expenses and facilities expenses.

Mixed-use property operating income decreased $0.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to higher rental expenses related to room expenses, personnel costs, facilities expenses and real estate taxes.

These decreases were partially offset by higher room rental income at the hotel portion of our mixed use property and higher parking garage income at the retail portion of our mixed use property.

Total office operating income decreased $14.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to $11.0 million in lease termination fees received at Coastal Collection at Torrey Reserve in 2024, a decrease in rental revenue driven primarily by lower occupancy at Coastal Collection at Torrey Reserve and First & Main and an increase in utilities expense, facilities services expense, repairs and maintenance expense and real estate tax expense.

These decreases were partially offset by an increase in occupancy and annualized base rents at City Center Bellevue, Timber Ridge and La Jolla Commons III, an increase in lease termination fees received at 14Acres and Timber Ridge in 2025 and an increase in parking garage income.

Retail operating income decreased $8.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to the sale of Del Monte Center.

Same-store retail operating income increased $1.2 million due to new tenant leases and scheduled rent increases at Carmel Mountain Plaza and Alamo Quarry Market.

Additionally, there was a decrease in real estate taxes due to lower property tax assessments at Alamo Quarry Market and an increase in real estate tax refunds received at Alamo Quarry Market and Carmel Mountain Plaza in 2025.

Multifamily operating income increased $0.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to the acquisition of Genesee Park.

Same-store multifamily operating income decreased $1.0 million due to a decrease in average occupancy and a slight increase in monthly base rent of 89.5% and $2,775, respectively, for the year ended December 31, 2025 compared to 91.0% and $2,718, respectively, for the year ended December 31, 2024.

Additionally, there was an increase in insurance expense, facilities services expense, repairs and maintenance expense and real estate tax expense.

Mixed-use operating income decreased $1.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a decrease in tourism, which led to a decrease in average occupancy and revenue per available room to 82.3% and $296, respectively, for the year ended December 31, 2025, respectively, compared to 85.9% and $319, respectively, for the year ended December 31, 2024, respectively.

This decrease was partially offset by an increase in parking income, lease settlement fees and rental revenue at the retail portion of our mixed-use property.

General and administrative.

General and administrative expenses decreased $0.5 million, or 1%, to $35.5 million for the year ended December 31, 2024, compared to $36.0 million for the year ended December 31, 2023.

This was primarily due to lower legal fees related to prior settlements and stock-based compensation expense attributable to a decrease in the number of restricted stock awards granted as part of our 2023 and 2024 grants.

These decreases were offset by higher employee-related costs, including, without limitation, with respect to base pay for certain salaried and hourly workers and benefits.

General and administrative expenses increased $2.4 million, or 7%, to $37.8 million for the year ended December 31, 2025, compared to $35.5 million for the year ended December 31, 2024.

This increase was primarily due to higher corporate legal expenses, consulting fees and 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 $1.9 million, or 1%, to $127.3 million for the year ended December 31, 2025, compared to $125.5 million for the year ended December 31, 2024.

This was due to the acceleration of assets related to a tenant vacating their space early at Torrey Reserve Campus.

Additionally, the increase was also due to new building improvement assets with One Beach Street placed into operations as of August 1, 2024, and new tenant improvement assets placed into service at La Jolla Commons and Alamo Quarry Market.

This increase was primarily due to $2.5 million related to the acquisition of Genesee Park on February 28, 2025, $3.1 million related to La Jolla Commons III, which was placed in service on April 1, 2025, $0.9 million related to One Beach Street, which was placed in service on August 1, 2024 and new tenant improvements, building improvements and leasing commission assets placed into service.

These increases were partially offset by lower depreciation expense at Coastal Collection at Torrey Reserve due to asset acceleration for a tenant vacating their space early in 2024 and Del Monte Center, which was sold on February 25, 2025.

Interest expense, net.

Interest expense, net increased $3.6 million, or 5%, to $78.1 million for the year ended December 31, 2025 compared to $74.5 million for the year ended December 31, 2024.

This increase was primarily due to the issuance of our 6.150% Senior Notes on September 17, 2024, the $100 million draw on our Revolver Loan on July 18, 2024, which was subsequently repaid on September 19, 2024, and higher interest on our $225 million Amended and Restated Term Loan Agreement.

These increases were partially offset by a decrease in interest expense related to the maturity and repayment of our Series F Notes on July 19, 2024 and Series B Notes on December 2, 2024.

This increase was primarily due to the closing of our 6.150% Senior Notes on September 17, 2024 and a decrease in capitalized interest related to La Jolla Commons III being placed into service on April 1, 2025.

This increase was partially offset by a decrease in interest expense related to the maturity and repayment of our Series F Notes on July 19, 2024, Series B Notes on December 2, 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.

The gain on sale of real estate of $44.5 million during the period was due to our sale of Del Monte Center on February 25, 2025.

Other Income, Net.

Other income, net increased $10.5 million, or 137%, to other income, net of $18.1 million for the year ended December 31, 2024 compared to other income, net of $7.6 million for the year ended December 31, 2023.

This increase was primarily due to an increase of $6.9 million in interest and investment income attributable to a higher yield on our average cash balance.

Additionally, there was an increase related to the litigation income of approximately $10.0 million received in 2024 relating to building specifications for one of the existing buildings at our office project in University Town Center (San Diego), compared to the litigation income of approximately $6.5 million received in 2023 related to certain building systems at our Hassalo on Eighth property.

Other income, net decreased $14.6 million, or 80%, to other income, net of $3.6 million for the year ended December 31, 2025 compared to other income, net of $18.1 million for the year ended December 31, 2024.

This decrease was primarily due to the net settlement payment of approximately $10.0 million received during the three months ended March 31, 2024 relating to building specifications for one of the existing buildings at our office project in University Town Center (San Diego) and a decrease in interest and investment income attributed to a lower yield and average cash balance during the period.

Liquidity and Capital Resources of American Assets Trust, Inc.

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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.

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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, the company entered into a new at-the-market, or ATM, equity program with five sales agents under which the company may, from time to time, offer and sell shares of common stock having an aggregate offering price of up to $250.0 million, or the 2021 ATM Program.

The sales of shares of the company's common stock made through the 2021 ATM Program are to be made in “at-the-market” offerings as defined in Rule 415 of the Securities Act.

As of December 31, 2024, the company had not issued any shares of common stock under the 2021 ATM Program.

The company intends to use the net proceeds from any issuances of common stock under the 2021 ATM Program to fund development or redevelopment activities, repay amounts outstanding from time to time under our third amended and restated credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes.

As of December 31, 2024, the company had the capacity to issue up to an additional $250.0 million in shares of common stock under the 2021 ATM Program.

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.

The company has no obligation to sell the remaining shares available for sale under the 2021 ATM Program.

On December 3, 2021, the company entered into a new at-the-market (“ATM”) equity program with five sales agents in 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 sales of shares of our common stock made through the ATM equity program, as amended, are made in “at-the-market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended.

For the year ended December 31, 2025, no shares of common stock were sold through the ATM equity program.

We intend to use the net proceeds from the ATM equity program to fund 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, 2025, we had the capacity to issue up to $250 million in shares of 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, 2025, 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.

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In the short and long term, we may seek to obtain funds through the issuance of additional equity, unsecured and/or secured debt financings, and property dispositions that are consistent with this conservative structure.

We currently believe that cash flows from operations, cash on hand, our 2021 ATM Program, our third amended and restated credit facility and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.

We currently believe that cash flows from operations, cash on hand, our ATM equity program, our third amended and restated credit facility and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.

Contractual Obligations

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Principal payments on long-term indebtedness $ 1,700,000 $ — $ 425,000 $ — $ 100,000 $ 150,000 $ 1,025,000

$ 2,025,000 $ 325,000 $ — $ 425,000 $ — $ 100,000 $ 1,175,000

Interest payments 451,936 76,555 66,349 59,268 57,148 55,028 137,588

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Total $ 2,232,559 $ 135,374 $ 499,006 $ 63,491 $ 161,007 $ 209,003 $ 1,164,678

(1) Term Loan B, Term Loan C and Series C Notes, totaling $325 million in the aggregate, were repaid in full without penalty or premium, subsequent to the year ended December 31, 2024.

Off-Balance Sheet Arrangements

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Comparison of the year ended December 31, 2025 to the year ended December 31, 2024

Total cash, cash equivalents, and restricted cash were $425.7 million and $82.9 million at December 31, 2024 and 2023, respectively.

Net cash provided by operating activities increased $18.4 million to $207.1 million for the year ended December 31, 2024, compared to $188.8 million for the year ended December 31, 2023.

The increase in cash from operations was primarily due to the net settlement received relating to the building specifications for one of the existing buildings at our office project in University Town Center (San Diego), an increase in lease termination fees and rental revenue and changes in operating assets and liabilities.

Cash and cash equivalents were $129.4 million and $425.7 million at December 31, 2025 and 2024, respectively.

Net cash provided by operating activities decreased $40.0 million to $167.1 million for the year ended December 31, 2025, compared to $207.1 million for the year ended December 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), lease termination fees received at Coastal Collection at Torrey Reserve during 2024 and a decrease in rental revenue and changes in operating assets and liabilities.

Net cash used in investing activities decreased $46.9 million to $30.5 million for the year ended December 31, 2025, compared to $77.4 million for the year ended December 31, 2024.

The decrease in cash used was primarily due to the decrease in capital expenditures at La Jolla Commons III and One Beach Street as these projects have completed construction, offset by an increase in tenant improvement expenditures related to new office and retail leasing activity.

Net cash provided by financing activities increased $278.6 million to $213.1 million for the year ended December 31, 2024, compared to net cash used by financing activities of $65.5 million for the year ended December 31, 2023.

The increase in cash provided in financing activities was primarily due to the proceeds received from the issuance of the 6.150% Senior Notes, partially offset by the repayment of the then-outstanding $100 million on our Revolver Loan and repayment in entirety of our Series B Notes on December 2, 2024.

The $100 million draw on our Revolver Loan was used to repay the entirety of our Series F Notes upon their maturity on July 19, 2024.

The decrease in cash used 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 tenant improvement projects, leasing commissions and building renovation capital projects.

Net cash used in financing activities increased $646.0 million to $432.9 million for the year ended December 31, 2025, compared to net cash provided by financing activities of $213.1 million for the year ended December 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.

Net Operating Income

Net Operating Income, or NOI, is a non-GAAP financial measure of performance.

Net Operating Income (“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 expenses, property marketing costs, real estate taxes and insurance).

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Interest expense, net (78,120) (74,527) (64,706)

Other income (expense), net 18,147 7,649 (625)

Gain on sale of real estate 44,476 — —

Other income, net 3,558 18,147 7,649

Net income $ 71,370 $ 72,819 $ 64,690

Funds from Operations

We present FFO because we consider FFO an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results.

We present funds from operations (“FFO”) because we consider FFO an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results.

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT.

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Real estate depreciation and amortization 127,312 125,461 119,500

Gain on sale of real estate (44,476) — —

Funds from operations, as defined by NAREIT $ 154,206 $ 198,280 $ 184,190

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

What changed 10-K

Item 7. Management’s Discussion and Analysis