AAT — American Assets Trust, Inc.

Summary of American Assets Trust Inc. Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Funds From Operations (FFO): $0.51 per diluted share, exceeding internal expectations and slightly up from Q1.
• Net Income: $0.09 per diluted share.
• Same-Store Cash Net Operating Income (NOI): Increased 0.3% overall; 1.3% when excluding a one-time reserve for an office tenant receivable.
• Occupancy Rate: Office portfolio at 84.4% leased; retail portfolio at 98% leased; multifamily portfolio over 94% leased.
• Liquidity: Approximately $610 million, including $110 million in cash and $500 million available under a revolving credit facility.
• Debt Metrics: Net debt-to-EBITDA at 6.7x (quarterly annualized), with a long-term target of 5.5x.

2. Strategic Updates and Business Highlights

• Leasing Activity: Executed approximately 110,000 square feet of office leases with cash spreads of 9% and straight-line spreads of 10%. Retail leases totaled approximately 139,000 square feet with cash spreads of 3%.
• Portfolio Performance: Achieved record average base rents across office, retail, and multifamily segments.
• Market Dynamics: Notable demand for quality office spaces, particularly in desirable submarkets like UTC and Del Mar Heights. Retail sector remains tight with low availability and rising rents.
• Hotel Performance: Embassy Suites in Waikiki led its competitive set in occupancy and RevPAR, despite mixed tourism conditions.

3. Forward Guidance and Outlook

• Full-Year FFO Guidance: Reaffirmed at $1.96 to $2.10 per diluted share, with a midpoint of $2.03. Potential to move into the upper half of the range if favorable operating trends continue.
• Leasing Expectations: Anticipated improvement in FFO as signed leases commence and additional vacancies are absorbed. Expected contributions from signed leases of $0.14 per share, with $0.05 recognized in 2026 and $0.09 in 2027.

4. Bad News, Challenges, or Points of Concern

• Market Challenges: San Diego office market absorption remains soft, with some areas like Portland facing ongoing difficulties.
• Tenant Watch List: A reserve of $1.2 million was established for a troubled office tenant, although space has been backfilled.
• Mixed Economic Conditions: While the broader economy shows resilience, inflation remains above target and consumer confidence is softening, affecting retail spending.

5. Notable Q&A Insights

• Office Leasing Outlook: Management indicated that achieving year-end occupancy targets is uncertain, with significant deals pending that could impact outcomes.
• Tenant Dynamics: The company is closely monitoring large tenants like Genentech and Smartsheet, with some successful backfilling of space but ongoing challenges in certain markets.
• Capital Recycling: AAT is evaluating potential asset sales but will only proceed if pricing is compelling and replacement opportunities are available.
• Spec Suite Program: The initiative is proving effective in reducing downtime and improving occupancy, with a significant portion of new leases coming from this program.

Overall, American Assets Trust demonstrated solid performance in Q2 2026, with positive leasing activity and strong financial metrics, while also navigating challenges in certain markets and tenant dynamics. The company remains focused on executing its strategic plan and improving cash flow through effective leasing and capital management.