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    AAT
    Earnings call· Jun 2026(Q2 FY26)

    American Assets Trust Q2 FY26 earnings call AAT

    Jul 29, 2026 Source

    Executive summary

    American Assets Trust Q2 FY26 — FFO Ahead of Expectations, Office Leasing Momentum Continues

    American Assets Trust delivered Q2 FY26 FFO ahead of expectations, driven by strong leasing activity in its office and retail portfolios. The company is focused on converting signed office leases into commenced rent and cash flow, with significant embedded earnings potential from its existing office assets. While some markets face headwinds like multifamily oversupply and hotel rate pressure, the company maintains a disciplined capital allocation strategy and strong liquidity, positioning it for long-term shareholder value creation.

    Highlights

    5

    • Generated FFO of $0.51 per diluted share, ahead of internal expectations.

    • Portfolio-wide same-store cash NOI increased 1.3% excluding a one-time reserve.

    • Office portfolio ended the quarter 84.4% leased, executing 110,000 sq ft of leases with 9% comparable cash spreads.

    • Retail portfolio ended the quarter 98% leased, executing 139,000 sq ft of leases with 3% comparable cash spreads.

    • Maintained strong liquidity of $610 million, including $110 million cash and $500 million available under its revolving credit facility.

    Concerns

    4

    • Office occupancy goal for year-end is 'a bit more binary' due to large proposals, potentially pushing into next year.

    • Multifamily market is a 'stabilization year' with modest rent growth due to elevated market vacancy from new deliveries.

    • Waikiki hotel experienced lower year-over-year visitor arrivals and rate competition, leading to a decline in hotel NOI to $2.5 million from $2.9 million.

    • A one-time reserve of $1.1-$1.2 million for an office tenant receivable impacted Q2 results.

    Guidance & targets

    2
    CategoryTargetConfidence
    Full-year FFO per diluted share
    $1.96 to $2.10
    high materiality
    Medium
    Net Debt/Adjusted EBITDA
    5.5x or below
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Office
    Same-store NOI increased primarily due to higher base rent from recently commenced leases at La Jolla Commons Tower 3, partially offset by scheduled tenant expirations at 14 acres. Excluding a one-time reserve, office same-store cash NOI would have been 2.4%.
    Leased: 84.4%Leases executed: 110,000 sq ftComparable cash spreads: 9%Straight line spreads: 10%Spec suite leases YTD: 14 totaling 76,000 sq ftSigned office leases not commenced: 200,000 sq ftAnnualized base rent from signed non-commenced leases: >$10 millionLa Jolla Commons Tower 3 leased: 49%1 Beach Street leased: 35%
    		—0.4%——
    Retail
    Same-store NOI declined reflecting the absence of a one-time real estate tax refund received during the second quarter of 2025.
    Leased: 98%Leases executed: 139,000 sq ftComparable cash spreads: 3%Straight line spreads: 20%
    		—-0.4%——
    Multifamily
    Same-store NOI increased driven by stronger rental income, particularly at Haslo on 8th and Genesee Park, partially offset by higher real estate tax expense at Pacific Ridge.
    Leased (excluding RV park): >94%San Diego communities leased: 96%San Diego renewal rents growth: 5%San Diego new lease rents decline: 2%San Diego blended growth: 3%Portland Haslo on 8th leased: 88%Portland renewal rents growth: 2%Portland new lease rents growth: 1%Portland blended growth: 2%
    		—0.9%——
    Mixed-Use (Waikiki Beach Walk)
    Same-store NOI increased as a 14% increase in retail NOI (from bad debt collection) was offset by lower ADR and higher operating expenses at Embassy Suites Waikiki.
    Retail NOI increase: 14% (due to bad debt collection)Hotel occupancy: 90.5% (vs 86% last year)RevPAR: $308 (up 0.9%)ADR: $340 (down 0.4%)Hotel NOI: $2.5 million (vs $2.9 million prior year quarter)
    		—0.6%——

    Operational metrics

    23
    FFO per diluted share
    $0.51increased modestly from Q1
    Q2 FY26

    Ahead of internal expectations, primarily driven by incremental rental income from recently commenced office leases.

    Net income attributable to common stockholders per diluted share
    $0.09
    Q2 FY26
    Portfolio-wide same-store cash NOI growth
    0.3%
    Q2 FY26

    In line with expectations, expected to grow in the back half of the year.

    Office tenant receivable reserve
    $1.1-$1.2 million
    Q2 FY26

    For cash receivables and straight line rent previously accrued in prior years. Recovery not assumed in outlook.

    Total liquidity
    $610 million
    Q2 FY26

    Includes $110 million cash and $500 million available under revolving credit facility.

    Cash on hand
    $110 million
    Q2 FY26

    Part of total liquidity.

    Revolving credit facility available
    $500 million
    Q2 FY26

    Part of total liquidity, maturity extended to April 2030.

    Term loan
    $100 million
    Q2 FY26

    Maturity extended to April 2030.

    Debt to EBITDA (quarterly annualized)
    6.7x
    Q2 FY26

    Long-term target remains 5.5x or below.

    Debt to EBITDA (trailing 12-month)
    6.9x
    Q2 FY26

    Long-term target remains 5.5x or below.

    Interest coverage ratio
    3.0x
    Q2 FY26
    Fixed charge coverage ratio
    3.0x
    Q2 FY26
    FFO upside potential from existing office portfolio (stabilized)
    $0.29
    Future

    Represents incremental FFO once properties are stabilized.

    FFO contribution from signed leases (total)
    $0.14
    Future

    Part of the $0.29 FFO upside potential from existing office portfolio.

    FFO contribution from signed leases recognized YTD
    $0.03
    YTD FY26

    Part of the $0.14 FFO from signed leases.

    FFO contribution from signed leases remaining
    $0.11
    Future

    Remaining portion of the $0.14 FFO from signed leases, expected to be realized as tenants take occupancy and rent commences.

    FFO contribution from signed leases expected H2 FY26
    $0.02
    H2 FY26

    Part of the $0.11 FFO remaining from signed leases.

    FFO contribution from signed leases expected FY27
    $0.09
    FY27

    Part of the $0.11 FFO remaining from signed leases.

    Office lease rate (Stratos)
    $63
    Future

    For backfilled space at Torrey Reserve.

    Spec suite program effectiveness (by deal)
    71%
    YTD FY26

    For new leasing below 10,000 sq ft.

    Spec suite program effectiveness (by square footage)
    62%
    YTD FY26

    For new leasing below 10,000 sq ft.

    Spec suite program share of portfolio
    7.1%
    Q2 FY26

    Represents a good path to 90%+ lease.

    City Center Bellevue vacancy rate
    4.9%
    Q2 FY26

    Building has consistently performed well with quick backfills.

    Industry KPIs

    6
    MetricValueDetails
    Occupancy rate90.5%%
    Same store noi growth0.3%%
    Net debt adjusted EBITDA6.7xx
    Leasing bookings volume signed110,000 sq ftsq ft
    Ffo core ffo normalized ffo per share$0.51USD per diluted share
    Lease renewal spread re leasing recapture9%%

    Orderbook & backlog

    2
    Signed office leases not yet commenced200,000 sq ftQ2 FY26

    Represents more than $10 million of annualized base rent

    Office leases in documentation/proposals73,000 sq ft in documentation, nearly 150,000 sq ft in proposalsQ2 FY26

    New and expansion space

    Deals & partnerships

    1
    StratosNew office lease for backfilled space at Torrey Reserve$63 per sq ft start rate84 months

    Lease for backfilled space at Torrey Reserve, with commencement on May 1st.

    Capital programs

    2
    Office Lobby Renovation (Southport One at Coastal Collection, Torrey Reserve)underway

    Benefit: last big lift in terms of capital in this office portfolio

    This is the last lobby renovation in the office portfolio, indicating capital demands will drop significantly after completion.

    Office Spec Suite Initiativeunderway

    Benefit: quickly getting people in and paying rent; represents 7.1% of the portfolio

    The program is helping shorten downtime, attract new tenants, and steadily build occupancy, with many suites leased even in the design phase.

    Risks & headwinds

    5
    Office occupancy goal for year-endyear-end

    a bit more binary

    Mitigation: Prioritizing rate, term, and credit over hitting a percentage. Actively engaged with large prospective tenants.

    Multifamily market stabilization2026

    modest rent growth; elevated market vacancy

    Mitigation: Concentrating on occupancy, measured concessions, resident retention, and expense control. New development activity has slowed materially.

    Waikiki hotel performanceQ2 FY26

    lower year over year visitor arrivals; rate competition persisted; Hotel NOI was approximately $2.5 million compared to $2.9 million in the prior year quarter

    Mitigation: Team focused on rate integrity, cost control, and performance. Summer booking paces ahead of last year.

    Office tenant receivableQ2 FY26

    $1.1-$1.2 million reserve

    Mitigation: Recovery will be pursued but not assumed in outlook, limiting forward operating impact.

    Genentech space re-leasingongoing

    no hits on Genentech yet; big chunk of space and a very challenged market

    Mitigation: Space is beautifully built out, not expected to be a heavy lift to re-let. Recent success in challenging markets for quality space.

    What to watch in Q3 FY26

    5

    Office occupancy at year-end

    year-end
    Current84.4% leased (Q2 FY26)
    Targetmid-80s

    Why it matters

    Indicates progress in leasing efforts and conversion of proposals to signed leases, impacting FFO and leverage.

    Could you update us on what you expect office occupancy to be at by year end now and specifically, What level of occupancy is contemplating guidance? Hey, Sean, it's Adam. Let me take that off and I'll let Steve kind of give a little bit more details. What I would tell you is the goal hasn't really changed, but the outcome is a bit more binary than it was earlier this year.

    Q&A highlights

    8

    What is the updated expectation for office occupancy by year-end, and what level is contemplated in guidance, given the prior expectation of reaching mid-80s?

    The year-end goal hasn't changed, but the outcome is more binary due to large proposals. If deals land on time, they're within range; if they push to next year, they could finish slightly below. Management prioritizes rate, term, and credit over hitting a percentage by year-end. Several large prospects are in play, especially in UTC, including a potential 100-120k sq ft RFP.

    “The goal hasn't really changed, but the outcome is a bit more binary than it was earlier this year... If we land a couple of them on that timeline we're working towards, we're inside of the range. If they push into next year, we could finish slightly below it.”

    asked by Sean Kataoka Glass · answered by Adam Wyll

    2 min read5 chapters

    Detailed Narrative

    01

    Economic Conditions and Capital Markets

    The broader economy presents a mixed but resilient picture with solid growth and low unemployment. Commercial real estate is seeing increased tenant demand and more constructive transaction activity, particularly in retail and multifamily. Office transaction activity is picking up, providing better valuation visibility. Public REIT markets have strengthened, outperforming broader equities on growing investor recognition of durable cash flows, limited new supply, and high replacement costs.

    02

    Office Market Dynamics and Flight to Quality

    The 'flight to quality' continues to define the office market, with trophy leasing above pre-pandemic averages. Supply is repairing itself with availability down for eight consecutive quarters, sublease space burning off, and new construction at generational lows. San Diego's UTC and Del Mar Heights sub-markets are capturing most leasing activity, while San Francisco is approaching pre-pandemic levels driven by AI and technology companies. Portland remains a challenged market, but activity is consolidating into the best buildings.

    03

    Spec Suite Program Success

    The spec suite program is proving effective in shortening downtime, attracting new tenants, and steadily building occupancy. Year-to-date, 14 spec suite leases totaling 76,000 sq ft have been signed. This program represents 7.1% of the portfolio and is seen as a quick path to achieving 90%+ lease rates, with many suites leased even in the design phase.

    04

    Multifamily and Retail Market Trends

    Retail remains one of the tightest real estate sectors with national availability near historic lows, limited new construction, and growing asking rents, supported by affluent trade areas. Multifamily is shaping up as a stabilization year for 2026, with elevated market vacancy in San Diego and Portland due to recent deliveries. However, new development activity has slowed materially in both markets, which should gradually improve the supply-demand balance.

    05

    Capital Allocation and Sustainability Initiatives

    The company is deploying capital where returns are strongest, primarily in leasing-related investments at newer and repositioned office assets. They continue to evaluate external opportunities selectively and will not force activity. The recently published 2025 sustainability report, 'Committed to What Matters,' highlights initiatives that strengthen resilience, support stakeholders, and make economic sense over the long term⏳.

    AI-generated summary of the company’s earnings call. Not investment advice.