Could you talk a little about the tenant at Toy Reserve? Maybe like when does the lease expire and what might be anticipated there in the near term?

The reserve was for an office tenant on the watch list in 2025. No revenue from this tenant was included in 2026 guidance. In Q2, $1.1-$1.2 million was reserved for cash receivables and straight-line rent accrued in prior years. Recovery will be pursued but is not assumed in the outlook, limiting forward operating impact. “In the second quarter of this year, we reserved about $1.1, $1.2 million, and that's cash receivables and straight line rent that we had previously accrued in prior years.”

Could you give us some color on the leasing pipeline there? Are there any additional leases out for signature or in documentation? And then where you might expect each asset to be by year end?

At La Jolla Commons, one spec suite remains with proposals, and proposals are out for full floors (8, 9, 10). At 1 Beach Street, tour activity is excellent despite construction. A final proposal is out for Suite 250, and they've been shortlisted for Suite 200. They expect to convert tours to deals as construction nears completion in the next 60 days. “At La Jolla Commons, we specced out the second and fourth floors. We have one suite on each floor remaining out of that spec suite effort, and we have proposals on one of those... In terms of One Beach, tour activity has been excellent in spite of the construction.”

Are you considering any capital recycling in the current environment after selling Del Monte Center last year?

The company is evaluating every asset for potential redeployment of capital. Two conditions must be met: compelling pricing and line of sight on a replacement that maintains or improves portfolio quality, and tax-efficient structuring due to low basis. They are actively pursuing opportunities but will not force anything. “We're looking at every asset in our portfolio through the same lens, which is whether the capital is better deployed somewhere else on a risk-adjusted basis.”

AAT

American Assets Trust (AAT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Jul 29, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year FFO per diluted share	$1.96 to $2.10 high materiality	FY26	Medium
Net Debt/Adjusted EBITDA	5.5x or below high materiality	Long-term	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%	—	—

Orderbook & backlog

Signed office leases not yet commenced 200,000 sq ft Q2 FY26

Represents more than $10 million of annualized base rent

Office leases in documentation/proposals 73,000 sq ft in documentation, nearly 150,000 sq ft in proposals Q2 FY26

New and expansion space

Deals & partnerships

Stratos New office lease for backfilled space at Torrey Reserve $63 per sq ft start rate 84 months

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

Capital programs

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 Initiative underway

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

Office occupancy goal for year-end year-end

a bit more binary

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

Multifamily market stabilization 2026

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 performance Q2 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 receivable Q2 FY26

$1.1-$1.2 million reserve

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

Genentech space re-leasing ongoing

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

Office occupancy at year-end

year-end

Current 84.4% leased (Q2 FY26)

Target mid-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.

Find out whether AAT delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.