Net income available to common stockholders of $11.8 million and $39.9 million for the three and nine months ended September 30, 2023, respectively, or $0.20 and $0.66 per diluted share, respectively.
Funds from Operations ("FFO") per diluted share decreased 6% and increased 3% year-over-year for the three and nine months ended September 30, 2023, respectively, or $0.59 and $1.84 per diluted share, respectively.
Increased 2023 FFO per diluted share guidance to a range of $2.36 to $2.40 with a midpoint of $2.38, a 2.6% increase over prior guidance.
SAN DIEGO, Oct. 24, 2023 (GLOBE NEWSWIRE) -- American Assets Trust, Inc. (: AAT) (the “company”) today reported financial results for its third quarter ended September 30, 2023.
Third Quarter Highlights
- Net income available to common stockholders of $11.8 million and $39.9 million for the three and nine months ended September 30, 2023, respectively, or $0.20 and $0.66 per diluted share, respectively.
- FFO decreased 6% and increased 3% year-over-year to $0.59 and $1.84 per diluted share for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.
- Same-store cash Net Operating Income ("NOI") increased 1.8% and 5.2% year-over-year for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.
- Increased 2023 FFO per diluted share guidance to a range of $2.36 to $2.40 with a midpoint of $2.38, a 2.6% increase over the prior 2023 guidance midpoint of $2.32.
- Leased approximately 63,000 comparable office square feet at an average straight-line basis and cash-basis contractual rent increase of 14% and 7%, respectively, during the third quarter.
- Leased approximately 132,000 comparable retail square feet at an average straight-line basis and cash-basis contractual rent increase of 19% and 8%, respectively, during the third quarter.
Financial Results
| (Unaudited, amounts in thousands, except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||
| Net income attributable to American Assets Trust, Inc. stockholders | $ | 11,778 | $ | 12,772 | $ | 39,897 | $ | 33,877 | |||
| Basic and diluted income attributable to common stockholders per share | $ | 0.20 | $ | 0.21 | $ | 0.66 | $ | 0.56 | |||
| FFO attributable to common stock and common units | $ | 44,817 | $ | 47,945 | $ | 140,231 | $ | 136,240 | |||
| FFO per diluted share and unit | $ | 0.59 | $ | 0.63 | $ | 1.84 | $ | 1.79 | |||
Net income attributable to common stockholders increased $6.0 million for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to (i) a $6.3 million net settlement payment received on January 3, 2023 related to certain building systems at our Hassalo on Eighth property, (ii) a $3.4 million net increase in our retail segment due to new tenant leases, (iii) a $2.2 million net increase in our office segment due to higher annualized base rents and (iv) a $2.1 million net increase at Waikiki Beach Walk - Embassy Suites due to increased tourism into Hawaii. These increases were offset by higher interest expense of $4.8 million on the $225 million Amended and Restated Term Loan Agreement and higher general and administrative expenses of $3.4 million due to an increase in stock-based compensation expense, general legal expenses and employee-related costs in 2023.
FFO decreased $3.1 million for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to a decrease in our office segment related to prior year accelerated revenue recognition of tenant improvement overages, as well as higher interest expense and general and administrative expenses as described above.
FFO is a non-GAAP supplemental earnings measure which the company considers meaningful in measuring its operating performance. A reconciliation of net income to FFO is attached to this press release.
Leasing
The portfolio leased status as of the end of the indicated quarter was as follows:
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||
| Total Portfolio | ||||||
| Office | 86.8% | 87.4% | 90.7% | |||
| Retail | 94.4% | 94.6% | 92.2% | |||
| Multifamily | 89.5% | 85.9% | 93.0% | |||
| Mixed-Use: | ||||||
| Retail | 95.1% | 94.6% | 94.9% | |||
| Hotel | 85.3% | 83.2% | 78.6% | |||
| Same-Store Portfolio | ||||||
| Office (1) | 89.7% | 90.3% | 93.1% | |||
| Retail | 94.4% | 94.6% | 92.2% | |||
| Multifamily | 89.5% | 85.9% | 93.0% | |||
| Mixed-Use: | ||||||
| Retail | 95.1% | 94.6% | 94.9% | |||
| Hotel | 85.3% | 83.2% | 78.6% | |||
(1) Same-store office leased percentages include Bel-Spring 520 which was acquired on March 8, 2022. Same-store office leased percentages exclude (i) One Beach Street due to significant redevelopment activity; (ii) the 710 building at Lloyd District Portfolio which was placed into operations on November 1, 2022, approximately one year after completing renovations of the building and (iii) land held for development.
During the third quarter of 2023, the company signed 38 leases for approximately 222,600 square feet of office and retail space, as well as 709 multifamily apartment leases. Renewals accounted for 71% of the comparable office leases, 100% of the comparable retail leases, and 44% of the residential leases.
Office and Retail
On a comparable space basis (i.e. leases for which there was a former tenant) during the third quarter of 2023 and trailing four quarters ended September 30, 2023, our retail and office leasing spreads are shown below:
| Number of Leases Signed | Comparable Leased Sq. Ft. | Average Cash Basis % Change Over Prior Rent | Average Cash Contractual Rent Per Sq. Ft. | Prior Average Cash Contractual Rent Per Sq. Ft. | Straight-Line Basis % Change Over Prior Rent | ||||||||||
| Office | Q3 2023 | 7 | 63,000 | 7.0% | $59.45 | $55.57 | 13.5% | ||||||||
| Last 4 Quarters | 40 | 316,000 | 3.4% | $65.35 | $63.21 | 12.1% | |||||||||
| Retail | Q3 2023 | 25 | 132,000 | 8.2% | $33.70 | $30.65 | 18.7% | ||||||||
| Last 4 Quarters | 77 | 363,000 | 8.4% | $34.65 | $31.78 | 15.2% | |||||||||
Multifamily
The average monthly base rent per leased unit for our multifamily properties for the third quarter of 2023 was $2,572 compared to an average monthly base rent per leased unit of $2,372 for the third quarter of 2022, which is an increase of approximately 8.4%.
Same-Store Cash Net Operating Income
For the three and nine months ended September 30, 2023, same-store cash NOI increased 1.8% and 5.2%, respectively, compared to the three and nine months ended September 30, 2022. The same-store cash NOI by segment was as follows (in thousands):
| Three Months Ended (1) | Nine Months Ended (2) | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||
| Cash Basis: | |||||||||||||||||
| Office | $ | 35,451 | $ | 35,449 | — | % | $ | 103,375 | $ | 99,625 | 3.8 | % | |||||
| Retail | 18,596 | 17,492 | 6.3 | 54,402 | 51,012 | 6.6 | |||||||||||
| Multifamily | 7,957 | 7,957 | — | 25,450 | 23,953 | 6.2 | |||||||||||
| Mixed-Use | 6,808 | 6,665 | 2.1 | 18,173 | 16,867 | 7.7 | |||||||||||
| Same-store Cash NOI | $ | 68,812 | $ | 67,563 | 1.8 | % | $ | 201,400 | $ | 191,457 | 5.2 | % | |||||
(1) Same-store portfolio includes Bel-Spring 520 which was acquired on March 8, 2022. Same-store portfolio excludes (i) One Beach Street due to significant redevelopment activity; (ii) the 710 building at Lloyd District Portfolio which was placed into operations on November 1, 2022, approximately one year after completing renovations of the building and (iii) land held for development.
(2) Same-store portfolio excludes (i) One Beach Street, due to significant redevelopment activity; (ii) Bel-Spring 520 which was acquired on March 8, 2022; (iii) the 710 building at Lloyd District Portfolio which was placed into operations on November 1, 2022, approximately one year after completing renovations of the building and (iv) land held for development.
Same-store cash NOI is a non-GAAP supplemental earnings measure which the company considers meaningful in measuring its operating performance. A reconciliation of same-store cash NOI to net income is attached to this press release.
Balance Sheet and Liquidity
At September 30, 2023, the company had gross real estate assets of $3.7 billion and liquidity of $490.0 million, comprised of cash and cash equivalents of $90.0 million and $400.0 million of availability on its line of credit. At September 30, 2023, the company had only 1 out of 31 assets encumbered by a mortgage.
Dividends
The company declared dividends on its shares of common stock of $0.33 per share for the third quarter of 2023. The dividends were paid on September 21, 2023.
In addition, the company has declared a dividend on its common stock of $0.33 per share for the fourth quarter of 2023. The dividend will be paid in cash on December 21, 2023 to stockholders of record on December 7, 2023.
Guidance
The company increased its 2023 FFO per diluted share guidance to a range of $2.36 to $2.40 per share, an increase of 2.6% at midpoint from the prior 2023 FFO per diluted share guidance range of $2.28 to $2.36 per share.
The company's guidance excludes any impact from future acquisitions, dispositions, equity issuances or repurchases, debt financings or repayments. Management will discuss the company's guidance in more detail on tomorrow's earnings call. The foregoing estimates are forward-looking and reflect management's view of current and future market conditions, including certain assumptions with respect to leasing activity, rental rates, occupancy levels, interest rates, credit spreads and the amount and timing of acquisition and development activities. The company's actual results may differ materially from these estimates.
Conference Call
The company will hold a conference call to discuss the results for the third quarter of 2023 on Wednesday, October 25, 2023 at 8:00 a.m. Pacific Time (“PT”). To participate in the event by telephone, please dial 1-833-630-1956 and ask to join the American Assets Trust, Inc. conference call. A live on-demand audio webcast of the conference call will be available on the company's website at www.americanassetstrust.com. A replay of the call will also be available on the company's website.
Supplemental Information
Supplemental financial information regarding the company's third quarter 2023 results may be found on the "Financial Reporting" tab of the “Investors” page of the company's website at www.americanassetstrust.com. This supplemental information provides additional detail on items such as property occupancy, financial performance by property and debt maturity schedules.
Financial Information
American Assets Trust, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Data)
| September 30, 2023 | December 31, 2022 | ||||||
| Assets | (unaudited) | ||||||
| Real estate, at cost | |||||||
| Operating real estate | $ | 3,494,369 | $ | 3,468,537 | |||
| Construction in progress | 233,720 | 202,385 | |||||
| Held for development | 547 | 547 | |||||
| 3,728,636 | 3,671,469 | ||||||
| Accumulated depreciation | (1,013,367 | ) | (936,913 | ) | |||
| Real estate, net | 2,715,269 | 2,734,556 | |||||
| Cash and cash equivalents | 89,968 | 49,571 | |||||
| Accounts receivable, net | 7,875 | 7,848 | |||||
| Deferred rent receivables, net | 89,023 | 87,192 | |||||
| Other assets, net | 108,584 | 108,714 | |||||
| Total assets | $ | 3,010,719 | $ | 2,987,881 | |||
| Liabilities and equity | |||||||
| Liabilities: | |||||||
| Secured notes payable, net | $ | 74,646 | $ | 74,578 | |||
| Unsecured notes payable, net | 1,614,307 | 1,539,453 | |||||
| Unsecured line of credit, net | — | 34,057 | |||||
| Accounts payable and accrued expenses | 70,970 | 65,992 | |||||
| Security deposits payable | 8,952 | 8,699 | |||||
| Other liabilities and deferred credits, net | 73,194 | 79,577 | |||||
| Total liabilities | 1,842,069 | 1,802,356 | |||||
| Commitments and contingencies | |||||||
| Equity: | |||||||
| American Assets Trust, Inc. stockholders' equity | |||||||
| Common stock, $0.01 par value, 490,000,000 shares authorized, 60,724,630 and 60,718,653 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 607 | 607 | |||||
| Additional paid-in capital | 1,467,455 | 1,461,201 | |||||
| Accumulated dividends in excess of net income | (270,817 | ) | (251,167 | ) | |||
| Accumulated other comprehensive income | 12,051 | 10,624 | |||||
| Total American Assets Trust, Inc. stockholders' equity | 1,209,296 | 1,221,265 | |||||
| Noncontrolling interests | (40,646 | ) | (35,740 | ) | |||
| Total equity | 1,168,650 | 1,185,525 | |||||
| Total liabilities and equity | $ | 3,010,719 | $ | 2,987,881 | |||
American Assets Trust, Inc.
Unaudited Consolidated Statements of Operations
(In Thousands, Except Shares and Per Share Data)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenue: | |||||||||||||||
| Rental income | $ | 105,494 | $ | 105,468 | $ | 312,105 | $ | 301,470 | |||||||
| Other property income | 5,704 | 5,555 | 16,568 | 15,178 | |||||||||||
| Total revenue | 111,198 | 111,023 | 328,673 | 316,648 | |||||||||||
| Expenses: | |||||||||||||||
