American Assets Trust ((AAT)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for American Assets Trust presented a balanced outlook, highlighting both significant achievements and notable challenges. The company reported strong leasing activity in its office and retail segments, strategic acquisitions, and robust liquidity management. However, it also faced challenges in its mixed-use portfolio, with a decline in Net Operating Income (NOI) and a decrease in Funds From Operations (FFO) due to recent dispositions. Overall, the sentiment was balanced, reflecting a mix of positive developments and areas of concern.
Strong Office Leasing Activity
American Assets Trust reported a robust performance in its office leasing activity, totaling approximately 140,000 square feet in the first quarter. The company achieved an 8% increase in cash basis rent spreads and a 15% increase on a straight-line basis. The office portfolio ended the quarter 85.5% leased, or 87.6% excluding One Beach, with all-time high average base rents, showcasing the strength of this segment.
Retail Portfolio Performance
The retail segment demonstrated resilience, ending the quarter 97% leased with executed leases totaling over 158,000 square feet. The company reported a 13% increase in cash basis rent spreads and a 21% increase on a straight-line basis for comparable spaces, highlighting the strong demand and performance of its retail properties.
Multifamily Portfolio Strength
In San Diego, the multifamily communities ended the first quarter approximately 95% leased, with a blended rent increase of 2%. The same-store cash NOI for these properties increased by 3.5% year-over-year, indicating solid performance and demand in this segment.
Strategic Property Acquisition
American Assets Trust made a strategic acquisition of the Genesee Parts Apartments, a nearly 200-unit multifamily community in San Diego. The property boasts a 97% lease rate and significant rent increase potential, aligning with the company’s growth strategy.
Dividend Announcement
The Board of American Assets Trust approved a quarterly dividend of $0.34 per share for the second quarter, reflecting the company’s commitment to returning value to its shareholders.
Liquidity and Debt Management
The company reported strong liquidity of approximately $544 million and no debt maturities until 2027 after repaying Term Loan B, Term Loan C, and Series C notes totaling $325 million. This demonstrates effective liquidity and debt management strategies.
Mixed-use Portfolio NOI Decline
The mixed-use portfolio faced challenges, with an 11.6% decline in NOI in the first quarter of 2025 compared to the same period in 2024. This was primarily driven by lower-than-anticipated occupancy at Embassy Suites Waikiki, highlighting areas needing attention.
Reduction in FFO
The first quarter of 2025 saw a decrease in FFO by approximately $0.03 per share compared to the fourth quarter of 2024, mainly due to the impact of the Del Monte Center disposition. This reflects some of the financial challenges faced by the company.
Challenges in Tourism
The company experienced a decrease in domestic tourism and rate competition in Waikiki, leading to underperformance at Embassy Suites with an average paid occupancy of 85%, 6% lower than budget. This highlights the challenges in the tourism sector impacting the company’s performance.
Forward-looking Guidance
American Assets Trust reaffirmed its full-year 2025 guidance range of $1.87 to $2.01 per FFO share, demonstrating confidence in its diversified portfolio’s strength and stability. The company reported a 3% increase in same-store cash NOI compared to the same period last year and highlighted strong leasing activity in its office and retail segments, underscoring its optimistic outlook.
In summary, the earnings call for American Assets Trust reflected a balanced sentiment, with strong performances in office and retail leasing, strategic acquisitions, and effective liquidity management. However, challenges in the mixed-use portfolio and tourism sector were noted. The company remains confident in its diversified portfolio’s strength, as evidenced by its reaffirmed guidance for 2025.