Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Assets Trust Inc (NYSE:AAT) achieved its highest FFO per share since its IPO, marking a significant milestone.
• The company reported record total revenue and aggregate dividends over $103 million.
• AAT's Waikiki Beach Walk Embassy Suites delivered its highest ADR to date in 2024.
• The retail segment excelled with properties at 95% leased and a 5% same-store NOI growth.
• AAT has no debt maturities until 2027, providing financial stability and flexibility.

Negative Points

• 2025 FFO per share guidance represents a 24% decrease compared to 2024, indicating potential financial challenges.
• Office portfolio closed the year at 85% leased, reflecting a decrease due to remeasurement and tenant downsizing.
• Increased interest expense from bond offerings and discontinuation of capitalized interest are expected to impact FFO negatively.
• Credit reserves are expected to decrease FFO by approximately $0.05 per share, reflecting potential tenant risks.
• The sale of Delmon Center is expected to decrease FFO by $0.11 per share, indicating dilution from asset disposition.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with AAT.

Q: Can you provide more details on the expected contribution from La Jolla Commons and other office assets in 2025? A: Bob Barton, CFO, explained that the 93% occupancy target is based on underwriting for these properties. Steve Center, EVP of Leasing, added that significant leasing activity is expected to commence later in the year, with some leases starting in late 2025 and others in 2026.

Q: What is the rationale behind selling Del Monte Center and acquiring a multifamily asset? A: Adam We, CEO, stated that the sale aligns with focusing on markets where the company can achieve greater operational efficiencies. The multifamily acquisition offers significant upside potential, with rents believed to be significantly below market.

Q: Why did you decide to increase the dividend despite a reduction in FFO expectations? A: Ernest Rady, Chairman, mentioned that the dividend increase reflects confidence in the portfolio's quality. Bob Barton, CFO, added that the increase is modest and maintains a payout ratio under 100%, which is manageable given the company's cash position.

Q: Can you elaborate on the $0.05 credit reserve and its drivers? A: Adam We, CEO, noted that the reserve is less than last year's and is allocated to office and retail sectors. It reflects a conservative approach to potential risks with certain tenants, including Petco and Michael's.

Q: Are you seeing any improvement in large tenant activity in the office leasing market? A: Steve Center, EVP of Leasing, indicated that while large tenant activity is still limited, there are positive signs, especially in Bellevue and San Francisco, with tenants committing to longer lease terms.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.