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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
aat-20220630_g1.jpg
AMERICAN ASSETS TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
Commission file number: 001-35030

AMERICAN ASSETS TRUST, L.P.
(Exact Name of Registrant as Specified in its Charter)
Commission file number: 333-202342-01
 
Maryland  (American Assets Trust, Inc.) 27-3338708  (American Assets Trust, Inc.)
Maryland  (American Assets Trust, L.P.) 27-3338894  (American Assets Trust, L.P.)
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
3420 Carmel Mountain Road, Suite 100
San Diego, California 92121
(Address of Principal Executive Offices and Zip Code)
(858) 350-2600
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

    American Assets Trust, Inc.               Yes     No
    American Assets Trust, L.P.              Yes     No
(American Assets Trust, L.P. became subject to filing requirements under Section 13 of the Securities Exchange Act of 1934, as amended, upon effectiveness of its Registration Statement on Form S-3 on February 6, 2015 and has filed all required reports subsequent to that date.)
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    
    
    American Assets Trust, Inc.               Yes      No
    American Assets Trust, L.P.              Yes      No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
American Assets Trust, Inc.
Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller reporting company
Emerging growth company

American Assets Trust, L.P.
Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      
    
    American Assets Trust, Inc.               Yes      No
    American Assets Trust, L.P.              Yes      No

Securities registered pursuant to Section 12(b) of the Act:
Name of Registrant Title of each class Trading Symbol Name of each exchange on which registered
American Assets Trust, Inc. Common Stock, par value $0.01 per share AAT New York Stock Exchange
American Assets Trust, L.P. None None None

American Assets Trust, Inc. had 60,528,115 shares of common stock, par value $0.01 per share, outstanding as of July 29, 2022.



EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2022 of American Assets Trust, Inc., a Maryland corporation, and American Assets Trust, L.P., a Maryland limited partnership, of which American Assets Trust, Inc. is the parent company and sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our” or “the company” refer to American Assets Trust, Inc. together with its consolidated subsidiaries, including American Assets Trust, L.P. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “our Operating Partnership” or “the Operating Partnership” refer to American Assets Trust, L.P. together with its consolidated subsidiaries.

American Assets Trust, Inc. operates as a real estate investment trust, or REIT, and is the sole general partner of the Operating Partnership. As of June 30, 2022, American Assets Trust, Inc. owned an approximate 78.8% partnership interest in the Operating Partnership. The remaining approximately 21.2% partnership interests are owned by non-affiliated investors and certain of our directors and executive officers. As the sole general partner of the Operating Partnership, American Assets Trust, Inc. has full, exclusive and complete authority and control over the Operating Partnership’s day-to-day management and business, can cause it to enter into certain major transactions, including acquisitions, dispositions and debt refinancings, and can cause changes in its line of business, capital structure and distribution policies.

American Assets Trust, Inc. believes that combining the quarterly reports on Form 10-Q of American Assets Trust, Inc. and the Operating Partnership into a single report will result in the following benefits:

better reflects how management and the analyst community view the business as a single operating unit;
enhance investors' understanding of American Assets Trust, Inc. and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
greater efficiency for American Assets Trust, Inc. and the Operating Partnership and resulting savings in time, effort and expense; and
greater efficiency for investors by reducing duplicative disclosure by providing a single document for their review.

The management of American Assets Trust, Inc. and the Operating Partnership is the same and operates American Assets Trust, Inc. and the Operating Partnership as one enterprise.

There are certain differences between American Assets Trust, Inc. and the Operating Partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between American Assets Trust, Inc. and the Operating Partnership in the context of how American Assets Trust, Inc. and the Operating Partnership operate as an interrelated consolidated company. American Assets Trust, Inc. is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, American Assets Trust, Inc. does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. American Assets Trust, Inc. itself does not hold any indebtedness. The Operating Partnership holds substantially all the assets of American Assets Trust, Inc., directly or indirectly holds the ownership interests in American Assets Trust, Inc.'s real estate ventures, conducts the operations of the business and is structured as a partnership with no publicly-traded equity. Except for net proceeds from public equity issuances by American Assets Trust, Inc., which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by American Assets Trust, Inc.'s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of operating partnership units.

Noncontrolling interests and stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of American Assets Trust, Inc. and those of American Assets Trust, L.P. The partnership interests in the Operating Partnership that are not owned by American Assets Trust, Inc. are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in American Assets Trust, Inc.’s financial statements. To help investors understand the significant differences between American Assets Trust, Inc. and the Operating Partnership, this report presents the following separate sections for each of American Assets Trust, Inc. and the Operating Partnership:

consolidated financial statements;
the following notes to the consolidated financial statements:
Debt;
Equity/Partners' Capital; and
Earnings Per Share/Unit; and


Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of American Assets Trust, Inc. and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of American Assets Trust, Inc. have made the requisite certifications and American Assets Trust, Inc. and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.




AMERICAN ASSETS TRUST, INC. AND AMERICAN ASSETS TRUST, L.P.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2022
 
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements of American Assets Trust, Inc.:
1
2
3
5
Consolidated Financial Statements of American Assets Trust, L.P.:
6
7
8
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


American Assets Trust, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Data)
 
June 30, December 31,
2022 2021
  (unaudited)
ASSETS
Real estate, at cost
Operating real estate $ 3,454,499  $ 3,389,726 
Construction in progress 176,582  139,098 
Held for development 547  547 
3,631,628  3,529,371 
Accumulated depreciation (894,202) (847,390)
Real estate, net 2,737,426  2,681,981 
Cash and cash equivalents 60,750  139,524 
Accounts receivable, net 7,218  7,445 
Deferred rent receivables, net 87,579  82,724 
Other assets, net 114,217  106,253 
TOTAL ASSETS $ 3,007,190  $ 3,017,927 
LIABILITIES AND EQUITY
LIABILITIES:
Secured notes payable, net $ 110,986  $ 110,965 
Unsecured notes payable, net 1,538,519  1,538,238 
Accounts payable and accrued expenses 66,334  64,531 
Security deposits payable 8,519  7,855 
Other liabilities and deferred credits, net 82,864  86,215 
Total liabilities 1,807,222  1,807,804 
Commitments and contingencies (Note 11)
EQUITY:
American Assets Trust, Inc. stockholders’ equity
Common stock, $0.01 par value, 490,000,000 shares authorized, 60,528,115 and 60,525,580 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
605  605 
Additional paid-in capital 1,456,747  1,453,272 
Accumulated dividends in excess of net income (235,107) (217,785)
Accumulated other comprehensive income 9,457  2,872 
Total American Assets Trust, Inc. stockholders’ equity 1,231,702  1,238,964 
Noncontrolling interests (31,734) (28,841)
Total equity 1,199,968  1,210,123 
TOTAL LIABILITIES AND EQUITY $ 3,007,190  $ 3,017,927 
The accompanying notes are an integral part of these consolidated financial statements.
1

American Assets Trust, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands, Except Shares and Per Share Data)
  Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
REVENUE:
Rental income $ 99,016  $ 87,639  $ 196,002  $ 168,769 
Other property income 5,139  4,170  9,623  7,026 
Total revenue 104,155  91,809  205,625  175,795 
EXPENSES:
Rental expenses 25,853  20,204  49,998  38,450 
Real estate taxes 11,287  10,612  22,716  21,966 
General and administrative 7,612  6,924  14,754  13,747 
Depreciation and amortization 31,087  27,646  61,499  55,147 
Total operating expenses 75,839  65,386  148,967  129,310 
OPERATING INCOME 28,316  26,423  56,658  46,485 
Interest expense (14,547) (14,862) (29,213) (28,867)
Loss on early extinguishment of debt —  —  —  (4,271)
Other (expense) income, net (181) (74) (343) (127)
NET INCOME 13,588  11,487  27,102  13,220 
Net income attributable to restricted shares (154) (135) (309) (272)
Net income attributable to unitholders in the Operating Partnership (2,852) (2,411) (5,688) (2,750)
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS $ 10,582  $ 8,941  $ 21,105  $ 10,198 
EARNINGS PER COMMON SHARE
Earnings per common share, basic
$ 0.18  $ 0.15  $ 0.35  $ 0.17 
Weighted average shares of common stock outstanding - basic 60,040,243  59,985,787  60,039,467  59,985,065 
Earnings per common share, diluted
$ 0.18  $ 0.15  $ 0.35  $ 0.17 
Weighted average shares of common stock outstanding - diluted 76,221,780  76,167,324  76,221,004  76,166,602 
DIVIDENDS DECLARED PER COMMON SHARE $ 0.32  $ 0.28  $ 0.64  $ 0.56 
COMPREHENSIVE INCOME
Net income $ 13,588  $ 11,487  $ 27,102  $ 13,220 
Other comprehensive income - unrealized income on swap derivatives during the period 3,314  475  8,910  1,222 
Reclassification of amortization of forward-starting swap realized gains included in interest expense (275) (275) (550) (550)
Reclassification of amortization of forward-starting swap realized gain included in loss on early extinguishment of debt —  —  —  (193)
Comprehensive income 16,627  11,687  35,462  13,699 
Comprehensive income attributable to non-controlling interests (3,496) (2,453) (7,462) (2,860)
Comprehensive income attributable to American Assets Trust, Inc. $ 13,131  $ 9,234  $ 28,000  $ 10,839 
The accompanying notes are an integral part of these consolidated financial statements.
2

American Assets Trust, Inc.
Consolidated Statement of Equity
(Unaudited)
(In Thousands, Except Share Data)
  American Assets Trust, Inc. Stockholders’ Equity Noncontrolling Interests - Unitholders in the Operating Partnership Total
  Common Shares Additional
Paid-in
Capital
Accumulated
Dividends in
Excess of Net
Income
Accumulated Other Comprehensive Income (Loss)
  Shares Amount
Balance at December 31, 2021 60,525,580  $ 605  $ 1,453,272  $ (217,785) $ 2,872  $ (28,841) $ 1,210,123 
Net income —  —  —  10,678  —  2,836  13,514 
Forfeiture of restricted stock (3,121) —  —  —  —  —  — 
Dividends declared and paid —  —  —  (19,367) —  (5,178) (24,545)
Stock-based compensation —  —  1,489  —  —  —  1,489 
Shares withheld for employee taxes (416) —  (15) —  —  —  (15)
Other comprehensive income - change in value of interest rate swaps —  —  —  —  4,408  1,188  5,596 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (217) (58) (275)
Balance at March 31, 2022 60,522,043  605  1,454,746  (226,474) 7,063  (30,053) 1,205,887 
Net income —  —  —  10,736  2,852  13,588 
Issuance of restricted stock 6,072  —  —  —  —  —  — 
Dividends declared and paid —  —  —  (19,369) —  (5,178) (24,547)
Stock-based compensation —  —  2,001  —  —  —  2,001 
Shares withheld for employee taxes —  —  —  —  —  —  — 
Other comprehensive income - change in value of interest rate swaps —  —  —  —  2,610  704  3,314 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (216) (59) (275)
Balance at June 30, 2022 60,528,115  $ 605  $ 1,456,747  $ (235,107) $ 9,457  $ (31,734) $ 1,199,968 


3

  American Assets Trust, Inc. Stockholders’ Equity Noncontrolling Interests - Unitholders in the Operating Partnership Total
  Common Shares Additional
Paid-in
Capital
Accumulated
Dividends in
Excess of Net
Income
Accumulated Other Comprehensive Income (Loss)
  Shares Amount
Balance at December 31, 2020 60,476,292  $ 605  $ 1,445,644  $ (176,560) $ 1,753  $ (18,036) $ 1,253,406 
Net income —  —  —  1,394  —  339  1,733 
Forfeiture of restricted stock (4,006) —  —  —  —  —  — 
Dividends declared and paid —  —  —  (16,932) —  (4,531) (21,463)
Stock-based compensation —  —  1,484  —  —  —  1,484 
Other comprehensive income - change in value of interest rate swaps —  —  —  —  579  168  747 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (216) (59) (275)
Reclassification of amortization of forward-starting swap realized gains included in loss on early extinguishment of debt —  —  —  —  (152) (41) (193)
Balance at March 31, 2021 60,472,286  605  1,447,128  (192,098) 1,964  (22,160) 1,235,439 
Net income —  —  —  9,076  2,411  11,487 
Issuance of restricted stock 5,184  —  —  —  —  —  — 
Forfeiture of restricted stock (2,604) —  —  —  —  —  — 
Dividends declared and paid —  —  —  (16,933) —  (4,531) (21,464)
Stock-based compensation —  —  1,484  —  —  —  1,484 
Other comprehensive income - change in value of interest rate swaps —  —  —  —  374  101  475 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (216) (59) (275)
Balance at June 30, 2021 60,474,866  $ 605  $ 1,448,612  $ (199,955) $ 2,122  $ (24,238) $ 1,227,146 

The accompanying notes are an integral part of these consolidated financial statements.
4

American Assets Trust, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
  Six Months Ended June 30,
  2022 2021
OPERATING ACTIVITIES
Net income $ 27,102  $ 13,220 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred rent revenue and amortization of lease intangibles (5,425) (8,938)
Depreciation and amortization 61,499  55,147 
Amortization of debt issuance costs and debt discounts 1,279  1,156 
Loss on early extinguishment of debt —  4,271 
Provision for uncollectable rental income (86) 776 
Stock-based compensation expense 3,490  2,968 
Unearned rents (1,714) (2,540)
Other, net (559) (554)
Changes in operating assets and liabilities
Change in accounts receivable 314  70 
Change in other assets (1,459) (4,419)
Change in accounts payable and accrued expenses (46) 14,540 
Change in security deposits payable 474  139 
Change in other liabilities and deferred credits 1,188  890 
Net cash provided by operating activities 86,057  76,726 
INVESTING ACTIVITIES
Acquisition of real estate (45,167) — 
Capital expenditures (63,060) (35,526)
Leasing commissions (4,252) (1,528)
Purchases of marketable securities —  (47,760)
Proceeds from the sale of marketable securities —  47,723 
Net cash used in investing activities (112,479) (37,091)
FINANCING ACTIVITIES
Repayment of unsecured line of credit —  (100,000)
Proceeds from unsecured notes payable —  494,675 
Repayment of unsecured notes payable —  (155,375)
Debt issuance costs (3,245) (5,075)
Dividends paid to common stock and unitholders (49,092) (42,927)
Shares withheld for employee taxes (15) — 
Net cash (used in) provided by financing activities (52,352) 191,298 
Net (decrease) increase in cash and cash equivalents (78,774) 230,933 
Cash, cash equivalents and restricted cash, beginning of period 139,524  139,049 
Cash, cash equivalents and restricted cash, end of period $ 60,750  $ 369,982 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:
Six Months Ended June 30,
2022 2021
Cash and cash equivalents $ 60,750  $ 368,266 
Restricted cash —  1,716 
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows $ 60,750  $ 369,982 
The accompanying notes are an integral part of these consolidated financial statements.
5

American Assets Trust, L.P.
Consolidated Balance Sheets
(In Thousands, Except Unit Data)
 
June 30, December 31,
2022 2021
  (unaudited)
ASSETS
Real estate, at cost
Operating real estate $ 3,454,499  $ 3,389,726 
Construction in progress 176,582  139,098 
Held for development 547  547 
3,631,628  3,529,371 
Accumulated depreciation (894,202) (847,390)
Real estate, net 2,737,426  2,681,981 
Cash and cash equivalents 60,750  139,524 
Accounts receivable, net 7,218  7,445 
Deferred rent receivables, net 87,579  82,724 
Other assets, net 114,217  106,253 
TOTAL ASSETS $ 3,007,190  $ 3,017,927 
LIABILITIES AND CAPITAL
LIABILITIES:
Secured notes payable, net $ 110,986  $ 110,965 
Unsecured notes payable, net 1,538,519  1,538,238 
Accounts payable and accrued expenses 66,334  64,531 
Security deposits payable 8,519  7,855 
Other liabilities and deferred credits, net 82,864  86,215 
Total liabilities 1,807,222  1,807,804 
Commitments and contingencies (Note 11)
CAPITAL:
Limited partners' capital, 16,181,537 and 16,181,537 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
(34,806) (30,138)
General partner's capital, 60,528,115 and 60,525,580 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
1,222,245  1,236,092 
Accumulated other comprehensive income 12,529  4,169 
Total capital 1,199,968  1,210,123 
TOTAL LIABILITIES AND CAPITAL $ 3,007,190  $ 3,017,927 

The accompanying notes are an integral part of these consolidated financial statements.

6

American Assets Trust, L.P.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands, Except Shares and Per Unit Data)
  Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
REVENUE:
Rental income $ 99,016  $ 87,639  $ 196,002  $ 168,769 
Other property income 5,139  4,170  9,623  7,026 
Total revenue 104,155  91,809  205,625  175,795 
EXPENSES:
Rental expenses 25,853  20,204  49,998  38,450 
Real estate taxes 11,287  10,612  22,716  21,966 
General and administrative 7,612  6,924  14,754  13,747 
Depreciation and amortization 31,087  27,646  61,499  55,147 
Total operating expenses 75,839  65,386  148,967  129,310 
OPERATING INCOME 28,316  26,423  56,658  46,485 
Interest expense (14,547) (14,862) (29,213) (28,867)
Loss on early extinguishment of debt —  —  —  (4,271)
Other (expense) income, net (181) (74) (343) (127)
NET INCOME 13,588  11,487  27,102  13,220 
Net income attributable to restricted shares (154) (135) (309) (272)
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P. $ 13,434  $ 11,352  $ 26,793  $ 12,948 
EARNINGS PER UNIT - BASIC
Earnings per unit, basic
$ 0.18  $ 0.15  $ 0.35  $ 0.17 
Weighted average units outstanding - basic 76,221,780  76,167,324  76,221,004  76,166,602 
EARNINGS PER UNIT - DILUTED
Earnings per unit, diluted
$ 0.18  $ 0.15  $ 0.35  $ 0.17 
Weighted average units outstanding - diluted 76,221,780  76,167,324  76,221,004  76,166,602 
DISTRIBUTIONS PER UNIT $ 0.32  $ 0.28  $ 0.64  $ 0.56 
COMPREHENSIVE INCOME
Net income $ 13,588  $ 11,487  $ 27,102  $ 13,220 
Other comprehensive income (loss) - unrealized income (loss) on swap derivatives during the period 3,314  475  8,910  1,222 
Reclassification of amortization of forward-starting swap realized gains included in interest expense (275) (275) (550) (550)
Reclassification of amortization of forward-starting swap realized gain included in loss on early extinguishment of debt —  —  —  (193)
Comprehensive income 16,627  11,687  35,462  13,699 
Comprehensive income attributable to Limited Partners (3,496) (2,453) (7,462) (2,860)
Comprehensive income attributable to General Partner $ 13,131  $ 9,234  $ 28,000  $ 10,839 

The accompanying notes are an integral part of these consolidated financial statements.
7

American Assets Trust, L.P.
Consolidated Statement of Partners' Capital
(Unaudited)
(In Thousands, Except Unit Data)

Limited Partners' Capital (1)
General Partner's Capital (2)
Accumulated Other Comprehensive Income (Loss) Total Capital
Units Amount Units Amount
Balance at December 31, 2021 16,181,537  $ (30,138) 60,525,580  $ 1,236,092  $ 4,169  $ 1,210,123 
Net income —  2,836  —  10,678  —  13,514 
Forfeiture of restricted units —  —  (3,121) —  —  — 
Distributions —  (5,178) —  (19,367) —  (24,545)
Stock-based compensation —  —  —  1,489  —  1,489 
Units withheld for employee taxes —  —  (416) (15) —  (15)
Other comprehensive income - change in value of interest rate swap —  —  —  —  5,596  5,596 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (275) (275)
Balance at March 31, 2022 16,181,537  (32,480) 60,522,043  1,228,877  9,490  1,205,887 
Net income —  2,852  —  10,736  —  13,588 
Issuance of restricted units —  —  6,072  —  —  — 
Forfeiture of restricted units —  —  —  —  —  — 
Distributions —  (5,178) —  (19,369) —  (24,547)
Stock-based compensation —  —  —  2,001  —  2,001 
Other comprehensive income - change in value of interest rate swap —  —  —  —  3,314  3,314 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (275) (275)
Balance at June 30, 2022 16,181,537  $ (34,806) 60,528,115  $ 1,222,245  $ 12,529  $ 1,199,968 


8

 
Limited Partners' Capital (1)
General Partner's Capital (2)
Accumulated Other Comprehensive Income (Loss) Total Capital
  Units Amount Units Amount
Balance at December 31, 2020 16,181,537  $ (19,020) 60,476,292  $ 1,269,689  $ 2,737  $ 1,253,406 
Net income —  339  —  1,394  —  1,733 
Forfeiture of restricted units —  —  (4,006) —  —  — 
Distributions —  (4,531) —  (16,932) —  (21,463)
Stock-based compensation —  —  —  1,484  —  1,484 
Other comprehensive income - change in value of interest rate swap —  —  —  —  747  747 
Reclassification of amortization of forward-starting swap realized gains included in interest expense —  —  —  —  (275) (275)
Reclassification of amortization of forward-starting swap included in loss on early extinguishment of debt —  $ —  —  $ —  $ (193) (193)
Balance at March 31, 2021 16,181,537  (23,212) 60,472,286  1,255,635  3,016  1,235,439 
Net income —  2,411  —  9,076  —  11,487 
Issuance of restricted units —  —  5,184  —  —  — 
Forfeiture of restricted units —  —  (2,604) —  —  — 
Distributions —  (4,531) —  (16,933) —  (21,464)
Stock-based compensation —  —  —  1,484  —  1,484 
Other comprehensive income - change in value of interest rate swap —  —  —  —  475  475 
Reclassification of amortization of forward-starting swap included in loss on early extinguishment of debt —  —  —  —  (275) (275)
Balance at June 30, 2021 16,181,537  $ (25,332) 60,474,866  $ 1,249,262  $ 3,216  $ 1,227,146 


(1) Consists of limited partnership interests held by third parties.
(2) Consists of general partnership interests held by American Assets Trust, Inc.
The accompanying notes are an integral part of these consolidated financial statements.
9

American Assets Trust, L.P.
Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
  Six Months Ended June 30,
  2022 2021
OPERATING ACTIVITIES
Net income $ 27,102  $ 13,220 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred rent revenue and amortization of lease intangibles (5,425) (8,938)
Depreciation and amortization 61,499  55,147 
Amortization of debt issuance costs and debt discounts 1,279  1,156 
Loss on early extinguishment of debt —  4,271 
Provision for uncollectable rental income (86) 776 
Stock-based compensation expense 3,490  2,968 
Unearned rents (1,714) (2,540)
Other, net (559) (554)
Changes in operating assets and liabilities
Change in accounts receivable 314  70 
Change in other assets (1,459) (4,419)
Change in accounts payable and accrued expenses (46) 14,540 
Change in security deposits payable 474  139 
Change in other liabilities and deferred credits 1,188  890 
Net cash provided by operating activities 86,057  76,726 
INVESTING ACTIVITIES
Acquisition of real estate (45,167) — 
Capital expenditures (63,060) (35,526)
Leasing commissions (4,252) (1,528)
Purchases of marketable securities —  (47,760)
Proceeds from the sale of marketable securities —  47,723 
Net cash used in investing activities (112,479) (37,091)
FINANCING ACTIVITIES
Repayment of unsecured line of credit —  (100,000)
Proceeds from unsecured notes payable —  494,675 
Repayment of unsecured notes payable —  (155,375)
Debt issuance costs (3,245) (5,075)
Distributions (49,092) (42,927)
Shares withheld for employee taxes (15) — 
Net cash (used in) provided by financing activities (52,352) 191,298 
Net (decrease) increase in cash and cash equivalents (78,774) 230,933 
Cash, cash equivalents and restricted cash, beginning of period 139,524  139,049 
Cash, cash equivalents and restricted cash, end of period $ 60,750  $ 369,982 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:
Six Months Ended June 30,
2022 2021
Cash and cash equivalents $ 60,750  $ 368,266 
Restricted cash —  1,716 
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows $ 60,750  $ 369,982 
The accompanying notes are an integral part of these consolidated financial statements.
10

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Organization
American Assets Trust, Inc. (which may be referred to in these financial statements as the “Company,” “we,” “us,” or “our”) is a Maryland corporation formed on July 16, 2010 that did not have any operating activity until the consummation of our initial public offering on January 19, 2011. The Company is the sole general partner of American Assets Trust, L.P., a Maryland limited partnership formed on July 16, 2010 (the “Operating Partnership”). The Company’s operations are carried on through our Operating Partnership and its subsidiaries, including our taxable real estate investment trust ("REIT") subsidiary ("TRS"). Since the formation of our Operating Partnership, the Company has controlled our Operating Partnership as its general partner and has consolidated its assets, liabilities and results of operations.
We are a full service, vertically integrated, and self-administered REIT with approximately 206 employees providing substantial in-house expertise in asset management, property management, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing.
As of June 30, 2022, we owned or had a controlling interest in 31 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of June 30, 2022, we owned land at three of our properties that we classify as held for development and/or construction in progress. A summary of the properties owned by us is as follows:
Retail
Carmel Country Plaza Gateway Marketplace Alamo Quarry Market
Carmel Mountain Plaza Del Monte Center Hassalo on Eighth - Retail
South Bay Marketplace Geary Marketplace
Lomas Santa Fe Plaza The Shops at Kalakaua
Solana Beach Towne Centre Waikele Center
Office
La Jolla Commons One Beach Street Corporate Campus East III
Torrey Reserve Campus First & Main Bel-Spring 520
Torrey Point Lloyd Portfolio
Solana Crossing City Center Bellevue
The Landmark at One Market Eastgate Office Park
Multifamily
Loma Palisades Hassalo on Eighth - Residential
Imperial Beach Gardens
Mariner's Point
Santa Fe Park RV Resort
Pacific Ridge Apartments
Mixed-Use
Waikiki Beach Walk Retail and Embassy Suites™ Hotel
Held for Development and/or Construction in Progress
La Jolla Commons – Land
Solana Crossing – Land
Lloyd Portfolio – Construction in Progress
11

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)


Basis of Presentation
Our consolidated financial statements include the accounts of the Company, our Operating Partnership and our subsidiaries. The equity interests of other investors in our Operating Partnership are reflected as noncontrolling interests.
The Company follows the Financial Accounting Standards Board (the "FASB") guidance for determining whether an entity is a variable interest entity (“VIE”) and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity would be required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. American Assets Trust, Inc. has concluded that the Operating Partnership is a VIE, and because American Assets Trust, Inc. has both the power and the rights to control the Operating Partnership, American Assets Trust, Inc. is the primary beneficiary and is required to continue to consolidate the Operating Partnership. Substantially all of the assets and liabilities of the Company are related to the operating partnership VIE.
All intercompany transactions and balances are eliminated in consolidation.
The accompanying consolidated financial statements of the Company and the Operating Partnership have been prepared in accordance with the rules applicable to Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (“GAAP”) for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and notes therein included in the Company's and Operating Partnership's annual report on Form 10-K for the year ended December 31, 2021.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using our best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Any reference to the number of properties, number of units, square footage, employee numbers or percentages of beneficial ownership of our shares are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.
Consolidated Statements of Cash Flows—Supplemental Disclosures
The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows (in thousands): 
  Six Months Ended June 30,
  2022 2021
Supplemental cash flow information
Total interest costs incurred $ 31,774  $ 30,092 
Interest capitalized $ 2,561  $ 1,225 
Interest expense $ 29,213  $ 28,867 
Cash paid for interest, net of amounts capitalized $ 28,201  $ 22,093 
Cash paid for income taxes $ 474  $ 222 
Supplemental schedule of noncash investing and financing activities    
Accounts payable and accrued liabilities for construction in progress $ 19,489  $ 9,695 
Accrued leasing commissions $ 2,936  $ 972 


12

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

 Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes to our significant accounting policies during the six months ended June 30, 2022.

Segment Information
Segment information is prepared on the same basis that our chief operating decision maker reviews information for operational decision-making purposes. We operate in four business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room all-suite hotel.
Revenue Recognition and Accounts Receivable
Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed rent escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on management's assessment of credit, collection and other business risks.
We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which require significant judgment by management. The collectability of receivables is affected by numerous different factors including current economic conditions, the impact of tenant bankruptcies, the status of collectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communications between our operating personnel and tenants, the extent of security deposits and letters of credit held with respect to tenants, and the ability of tenants to perform under the terms of their lease agreement. The provision for doubtful accounts at June 30, 2022 and December 31, 2021 was approximately $3.7 million and $4.6 million, respectively.
Rent Concessions – COVID-19
In 2021, we provided lease concessions to certain tenants, primarily within the retail segment, as a result of the COVID-19 pandemic, in the form of rent deferrals and abatements. These lease concessions generally included an increase in our rights as a lessor. We assess each lease concession and determine whether it represents a lease modifications under Accounting Standards Codification Topic 842, Leases ("ASC 842"). During the second quarter of 2022, we provided an immaterial amount of lease concessions to certain tenants that continued being impacted by the COVID-19 pandemic.
Recent Accounting Pronouncements
 
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides companies with optional practical expedients to ease the accounting burden for contract modifications associated with transitioning away from LIBOR and other interbank offered rates that are expected to be discontinued as part of reference rate reform. For hedges, the guidance generally allows changes to the reference rate and other critical terms without having to de-designate the hedging relationship, and permits the shortcut method to continue to be applied. For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract. This guidance can be applied immediately, however, it is generally only available through December 31, 2022, with a newly proposed sunset date of December 31, 2024. We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients.
13

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

NOTE 2. REAL ESTATE
Property Asset Acquisitions
On March 8, 2022, we acquired Bel-Spring 520 in Bellevue, Washington, consisting of an approximately 93,000 square feet, multi-tenant office campus. The purchase price was $45.5 million, less seller credits of approximately $0.1 million of future rent abatement, and approximately $0.6 million of contractual tenant improvements. Additionally, closing costs were approximately $0.1 million.
The property was acquired with cash on hand.
The financial information set forth below summarizes the Company’s purchase price allocation for Bel-Spring 520 during the six months ended June 30, 2022 (in thousands):
 
Bel-Spring 520
Land $ 13,744 
Building 27,793 
Land improvements 713 
Furniture, fixtures, and equipment 1,833 
Total real estate 44,083 
Lease intangibles 2,036 
Prepaid expenses and other assets 10 
Assets acquired $ 46,129 
Accounts payable and accrued expenses $ (14)
Security deposits payable (189)
Other liabilities and deferred credits (641)
Liabilities assumed $ (844)

The value allocated to lease intangibles is amortized over the related lease term as depreciation and amortization expense in the statement of income. The remaining weighted average amortization period as of June 30, 2022, is 3.5.
The following table summarizes the operating results for Bel-Spring 520 included in the Company's historical consolidated statement of operations for the period of acquisition through June 30, 2022 (in thousands):

Bel-Spring 520
Revenues $ 953 
Operating expenses 947 
Operating income
Net income attributable to American Assets Trust, Inc. $

14

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

NOTE 3. ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES
The following summarizes our acquired lease intangibles and leasing costs, which are included in other assets and other liabilities and deferred credits, as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022 December 31, 2021
In-place leases $ 65,654  $ 67,215 
Accumulated amortization (39,236) (38,130)
Above market leases 1,987  2,532 
Accumulated amortization (1,859) (2,383)
Acquired lease intangible assets, net $ 26,546  $ 29,234 
Below market leases $ 57,368  $ 58,655 
Accumulated accretion (36,042) (36,253)
Acquired lease intangible liabilities, net $ 21,326  $ 22,402 

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy for inputs used in measuring fair value is as follows:

1.Level 1 Inputs—quoted prices in active markets for identical assets or liabilities
2.Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities
3.Level 3 Inputs—unobservable inputs
The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs. We measure the fair value of this liability based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques.

The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contract at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

15

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2022 we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative. As a result, we have determined that our derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows (in thousands):
  June 30, 2022 December 31, 2021
  Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Deferred compensation liability $ —  $ 2,231  $ —  $ 2,231  $ —  $ 2,503  $ —  $ 2,503 
Interest rate swap asset $ —  $ 7,103  $ —  $ 7,103  $ —  $ —  $ —  $ — 
Interest rate swap liability $ —  $ —  $ —  $ —  $ —  $ 1,807  $ —  $ 1,807 
 The fair value of our secured notes payable and unsecured senior guaranteed notes are sensitive to fluctuations in interest rates. Discounted cash flow analysis using observable market interest rates (Level 2) is generally used to estimate the fair value of our secured notes payable, using rates ranging from 3.6% to 5.4%.
Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The carrying values of our term loans set forth below are deemed to be at fair value since the outstanding debt related to Term Loans B and C are directly tied to monthly LIBOR contracts and Term Loan A is directly tied to the monthly SOFR contract. A summary of the carrying amount and fair value of our secured financial instruments, all of which are based on Level 2 inputs, is as follows (in thousands):  
  June 30, 2022 December 31, 2021
  Carrying Value Fair Value Carrying Value Fair Value
Secured notes payable, net $ 110,986  $ 111,548  $ 110,965  $ 113,207 
Unsecured term loans, net $ 249,214  $ 250,000  $ 249,654  $ 250,000 
Unsecured senior guaranteed notes, net $ 798,158  $ 783,692  $ 797,953  $ 832,795 
Senior unsecured notes, net $ 491,147  $ 429,470  $ 490,631  $ 503,000 

NOTE 5. DERIVATIVE AND HEDGING ACTIVITIES

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.  To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 
The following is a summary of the terms of our outstanding interest rate swaps as of June 30, 2022 (dollars in thousands):
Swap Counterparty   Notional Amount   Effective Date   Maturity Date   Fair Value
U.S. Bank N.A. $ 100,000  3/1/2016 3/1/2023 $ 938 
Wells Fargo Bank, N.A. $ 50,000  5/2/2016 3/1/2023 $ 459 
Bank of America, N.A. $ 50,000  1/14/2022 1/5/2027 $ 2,865 
Wells Fargo Bank, N.A. $ 50,000  1/14/2022 1/5/2027 $ 2,841 
The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income and will be subsequently reclassified into earnings during the period in
16

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

which the hedged forecasted transaction affects earnings for as long as hedged cash flows remain probable. During the next twelve months, we estimate the cash flow hedges in place will reduce interest expense by approximately $1.1 million.
The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative.  This analysis reflects the contractual terms of the derivative, including the period to maturity, counter party credit risk and uses observable market-based inputs, including interest rate curves, and implied volatilities.  The fair value of the interest rate swap is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. 
NOTE 6. OTHER ASSETS

Other assets consist of the following (in thousands): 
June 30, 2022 December 31, 2021
Leasing commissions, net of accumulated amortization of $41,664 and $40,595, respectively
$ 39,687  $ 38,589 
Interest rate swap asset 7,103  — 
Acquired above market leases, net 128  149 
Acquired in-place leases, net 26,418  29,085 
Lease incentives, net of accumulated amortization of $943 and $913, respectively
714  595 
Other intangible assets, net of accumulated amortization of $1,544 and $1,382, respectively
2,355  2,445 
Debt issuance costs, net of accumulated amortization of $2,394 and $2,070, respectively
2,268  — 
Right-of-use lease asset, net 25,098  26,254 
Prepaid expenses and other 10,446  9,136 
Total other assets $ 114,217  $ 106,253 

NOTE 7. OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits consist of the following (in thousands):
June 30, 2022 December 31, 2021
Acquired below market leases, net $ 21,326  $ 22,402 
Prepaid rent and deferred revenue 16,112  16,309 
Interest rate swap liability —  1,807 
Deferred rent expense and lease intangible — 
Deferred compensation 2,231  2,503 
Deferred tax liability 967  967 
Straight-line rent liability 15,340  14,274 
Lease liability 26,831  27,917 
Other liabilities 57  33 
Total other liabilities and deferred credits, net $ 82,864  $ 86,215 
Straight-line rent liability relates to leases which have rental payments that decrease over time or one-time upfront payments for which the rental revenue is deferred and recognized on a straight-line basis.

17

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

NOTE 8. DEBT
Debt of American Assets Trust, Inc.
American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's obligations under the (i) amended and restated credit facility, (ii) term loans, (iii) senior guaranteed notes, and (iv) senior unsecured notes.
Debt of American Assets Trust, L.P.
Secured notes payable
The following table is a summary of our total secured notes payable outstanding as of June 30, 2022 and December 31, 2021 (in thousands):
  Principal Balance as of Stated Interest Rate Stated Maturity Date
Description of Debt June 30, 2022 December 31, 2021 as of June 30, 2022
City Center Bellevue (1)
$ 111,000  $ 111,000  3.98  % November 1, 2022
111,000  111,000 
Debt issuance costs, net of accumulated amortization of $408 and $387, respectively
(14) (35)
Total Secured Notes Payable Outstanding $ 110,986  $ 110,965 

(1)Interest only.
Additionally, the Operating Partnership has provided a carve-out guarantee on the property-level mortgage debt at City Center Bellevue. Certain loans require the Operating Partnership to comply with various financial covenants. As of June 30, 2022, the Operating Partnership was in compliance with these financial covenants.

18

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

Unsecured notes payable
The following table is a summary of the Operating Partnership's total unsecured notes payable outstanding as of June 30, 2022 and December 31, 2021 (in thousands):
Description of Debt Principal Balance as of Stated Interest Rate Stated Maturity Date
June 30, 2022 December 31, 2021 as of June 30, 2022
Term Loan A $ 100,000  $ 100,000  Variable
(1)
January 5, 2027
Term Loan B 100,000  100,000  Variable
(2)
March 1, 2023
Term Loan C 50,000  50,000  Variable
(3)
March 1, 2023
Senior Guaranteed Notes, Series F 100,000  100,000  3.78  %
(4)
July 19, 2024
Senior Guaranteed Notes, Series B 100,000  100,000  4.45  % February 2, 2025
Senior Guaranteed Notes, Series C 100,000  100,000  4.50  % April 1, 2025
Senior Guaranteed Notes, Series D 250,000  250,000  4.29  %
(5)
March 1, 2027
Senior Guaranteed Notes, Series E 100,000  100,000  4.24  %
(6)
May 23, 2029
Senior Guaranteed Notes, Series G 150,000  150,000  3.91  %
(7)
July 30, 2030
3.375% Senior Unsecured Notes 500,000  500,000  3.38  % February 1, 2031
1,550,000  1,550,000 
Debt discount and issuance costs, net of accumulated amortization of $10,925 and $9,462, respectively
(11,481) (11,762)
Total Unsecured Notes Payable $ 1,538,519  $ 1,538,238 
 
(1)The Operating Partnership has entered into two interest rate swap agreements that are intended to fix the interest rate associated with Term Loan A at approximately 2.70% through its maturity date, subject to adjustments based on our consolidated leverage ratio.
(2)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan B at approximately 3.15% through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan B is approximately 2.65%, subject to adjustments based on our consolidated leverage ratio.
(3)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan C at approximately 3.14% through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan C is approximately 2.64%, subject to adjustments based on our consolidated leverage ratio.
(4)The Operating Partnership entered into a treasury lock contract on May 31, 2017, which was settled on June 23, 2017 at a loss of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge; accordingly, the effective interest rate is approximately 3.85% per annum.
(5)The Operating Partnership entered into forward-starting interest rate swap contracts on March 29, 2016 and April 7, 2016, which were settled on January 18, 2017 at a gain of approximately $10.4 million. Each of the forward-starting interest swap rate contracts were deemed to be a highly effective cash flow hedge; accordingly, the effective interest rate is approximately 3.87% per annum.
(6)The Operating Partnership entered into a treasury lock contract on April 25, 2017, which was settled on May 11, 2017 at a gain of approximately $0.7 million. The treasury lock contract was deemed to be a highly effective cash flow hedge; accordingly, the effective interest rate is approximately 4.18% per annum.
(7)The Operating Partnership entered into a treasury lock contract on June 20, 2019, which was settled on July 17, 2019 at a gain of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge; accordingly, the effective interest rate is approximately 3.88% per annum.

On January 26, 2021, the Operating Partnership issued $500 million of senior unsecured notes (the "3.375% Senior Notes") that mature February 1, 2031 and bear interest at 3.375% per annum. The 3.375% Senior Notes were priced at 98.935% of the principal amount with a yield to maturity of 3.502%. The net proceeds of the 3.375% Senior Notes, after the issuance discount, underwriting fees, and other costs were approximately $489.7 million, which were primarily used to (i) prepay our $150 million Senior Guaranteed Notes, Series A, with a make-whole payment (as defined in the Note Purchase Agreement for the Series A Notes) thereon of approximately $3.9 million, on January 26, 2021, (ii) repay our $100 million then outstanding balance under our Revolver Loan on January 26, 2021, (iii) fund the development of the La Jolla Commons III office building and (iv) for general corporate purposes.
Certain unsecured loans and notes require the Operating Partnership to comply with various financial covenants. As of June 30, 2022, the Operating Partnership was in compliance with these financial covenants.

19

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

Amended Term Loan Agreement

On January 9, 2018, we entered into the Third Amendment to the Term Loan Agreement (as so amended, the "Term Loan Agreement"), which maintains the seven years $150 million unsecured term loan (referred to herein as Term Loan B and Term Loan C) to the Operating Partnership that matures on March 1, 2023 (the “$150mm Term Loan”). Effective as of March 1, 2018, borrowings under the Term Loan Agreement with respect to the $150mm Term Loan bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) LIBOR, plus a spread which ranges from 1.20% to 1.70% based on the Operating Partnership’s consolidated leverage ratio, or (2) a base rate equal to the highest of (a) 0%, (b) the prime rate, (c) the federal funds rate plus 50 bps or (d) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.70% to 1.35% based on the Operating Partnership’s consolidated leverage ratio. Additionally, the Operating Partnership may elect for borrowings to bear interest based on a ratings-based pricing grid as per the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Term Loan Agreement.

Third Amended and Restated Credit Facility
On January 9, 2018, we entered into a second amended and restated credit agreement (the "Second Amended and Restated Credit Facility"). The Second Amended and Restated Credit Facility provides for aggregate, unsecured borrowing of $450 million, consisting of a revolving line of credit of $350 million (the "Revolver Loan") and a term loan of $100 million (the "Term Loan A"). The Second Amended and Restated Credit Facility had an accordion feature that allowed us to increase the availability thereunder up to an additional $250 million, subject to meeting specified requirements and obtaining additional commitments from lenders.
Borrowings under the Second Amended and Restated Credit Agreement initially bore interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from (a) 1.05% to 1.50% (with respect to the Revolver Loan) and (b) 1.30% to 1.90% (with respect to Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) LIBOR plus 100 bps, plus a spread which ranges from (i) 0.10% to 0.50% (with respect to the Revolver Loan) and (ii) 0.30% to 0.90% (with respect to Term Loan A), in each case based on our consolidated leverage ratio.
On January 9, 2019, we entered into the first amendment (“First Amendment”) to the Second Amended and Restated Credit Facility, which extended the maturity date of Term Loan A to January 9, 2021, subject to three, one year extension options. In October 2020, we exercised an option to extend the maturity date of Term Loan A to January 9, 2022, subject to certain conditions. Additionally, in connection with the First Amendment, borrowings under the Second Amended and Restated Credit Facility with respect to Term Loan A bore interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from 1.20% to 1.70% based on our consolidated total leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.20% to 0.70% based on our consolidated total leverage ratio. The foregoing rates were intended to be more favorable than previously contained in the Second Amended and Restated Credit Facility (prior to entry into the First Amendment) with respect to Term Loan A.
On January 5, 2022, we entered into the Third Amended and Restated Credit Facility, which provides for aggregate, unsecured borrowings of up to $500 million, consisting of a revolving line of credit of $400 million (the “2022 Revolver Loan”) and a term loan of $100 million (the “2022 Term Loan A”). The 2022 Revolver Loan initially matures on January 5, 2026, subject to two, six-month extension options. The 2022 Term Loan A matures on January 5, 2027, with no further extension options. Borrowings under the Third Amended and Restated Credit Agreement bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) the applicable Secured Overnight Financing Rate (“SOFR”), plus the applicable SOFR Adjustment, and a spread which ranges from (a) 1.05% to 1.50% (with respect to the 2022 Revolver Loans) and (b) 1.20% to 1.70% (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps, (c) the Term SOFR Screen Rate with a term of one month plus 100 bps and (d) 1.00%, plus a spread which ranges from (i) 0.10% to 0.50% (with respect to the 2022 Revolver Loan) and (ii) 0.20% to 0.70% (with respect to the 2022 Term Loan A), in each case based on our consolidated leverage ratio. On January 14, 2022, the Operating Partnership entered into two interest rate swap agreements that are intended to fix the interest rate associated with the 2022 Term Loan A at approximately 2.70% through January 5, 2027, subject to adjustments based on our consolidated leverage ratio. At June 30, 2022, there were no amounts outstanding under the 2022 Revolver Loan and we had incurred approximately $2.3 million of debt issuance costs, net, which are recorded in other assets,
20

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

net on the consolidated balance sheets. For the six months ended June 30, 2022, the weighted average interest rate on the 2022 Revolver Loan was 1.45%

Additionally, the Third Amended and Restated Credit Facility includes a number of customary financial covenants, including:
A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60%;
A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 40%;
A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x;
A minimum unsecured interest coverage ratio of 1.75x;
A maximum unsecured leverage ratio of 60%; and
Recourse indebtedness at any time cannot exceed 15% of total asset value.
The Third Amended and Restated Credit Facility provides that our annual distributions may not exceed the greater of (1) 95% of our funds from operation ("FFO") or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.
As of June 30, 2022, the Operating Partnership was in compliance with the financial covenants in the Third Amended and Restated Credit Facility.
NOTE 9. PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P.
Noncontrolling interests in our Operating Partnership are interests in the Operating Partnership that are not owned by us. Noncontrolling interests consisted of 16,181,537 common units (the “noncontrolling common units”), and represented approximately 21.2% of the ownership interests in our Operating Partnership at June 30, 2022. Common units and shares of our common stock have essentially the same economic characteristics in that common units and shares of our common stock share equally in the total net income or loss distributions of our Operating Partnership. Investors who own common units have the right to cause our Operating Partnership to redeem any or all of their common units for cash equal to the then-current market value of one share of our common stock, or, at our election, shares of our common stock on a one-for-one basis.
During the six months ended June 30, 2022, no common units were converted into shares of our common stock.
Earnings Per Unit of the Operating Partnership
Basic earnings per unit (“EPU”) of the Operating Partnership is computed by dividing income applicable to unitholders by the weighted average Operating Partnership units outstanding, as adjusted for the effect of participating securities. Operating Partnership units granted in equity-based payment transactions that have non-forfeitable dividend equivalent rights are considered participating securities prior to vesting. The impact of unvested Operating Partnership unit awards on EPU has been calculated using the two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested Operating Partnership units’ participation rights in undistributed earnings.
The calculation of diluted EPU for the three months ended June 30, 2022 and 2021 does not include the weighted average of 483,110 and 486,035 unvested outstanding Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders. The calculation of diluted EPU for the six months ended June 30, 2022 and 2021 does not include the weighted average of 484,295 and 487,895 unvested Operating Partnership units,
respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.
21

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

NOTE 10. EQUITY OF AMERICAN ASSETS TRUST, INC.
Stockholders' Equity
On December 3, 2021, we entered into an at-the-market ("ATM") equity program with five sales agents in which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $250 million. The sales of shares of our common stock made through the ATM equity program, as amended, are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. For the six months ended June 30, 2022, no shares of common stock were sold through the ATM equity program.

We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As of June 30, 2022, we had the capacity to issue up to $250 million in shares of our common stock under our current ATM equity program. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs. As of June 30, 2022, we have no obligation to sell the remaining shares available for sale under the ATM equity program.
Dividends
The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the six months ended June 30, 2022:
Period Amount per
Share/Unit
Period Covered Dividend Paid Date
First Quarter 2022 $ 0.32  January 1, 2022 to March 31, 2022 March 24, 2022
Second Quarter 2022 $ 0.32  April 1, 2022 to June 30, 2022 June 23, 2022
Taxability of Dividends
Earnings and profits, which determine the taxability of distributions to stockholders and holders of common units, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of revenue recognition and compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation.
Stock-Based Compensation

We follow the FASB guidance related to stock-based compensation which establishes financial accounting and reporting standards for stock-based employee compensation plans, including all arrangements by which employees receive shares of stock or other equity instruments of the employer.  The guidance also defines a fair value-based method of accounting for an employee stock award or similar equity instrument.
The following table summarizes the activity of restricted stock awards during the six months ended June 30, 2022:
Units Weighted Average Grant Date Fair Value
Nonvested at January 1, 2022 487,397  $ 23.78 
Granted 6,072  32.94 
Vested (6,350) 35.66 
Forfeited (3,121) 23.18 
Nonvested at June 30, 2022 483,998  $ 23.74 
We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $2.0 million and $1.5 million in noncash compensation expense for the three months ended June 30, 2022 and 2021, respectively, which is included in general and administrative expenses on the consolidated statements of comprehensive income. We recognized $3.5 million and $3.0 million in noncash compensation expense for the six months ended June 30, 2022 and 2021, respectively. Unrecognized compensation expense was $7.2 million at June 30, 2022.
22

American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2022
(Unaudited)

Earnings Per Share
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings. The weighted average unvested shares outstanding, which are considered participating securities, were 483,110 and 486,035 for the three months ended June 30, 2022 and 2021, respectively, and 484,295 and 487,895 for the six months ended June 30, 2022 and 2021, respectively. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares as these unvested shares have nonforfeitable dividend equivalent rights.
Diluted EPS is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method. For the three and six months ended June 30, 2022 and 2021, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable. Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive for all periods presented, and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
The computation of basic and diluted EPS is presented below (dollars in thousands, except share and per share amounts): 
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
NUMERATOR
Net income $ 13,588  $ 11,487  $ 27,102  $ 13,220 
Less: Net income attributable to restricted shares (154) (135) (309) (272)
Less: Income from operations attributable to unitholders in the Operating Partnership
(2,852) (2,411) (5,688) (2,750)
Net income attributable to common stockholders—basic
$ 10,582  $ 8,941  $ 21,105  $ 10,198 
Income from operations attributable to American Assets Trust, Inc. common stockholders—basic
$ 10,582  $ 8,941  $ 21,105  $ 10,198