American Assets Trust, Inc. Aktie

Good morning, and welcome to the American Assets Trust First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the call over to Meleana Leaverton, Associate General Counsel of American Assets Trust. Please go ahead.

Thank you, and good morning. The statements made on this earnings call include forward-looking statements based on current expectations, which statements are subject to risks and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements as actual events could cause the company's results to differ materially from these forward-looking statements.

Yesterday afternoon, American Assets Trust's earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investors section of its website, americanassetstrust.com.

It is now my pleasure to turn the call over to Adam Wyll, President and CEO of American Assets Trust.

Good morning, everyone, and thank you for joining us today. At American Assets Trust, we continue to approach this market with the same mindset that has guided us across cycles, patient, disciplined and with a long-term focus. That mindset, combined with the quality of our assets and our platform, guides how we allocate capital, manage risk and run our business.

We started 2026 in line with our expectations, generating $0.51 of FFO per diluted share and continuing to make progress against the priorities we laid out last quarter. Across the portfolio, we saw encouraging activity, most notably in office leasing, while our retail assets remained highly leased and consistent, our multifamily teams operated well through a competitive supply environment, and Waikiki Beach Walk delivered steady results against a still mixed tourism backdrop.

Before turning to the portfolio, I want to highlight a significant balance sheet accomplishment. On April 1, we successfully completed the recast and upsize of our unsecured credit facility. We increased our revolving line of credit from $400 million to $500 million and extended the maturity of the revolver and our $100 million term loan to April 1, 2030. Altogether, this facility provides us with $600 million of total unsecured borrowing capacity. This outcome reflects the quality of our portfolio, the strength of our banking relationships and the confidence of our lender group has in our credit.

Importantly, it gives us enhanced financial flexibility and runway as we execute our leasing and operating objectives now with no debt maturities until 2027. That added capacity is particularly valuable in the current market. While the macro backdrop remains uneven, our tenants are generally well capitalized and the markets where we operate continue to benefit from diversified economies, strong demographics and meaningful barriers to new supply. Those structural advantages matter, particularly during periods when the broader landscape is less predictable.

One topic that has generated considerable discussion in our office segment is artificial intelligence. AI is driving investment, business formation and growth across technology, infrastructure and innovation-oriented companies, along with the professional and advisory ecosystem that supports them. While its impact on office demand will vary by industry, we believe the net effect in our markets has been constructive. At the same time, the bar for office space keeps rising. When companies make office commitments today, they are focused on location, amenities, flexibility, ownership quality and the ability to attract talent, attributes that define our coastal office portfolio.

On our own platform, we are investing in technology to improve how we operate from work order management and preventative maintenance analytics to tenant communication tools while also building the data foundation for future AI capabilities. We are early in this effort, but we believe it can become a differentiator as we improve the tenant experience and our operating margins.

In office, the momentum we flagged last quarter carried forward. Demand concentrates at the top of the market and well-located, well-amenitized buildings with strong ownership. That is where we compete. Our office portfolio ended the quarter 84.5% leased and our same-store office portfolio ended the quarter 86% leased. Same-store office cash NOI came in essentially flat year-over-year, modestly ahead of our internal expectations, reflecting the known move-outs we've previously discussed.

During the quarter, we executed approximately 237,000 square feet of office leases with comparable cash leasing spreads of 4.8% and straight-line leasing spreads at 10.6%. Meanwhile, of our 14 noncomparable leases in Q1, which are now separately disclosed in our supplemental, 12 were new tenants, 9 of which were in our spec suite program, underscoring the role that program is playing in converting demand into executed leases.

We entered the second quarter on solid footing, including approximately 244,000 square feet of previously signed leases not yet commenced, another 122,000 square feet in lease documentation and a proposal pipeline of over 200,000 square feet. At La Jolla Commons Tower III, the building is currently 49% leased with proposals out on another 30% of the building. The UTC submarket has limited large block availabilities outside of Tower III and with no meaningful new supply on the horizon, we believe we are in a strong position to capture large tenant requirements in the submarket, including several active requirements we are tracking today.

At One Beach Street, the building is currently 36% leased. While one larger opportunity we referenced last quarter did not move forward, our leasing focus has shifted toward building a broader pipeline of smaller and midsized tenants. We already have permits in hand and work underway to advance our spec suite build-out, positioning us to capture tenants seeking high-quality, move-in-ready space.

Prospect activity has improved and the execution across the portfolio has been strong. We remain confident that the trajectory of our office portfolio, including our progress towards stabilizing Tower III and One Beach will translate into increased cash flow as these leases convert to revenue.

Last quarter, I mentioned our goal of ending the year between 85% and 88% leased across our office portfolio. Since then, we learned that Genentech at Lloyd District, approximately 67,000 square feet reversed course on a short-term renewal and will be vacating in Q4. The space itself is turnkey and modern, and we believe it will show well in the market. However, the vacancy was not in our assumptions last quarter. And as a result, we are now targeting the lower end of that range. We have some work to do, but reaching that level would still represent a meaningful step forward.

Retail remains a source of consistent, reliable performance. Our retail portfolio ended the quarter 98% leased, and we executed approximately 39,000 square feet of leasing during the period with average base rents reaching a new portfolio record of $30 per square foot.

Same-store cash NOI was modestly below the prior year period, primarily due to the temporary impact of vacancies from 2 former Party City spaces and a former Discount Tire space. The Discount Tire space in 1 of the 2 Party City spaces are already re-leased with cash rents expected to commence later this year.

Tenant health across the retail portfolio is strong. Leasing demand is solid, and our centers benefit from affluent supply-constrained trade areas with limited new competition. Less than 3% of our retail square footage expires this year, and we are actively engaged on upcoming rollover. While we are closely monitoring the consumer in an uncertain economic climate, we believe the demographics surrounding our retail assets support a resilient spending base and a steady cash flow profile.

In multifamily, same-store cash NOI increased 3% year-over-year, a solid result given the competitive supply landscape in San Diego and Portland. Excluding the RV Park, our multifamily portfolio ended the quarter 96% leased. In San Diego, our apartment communities ended the quarter 98% leased. And excluding our newest acquisition, Genesee Park, net effective rents in San Diego were up just over 1% compared to the prior year period.

In Portland, Hassalo on Eighth ended the quarter at 93% leased, up an additional 4% from a year ago. Net effective rents were essentially flat, which we view as a reasonable outcome in the current Portland market. The recovery remains gradual and our focus right now is on protecting occupancy while positioning for better growth as supply moderates. As we have noted, 2026 is more of a stabilization year for multifamily than a recovery year, and we are focused on optimizing pricing, maintaining occupancy and tightly managing controllable expenses.

At Waikiki Beach Walk, our retail component continued to perform well year-over-year, partially offsetting softness on the hotel side with overall mixed-use cash NOI down modestly versus the prior year period. We believe in the long-term value of this irreplaceable fee simple asset and are focused on driving performance across both the hotel and retail components.

Finally, I'm pleased to share that our Board has approved a quarterly dividend of $0.34 per share payable on June 18 to shareholders of record as of June 4. While our payout ratio remained elevated in the quarter, much of that reflects leasing-related capital tied to signed leases and our spec suite program, both of which are intended to drive occupancy and future NOI growth. We continue to have conviction in the long-term cash flow profile of the portfolio and are comfortable maintaining the current dividend at this point in time. Bob will provide more detail on the payout ratio and its expected moderation in just a moment.

In closing, we are pleased with how we have begun 2026. We are converting leasing activity into future revenue, strengthening our balance sheet and executing against the plan we laid out entering 2026. Our priorities for the year are unchanged, advanced office leasing, protect the steady cash flow from our retail and multifamily platforms and remain disciplined in how we allocate capital.

At our core, we own irreplaceable coastal real estate. We operate through a vertically integrated platform, and we manage this business with a long-term perspective. We are in a good position, and our focus is on converting that position into earnings growth.

With that, I will turn the call over to Bob, who will walk through the financial results in more detail.

Thanks, Adam, and good morning, everyone. Last night, we reported first quarter 2026 FFO per share of $0.51 and net income attributable to common stockholders of $0.08 per share. FFO increased $0.04 per share compared to the fourth quarter of 2025, driven primarily by lower G&A expense. Incremental rental income at Pacific Ridge Apartments and 14 Acres as well as lower operating expenses at La Jolla Commons. As we expected, same-store cash NOI across all sectors was flat year-over-year in Q1.

Breaking that down by segment as compared to Q1 2025, office same-store NOI was essentially flat, primarily due to the expiration of CLEAResult at First & Main in April of 2025. The space has been partially backfilled. Retail NOI declined 0.7%, driven by the known vacancies Adam mentioned at Gateway Marketplace and Solana Beach Towne Centre, both of which have now been addressed through executed leasing.

Multifamily NOI increased 3%, driven by higher rental income and improved occupancy, particularly at Pacific Ridge and Hassalo on Eighth. Mixed-use NOI declined 2.7% as a year-over-year increase of 2% of the retail component was offset by lower ADR and higher operating expenses at Embassy Suites Waikiki, where in Q1, occupancy improved to 92% from 85%. RevPAR increased 2% to $305. ADR softened by 6% to $332 and NOI was approximately $2.4 million versus $2.6 million last year.

Turning to liquidity and leverage. We ended the quarter with approximately $518 million of liquidity, including $118 million of cash and $400 million available on our revolving credit facility. As Adam mentioned, we closed the recast and upsized the credit facility on April 1, extending both the $500 million revolver and $100 million term loan to April 2030.

Net debt-to-EBITDA was 6.9x on a trailing 12-month basis. Our long-term target remains 5.5x or below. Interest and fixed charge coverage were both 3.0x.

Turning to the dividend. Our first quarter dividend payout ratio was approximately 111%, driven primarily by the timing of leasing-related capital expenditures, including tenant improvements, leasing commissions and our spec suite program, along with normal recurring capital needs. Importantly, a meaningful portion of this capital is tied to leases that have already been signed or spaces that we are proactively preparing to meet current tenant demand. As those leases commence and convert to cash rent, we expect the payout ratio to moderate. For the remaining 3 quarters of the year, we currently expect the payout ratio to trend in the low to mid-90% range with the full year payout ratio likely landing in the upper 90% range.

Since our IPO in 2011, our payout ratio has generally been approximately 65% to 85%, and we continue to view that as an appropriate long-term range for the business. In the interim, given our liquidity position, our visibility into signed lease commencements and our confidence in the long-term cash flow profile of the portfolio, management and the Board are comfortable maintaining the current dividend. As always, we will continue to evaluate the dividend each quarter in the context of operating performance, leasing progress, capital requirements and broader market conditions.

Turning to 2026 guidance. We are reaffirming our full year FFO guidance range of $1.96 to $2.10 per share with a midpoint of $2.03. This reflects continued stability across our diversified portfolio, supported by leasing activity, contractual rent growth and disciplined cost management. Based on our current outlook, we believe we are well positioned to achieve our full year objectives with potential to trend towards the upper end of the range if several factors align.

Number one, retail tenants currently reserved for bad debt continue to pay their rents. Number two, office lease commencements occur ahead of expectations. Number three, multifamily outperforms expectations on occupancy and/or rent growth; and number four, tourism demand improves, supporting performance at Embassy Suites Waikiki. As a reminder, our guidance excludes the impact of future acquisitions, dispositions, capital markets activity or debt refinancings not yet announced.

We remain committed to transparency, and we'll continue to provide clear insight into both our results and assumptions. Additionally, all non-GAAP metrics discussed today are reconciled in our earnings materials.

I'll now turn the call back over to the operator for Q&A.

[Operator Instructions] The first question comes from Todd Thomas from KeyBanc.

This is Sean Glass on for Todd. You previously discussed some known move-outs in the office portfolio. I think there was an expectation that there could be 300 to 400 basis points of occupancy from expected vacates. Have any tenant decisions shifted or changed since year-end? And could you remind us what's embedded in guidance for the office portfolio's year-end lease rate?

Well, as Adam said, the one new one is Genentech, which will occur in Q4 of this year. On the positive side, we have 3 known move-outs that are in lease documentation at City Center Bellevue specifically. So that's 28,000 feet of move-outs that are already in lease documentation. So that's the latest.

And one thing of note that of the -- I'm tracking 173,000 feet right now, 17 deals, 8 of those or about 60,000 feet are relocations due to expansion. So we're expanding tenants and they're getting space back. So that's -- those are good news givebacks of tenants that have already expanded. We're just getting the -- once the TIs are done, we're getting their spaces back. So it's not all bad news.

And Sean, we mentioned in the script that we're targeting mid-80% full portfolio occupancy or lease percentage by the end of the year, which is achievable if momentum continues as it is right now, but we're going to give you guys a range so we have a little bit of flexibility to figure out how it shakes out.

That's great color. I wanted to ask about La Jolla specifically, some very good traction there on the leasing. Can you talk about the pipeline a little, whether any additional leases are out for signature or anything documentation? And maybe some color on where you might expect La Jolla to be at year-end?

So it is the premier offering, it's not only UTC, but Del Mar Heights as well in terms of available spaces and I'm speaking of Tower III specifically. Right now, we're in proposals with 2 full floor users and 2 multi-floor users. And we don't have that many floors to lease. So it's a good situation. We're in space planning with every one of them. The competition is very narrow. So we expect to make one or more of those, and that would account for the remainder of the full floors.

On the spec suite program, we only have one suite left on the fourth floor. We've already pre-leased the fifth floor spec suite, and those aren't going to be completed until September of this year. So the traction is good. And the traction is with well-capitalized professional service firms like the tenants that you want in this sort of building. So we're pleased with that.

Okay. If I could slip one more in on One Beach, I mean, some good traction there, too. Could you talk a little about -- you touched on the AI demand or otherwise and also where you think that might be at year-end? And maybe you could touch on the one large opportunity that didn't pencil if that changes the equation at all?

Well, for that large deal, we gave ourselves a 30-day window on which to vet it. There were some complexities to it due to the use dealing with exiting, dealing with traffic and such. And it ended up not panning out. We spent 45 days on it, but we pivoted very quickly back to the spec suite program, which is underway, and Jerry and his team will complete that construction around September [indiscernible] yesterday. Keep in mind, we pre-leased that third floor before we had started construction on that floor. So we expect to have similar results. I can't give you the exact timing, but we're optimistic.

The next question comes from Haendel St. Juste from Mizuho.

This is Ravi Vaidya on the line for Haendel. I hope you are doing well. I wanted to ask a bit about the signed and non-occupied pipeline in both office and retail. Can you give some -- maybe some numbers as to how -- when you think leases will begin cash flowing for those 2 verticals? And maybe regarding detail about the timing and when over the next couple of years for both office and retail?

Yes. So Ravi, it's Adam. Yes, as I mentioned in my script, we have about 0.25 million square feet on the office portfolio signed not commenced. And I think about $0.07 is reflected in 2026 guidance, but about 100,000 square feet in that signed but not commenced won't hit meaningfully until next year. So you're looking at about $0.07 per share or so, call it, $5-plus million that will hit this year. I don't have the retail numbers in front of me. I don't think there's much on that front, though.

Got it. That's super helpful. I wanted to ask about the hotel in Hawaii. I noticed the occupancy came up quite a bit as you discussed in your script, but it was mostly offset by rate. What can we see regarding demand for tourism, foot traffic and how that asset is positioned from both seeing demand from Japanese and American tourists right now?

Yes, Ravi, this is Bob here. It's still slow right now. But what's interesting in terms of the rates, we still outperform our competitive set, which consists of just under 10 hotels, including Beach Walk properties. I mean, for example, we -- our occupancy was 91%, but our comp was 79%. Our ADR was $300 plus, and there was another $300.

RevPAR were $300 plus and our comp set significantly under $300. So it's -- everybody is feeling the impact from the statistics that I'm seeing is that we're the #1 hotel in Waikiki. Two things happened during March. One is that, I don't know if you heard about it, but there was a Kona -- from the Kona Island got over to Waikiki and there was 2 huge rainstorms.

It was 2 Kona rainstorms, one on March 16, another one on March 24. significant flooding, dumping over to get this, over 2 trillion gallons of rain or 2 years of rain in 2 storms overall. So everybody in town felt that impact on that. Secondly is that the Japanese yen, we're still following the more wealthy clientele from Japan continue to come. But if you notice, Japan yen has got up to the JPY 160 range. I think it dipped to JPY 159. So it continues to stay up there, and they have to work through that issue. So there's a lot of little things that are impacting that. Also, you have operating expenses going up. But all in all, it's the #1 performing Embassy Suites in the world. It continues to be.

Ravi, just to layer on that. As you know, Waikiki is very sensitive to tourism, especially international demand. And as Bob was mentioning, the Japanese aren't there as much as they used to be. It used to be closer to 40% of tourism in Waikiki, now it's about 20%. So it's slow incremental progress. Recovery has been slower than anticipated and the affordability pressures are really weighing on the results. So still, it remains a high barrier to entry, globally relevant market, and we view the asset well positioned for the long term.

This concludes our question-and-answer session. I would like to turn the conference back over to Adam Wyll for closing remarks.

Yes. Thanks, everybody, for calling and joining us today or listening on record later. We appreciate your interest, and we'll be transparent as possible going forward. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the American Assets Trust, Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Meleana Leaverton, Associate General Counsel of American Assets Trust. Please go ahead.

Thank you, and good morning. The statements made on this earnings call include forward-looking statements based on current expectations, which statements are subject to risks and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements as actual events could cause the company's results to differ materially from these forward-looking statements. Yesterday afternoon, American Assets Trust's earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investors section of its website, americanassetstrust.com.

It is now my pleasure to turn the call over to Adam Wyll, President and CEO of American Assets Trust.

Good morning, everyone, and thank you for joining us to review our fourth quarter and full year 2025 results, as well as our outlook for 2026.

For the full year, we earned $2 of FFO per share, about 3% above our initial expectations. As we discussed coming into the year, we positioned 2025 as a reset, reflecting several known offsets versus 2024, including the roll-off of onetime revenue items and the end of capitalized interest on certain projects. At the same time, we continue to invest in office leasing at our development and redevelopment projects, and recycled capital into a high-quality San Diego multifamily acquisition that has performed in line with our underwriting.

Against that backdrop, delivering above our initial guidance speaks to the quality of our assets and the teams executing across our markets. In fact, portfolio-wide same-store NOI ended slightly positive for the year, supported by strong collections and disciplined expense management, with our office and retail segments offsetting mixed performance from our multifamily and mixed-use segments.

Importantly, our 2025 results reflected the themes we highlighted throughout the year. Office made continued progress leasing newer and redeveloped space with tenant engagement improving in the second half and increasingly concentrated in well-located Class A product. Retail, again stood out, supported by low vacancy, limited near-term expirations and a smaller watch list than a year ago. Multifamily worked through elevated new supply in our markets, which constrained near-term rent growth and our teams focused on occupancy, revenue management and expense discipline. And in Waikiki, we operated through a softer tourism year than expected, and our hotel results reflected that. But we believe that asset remains well positioned within its competitive set as conditions improve.

While macro uncertainty persists, we believe our coastal infill locations and high-quality real estate position us to capture demand as it materializes. With that context, I'll walk through each segment and then conclude with our priorities for 2026.

Across our West Coast office markets, we are seeing continued signs of stabilization and gradual improvement in leasing activity with tenant engagement increasingly concentrated in the best assets. Conversations are becoming more active, decision time lines are improving and demand is extending beyond renewals. In markets like San Diego and San Francisco, vacancy trends are showing early signs of stabilization, supported by declining sublease availability and a more active leasing environment. In Bellevue, while overall vacancy remains relatively elevated, conditions have been comparatively much stronger than in Seattle with improving demand dynamics, reduced sublease pressure, and increased interest from technology and innovation-driven tenants, particularly in the CBD, which we expect over time to spill over into the surrounding suburbs.

In Portland, our scale and long-standing presence continue to be an advantage in a market with relatively few institutional owners, which helps us compete effectively and win more than our fair share of leasing opportunities. Overall, while office market conditions continue to normalize at different paces, we are encouraged by the direction of travel and believe our portfolio is well positioned to benefit as leasing momentum continues to build.

Our office portfolio ended the quarter 83% leased, and our same-store office portfolio was 86% leased, up about 150 basis points from Q3. In addition, we have approximately 140,000 square feet of signed office leases that have not yet commenced paying cash rents. Same-store office NOI increased just over 1% for the quarter, and nearly 2.5% for the full year. Looking ahead, roughly 8% of our total office square footage is scheduled to expire this year, which is consistent with the typical level of expirations we see each year. We are actively engaged on that rollover, and that figure includes known move-outs of about 4% of our office square footage, which we anticipated and are managing as part of our leasing strategy.

During the fourth quarter, we executed 23 leases totaling over 193,000 square feet, with positive cash leasing spreads of 6.6% and GAAP leasing spreads of 11.5% for the quarter, and achieved our highest ever average base rents in our office portfolio. For the full year, total office leasing volume increased 55% over 2024, and leasing spreads increased 6.4% for cash and 14% for GAAP. We continue to see the strongest interest for well-located space that is move-in ready and amenity supported, and that is where our development and redevelopment efforts have been concentrated.

At La Jolla Commons Tower III, we ended the quarter at 35% leased with another 15% in lease documentation currently and our active prospect pipeline is growing. At One Beach Street, we ended the quarter at 15% leased and subsequently executed leases for an additional 21%, bringing the property to 36% leased today, with proposals for another 46% currently in negotiation. In response to increased demand for move-in ready space, we are advancing spec suite development at One Beach Street with permitting complete and work underway.

As we move into 2026, we started the first quarter with momentum, having already executed approximately 68,000 square feet of leases with an additional 214,000 square feet in lease documentation. We have meaningful prospects engaged across the portfolio and remain focused on converting activity into signed leases and commenced rent. While larger blocks still require thoughtful execution, velocity has improved and the path from engagement to execution is shortening. At this point, we are targeting to end the year between 86% to 88% leased across our entire office portfolio, an increase of about 400 basis points at the midpoint from the end of 2025. We will do our best.

Turning to retail, which remains a cornerstone of stability and represents 26% of portfolio NOI, we ended the year at 98% leased. Fourth quarter leasing totaled 43,000 square feet with positive cash and GAAP leasing spreads for the quarter. In fact, for the year, leasing spreads were 7% on a cash basis and 22% on a GAAP basis, all supported by healthy sales and steady traffic across our centers.

While a moderating labor market is impacting the broader consumer, higher income households continue to drive a disproportionate share of spending. Given the quality, location and demographics of our retail assets, that backdrop remains supportive of demand across our centers. As we've said in prior quarters, we really like the setup for our retail platform. Nationally, retail availability is expected to remain near record lows given limited new supply, which should continue to support asking rents. Our portfolio benefits from high barrier supply-constrained submarkets, strong occupancy and a well-laddered expiration profile, which includes just 4% of our retail square footage expiring this year. Looking to 2026, we expect continued favorable performance and we will stay disciplined on renewals, tenant quality and CapEx prioritization.

In multifamily, we ended the year 95.5% leased, excluding the RV Park, and achieved approximately 1% net effective rent growth year-over-year versus the fourth quarter of 2024, a steady result in a competitive leasing environment. At the same time, operating conditions remain influenced by new supply across markets such as San Diego and Portland, which continues to weigh on near-term rent growth.

Occupancy held stable through 2025, while pricing remained competitive as deliveries were absorbed and concessions persisted in certain submarkets. Consistent with the broader industry backdrop, we are not assuming a rapid improvement in 2026, which we view as more a period of stabilization and recovery, and we remain focused on execution, optimizing pricing and concessions by submarket, maximizing occupancy, enhancing the resident experience and tightly managing controllable expenses.

In San Diego, our communities ended the fourth quarter 96% leased, excluding the RV park. Renewal rents increased while new lease pricing was more competitive as we prioritized occupancy, including more meaningful use of concessions late in the year. Genesee Park continues to perform in line with our underwriting, ending the year 97% occupied, and we continue to see attractive long-term mark-to-market opportunity as we execute the value-add plan.

In Portland, Hassalo on Eighth ended the year 91.5% leased. Blended net effective rents were approximately flat between new leases and renewals. At Waikiki Beach Walk, 2025 reflected softer tourism trends, which pressured both rate and occupancy at different points during the year. While overall visitation moderated, spending per visitor was steadier, supported by longer stays and higher daily spend. Industry data reflected this mix with RevPAR down year-over-year despite relatively steadier demand among higher spending guests.

Bob will provide more details on the strength of our balance sheet and capital allocation, but I want to address a point of significant frustration for our management team and Board, which is our current share price. It is clear that many listed real estate companies have remained largely out of favor with the broader investment community throughout much of 2025, often trading at a substantial discount to the intrinsic value and quality of the underlying assets. AAT is no exception.

The public market valuation, in our view, fails to reflect the trophy nature of our primarily coastal portfolio and our long-term growth prospects. While we cannot control macro sentiment, it is our job to close that disconnect to the best of our abilities by delivering consistent operational execution, demonstrating the cash flow durability of our new developments and redevelopments, continuing to execute our strategy with discipline to create long-term value for our shareholders and position AAT to capture opportunities, whether or not the environment is volatile or stable.

Note that our Board has declared a quarterly dividend of $0.34 per share for the first quarter, payable on March 19 to stockholders of record on March 5. At this point in time, we expect to maintain the dividend at current levels with the outlook for our dividend coverage ratio improving as our office developments stabilize and begin to contribute more meaningfully to cash flow. That said, our approach remains measured, and we will continue to allocate capital prudently and reevaluate as conditions evolve.

Looking ahead, we view 2026 as an opportunity to build upon the progress we made in our reset year. Our priorities are straightforward. One, continue to drive office leasing with a focus on converting improving prospect activity into signed leases and commence revenue at our newer and repositioned assets. Two, maintain retail momentum by keeping our centers full, proactively managing expirations and staying focused on tenant quality. Three, manage through the multifamily supply cycle with disciplined revenue management and cost control, positioning the portfolio for better growth as supply moderates. Four, operate our hotel prudently, while staying responsive to market demand and focused on managing costs and driving performance. And five, continue to be thoughtful with our capital and strengthen the balance sheet, all with the obvious goal of improving our valuation over time.

You'll note that our FFO guidance in 2026 at the midpoint is 1.5% above 2025, and portfolio-wide same-store NOI growth, excluding reserves, is over 2%, which Bob will provide more details on in just a minute. Note that these estimates reflect our current view of leasing velocity, market rent growth and operating costs across the portfolio, as well as the timing of lease commitments and the cadence of operating expenses across the year. As always, we take a realistic, yet conservative, approach to guidance with the goal of executing ahead of our midpoint over time.

In closing, I want to thank our employees for their dedication and our tenants, partners and shareholders for their continued confidence and support.

With that, I'll turn the call over to Bob to discuss our financial results and initial guidance in more detail. Bob?

Thanks, Adam, and good morning, everyone. Last evening, we reported fourth quarter and full year 2025 FFO per share of $0.47 and $2, respectively. Net income attributable to common shareholders for the fourth quarter and full year 2025 was $0.05 per share and $0.92 per share, respectively. Fourth quarter FFO decreased by approximately $0.02, to $0.47 per share compared to Q3 '25. This decline was primarily attributable to termination fees recognized in Q3 that did not reoccur in Q4.

Let's talk about same-store cash NOI. For the full year ended 2025, same-store cash NOI increased by 0.5% compared with 2024. The key drivers of same-store NOI were: Number one, office increased 2.3% for the year, driven primarily by higher base rent and improved expense recoveries, including contributions from the Databricks expansion and new leasing at City Center Bellevue, partially offset by known move-outs at First & Main, Torrey Reserve and Eastgate.

Secondly, retail increased 1.2% for the year, reflecting strong first half growth of 5.4% in Q1 and 4.5% in Q2, '25, partially offset by the impact of 4 tenant move-outs in Q3 and Q4, two at Waikele Center and two at Gateway Marketplace. Of note, the Gateway spaces have since been backfilled through an expansion by Hobby Lobby, and new lease with Wingstop, both scheduled to commence rent on July 1, 2026.

Thirdly, multifamily declined 3.2% for the year, driven by flat to modestly lower rents, elevated concessions amid new supply in our two markets, and higher operating expenses, trends we've seen across the multifamily industry in our markets as well.

And fourth, our mixed-use declined as well by 6.7% in 2025 versus 2024. As softer Waikiki hotel demand, continued pressure from Japan-related travel and higher operating expenses weighed on results. Occupancy averaged roughly 82%, about 360 basis points lower year-over-year, while ADR was essentially flat at about $370, driving RevPAR down approximately 7% to about $296. Despite the soft year, we continue to outperform our comp set in Waikiki, and we believe the fundamentals of Waikiki remain attractive over the longer term as this cycle normalizes. Meanwhile, the retail portion of Waikiki Beach Walk increased 8% year-over-year, driven by higher base and percentage rents and lower bad debt expense.

As it relates to liquidity, at the end of the fourth quarter, we had liquidity of approximately $529 million, comprised of approximately $129 million in cash and cash equivalents, and $400 million of availability on our revolving line of credit. We are currently in the process of renewing our credit facility, which now matures in early July. As a reminder, we previously extended the maturity to move the renewal cycle away from the first week of the year, which created timing challenges for all parties. We expect to close on our recast in Q2. Additionally, as of the end of the fourth quarter, our leverage, which we measure in terms of net debt to EBITDA, was 6.9x on a trailing 12-month basis and 7.1x on a quarter annualized basis. Our objective is to achieve and maintain long-term net debt to EBITDA of 5.5x or below. Our interest coverage and fixed charge coverage ratio ended the quarter at 3x on a trailing 12-month basis.

Let's talk for a moment regarding the dividend payout ratio. For a REIT, we look at it as total dividends divided by funds available for distribution, also known as FAD or AFFO. As Adam mentioned, we continue to expect our dividend to remain at current levels. While our 2025 payout ratio is just under 100% due primarily to elevated CapEx spending, our 2026 outlook implies a payout ratio of approximately 89%. Assuming continued progress in leasing and a stable operating environment, we would expect the payout ratio to trend lower beyond 2026 towards our goal of 85%, and we will continue to monitor coverage closely.

Let's talk about 2026 guidance. We are introducing our 2026 FFO per share guidance range of $1.96 to $2.10 per FFO share, with a midpoint of $2.03, which is approximately 1.5% increase over 2025 actual FFO of $2 per share. Starting with 2025 FFO of $2 per share, there are 9 items in aggregate that drive the change to our 2026 midpoint.

They are, number one, same-store cash NOI for all segments combined, excluding reserves, which I will discuss in more detail in a few minutes, is expected to increase by 2.2% in 2026. By segment, and on the same-store NOI basis versus 2025, the expected contribution to FFO per share is as follows.

Office is expected to increase approximately 3.3% or $0.06 per share. Retail is expected to increase approximately 1.7%, or $0.02 per share. Multifamily is expected to increase approximately 2.2%, or $0.01 per FFO share. And mixed-use is expected to decrease approximately 3.3%, or $0.01 per FFO share. For Embassy Suites in Waikiki, our 2026 outlook prepared in collaboration with our partners at Outrigger assumes approximately 2.5% revenue growth and 4% expense growth, reflecting inflationary pressures in Hawaii, including food, labor and overhead. Within that, we assume average occupancy is expected to increase by approximately 1%. Average ADR is expected to be flat and increase approximately 0.5% from $360 in 2025, to $362 in 2026. Average RevPAR is expected to increase approximately 2% from $296 in '25 to $302 in 2026.

Number two, let's talk about non-same-store cash NOI. It's driven primarily by two assets. La Jolla Commons III, which was completed in the second quarter of 2024 and Genesee Park, our multifamily acquisition that closed in the first quarter of 2025. Together, these non-same-store assets are expected to contribute approximately $0.03 per share to FFO in 2026.

Number three, credit reserves that we are budgeting are expected to reduce 2026 FFO by approximately $0.04 per share. Of that amount, roughly $0.02 per share is allocated to office and $0.02 per share to retail. In total, these reserves represent about 64 basis points of our expected 2026 revenue, which we believe is a reasonable level. As we did last year, we are taking a conservative approach given the uncertainty in the macro environment, and our goal is to reduce these amounts over the course of the year as performance and collections materialize.

Number four, G&A is budgeted to decline in 2026, which we expect will contribute approximately $0.04 per share to FFO. This is primarily due to meaningfully lower professional fees and other nonrecurring costs that were incurred in 2025 and are not expected to repeat at the same level in 2026.

Number five, interest expense is expected to increase in 2026, primarily due to the end of the capitalized interest related to La Jolla Commons III, which we expect will reduce FFO by approximately $0.02 per share.

Number six, other income is expected to be lower in 2026, primarily due to lower budgeted interest income, which we expect will reduce FFO by approximately $0.02 per share.

Number seven, nonrecurring termination fees recognized in 2025 will not be included in our 2026 guidance, which will reduce FFO by approximately $0.025 per share.

Number eight, 2026 GAAP adjustments are expected to increase FFO by approximately $0.01 per share. The majority of the variance relates to the related impact of straight-line rents.

Number nine, we have no contribution from Del Monte Center in 2026 following its sale in 2025. Because the asset contributed for roughly 2 months in 2025 prior to the sale, the year-over impact is expected to be a reduction of approximately $0.01 per share.

These items in aggregate represent approximately $0.03 per share, which bridges 2025 FFO of $2 per share to the midpoint of 2026 guidance of $2.03 per FFO share. While we believe the 2026 guidance is our best estimate as of the date of this earnings call, we do believe that it is possible that we could perform towards the upper end of this guidance range.

Key factors that would support that include, number one, converting a meaningful portion of our speculative office leasing activity earlier in the year. Number two, continued rent collections from the tenants for which we have reserved. And three, better-than-budgeted performance in both multifamily and mixed-use through improved occupancy and pricing, and/or lowering operating expenses. As always, our guidance, our NOI bridge and these prepared remarks exclude any impact from future acquisitions, dispositions, equity issuances or repurchases, future debt refinancings or repayments other than what we have already discussed. We will continue our best to be as transparent as possible and share with you our analysis and interpretations of our quarterly numbers. I also want to briefly note that any non-GAAP financial measures that we discussed like NOI are reconciled to our GAAP financial results in our earnings release and supplemental information.

I'll now turn the call back over to the operator for Q&A.

[Operator Instructions] The first question comes from Haendel St. Juste with Mizuho.

Appreciate all the detail. Maybe I wanted to start with the office portfolio. I noticed that TIs, especially for renewals were elevated. I guess I'm curious if that's the strategic decision you're making there, more reflective of a weak demand environment, concerns about AI? And what can you tell us about the conversations for your upcoming expirations? The rents on some of those, I think, are pretty elevated. Curious kind of how that compares to current market.

Let me kick that off, and I'll hand it over to Steve real quick. And hello, Haendel, nice to have you on the call today.

As you know, it's true that office leasing today obviously carries a higher capital burden than pre-pandemic, mainly from whether that's amenities or TIs, commissions and the investment needed to deliver space that's move-in ready. And we expect that to moderate over time as occupancy improves and availability tightens, particularly in our better buildings and submarkets. The pricing power and the concession levels will tend to normalize. But Steve's got some more specific information in particular to our portfolio that he can share on that front.

Haendel, good question. And there's a really positive answer to it. Really, it skewed high because of Autodesk going as long as they could on the second floor, which is a critical space for them. They approached us to add term early. So their lease wasn't up for a couple of years, but that second floor is critical to them. So they came to us and said, would you extend? And we did that at almost -- well, a very positive rate, and we gave them $35 a foot TIs to do so. And that's a big -- that's 45,000 feet.

So added to that Smartsheet did the same thing. They extended their second floor space, which is where the company gathers. They extended it by 6 years. They came to us early, said, this is a critical space for us. We want to rejigger it. And so we need some money to do that, and we want to go 6 years longer. So when you strip those two renewals out of the metric on the TIs, the remainder is at $6.41, versus $31. So I would agree...

Yes, those two don't create a trend. Those are an anomaly.

Got it. Got it. No, I appreciate that, Steve. I wanted to also ask about the balance sheet, Bob. I know you've got some pretty good liquidity on hand. The leverage is still sitting here at kind of 7x plus EBITDA. You mentioned the 5.5x target. I guess I'm curious if there's any sense of time line to get there? I'm presuming that's going to come from kind of internal cash flow. But just curious kind of what the steps and potential time line to get to that target. Any thoughts there would be appreciated.

Haendel, good question. The time line is really -- as soon as we lease up La Jolla Commons III and One Beach, and Steve will have more information on that in a few minutes. But the sooner we can get those properties leased up, we will be at the very low end of 6x. And then from there, we'll work down to the 5.5x. We were at 5.5x before COVID. So a lot of things have happened. But anyway, that's the time line.

Got it. I appreciate that, Bob. And then last one, if I could. Adam, just going back to some of the comments you made in your initial remarks, I understand the frustration with the stock. And obviously, it seems front and center for you guys.

I guess just curious on kind of what some of the steps you might be willing to take there beyond the kind of the execution as you laid out? Are you open to any strategic asset sales to capture that arbitrage between where the private market is, where your stock is trading? Any asset sales? I mean, anything that perhaps you see that you can -- from an action perspective, steps you could take to really reinvigorate the stock, the multiple?

Yes, that's a good question. It's a billion-dollar question. Look, Haendel, we continue to be pragmatic on asset sales. If we can sell an asset at a price we think reflects long-term value and redeploy those proceeds to improve the balance sheet, or fund higher return opportunities, we'll do that. But we're not going to sell assets at a discount just to check a box either. So the main messaging for us is more so discipline. And as retail continues to perform well and office really seems to be improving from what we're seeing, we feel like we have time on our side to be selective. So to kind of force that issue is not something we're going to do.

But we'll continue to look at opportunities. The bar is high for us to find something to buy. We would certainly need a compelling basis, durable cash flows, a clear path to value creation. And at today's pricing and financing levels, that's a much narrower set for us. So we're just trying to be smart with what we've got and not chase external growth for the sake of activity.

The next question comes from Todd Thomas with KeyBanc Capital Markets.

First, I just wanted to ask about the guidance assumptions in the office segment first related to the 86% to 88% year-end lease rate. Relative to where you ended the year, 83.1% for the total portfolio. Where are you today pro forma what's been leased already year-to-date, including One Beach Street where it sounds like there's been some good progress and all of the known move-outs that you discussed? I'm just trying to get a sense for how much of that target is speculative in nature as you move through the year.

So right now, I think Adam mentioned it, we've got -- we signed 68,000 feet in 11 deals already this year. And we have another 13 deals in lease documentation for a total of 214,000 feet. And then behind that, we've got another 235,000 feet of proposals that I'd put better than 50-50. So the pipeline is significant. They're in that 86% to 88%. There is speculative leasing.

But we've had some really interesting positive surprises lately. For instance, we had a full floor tenant in Portland that was a known move-out that came back and said, we're no longer interested in moving to the suburbs. We're back to being committed to the downtown market. And so we have RFPs to renew them, and downsize them, slightly in the existing space that they're in. And also our First & Main property is a candidate for them as well. But candidly, we think we're going to get a letter of intent today that makes First & Main not a viable alternative anymore. So that's one example.

We've had tenants come out of nowhere that turn into leases, looking at a spec suite, touring it 1 week and then we're in leases the next. That happened at Torrey Reserve. That happened -- we had a tenant that thought they were going to be purchased. This is City Center Bellevue, a 7,000-foot space. They thought they were going to be purchased. They turned it down, took additional VC money. And now they signed a lease for 7,000 feet there. And we had another one do the same thing at City Center.

So we're seeing a lot of positive surprises, and we're fortunate we've been making the investment to make these spaces ready to move into because we're reaping the benefits of that now. So to that end, at La Jolla Commons III, for example, we spec-ed out the fourth floor and with a lease that we have out for Signature, we have one space left on that floor. We're delivering the fifth floor spaces later this year, end of summer, early fall. We've already leased one of them, and we're in play on a handful of others. So the spec suite development and delivery leads to very quick lease -- we can convert to leases and cash flow. And so I think we're speccing about 44% of our vacancy right now. And so with these experiences I'm telling you about and the pipeline we've got ahead of us, we're feeling pretty good.

Okay. All right. That's helpful. And then is there additional leasing assumed in the non-same-store portfolio, I guess, primarily La Jolla Phase III as it pertains to the guidance? I guess I would have thought that the contribution from lease-up could be potentially more meaningful. What's assumed in the guidance for lease-up at La Jolla Phase III?

Yes. Well, what we said -- I mean, is driven primarily by the two assets, La Jolla Commons III and Genesee Park. So La Jolla Commons III, I think Steve touched on that just a minute ago. So -- yes, we've put approximately -- the two assets together was approximately $0.03 per share of FFO that's contributing on the non-same-store cash NOI.

And Todd, as we -- this is first-generation space at La Jolla Commons III. So we're not reflecting those rents until they commence and those are later in the year.

Okay. Got it. Right. So there's concessions initially. I guess, Bob, yes, you've talked about $0.30 of FFO from the combination of La Jolla, One Beach, and I think the Bellevue redevelopments. Can you sort of provide an update as to how much of that is expected to be online in '26, versus how much more there is to come beyond '26 from that -- from those assets and the lease-up and stabilization?

Yes, we can put something together, but I don't -- kind of put those numbers together with the activity that Steve has just recently seen at One Beach. I think it's going to be positive, significantly positive. But Steve, do you want to mention anything on that?

Well, sure. The first lease signed at One Beach, 13,000 feet roughly on -- that's going to commence April 2. That's when we move them in. And then that same tenant is taking the rest of the floor. That lease commences February 1 of next year. And there's 2 months of free rent on that one. So you're going to get a bunch of cash flow next year from that one.

The spec suites are -- at La Jolla Commons III are going to produce revenue this year. We've got a larger tenant for 25,000 feet that we're in lease documentation with that will take us to -- and one spec suite in play that will take us to 50% leased. The small spec suite 4,000 feet, that rent will commence immediately as soon as we sign the lease. And then the larger deal will take some time to build out. That's going to be a tenant build that will start paying rent next year.

And then let's talk about 14Acres or Eastgate. We've got a spec suite program in place there, but we've got several deals that are signed already, or in the process of being signed that will kick in. So we've made really good progress there. That's one where we have known move-outs that are offsetting that progress, but we're leasing the spaces that we're delivering in spec conditions. So that's another big contributor.

Yes. So Todd, just to get back to your question on that $0.30 that we had talked about on one of our presentations, and we'll update that in the next month or so. But basically, I stick to that $0.30. It's just a question of timing.

14Acres in Q4, we signed two deals totaling 19,000 feet. At La Jolla Commons III, we signed three deals totaling 17,500 feet. One Beach, we signed the 13,000 footer, and we just signed yesterday the remainder of that third floor. So that's just some color on Q4 and where we are right now.

Got it. That's helpful. So it seems like some of the leasing progress will be better reflected when cash rent commences later in '26, and really more meaningfully in '27 at the rate and pace that activity is picking up here.

And then I just wanted to ask one more question, just back on the balance sheet and Bob, your comments around the revolver. Any expectations on changes in pricing as you look to, sort of, amend the facility? And do you plan to maintain the $400 million of capacity?

Well, we -- our banking syndicate supports us whether we go $400 million or $500 million. So we're just talking internally, trying to make the best decision, what's the best outcome for us on that. Right now, we're leaning towards the $500 million. But if we go $400 million, that's okay, too. So we have a very supportive bank syndicate. It's just an absolute -- it's a great team to work with, and they're open to whatever we want to do on that.

So -- but pushing it out to a July -- early July maturity will be better for all people. I mean we used to have the cadence where everybody, both the banking syndicate and AAT were running in circles trying to get that closed every 4 years. And so now it's a lot easier for the banking syndicate and our team just to push it out a little bit further.

And Todd, we expect the pricing grid to stay the same.

The next question comes from Ronald Kamdem with Morgan Stanley.

This is Matt on for Ron. You guys mentioned in your prepared remarks, there's a lot of leasing activity going on with One Beach and La Jolla Commons. Could you guys talk to any of the tenant types driving the demand? How you guys are feeling about the stabilization of the assets compared to the past few quarters? Just any additional color there would be helpful.

Steve, you want to start?

One, we're feeling very positive. We're feeling much better about the pipeline. The quality of the tenants at La Jolla Commons III, it's diverse. We have a legal Software as a Service. We have a really prominent insurance company that we just signed up. So it's -- and then we had an international bank, and it's a wealth management arm of an international bank. So we're seeing these really high-quality tenants that -- they're looking to take advantage of that A+ environment. And so we're just seeing more and more of that. We just signed a letter of intent. We're in leases, as I alluded to earlier, with another -- it's a consulting firm. It's an engineering firm -- an international engineering firm that this is their headquarters in San Diego. So we're going to -- we expect to see more of the same and diversity, but really high-end tenants at La Jolla Commons III.

At One Beach, the first tenant is AI, and several of the tenants we're seeing in Bellevue are AI as well. The other proposal we're entertaining right now is not AI. It's not -- well, it's technology related, but it's not part of the AI wave. So it's good. That would be a long-term lease and take the entire second floor. So we'll see how that plays out.

Okay. Great. And then I also noticed in the quarter that 92% of the office leasing was from renewals versus 70 -- I want to say 73% in 3Q. Was that just largely due to the large renewals that you guys did in the quarter with Autodesk, some of the other top tenants? And if we could expect kind of more of the same going forward? Or is that just like a lumpiness factor?

No, it's a great question. I'm glad you asked it because I think there's a gap in what we exhibit. So what I'm getting at is, we did 193,000 feet in the quarter of leasing. What you're talking about the 135,000 feet is comparable leasing, new and renewal. We did 60,000 feet of new leases on top of that. So all of the Tower III, One Beach and all of the leases we're doing at 14Acres or Eastgate are all noncomparable leases. And so if you look at the year, we did 246,000 feet of those noncomparable leases in 2025. That's 5.8% of the portfolio that if you just look at same-store or comparable leasing, you're going to miss that. And so we need to do a better job of articulating that going forward. And then in terms of the overall year, over 53% of the leases were new or expansion.

The next question comes from Dylan Burzinski with Green Street.

Most of my questions have already been asked. But I guess just going -- maybe speaking a little bit to the credit reserves of $0.04 that you guys have baked in the guidance. Can you kind of just talk about that? I know you mentioned half office, half retail, but are these sort of tenants that are -- have a looming bankruptcy? Or are you guys, just sort of, baking in some sort of conservatism as we get into 2026 here?

Yes, Dylan. So on the retail side, which we mentioned is a steadier part of the portfolio. We're not really seeing much of a broad-based deterioration in tenant health right now. And so our watch list is manageable. We're keeping an eye on a theater in one of our projects and maybe a few on the fringe like pet supply companies. But other than potentially mom-and-pops, there's nothing on the radar that we're expecting. So we're just kind of taking a kind of a generalized reserve on retail.

And then on the office side, it's kind of a hybrid of credit reserve and speculative leasing reserve. Like we're ambitious in our office leasing expectations and the credit quality, of course, but we want to be measured, too. So there's no specific office tenant that we have kind of acute concerns about. But we're just going to take a reserve because things fall out throughout the year every so often, and we just want to model appropriately.

That's helpful. And then maybe just touching on the office side of things. You guys mentioned expectations for a big jump in office lease percentage this year. I guess, how do you guys sort of envision the path back to sort of 90% plus occupancy? Do you guys view that as sort of being able to do that in the next sort of 2 years? Or is that sort of more a longer-term goal in your guys' mind?

I would say 2 years is reasonable.

I mean it's within the realm of reason for sure, but we don't want to overpromise that. That's our goal to get back to the 90% threshold, but we're going to take it a year at a time or quarter-to-quarter and get there. But we're really poised to do it. Now we've made the investment in the spec suites. There'll be -- everything we're doing is completed this year. So we've got really -- a lot of great inventory that's not going to take a bunch of time to deliver. So we're anticipating some good results.

This concludes our question-and-answer session. I would like to turn the conference back over to Adam Wyll for any closing remarks.

Thanks, everybody, for joining us on the call today. We appreciate your time and continued support, and hope you have a great first quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, everyone, and welcome to the American Assets Trust Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the floor over to Meleana Leaverton, Associate General Counsel of American Assets Trust. Please go ahead.

Thank you, and good morning. The statements made on this earnings call include forward-looking statements based on current expectations. These statements are subject to risks and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements as actual events could cause the company's results to differ materially from these forward-looking statements.

Yesterday afternoon, American Assets Trust earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investors section of its website, americanassetstrust.com. It is now my pleasure to turn the call over to Adam Wyll, President and CEO of American Assets Trust.

Thank you. Good morning, everyone, and thank you for joining us today. At American Assets Trust, we remain focused on executing with discipline and consistency. Our vertically integrated platform, high-quality coastal portfolio and thoughtful approach to capital allocation continue to provide resilience and opportunity.

As always, we remain focused on creating long-term value for shareholders across cycles. For the third quarter, funds from operations came in at $0.49 per diluted share, just ahead of our internal projections, supported by continued leasing progress, disciplined expense management and minimal utilization of our bad debt reserve. Portfolio-wide same-store NOI was slightly down for Q3 and is up almost 1% year-to-date, which candidly is tracking with what we've characterized as a transition year.

Collections remain strong, and our teams continue to execute to the best of our abilities across all asset classes. The broader economic backdrop remains mixed. Interest rates have shown signs of stabilizing after 2 years of volatility and inflation has moderated but remains above long-term targets and consumer confidence has softened perhaps less than some had feared.

At the same time, capital markets activity remains relatively subdued for commercial real estate. Against this backdrop, our strategy of owning irreplaceable coastal assets, maintaining a strong balance sheet and operating through a fully integrated platform continues to serve us well, underscoring the durability of our long-term approach.

Turning to portfolio updates. The office sector remains selective, and we remain very part of that select set. Tenants are focused on well-located, amenitized and institutionally managed assets and our portfolio is designed to meet those demands. Our office portfolio ended the quarter 82% leased, with our same-store office portfolio 87% leased and 5% of the office portfolio includes signed leases that have not commenced paying cash rents.

Same-store office NOI increased positively for the quarter ahead of expectations despite almost 160,000 square feet of known move-outs at First & Main Toy Reserve in 14 acres. We completed approximately 180,000 square feet of office leasing during the quarter with comparable rent spreads increasing 9% on a cash basis and 18% on a straight-line basis reinforcing that our best-in-class buildings continue to attract tenants even in a competitive environment.

Importantly, while the time it takes to finalize office leases has lengthened across our markets, we are not losing deals as a result, tenants are simply being more deliberate. Along those lines, entering Q4, we have over 25,000 square feet of signed leases and another 56,000 square feet in lease documentation with proposal activity over several hundred thousand square feet.

At our new [ La Jolla ] Commons Tower 3, following quarter end, we executed leases or have leases and documentation for another 8% of the space with proposals out on another 15%. Momentum is clearly building with increased tours and RFP activity, and we remain optimistic that additional leasing will follow. Meanwhile, the new Travis wide card restaurant opening later this year will further enhance the already robust amenity package at the campus. Combined with the scarcity of large blocks of Class A space and UTC, we believe this positions us well to capture demand in one of the healthiest office submarkets in the country.

At One Beach Street in San Francisco, we saw continued touring activity and are in active negotiations for portions of the building. While San Francisco continues to evolve through its recovery, there are encouraging signs of improved tenant engagement at the highest quality properties such as ours, and we are confident that selective demand will find its way to our assets. It's only a matter of time.

Our retail portfolio continues to perform well, thanks to strong consumer spending across our centers. Nationally, retail availability remains near record lows. New construction is virtually nonexistent and asking rents have continued to rise.

At quarter end, our retail portfolio was 98% leased with 2% signed but not commenced paying cash rents. We executed over 125,000 square feet of new renewal leases in Q3 and with spreads increasing over 4% on a cash basis and 21% on a straight-line basis. Same-store NOI was about $400,000 less than the comparable period largely reflecting the amount and timing of expense reimbursements as well as lost rents from Party City and reduced rent from at home due to their bankruptcies.

Nevertheless, tenant sales and foot traffic remains solid, supported by favorable demographics, resilient employment and limited new supply in our markets. Our focus remains on securing best-in-class retailers, maintaining high occupancy and continuing to drive rent growth over time. In multifamily, performance in San Diego reflected the dynamics of a market working through new supply.

Rent growth has decelerated, yet our blended average rents remain positive and occupancy improved as we exited the quarter higher than a year ago even as we enter the seasonally slower leasing period. At quarter end, our San Diego communities, excluding our RV park, we're 94% leased, which is closer to 95% leased today based on recent leasing momentum.

Same-store performance was notably impacted by higher concessions, military-related deployments and move-outs impacting almost 30 units in our South Bay assets a reduction in international student occupancy at Pacific Ridge tied to recent administration policies and the timing of certain property expenditures.

We achieved rent increases of 5% on renewals and 2% on new leases for a blended increase of 4%. Excluding our new [ Genesee ] Park acquisition, rent increases were a 3% blended increase. In Portland, [ Hassalo ] ended the quarter 91% leased and delivered slightly positive blended rent growth of 1%. Although the market continues to absorb new deliveries and faces affordability challenges, we are encouraged by steadying leasing activity and strong retention.

Looking ahead, the 4,000-seat live music venue under construction across the street from Hassalo scheduled to open in 2027 will add vibrancy and help drive continued demand. We recognize there is still room for improvement in multifamily lease percentages and rent levels, and our teams remain focused on driving occupancy and capturing long-term rent growth.

At Waikiki Beach Walk, our retail component continues to perform in line with expectations, while our Embassy Suites lagged due to softer tourism and heightened rate competition in Oahu. Arrivals have been below prior year levels, reflecting both the stronger dollar and increased competition from other destinations. In addition, the hotel has been further impacted by labor and utility cost pressures and our guest base, which is more cost conscious, has felt the effects of economic uncertainty more acutely.

Of note, in the past 3 months, more than $0.5 billion of leased fee interest at major Hawaii hotels have changed hands a yield of 4% or lower. This activity underscores the long-term strength and scarcity value of owning the fee simple under all of our Hawaii assets. We remain confident in the long-term appeal of this irreplaceable property in our managing costs and revenue opportunities carefully in the interim.

Our priorities are unchanged to convert leasing momentum across our office portfolio, including [ La Joya ] Commons and One Beach and designed leases, sustained positive leasing spreads in office and retail leasing and support stable occupancy and rent growth in our multifamily portfolio as supply is absorbed. At the same time, we are managing expenses tightly and preserving flexibility to capitalize on future opportunities.

All of this reflects our disciplined resilient approach to creating long-term value for our shareholders. Finally, I am pleased to share that the Board approved a quarterly dividend of $0.34 per share for Q4 payable on December 18, and to shareholders of record as of December 4. In closing, I want to thank our teams across the company for their dedication and execution.

Their hard work continues to position American Assets for us to execute across cycles. With that, I'll now turn the call over to Bob.

Thanks, Adam, and good morning, everyone. For the third quarter, FFO was $0.49 per diluted share. Net income attributable to common stockholders was $0.07 per diluted share and total revenue was $110 million for the quarter. Results were generally stable sequentially, with modest favorability by segment, largely reflecting known office move-outs expenses, timing and softer tourism trends in Hawaii.

Specifically, the $0.03 decline in FFO from Q2 to Q3 reflects 5 things: first, slightly lower office contribution due to a previously disclosed lease expiration at first of May and the tenant termination at City Center Bellevue, which despite being cash positive with an immediate backfill resulted in a GAAP impact from writing off remaining straight-line rent.

Second, retail results reflect the timing of property tax refunds recognized in Q2 that did not repeat in Q3. Third, lower family base rent at Pacific Ridge from summer student move-outs and that [indiscernible] from Portland oversupply, along with higher operating expenses portfolio-wide. Fourth, softer tourism and rate pressure in Oahu and fifth, partially offset by a $1.1 million lease termination fee recognized in the quarter.

Let's talk about same-store cash NOI. For all sectors, same-store cash NOI combined decreased by 0.8% in the third quarter of 2025 compared to the same period in 2024 and which was generally in line with our expectations for a transition year. Breaking Q3 out by segment and each as compared to Q3 2024, our same-store office portfolio's NOI increased by 3.6%, benefiting from rent commencements and higher rents at our City Center Bellevue property and the expiration of rent abatements at Torrey Reserve.

Our same-store retail portfolio's NOI declined by 2.6%, driven by credit-related loss of rents mentioned by Adam, as well as timing of expense reimbursements. Our same-store multifamily portfolio's NOI declined by 8.3%, reflecting supply headwinds in San Diego and expense pressure at select properties. Our same-store mixed-use portfolio's NOI declined by 10%, primarily driven by lower-than-anticipated occupancy and average daily rate at Embassy Suites Waikiki.

Specifically and compared to Q3 2024, paid occupancy for Q3 2025 was lower by 5.5%. RevPAR for Q3 '25 was down 11.7%. ADR for Q3 25 was $381 down 5.4%. The and net operating income for Q3 '25 was approximately $2.7 million, down $0.9 million.

These results are similar to other hotels in our comp set in Waikiki, Hawaii. We view these macroeconomic pressures as near term and not reflective of long-term fundamentals, and we remain confident in the long-term performance of our Hawaii hotels. In fact, according to preliminary figures from the Japan National Tourism organization, the number of Japanese nationals traveling overseas in August 25, reached $1.6 million, up 14% year-over-year.

This was the highest monthly outbound volume so far this year. Compared to pre-pandemic August 2019 levels of $2.1 million. Outbound traffic has now recovered to nearly 80%. The trajectory of outbound travel is clearly upward. August strong performance reflects pent-up leisure demand during the summer holiday season, following fuel surcharges and increasing seat capacity by Japan's to national carriers.

Hawaii continues to be one of the most aspirational overseas destinations for Japanese travelers and recovery trends in the outbound market directly benefit our property as well as the other properties in Waikiki and surrounding guidelines. Forward-looking trends from JAL and ANA Airlines suggest sustained demand for Q4, and we anticipate this momentum to carry into winter and spring 2026.

As outline volume near pre-pandemic levels, Hawaii is well positioned to capture an outsized share of the recovery given its strong brand equity culture affinity and increasing promotional activity. Let's talk about liquidity now. Turning to the balance sheet. As of the end of the third quarter, we had total liquidity of approximately $539 million, consisting of roughly $139 million in cash and cash equivalents and $400 million of availability under our revolving line of credit.

Our net debt to EBITDA ratio was 6.7x on a trailing 12-month basis and 6.9x on a quarter annualized basis. and we remain committed to reducing leverage towards our long-term target of 5.5x or lower. Our interest coverage and fixed charge coverage ratios were both approximately 3.0x on a trailing 12-month basis. Let's talk about 2025 guidance. We are raising our full year 2025 guidance range to $1.93 to $2.01 per FFO share with a midpoint of $0.97 per share.

This represents a $0.02 increase from our prior guidance midpoint of $1.95 issued in the second quarter of 2025. The upward revision largely reflects year-to-date performance, outperformance towards the high end of the range would depend on consistent rent collections from tenants currently reserved for credit exposure.

Increased demand and continued expense discipline in multifamily, strengthening near-term travel trends at our Embassy Suites Waikiki Together, these levers represent upside potential, and we will continue to monitor each closely as the year progresses. As a reminder, our guidance in these prepared remarks include the impact of any future acquisitions, dispositions equity issuances or repurchases and debt refinancings or repayments except for those already disclosed.

We remain committed to transparency and will continue to provide clear insights into our quarterly results and the key assumptions that inform our outlook. Additionally, please note that any non-GAAP financial metrics discussed today such as net operating income or NOI, are reconciled to the most directly comparable GAAP measures in our earnings release and supplemental materials.

I'll now turn the call back over to the operator for Q&A.

[Operator Instructions] And our first question today comes from Todd Thomas from KeyBanc Capital Markets.

Everyone. This is A.J. on for Todd. Appreciate you guys taking my question. Adam, maybe starting with you. I appreciate your comments just in the opening remarks around the leasing pipeline. Just maybe pulling on that thread a little more.

Would you just provide an update with regards to the anticipated time line to stabilize the La [indiscernible] II and One Beach Street assets?

Yes, sure. I'll have Steve offer a little bit more insight. But what we are seeing lately, as I mentioned, is a lot more activity. And so though it's really difficult to pin actual stabilization date. We feel the momentum is carrying us to that date a little quicker than it had been in the past quarters. But Steve, maybe you can add a little bit more color on both of those.

Sure. As Adam mentioned, we signed a lease with an international bank just last week, and then we have 2 others in lease documentation. One is a technology company in the legal field, and the other is a very high-end insurance company. And then we've got 2 other proposals totaling actually 17,000 feet.

And we've got 2 other competitors for the 19,000 foot spec suite. And then along those lines, we're building out more spec suites. We've got another several spec suites under construction and delivering spaces that are ready to go has really borne fruit. The bank that we signed went into a spec suite with minor modifications and the other tenants that are prospects are largely tenants that need the space sooner than later.

So building the space out, having it ready to go with minor modifications is really playing out well. And the tenants that are signing leases are paying the rents. They want the best and they're paying up for it. So we're hitting our numbers on the rent side. So we're very encouraged by that.

And as Adam said, the activity is picking up. And with the completion of the restaurant and a major conference center that we're adding to the campus, we think the momentum of 26 is going to be really solid. As it relates to One Beach, we're excited. We just converted our first deal to lease documentation yesterday.

We're getting that lease out today, and we hope to sign it Gosh, by the end of the quarter, we expect to. We've got another prospect for the same space, actually, and so we're playing that out, and we've got robust tour activity. Really, it's turning into an AI hub of the North Waterfront is in Jackson Square. There's one pivotal tenant that signed a lease 2 blocks away that really is creating some gravity in that location. And it's interesting, being we talk to the CEOs of the 2 firms competing for the same space.

They both live in the neighborhood. They can walk to work. So it really is turning out to be this new hub, and it's a great location. They love it. Furthermore, both firms looked at a bunch of space. They looked at competing projects and they consider that all the commodity space. When they got to One Beach, they said this is different.

This is the first one we've been willing to step up and make an offer on. So we're encouraged by that feedback. And so -- as Adam said, we're more positive about stabilization of both. We can't predict exactly when, but it's sooner than we would have said last time we talked.

Understood. I appreciate that color, Steve. Well, I guess, sticking with leasing, you guys are speaking about leases in the quarter. Any known move-outs, I guess, as we look to 26 that we should be aware of?

Sure. There's -- well, they're not known yet. We've got some that we're forecasting. It's about 180,000 feet of those tenants that are up in the air. One case is let's see Genentech. They're in 3 floors currently. They're considering getting back a floor, although we question whether that happens.

So that will play out in the next 6 months or so. We've got a full for health care clinic at Boyd 700 that we know is coming back. So we've got 18,000 feet that's up in the air. We don't know for certain how that's going to play out. But we've got a really strong leasing activity behind it. And so we've been able to really quite really well against those types where we're swimming upstream, so to speak, but we only went backwards 10 basis points this quarter after losing 70,000 feet of known givebacks this quarter.

Our new leasing activity is accelerating and the known givebacks this quarter are down to about 23,000 or 24,000 feet. So we think that's going to flip in our favor from an occupancy standpoint next year.

Perfect. I appreciate that. And then maybe, Bob, switching to you, just real quick on the balance sheet, just with leverage ticking up in the quarter. Would you just provide some thoughts on the company's current letters profile and perhaps plans and a time line to get back to under 6x on a net debt-to-EBITDA basis closer to your long-term 5.5x long-term target?

Yes. From our perspective, we have a plan on how to get there. And the plan really is leasing up One Beach and La [indiscernible] Commons 3. And with that, we'll have approximately $0.30 of additional FFO we'll be back in the game at the -- and all the debt ratios will get closer to 6, if not below 6% by the -- so we feel pretty confident about it.

We've met with all 3 of the rating agencies, and they continue to give us a stable outlook. They understand -- and even the rating agencies, all 3 of them have commented in their own information that they share with the public is that it's -- it's generally -- the expectation from their standpoint is generally 18 months out on leasing up office, high-quality office it's commodity forget.

But if it's high-quality office like our portfolio, we have a good shot of even beating that. So we'll see, we'll take one step at a time. We feel positive about it. It's just a timing thing. That's all it comes down to.

And our next question comes from Reni Pier from Green Street Advisors.

So I know you mentioned the multifamily portfolio having been weighed on by higher deliveries and San Diego in addition to higher concessions. Just trying to get a sense of where you think that segment finishes out the year? Are you expecting some relief on the concession front?

I believe you've mentioned some stronger leasing recently in the portfolio. So trying to get a sense of where same-store NOI might finish the year out.

Yes. I mean, well, just to start, the San Diego multifamily, we think that market remains fundamentally resilient. But as I mentioned, the near-term NOI is impacted by the higher operating expenses and some of the elevated supply -- we have had some incremental leasing success.

Maybe Abigail can share that with you high level. I'm not sure that we've modeled that end of year-end NOI projections yet. So we just want to be careful about what we say on that front. But Abigail, do you have commentary perhaps on the incremental leasing we've seen over the past few weeks in our San Diego multifamily?

We are currently multiple leased and at the end of the quarter, specifically over at Pacific Ridge. We have seen a recent uptick with USD's students securing tenant fees for their upcoming winter and spring semesters, which is really encouraging for us because going into it's traditionally a slower leasing season we're finding that people are securing their units earlier sooner rather than later.

And then also at our other communities, we're finding that leasing is moving forward broadly, specifically over at Loma Palisades and that [ Genesee ] Park, leasing over there has picked up and we're upwards of 96%, 97% leased. Again, in what's usually a historically slow leasing period for us. We really attribute that as that I mentioned to well-maintained communities.

Our properties are in the best zip codes in San Diego. And then we also have this incredible team members who are operating these communities. So we remain optimistic with our leasing through the end of the year and the end of the quarter.

Yes, Reyni, we expect stability to improve as supply is absorbed and expenses normalize -- so that's the expectation looking out.

Yes. One last question, [indiscernible] You have all 3 of these talking here on this is that in San Diego, remember that you have the Pacific Ridge, which is right across some U.S. site. So we do take a dip on the move out of tenants from July, August, June, July, August.

So that's our dip every year, and then we generally come back strong after that. But it's Abigail is doing a great job keeping the occupancy. We're as competitive as anybody in San Diego when it comes to rate. But I think overall, I think people are feeling that there is pressure on the operating expenses.

It's not just us, it's other multifamily as well. And I think with the competition, especially with -- compared to Mission Valley, there are concessions. So we're doing the best we can. And I don't think we're dissimilar from any other multifamily also.

Great. I appreciate all that color. And then maybe a question for Steve primarily. Good quarter on the office leasing front, I was hoping you could give some detail around which tenant industries you're seeing the most active in market? That would be very helpful.

Well, San Francisco, it's AI. And there is an emergence of new co-working operators in AI. But it's really AI driven for the most part there. We're seeing some of that in Bellevue as well. Overall seeing a broad base of other types of tenants. So we've got a technology firm that's in the legal industry that's in leases at Tower 3.

We've got an insurance company I mentioned earlier in Tower 3, the ultra high-end net worth people that they cater to. Let's see, we've got finance. You've got a company that's for 4.5x and it's a first in Maine and in Portland, and they just did a valuation of the dental practice that we're doing an assignment on. So it's interesting. It's just a broad swath of really good quality tenants well firms law firms yes.

Our next question comes from Ronald Kamdem from Morgan Stanley.

This is Matt on for Ron. I was just curious, you guys talked a little bit about the tenant types that are interested in leasing space. Could you talk about the leasing trends between the different submarkets would you say there's any markets that are seeing more concentrated interest or if it's just kind of widespread?

It's a flight to quality. So I wouldn't talk about it market to market. It's really every market is mixed and not all ships are rising. So it's really -- the activity is gravitating towards to the best properties, but also space that's ready to go. That's the biggest trend I'm seeing as tenants don't want to wait for every tenant rep broker we talk to, we tell them our strategy of spec suites and having spaces ready to go, said we're spot on.

And the results speak for themselves. We've got about, I think, 38% of the deals we've done year-to-date have been in Spec suites. We're doing about 40% of our vacancy in spec suites. And these are smaller spaces. Our average space is 3,000 to 4,000 feet. So it's low risk. We build them out. They're ready to go with minor modifications at most.

And that design will last longer than the tenancy. And if you look at our TIs on our renewals, they're very low because we've built out the spaces and they don't require a whole lot of work in to [indiscernible] them.

Got it. And then just as a follow-up to that, could you just talk a little bit about how we could think about the office occupancy trajectory over the coming quarters? You guys are seeing momentum in leasing and just kind of wondering how that actually builds into the occupancy as we get into '26.

New leasing is about 70% of our activity right now. So that bodes well for making up any known givebacks that are coming. Q3 is a light on good that quarter, so we should make good ground up. And we've now recognized -- we're no longer looking at same store.

It's really -- that 82% is the whole portfolio, including Tower 3 and including One Beach. So it is what it is. One Beach alone will really put a big dent in that Tower 3, as I said, the momentum is building. And I think 26% is going to be a real strong year. So I think we'll go positive. We'll go positive in 2026. I can't tell you how are -- we'll see how those non banks play out. But the new leasing is strong.

If you had to mention several hundred thousand feet of proposals, that's the biggest number we've had that I can remember. And our current leasing activity for the year as we finish out the quarter as expected, it will be our second best quarter -- or our second best year since I've been here since 2018.

Matt, we'll have more visibility into that with our next call in terms of occupancy expectations in the office sector. So we'll have dug in a little deeper on that through year-end.

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Adam for any closing remarks.

Thank you for your continued support. We hope you enjoyed the call as much as we'd in. Hope you have a great day. Thanks, everybody.

And with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Good morning, and welcome to the American Assets Trust Inc.'s Second Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Meleana Leaverton, Associate General Counsel of American Assets Trust. Please go ahead.

Thank you and good morning. The statements made on this earnings call include forward-looking statements based on current expectations, which statements are subject to risks and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements as actual events could cause the company's results to differ materially from these forward-looking statements.

Yesterday afternoon, American Assets Trust's earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investors section of its website, americanassetstrust.com.

It is now my pleasure to turn the call over to Adam Wyll, President and CEO of American Assets Trust.

Good morning, everyone. At American Assets Trust, we approach every cycle with the same mindset: Stay nimble, stay thoughtful and stay true to our strategy, investing in our high-quality assets, maintaining balance sheet strength and creating long-term value for our shareholders. That consistency has carried us through challenging environments before, and we believe it continues to serve us well today as we navigate elevated interest rates, persistent inflation, tariff uncertainty and evolving tenant demand.

In the second quarter of 2025, our results came in just above our own expectations. FFO per diluted share was $0.52, and same-store cash NOI was approximately flat for Q2 and up 1.4% year-to-date compared to the prior year. These results reflect steady performance in a mixed operating environment and underscore the resilience of our portfolio and the value of our disciplined approach to asset management.

Turning to the portfolio. Our office portfolio ended the quarter 82% leased, and our same-store office portfolio, which excludes One Beach and La Jolla Commons III, ended the quarter 87% leased. Same-store office cash NOI was approximately flat for the quarter and up over 2% year-to-date as compared to the prior year. We completed approximately 102,000 square feet of leasing during the quarter, with comparable rent spreads decreasing 2% on a cash basis and increasing 10% on a straight-line basis. Notably, the negative cash basis rent spread was primarily attributable to a deal backfilling a 12,000 square foot First & Main space with just 2 months of downtime, no TIs and a lower start rate than the prior tenant, but with 5% annual bumps.

We entered Q3 with solid momentum, including approximately 17,000 square feet of executed leases and an additional 111,000 square feet in active lease documentation. Leasing interest continues to build across our office portfolio, reflected in growing prospect engagement and inbound RFP volume. Across our office portfolio, demand remains concentrated in less than full floor requirements, and winning in this environment depends on several fundamentals: Ownership with the financial strength to fund tenant improvements and commissions; a reputation for operational excellence and responsive service; completed renovations and amenities; availability of move-in ready suites requiring only light customization; hands-on construction management that minimizes cost and schedule uncertainty; and an efficient solutions-oriented lease negotiation process, because time kills deals.

Of course, our near-term focus remains on driving occupancy, enhancing the tenant experience and positioning the portfolio to perform well under current utilization patterns even if broader office attendance has reached a near-term equilibrium. We remain confident in our coastal high-barrier markets over the long term as employers continue to prioritize high-quality, collaborative and amenitized environments to support productivity and talent retention.

In fact, this year, two of the world's largest real estate brokerage firms, neither of which represent us as landlord, chose our San Diego properties for their new headquarters in the market. We view this as a meaningful validation of the quality, positioning and upkeep of our office portfolio and the strength of our tenant experience.

In retail, our portfolio continues to perform well, backed by healthy consumer demand in our trade areas. We ended the quarter 98% leased with same-store cash NOI growth of 4.5%. We executed over 220,000 square feet of new and renewal leases in Q2, with spreads increasing over 7% on a cash basis and 22% on a straight-line basis. Rent collections remained strong in all tenants on our reserve list, including At Home at Carmel Mountain Plaza were current through Q2. Meanwhile, we're actively engaged with At Home in a mutually beneficial lease structure moving forward for their sole location in San Diego.

In addition, in Q2, we backfilled the former Party City space at Gateway Marketplace with rents approximately 30% above prior levels. We continue to see durable demand for our retail centers, which are supported by strong local employment and favorable demographics. With limited new supply and consistent foot traffic, we expect these trends to continue.

Our multifamily portfolio performed in line with expectations, and San Diego recently delivered new supply has created a more competitive leasing environment, and we are navigating elevated operating costs and increased concessions. Still, our communities demonstrated strong stability, ending the quarter approximately 94% leased. We achieved rent increases of 7% on renewals and 4% on new leases for a blended rent increase of 6%. Excluding our new Genesee Park acquisition, rent increases were 6% on renewals, 2% on new leases for a 4% blended increase and an approximately 2% increase in net effective rents compared to the same quarter last year.

Occupancy at Pacific Ridge temporarily dipped just below 85% at the beginning of July due to the seasonal student turnover, but it is expected to rebound above 90% by the end of August. The community remains at about 92% leased right now. And as previously disclosed, we acquired Genesee Park based on our conviction in the long-term fundamentals of the coastal San Diego market, the opportunity to meaningfully mark-to-market rents and the potential for future densification. We're pleased that the asset continues to perform in line with our underwriting assumptions.

Up in Portland, Hassalo on Eighth ended Q2 91% leased with blended rent growth of approximately 1%. While the market continues to work through elevated supply and a slower pace of job growth, we're encouraged by steady leasing activity and solid retention. Competition from suburban product remains a factor, and with occupancy holding in the low 90s and signs of stabilization emerging, we see plenty of room for improvement, hopefully in the quarters ahead.

At our fee-owned mixed-use Waikiki Beach Walk in Oahu, where we are pleased to report no damage or injuries from the tsunami warning last night, NOI declined 5% compared to Q2 last year, driven by softer performance at our Embassy Suites. While the NOI of the retail component grew 7% year-over-year, the hotel was down approximately 15%, reflecting lower paid occupancy and RevPAR amid ongoing softness and domestic leisure demand, heightened rate competition across Waikiki and global economic uncertainty. Elevated labor costs and room expenses also impacted margins during the quarter.

That said, our Embassy Suites continue to lead its competitive set in RevPAR, underscoring the strength of the asset, its prime location and its appeal to value-driven travelers. We remain confident in the property's long-term positioning as the market stabilizes.

A few final items. I'm pleased to share the Board approved a quarterly dividend of $0.34 per share for Q3, payable on September 18 to shareholders of record as of September 4. This reflects our continued confidence in the long-term stability and cash flows of the portfolio. And additionally, in Q2, we published our 2024 sustainability report, highlighting our progress and commitments across environmental, social, governance and human capital initiatives. We remain proud of the role our company plays in advancing responsible business practices.

In closing, while external conditions remain dynamic, we will continue to manage with flexibility and a long-term view, always grounded in the fundamentals that have served us in our portfolio well across countless cycles. Our team is known for executing with this discipline and foresight. On behalf of the management team, including Ernest, who is joining us today, thank you for your continued support.

And by the way, you guys, I think the team is doing a really good job. So I'm grateful.

Thanks, Adam and Ernest. And good morning, everyone. Last night, we reported second quarter 2025 FFO per share of $0.52. Second quarter 2025 net income attributable to common stockholders per share was $0.09. Second quarter 2025 FFO remained flat compared to Q1 2025. However, excluding the approximately $800,000 in lease termination fees recognized in Q2 '25, FFO declined by approximately $0.01 per share. The decrease primarily reflects the sale of Del Monte Center on February 25, '25, with 2 months of FFO contribution in Q1 that was no longer present in Q2. Same-store cash NOI for all sectors combined was approximately flat year-over-year in the second quarter of '25 compared with the same period in '24. .

Breaking out Q2 out by segment and each as compared to Q2 '24. Our same-store office portfolio's NOI was approximately flat, primarily due to the known move out of CLEAResult at first of May on April 30, '25. A portion of the vacated space has already been backfilled, as Adam mentioned earlier.

Our same-store retail portfolio's NOI increased by 4.5%, primarily driven by commencement of new leases and contractual rent escalations at both Alamo Quarry and Carmel Mountain Plaza. Additionally, retail portfolio also benefited from lower operating expenses at Carmel Mountain Plaza and Alamo Quarry, further contributing to the year-over-year growth.

Our same-store multifamily portfolio's NOI declined by 3.9%, primarily due to lower rental income at our Hassalo on Eighth property in Portland and higher operating expenses at our Pacific Ridge property in San Diego. And our same-store mixed-use portfolio's NOI declined by approximately 5%, primarily driven by lower-than-anticipated ADR at Embassy Suites Waikiki.

Specifically and compared to Q2 '24, paid occupancy for Q2 '25 was approximately flat at 86%. RevPAR for Q2 '25 was $305, down 4%, though we exceeded our competitive set in Q2 by $62 per room. ADR for Q2 '25 was $355, down 3%, though we expected our competitive set in Q2 by $86 per room.

Number four, net operating income for Q2 '25 was approximately $2.9 million, down $0.5 million. Based on our STARs reports that we see monthly, most, if not all of the hotels in Waikiki are experiencing similar trends. The Japanese yen remains around $147 to the U.S. dollar. Rising airfare and hotel costs are prompting some domestic travelers to reconsider trips to Hawaii, instead choosing international destinations, supported by a strong dollar, or opting for all-inclusive cruises. That said, the unique appeal aloha spirit and safety of Oahu and the neighboring islands continues to attract visitors. We view these headwinds as temporary and remain confident in the long-term strength of Hawaii's tourism market.

Let's talk about liquidity. As of the end of the second quarter, we had total liquidity of approximately $544 million, consisting of roughly $144 million in cash and cash equivalents and $400 million of availability under our revolving line of credit. Additionally, our net debt-to-EBITDA ratio was 6.3x on a trailing 12-month basis and 6.6x on a quarter annualized basis. Our long-term goal remains to reduce and maintain net debt-to-EBITDA at 5.5x or lower. Our interest coverage and fixed charge coverage ratios were about 3.1x on a trailing 12-month basis.

Let's talk about our '25 guidance. We are increasing our full year 2025 guidance range to $1.89 to $2.01 per FFO share with a midpoint of $1.95 per FFO share, an increase of $0.01 over our initial midpoint of $1.94. This outlook reflects steady momentum across our core sectors, supported by leasing activity, rent escalations and disciplined operations. Our guidance assumes a stable environment and sustained tenant demand.

Based on year-to-date performance and current visibility, we believe we are well positioned to meet our full year goals. While the updated guidance reflects our best estimate today, outperforming toward the high end would require several favorable developments, including, first, the majority of office or retail tenants for whom we have established credit reserves must continue to meet their rent obligations throughout the year. As of Q2 '25, we have reserved approximately $0.02 per share of FFO, split evenly between office and retail tenants. Based on a probability-weighted assessment of at-risk tenants, year-to-date, none of these reserves have been utilized.

Second, our multifamily segment would need to exceed expectations, driven by improved occupancy, continued rent growth and better-than-forecasted expense management. Third, a meaningful recovery in tourism in the last half of the year would support stronger performance at our Embassy Suites property. We remain optimistic that both domestic and international travel will improve either later this year or in the years ahead.

Together, these levers represent upside potential, and we will continue to monitor each closely as the year progresses. As a reminder, our guidance in these prepared remarks exclude the impact of any future acquisitions, dispositions, equity issuances or repurchases and debt refinancings or repayments, except for those already discussed. We remain committed to transparency and will continue to provide clear insights into our quarterly results and the key assumptions that inform our outlook.

Additionally, please note that any non-GAAP financial metrics discussed today, such as net operating income or NOI, are reconciled to the most directly comparable GAAP measures in our earnings release and supplemental materials.

I'll now turn the call back over to the operator for Q&A.

[Operator Instructions] Our first question comes from Todd Thomas with KeyBanc Capital Markets.

This is A.J. on for Todd. The first one, just with regards to guidance, Bob, maybe for you. Are there any changes to the same-store NOI growth outlook for the various segments relative to the forecast provided with initial guidance, I think, back in 4Q '24? Just -- any adjustments to those assumptions?

Thanks for the question. Yes, we're still on track. There's obviously noise going on with some of the termination fees that we've had. But from my perspective, we're still on track. We hope to outperform what we currently have in guidance. But I don't see any significant differences. Adam, do you have any input on that?

No. I think we might find, J.J., that a few of our segments may outperform the guidance Bob gave on same-store NOI and others may underperform. For instance, the hotel is not going to do as well as we expected based on what's going on in the world these days, but office seems to be trending better. So we'll see how it shakes out over the last 2 quarters.

Okay. I appreciate that color. And Adam, maybe sticking with you. Last quarter, you noted an uptick in the touring around the La Jolla Commons III and One Beach. Can you just discuss the leasing pipeline and interest level for those two specifically, any year-end leasing goals you may be able to share with us?

Yes, we are seeing increased touring activity and prospects and RFP activity, but I'll let Steve kind of chime in a little bit more on that. He's a little more dialed in.

Sure. Starting with One Beach. And we had talked about it before, that the deal size is moving up to a point where it makes sense for us to be engaged on deals. Previously, it was 2,000, 4,000, 6,000 foot spaces, and our floor plates are 35,000 feet. Now you're seeing the average deal size tick up. The greatest amount of activity is from 20,000 to 60,000 feet right now, which is right in our wheelhouse.

So to that end, in this market, you have to have spaces that are ready to go, and Adam touched on it earlier. So we're moving forward with our plans to develop a parking and amenities on the first floor of the building and then to spec out improvements on the first and second floors in anticipation of this demand so that when they're ready to go, they're within a few months of moving in.

So -- and to that end, because we've made that commitment and the brokers are communicating it and we have our segmentation breaking the building up into smaller components, our touring activities are way up. In fact, we had a full building tour yesterday afternoon. So that's encouraging.

And then moving on to La Jolla Commons III. Keep in mind, our amenities aren't even complete yet. The restaurant, Fleurette, will be complete this fall, probably October and open up, and that's a key component to attracting tenants to the campus. And then second, we have a major conference center under construction that will be completed, what, Jerry, in September?

Absolutely same time frame, yes.

So with that, we think you'll see acceleration in lease-up. That being said, we have 3 of our spec suites, 1 on 2 and 2 on the fourth floor, they're under construction. That we're -- we're deep in negotiations and space planning on. We're about 9% of the property. And we have some existing tenant demand that may come about with the merger of an accounting firm with another accounting firm that's in a 10-year lease with us in Tower 1. That is going to grow past the Tower 1's ability to accommodate them. So that may bleed into Tower 3. We have a second tenant as well that's contemplating similar growth, different situations, they're just growing as a law firm. And they may not be able to be fully housed in Tower 1.

So really, the 930,000 foot 3-building campus is coming into play. It's not just a 200,000-foot 10-story tower. It's a campus, and it's very dynamic. And it's really attractive long term for some larger tenants as well given the flexibility that comes with being part of something of that scale.

I appreciate that color. It's really helpful. And then maybe just moving on to the occupancy at 14 Acres increased significantly in the quarter. Can you just talk about the lease that was completed there and maybe with the renovations completed at that asset and the other Bellevue properties that were acquired within the last few years? What's the demand response you're seeing? Is it as anticipated? What are the leasing goals for those assets, specifically at 14 Acres and Timber Spring?

Great question. We'll start out with 14 Acres. You touched on it, Jerry and I talked about it this morning. The renovation is complete. It's beautiful. And so with that, tour activities are up. And we -- Adam touched on -- we've been very active in developing a spec suite program there as well. And all of the multi-tenant space is less than full floor. And with that, we get the plans done, tenants engaged. They've seen the commitment to spend money on the renovations. And so once we're short, we've done several leases and we've got several pending for these spaces that we've designed, and they're really minor modifications to the spec suites that we've designed.

So we're moving ahead very quickly. And keep in mind, this is a 44% vacant submarket with negative net absorption. And yet we've got a lot of activity there. So we're excited about that. And just to use that, Todd -- I'm glad Todd wrote up his remarks early because it gives me a chance to contemplate how it looks to everyone. And he noted that we went backwards by 70 basis points in terms of occupancy. And he noted that to give back a clear result, we had 113,000 feet of known givebacks this quarter, and we accounted -- through new leasing, we accounted for all the 28,000 feet of that. So givebacks were 280 basis points. We made up 210 basis points with just new leasing.

So this quarter, 81% of our leases were new leases, not only comparable but noncomparable. So we've got great leasing activity that's moving on to the I-520 corridor. It's a bit healthier than the I-90 corridor, and that's where Bell Spring, 520, which is now Timber Springs and Timber Ridge are. Timber Ridge is now 97% leased with the Sitech lease that we just signed last quarter. And then Timber Springs is close to -- we'll be approaching 87% or 88% leased with the lease. We think we just sent out a final draft for a full floor lease there.

So we made great progress there. And again, that's a negative net absorption market with higher vacancy and yet, we're making really good progress.

Next question comes from Haendel St. Juste from Mizuho.

This is Ravi on the line for Haendel. I hope you guys are doing well. I wanted to ask about the multifamily portfolio. I think I heard in your prepared remarks that the new lease spreads were below renewal spreads. I guess I would have maybe anticipated to hear the opposite and given the perpetual high interest rates and on affordability with housing, I thought we would have seen maybe some heightened demand for multifamily. Can you maybe offer some further commentary or color?

Yes. Ravi, it's Adam. We're navigating different markets, right? So we're in San Diego and Portland. Portland has had its share of struggles that's been compounded with the extra supply. So obviously, we're doing the best we can there, rents have kind of stabilized. And we expect some growth later this year or into next year once the markets kind of absorb that excess supply.

San Diego is a different story, though, where we've seen like an incredible surge over the past several years and it's starting to equalize somewhat now that there's a lot of more supply being absorbed as well here. But maybe Abigail can add a little color on the difference between the renewals and the new rates that we're seeing, which are still growing positively, but not as much as they have been over the past few years. Abigail, do you see anything there you can share?

I think Adam hit the nail on the head with answering that question. In San Diego, our rental rates across the portfolio are operating a little bit higher than what we are seeing county-wide. With some of the properties, we have some caps that are in place. But at Pacific Ridge, we're continuing to see some rent growth that's favorable throughout the region where there is saturation with new supply and new products.

The good part about our properties is, as mentioned before, is that we are in unbeatable locations. We've got irreplaceable products, experienced and knowledgeable management teams that attract residents near and far, and we maintain our communities in top order. And so I think we'll continue to see favorable growth as much as we can and continue to thrive in this current marketplace. It's a desirable location, and we've got great properties throughout.

Got it. I wanted to ask about the hotel in Hawaii and some of the demand drivers there. It seems like a weak yen, north of 145. The conversion rate between the yen and the dollar is weighing on demand from that market. Is there a number where you think the demand will pick up? Like, is it 120? Is it 110? Is that something that you guys are kind of forecasting in terms of maybe, future demand?

It's really tough to predict, Ravi. As you know, Oahu's tourism was 40% from Japan or Asia, pre-pandemic. And I think right now, it's kind of in the mid-teens, and it's incrementally picking up. But the dollar is getting a little weaker. So that's helping somewhat on the margin. I think we're anticipating more action next year, but it really remains to be seen because there's so much going on in the world with geopolitics and economic uncertainty. We're hopeful and we're doing our best to kind of cater to those large Asian package groups. But I think to expect anything meaningful this year would be a stretch. Do you have anything to add to that, Bob?

Yes, Ravi. I mean, we're down, as you noted, this quarter. And we're actually -- I mean, to be honest with you, we're down about where we were prior to COVID or just the beginning of COVID, which I'm scratching my head on. But the reality is that if the Japanese yen is at 147 and we used to be at 108 pre-COVID, the median income from Japan tourism is still going to be slow. They can go -- they have choices to go other places. The people that are wealthy from Japan are willing to make the stride coming out here.

But having said that, I think there's also a lot of uncertainty. All the tariffs, things going on across the world. I think people are just taking a pause. Like I said in my comments, I mean, they have other choices on where to go. But also, too, is that I've noted on these STAR reports that we get, Ravi, which really tracks all the comparable hotels. And we have all the comparable hotels in Waikiki. And in our competitive set, we have probably 10, 12 hotels. It's a combination of on the beach and off the beach, we outperform all of them in terms of RevPAR, in terms of ADR. So I'm not overly concerned about it. I think it's just a point in time that we're all going through. And we're still doing better than most of them.

Got it. That's really helpful. And lastly, in the past, I think you've said that there's about $0.30 of leasing upside in terms of a pipeline going forward. Maybe -- in what segments do you think that total pipeline is expected to materialize first?

That $0.30, Ravi, was predominantly office. Leasing up La Jolla Commons III, One Beach and our suburban Bellevue assets gets you to about $0.30. And I guess I could mention, too, that we've got probably 5% of our office GLA is signed leases, but have not commenced yet. So there is going to be a meaningful uptick coming down the road once those rents commence.

Our next question comes from Brenny Pyre with Green Street Advisors.

So it seems like AAT was pretty busy on the acquisitions and dispositions front earlier this year and there's a healthy balance of cash on the balance sheet at the moment. Any plans to put that to work? And if so, which property types or markets do you think provide the best risk-adjusted returns?

We're always looking -- this is Ernest. We're always looking. We have to find something that offers a significant upside. We don't want to spend the money just for the sake of spending the money. And our preference is for -- at the moment, not office because we have our opportunities ahead of us in office, but we're looking at multifamily and we'd certainly consider retail if it became available.

And of course, Brenny, that money is working for us in the bank, earning interest right now as we evaluate options, and it gives us pretty solid comfort, having that balance sheet strength as we look for...

With all the uncertainties in the world, that money in the bank plus the line of credit does give us some extra sleep that we wouldn't enjoy otherwise.

Got it. All fair points. And then one more question. In regards to the touring activity you're seeing at One Beach and I guess, for San Francisco as a whole, could you talk about the tenant industries that you're getting most touring from? Is AI starting to step up as a more likely tenant for the One Beach asset?

That's the primary driver of this most recent activity. Current -- I mean, I think they've contributed 5 million square feet of leasing thus far, but it's predicted it could be as big as 25 million square feet in the next few years. So it's growing by leaps and bounds.

But it's also -- you're seeing -- well, Databricks is an AI company as well. So yes, it's largely AI, it's technology. On the law firm side, you're actually seeing rightsizing and consolidation for the most part, financial services as well. So it's really tech-driven.

Great. Thanks for the color. That's all for me.

This concludes our question-and-answer session. I would like to turn the conference back over to Adam Wyll for any closing remarks.

Well, on behalf of everyone at American Assets Trust, we appreciate your support, and you're joining us today. Have a great week.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.