Market Overview

American Assets Trust, Inc. Reports Third Quarter 2019 Financial Results

Share:

Net income available to common stockholders of $12.9 million and $32.9 million for the three and nine months ended September 30, 2019, respectively, or $0.22 and $0.63 per diluted share, respectively

Funds From Operations per diluted share increased 8% and 1% year-over-year for the three and nine months ended September 30, 2019, respectively, or $0.57 and $1.63 per diluted share, respectively

Same-store cash NOI increased 1.6% and decreased 1.0% year-over-year for the three and nine months ended September 30, 2019, respectively. Excluding lease termination fees, same-store cash NOI increased 0.6% and 1.0% year-over-year for the three and nine months ended September 30, 2019, respectively

SAN DIEGO, Oct. 29, 2019 (GLOBE NEWSWIRE) -- American Assets Trust, Inc. (NYSE:AAT) (the "company") today reported financial results for its third quarter ended September 30, 2019.

Third Quarter Highlights

  • Net income available to common stockholders of $12.9 million and $32.9 million for the three and nine months ended September 30, 2019, respectively, or $0.22 and $0.63 per diluted share, respectively
  • Funds From Operations increased 8% and 1% year-over-year to $0.57 and $1.63 per diluted share for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018
  • Same-store cash NOI increased 1.6% and decreased 1.0% year-over-year for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018
  • Increasing quarterly dividend 7% to $0.30 per share of common stock in the fourth quarter of 2019 compared to the third quarter of 2019
  • Introducing 2020 annual guidance midpoint of $2.42 with a range of $2.38 to $2.46 of FFO per diluted share, a 9% increase over the revised 2019 annual guidance midpoint; excluding 2019 lease termination fees, the increase is 13% over the revised 2019 annual guidance midpoint
  • 2020 same-store cash NOI estimated to increase approximately 9% over the 2019 full year same-store cash NOI forecast based on an approximately 4.0% same-store cash NOI increase in retail, an approximately 14.0% same-store cash NOI increase in office and an approximately 3.5% same-store cash NOI increase in multifamily
  • Leased approximately 71,000 comparable office square feet at an average straight-line basis and cash-basis contractual rent increase of 29% and 12%, respectively, during the three months ended September 30, 2019
  • Leased approximately 30,000 comparable retail square feet at an average straight-line basis and cash-basis contractual rent increase of 9% and 3%, respectively, during the three months ended September 30, 2019
  • Closed a privately placed debt offering of $150 million of eleven-year senior guaranteed notes, due July 30, 2030, with a fixed interest rate of 3.91% and an effective interest rate of 3.88% net of settlement of a treasury lock contract

Financial Results

Net income attributable to common stockholders was $12.9 million, or $0.22 per basic and diluted share for the three months ended September 30, 2019 compared to $10.4 million, or $0.22 per basic and diluted share for the three months ended September 30, 2018. For the nine months ended September 30, 2019, net income attributable to common stockholders was $32.9 million, or $0.63 per basic and diluted share compared to $13.0 million, or $0.28 per basic and diluted share, for the nine months ended September 30, 2018. The year-over-year increase is primarily due to a decrease in depreciation expense at Waikele Center attributed to the redevelopment of the former Kmart space, an increase in lease termination fees at Carmel Mountain Plaza attributed to the termination of our former ground lease, and an increase in annualized base rents at The Landmark at One Market, City Center Bellevue, and Lloyd District Portfolio.

During the third quarter of 2019, the company generated funds from operations ("FFO") for common stockholders of $43.0 million, or $0.57 per diluted share, compared to $34.1 million, or $0.53 per diluted share, for the third quarter of 2018. For the nine months ended September 30, 2019, the company generated FFO for common stockholders of $112.5 million, or $1.63 per diluted share, compared to $103.8 million, or $1.62 per diluted share, for the nine months ended September 30, 2018. The increase in FFO from the corresponding periods in 2018 was primarily due to the increase in annualized base rents at The Landmark at One Market, City Center Bellevue, and Lloyd District Portfolio, an increase in lease termination fees at Carmel Mountain Plaza attributed to the termination of our former ground lease, and the acquisition of La Jolla Commons on June 20, 2019 partially offset by the expiration of the Kmart lease at Waikele Center on June 30, 2018.

FFO is a non-GAAP supplemental earnings measure which the company considers meaningful in measuring its operating performance.  A reconciliation of FFO to net income is attached to this press release.

Leasing

The portfolio leased status as of the end of the indicated quarter was as follows:

  September 30, 2019 June 30, 2019 September 30, 2018
Total Portfolio      
Retail 98.0 % 97.5 % 98.5 %
Office 94.7 % 93.7 % 91.4 %
Multifamily 90.5 % 92.6 % 92.3 %
Mixed-Use:      
Retail 98.0 % 98.2 % 95.9 %
Hotel 92.1 % 91.7 % 93.6 %
       
Same-Store Portfolio    
Retail (1) 97.7 % 97.1 % 98.3 %
Office (2) 95.5 % 95.0 % 93.5 %
Multifamily 90.5 % 92.6 % 92.3 %
 
(1) Same-store retail leased percentages exclude Waikele Center, due to significant redevelopment activity.
(2) Same-store office leased percentages includes the 830 building at Lloyd District Portfolio which was placed into operations on August 1, 2019 after renovating the building. Same-store office leased percentages excludes Torrey Point, which was placed into operations and became available for occupancy in August 2018 and La Jolla Commons, which was acquired on June 20, 2019. Torrey Point and La Jolla Commons will be included in same-store office leased percentages commencing in the fourth quarter of 2019 and third quarter of 2020, respectively.


During the third quarter of 2019, the company signed 43 leases for approximately 133,300 square feet of retail and office space, as well as 610 multifamily apartment leases.  Renewals accounted for 89% of the comparable retail leases, 64% of the comparable office leases and 52% of the residential leases.

Retail and Office
On a comparable space basis (i.e. leases for which there was a former tenant) during the third quarter 2019 and trailing four quarters ended September 30, 2019, our retail and office leasing spreads are shown below:

               
    Number of
Leases
Signed
Comparable
Leased
Sq. Ft.
Average Cash
Basis %
Change Over
Prior Rent
Average Cash Contractual Rent Per Sq. Ft. Prior Average Cash Contractual Rent Per Sq. Ft. Straight-Line
Basis %
Change Over
Prior Rent
Retail Q3 2019 19 30,000   2.8 %   $59.44 $57.81   9.3 %  
Last 4 Quarters 61 181,000   3.7 %   $46.40 $44.73   10.6 %  
                       
Office Q3 2019 14 71,000   12.0 %   $51.95 $46.40   29.2 %  
Last 4 Quarters 47 494,000   45.5 %   $73.75 $50.70   69.3 %  

Multifamily
The average monthly base rent per leased unit for same-store properties for the third quarter of 2019 was $2,073 compared to an average monthly base rent per leased unit of $2,053 for the third quarter of 2018, an increase of approximately 1%.

Same-Store Cash Net Operating Income
For the three and nine months ended September 30, 2019, same-store cash NOI increased 1.6% and decreased 1.0%, respectively, compared to the three and nine months ended September 30, 2018. The same-store cash NOI by segment was as follows (in thousands):

  Three Months Ended (2)         Nine Months Ended (2)      
  September 30,         September 30,      
  2019   2018   Change   2019   2018   Change
Cash Basis:                          
Retail (1) $ 15,221     $ 16,024     (5.0 )   %   $ 44,878     $ 46,677     (3.9 )   %
Office (1) 19,132     17,307     10.5         56,027     55,995     0.1      
Multifamily 7,367     7,741     (4.8 )       23,353     22,848     2.2      
Mixed-Use        
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