American Assets Trust ((AAT)) has held its Q2 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
American Assets Trust’s recent earnings call painted a picture of resilience amidst a challenging environment. The company showcased robust leasing activity in its office and retail sectors, alongside positive rent growth in its multifamily portfolio. However, these positive notes were tempered by difficulties in the multifamily and mixed-use portfolios, particularly in Portland and Oahu, and a flat overall same-store cash NOI.
Office Leasing Activity
The company completed approximately 102,000 square feet of office leasing during the quarter. While comparable rent spreads decreased by 2% on a cash basis, they increased by 10% on a straight-line basis. Entering the third quarter, American Assets Trust had 17,000 square feet of executed leases, with an additional 111,000 square feet in active lease documentation, indicating a strong pipeline.
Retail Portfolio Performance
The retail portfolio ended the quarter with an impressive 98% lease rate and same-store cash NOI growth of 4.5%. The company executed over 220,000 square feet of new and renewal leases in the second quarter, achieving rent spreads that increased by over 7% on a cash basis and 22% on a straight-line basis.
Multifamily Rent Growth
In the multifamily sector, American Assets Trust achieved rent increases of 7% on renewals and 4% on new leases, culminating in a blended rent increase of 6%. This indicates a healthy demand and pricing power in this segment.
Dividend Declaration
Reflecting confidence in its long-term stability and cash flows, the board approved a quarterly dividend of $0.34 per share for the third quarter. This decision underscores the company’s commitment to returning value to its shareholders.
Liquidity and Financial Position
American Assets Trust reported total liquidity of approximately $544 million, comprising roughly $144 million in cash and cash equivalents and $400 million of availability under its revolving line of credit. This strong liquidity position provides the company with flexibility to navigate market challenges.
Multifamily Portfolio Challenges
The same-store multifamily portfolio’s NOI declined by 3.9%, primarily due to lower rental income at the Hassalo on Eighth property in Portland and higher operating expenses at the Pacific Ridge property in San Diego. These challenges highlight areas for potential improvement.
Mixed-Use Portfolio Decline
The mixed-use portfolio experienced a 5% decline in same-store NOI, driven by lower-than-anticipated ADR at the Embassy Suites Waikiki. This reflects ongoing challenges in the hospitality sector.
Hotel Performance in Oahu
The NOI for hotels in Oahu declined by 5% compared to the previous year, attributed to softer performance at the Embassy Suites, with lower paid occupancy and RevPAR amid ongoing softness in domestic leisure demand.
Forward-Looking Guidance
Looking ahead, American Assets Trust provided an optimistic outlook by increasing its full-year 2025 guidance range to $1.89 to $2.01 per FFO share, reflecting steady momentum across its core sectors. The company reported a Funds from Operations (FFO) per diluted share of $0.52 for the quarter, with same-store cash NOI up 1.4% year-to-date. The office portfolio remains strong with an 82% lease rate, and the retail sector continues to thrive with a 98% lease rate.
In summary, American Assets Trust’s earnings call highlighted a balanced performance with strong leasing activity and rent growth in key sectors, despite challenges in certain portfolios. The company’s robust liquidity and positive forward-looking guidance suggest a stable outlook, reinforcing confidence in its strategic direction.