Earnings call transcript Q2 2023

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Operator

Good day.

As a reminder, today's conference call is being recorded. Please note that statements made on this conference 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.

It is now my pleasure to introduce your host for today Mr. COO Assets and President Wyll, of Trust. American Adam you. Thank Mr. Wyll, you begin. may

Adam Wyll

release Welcome Deseray. Call. Assets earnings Both were are Good Investors Form you, on of SEC to to Yesterday supplemental the furnished morning, our now Earnings Thank X-K. XXXX our everyone. American website on information Quarter Trust afternoon, the available and section Second americanassetstrust.com.

and XXXX of quick I'll to Ernest? our Chairman over our turn Ernest discussion the quarter call And CEO the intro, begin with results. that second to Rady,

Ernest Rady

improve Thanks, makes Adam everyone. That over morning, believe to strong remain With each decision continuing that value with to strategic sheet our disciplined business among term. and good the the we respect remaining and American we that best includes, shareholder for longer operational asset Assets path our classes. maximize irreplaceable Trust our our will each in of the properties in balance and take markets and to invest

our again year the office increased ongoing In negative our trajectory that estate, earnings for real QX particular. the XXXX, commercial XXXX. continue performance by full in on market have despite once we as far our sentiment encouraged sector our defy operating odds which we guidance were we the based optimistic remain Nevertheless, to better-than-expected in fundamentals, so

mainly growth of our our optimize our who this people, and quality as wealth work in and our to both a of and our shareholder creation. exceptional is stewards minds, the properties frankly doubt of testament that No a statement long-term are to -- organization your well the --

And of matter vigilant all face and best continue what abilities. in what the we of forward our plan on operationally going execute presented pessimistic economic our and us proud that any focused the business incredibly remain scenario of may to market I'm to accomplished the will headwinds to and no be headlines. we've

But $X.XX and segments first to mention various a into supported results Directors Adam, for that confidence is details on portfolio our third of embedded quarterly I which go per our of results financial maintained of an believe the Bob and Board's year. expression this quarter, want our more of financial and is our Board growth dividend and guidance. the asset Steve will in approved do share we has the by

The to to be of dividend behalf of and at allowing September all American you company. On confidence your will in September Trust thank of manage us paid myself, your especially on XX continued shareholders and want support to continue X. to for us I record

to please? over the going back Adam. turn now to Adam, call I'm

Adam Wyll

Thanks, Ernest.

As you have all likely an heard, in ongoing flight real estate. quality there exists to commercial

honestly, assets welcome wide amenities, most with best-in-class we open top-notch know the properties that arms after elements, highest sustainability sought caliber as in our by that property our with among to management irreplaceable are the Quite tenants we and access locations desired transportation they because are public teams.

provide those our most of close talent tenants. to which are tenants prospective Additionally, employee and universities innovation excellent an centers, source and for world-renowned of properties

long-term the factors have to our the macroeconomic impacting our face current We will others. challenges that over and outperformance in even believed contribute these always the relative of organization

a property time on at seen to have like and office. over we corporations few Amazon, office front, year. an early employees large to on BlackRock, properties JPMorgan to much to this more past Briefly of this spend based tenant manager swipes, records uptick the translates at From the since card many what we months and between name XX% Disney estimates office requiring utilization the our utilization in few, access their control X% can see

And properties if downtown Landmark XX% closer has Market, average In at tenants, where and has relatively to to increased we for is Area the one of the at employees. being San this one has and office the to our Bellevue increased the Portland XX%. primary Bay utilization utilization XX% XX%. hub own with on XX% In best One Francisco, between approximately of San office Diego, from by driven on office finally to utilization asset office utilization XX% XX% remained not flat

On base are the are XX% property lease retail signed higher recently Market, to we what HomeGoods & Bed our with space announce that backfills front, Bath than The Beyond we former Quarry Bed at approximately of Bath bringing for our XX% HomeGood remainder rents that a XXXXX that paying. feet Beyond the been thrilled with to had lease Alamo & leased.

both due cash renewals to certain larger drop that basis, spreads past QX. in positive timing the from though inked leasing still a retail did of the and of our off we GAAP QX, rent with on quarters In few escalations

We several been retail that look signed next or in that lease renewal are quarter. in also have already documentation have discussing forward deals we to QX

of With QX. In multifamily posted positive vacant at an we on rates XX% no units prior approximately leases our of with respect to XX% concessions approximately results as better-than-expected increase. X% in the rate prior communities, Diego, while San rents to renewed average average a increased for units continue rents, of over rent a an we we over saw average see rent on growth blended

our of levels second for San year-over-year respectively. compared pre-COVID quarter XXXX, net and in XX% approximately XXXX Additionally, multifamily Diego, higher approximately and effective leases new above now XX% the to rents are

new pleased our for also to announce Diego, San lease University Apartments. are that the in Pacific QX units XXX of we We master with Ridge at signed a

X% school and staggered will terms lease starting in year, consecutive month master the years with And August school X.X dates. is bumps move-out for three rent which lease XXXX XX annual be per to

the in in $XX this three-year term. lease approximately million bring cash to expect rents We master over

occupancy of Ridge Pacific QX, the move the end this lines over as may the we have the XX%. percentage Pacific you by result by dropped XX%, occupancy just at was as expect noticed University our our students San expected that May, year below XX%-plus out end Diego at August those of of Along of Ridge the of to at QX. back ended This lease rebound levels end and to at of

multifamily a we net increase offered X% renewals our longer-term saw Meanwhile, new in on market on leases. being quarter San Hassalo approximately approximately XXXX. XX% effective and year-over-year, for Though, Portland numbers. rents has blended remained second Diego in our in QX concessions with multifamily move-ins leases Portland The new of sluggish of to Eighth, at the to are higher compared somewhat between relative

and XXXX in highlights Finally, you environmental range which of human capital. sustainability we report published responsibility, and initiatives report. social governance commitments including covers our across Hope, XXXX corporate and enjoy our our operations topics a QX, sustainability, the

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

Robert Barton

morning common night good second in $X.XX than and quarter, and better but expected. All Adam per but of the $X.XX. net we XXXX quarter Thanks attributable overall to of per quiet quarter share everyone. income, second was busy share stockholders quarter Last all, reported XXXX a FFO second

quarter Hassalo XXXX, Second the FFO, January in decreased on to Portland. systems first, $X.XX two is $X.XX $X.XX quarter of the per building items: the to settlement FFO to XXXX XXXX, in compared to Eighth primarily decrease by nonrecurring FFO our from disclosed share, related first following in at certain litigation approximately of the previously related

of Combined XXXX of $X.XX to FFO approximately performed quarter our portfolio per for $X.XX share. items reconciled first QX XXXX two FFO approximately per than these QX office our decrease results that XXXX. share the better Offsetting back

NOI. X.X% cash year-over-year ended same-store about talk quarter. the for growth QX second In XXXX, at we Let's

Francisco Bellevue at same-store San our burning of One our Our in QX, the as starting and our Market at office Torrey portfolio large of properties. Campus remaining at a in abatements for in leases at X.X% Landmark grew lease Reserve one result off tenants new

same-store grew Our at X.X% properties. retail retail of a our starting in QX, result leases primarily at new portfolio as

Embassy our higher Diego mixed-use due multifamily in in portfolio properties. Our result And at of QX, QX, at higher as at same-store at multifamily San revenue rents Waikiki Suites, grew portfolio Walk. grew X.X% Beach a X.X% primarily to our our

to end of we approximately the of and million our in $XX and of cash line comprised full $XXX had million availability Turning equivalents revolving At cash $XXX credit. approximately the liquidity million of second on of liquidity. quarter,

we quarter, the Additionally, leverage our measure to X.Xx. which in was as terms of second EBITDA net of of end debt the

to is objective a EBITDA achieve X.Xx maintain below. Our net debt of to and or

ratio fixed coverage Our ended interest X.Xx. at quarter and the coverage charge

near-term We are capitalized with maturities. well no

guidance. XXXX about talk Let's

$X.XX. We from to that our increase range with to of $X.XX to per guidance midpoint FFO FFO approximate $X.XX a stated an had XXXX our $X.XX a share midpoint in guidance X% increasing earnings share, previously range per our call share $X.XX with of of $X.XX are XXXX issued per FFO QX a

this the through make items XXXX FFO following walk up in increase guidance. that Let's our

certain office per office a and in of First, share that previously That have result our signed we XXXX office XXXX. FFO contributed new in properties rents was approximately QX collecting our on our leases not guidance, primarily as $X.XX included of reserved. tenants outperformance

in FFO previously properties $X.XX outperformance multifamily approximately contributed included not our QX was XXXX of Second, of guidance. in that XXXX share

contributed per reserved. retail $X.XXX in we our approximately that retail properties included FFO of not on tenants was guidance, collecting result as our have primarily Third, rents a XXXX previously share of certain that

increase be per in share hotel Beach at added by previously the XX maintain FFO for point. of was this time, $X.XX XXXX into previous the XXXX in contributed to when Suites point days visibility not bookings the at remainder and QX FFO adjustments Walk forecast Waikiki guidance. prepared our outperformance of intend to prior our Outrigger fourth we midpoint with this in Embassy XXXX of partners These local And XX our will being share over represent our XXXX. together approximately $X.XXX just At currently guidance per included that our out, in

best While that could do we end our also this estimate increased earnings it range. this is updated guidance to of we we that possible the of high guidance believe is as perform the XXXX call, believe

we NOI repurchases, our discussed. repayments from acquisitions, other remarks debt our bridge issuances dispositions, always future any these impact already future than equity have or As and what prepared refinancings guidance, exclude or

numbers. with We discussed in that as reconciled interpretations best note earnings as financial to possible and I you measures any and results our share of supplemental transparent will and quarterly our analysis want continue that non-GAAP to information. release briefly our we've to GAAP are our our also be financial

turn Steve Center, a call the Properties, Vice for Office on now update our President brief to Senior office over Steve. I'll our segment. of

Steve Center

totaling approximately of quarter, XX.X% with leased, executed XX.X% XX X,XXX approximately straight-line our Thanks, of portfolio XXX,XXX with for on including square basis square second we increases end XX.X% leases XX%, cash basis. was three quarter, leases office a second feet, portfolio same-store comparable a the the leased. feet, and In Bob. new rent our on At at the

cash a on smaller Nine basis. cash at of at One but with Market, X.X% comparable we on QX X.X% that renewed with feet, basis XX,XXX rent our in comparison of seven straight-line an totaling of tenants XX,XXX San increases XXXX. straight-line XXX,XXX Francisco and Autodesk feet rent increase basis, a approximately renewal a X% on leases versus We approximately square square renewed Landmark totaling on in of as approximately basis and square follows: feet, X% decrease set a approximately rents were a approximately

this result they are certainly, in the We we their deal a terrific was that office customer for completed of believe understand a as ours. win-win building in that the headquarters largest QX, the Autodesk, were will foreseeable we in and San us our with remain and Francisco thrilled renewal for future

at We significant many which our activity commitments. across nearing willing new news our increased is longer-term Commons Jolla point. with front this are tour tenants completion, share our leasing proposal but encouraged to are tour activity Note leasing no III, to by that La portfolio, includes this make and that

amenities, We in fitness rents than office investments headwinds. centers, of centers, believe spaces hubs, our will Those properties. to investments lounges most at conference strategic to outdoor include fair strategic bike absorption, more continue current net continue such capture to share premium us of despite our our new market at portfolio, and/or as exceptional position the

the conditions, that portfolio. not to performance While additional current we continue will due from to immune are flight to to our office attrition drive quality solid potential we believe

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

Operator

Your [Operator the Thank Haendel line question comes you. Juste The Instructions] for with from of questions. your now first floor Mizuho. open is

Your open. line is

Ernest Rady

Haendel morning, Good

Ravi Vaidya

line the are for good This Hope doing you Ravi guys is Haendel. Hi, on morning. Vaidya well.

HomeGoods to up the lease. want Can discuss you and space on and Just contributed the investments, in to that CapEx capital spread. the follow retrofitting the XX%

Ernest Rady

handle to want Bob, you do that?

Robert Barton

Sure.

them going bit you're to have So don't a And looking we're on midsized what to a for but standard like the early a we're matter one. is getting a I space such. air, front pretty that little next ready to and the opening the numbers tenant delivering do that. in at we're of, of exact in of the summer just bringing again, year, XXXX doing the CapEx, of have me, space looking that's box of and at storefront for

Ernest Rady

us. properties, Our great a to pride San is Antonio

glad we're them. to So, have

Ravi Vaidya

Okay.

two -- more one here. Another just or

area? discuss the you consumer? asset, the are rebounding Hawaii the mix, further seeing of potential seeing can and the if Regarding American softness you tourist tourists from And Japanese you're any

Ernest Rady

Bob, handle to do you that, want please?

Robert Barton

yes, coming expectation our Japanese -- seen Sure. so back summer. we've the for -- far, XXXX Ravi, the the strong have not as we as

guests number know the feedback. is up, all our exchange So US But ready a is dollar. matter And Japanese part on the one from tourism to take XXX matter a airlines the we just when. foreign is have HNA it's JPY a a rate it is, if the of of lined destination it's that Hawaii I additional Japan. J.P.P.Y major that that are [ph] you to know our not from of of airlines for one,

we're But it's far last is increase, increased ADR only RevPAR occupancy has strong. I that not haven't only the set. our interesting -- we and in year. our seen over our our competitive what's ADR it not but June. mean so remains Not So, over

Ravi Vaidya

Hello?

Robert Barton

So anyway, your answers hopefully question. that

Ravi Vaidya

That's Thank one just helpful. very more And here. you.

that for office a about term the going now, the expect can this to we've five something we see of is Is signed years. forward? Just couple quarters seen leases

Robert Barton

out. cutting Ravi, you're

Ernest Rady

and too. I'm to know over like Yes. getting Steve handle you and to to know out. the years. you what's it about the answer, And have leasing, that cut five if He next the happen ought wants I'd to going office

Ravi Vaidya

years the signed for about couple going something term. see office we could now. leases term was Sorry, of quarters of five forward? my that question a expect to Is regarding is The

Steve Center

years. Good question. lease deals I've in going pending got It's The actually now X.X signed are either longer. or right at documentation

tenants I longer, mentioned, seeing to both -- went and go So and renewal new we're tenants.

is So, trend up. that going

Ravi Vaidya

Thank for your time. it. you Got

Ernest Rady

said great as and seems aren't I and remarks public our earlier opinion as of properties to to are which is team, bad the think questions? Is things be, our management that thanks my there other any I in great. the nearly which

Operator

Our next Thomas with question KeyBanc comes Todd from Markets. of the line Capital

open. Your is line

Ernest Rady

morning. Good

Todd Thomas

Good you half detail quarter you're high that Thanks. you first little the well with third could anticipating from Bob, down just fourth That's quarter the and second but $X.XX, would you bit revised in was right? each quarter the end morning. Can assume of at quarter the effect the $X.XX the I provide in the helps just appreciate If right. third of in of year? FFO All the some bridge half you're results the a guidance, I $X.XX. step fourth detail talk get and to around we above hoping back quarterly primary of about more the the range. the decrease in the

Ernest Rady

great question. a That's

Robert Barton

-- guidance that, on occur. I of Yes. recall was of reserves. think more that to at I Thanks for updated we $X.XX is came to FFO then risk identified started $X.XX we per that. the the mean one question And -- especially that $X.XX it share Yes, likely way of look $X.XX the And bridge office if thought Todd. you share year per than our with we attributed that to $X.XX And and QX and retail. because along FFO we we of was the not to this

of so office for retail. to now $X.XX ratcheted in to for $X.XX of And now guidance, and office QX, our $X.XX that down down it retail. per and we $X.XX have got And

think don't come million, times of uncertain there that's may But and know what going we on. We use in use So are have cash those some don't we we likelihood another that The they're reserves. reserves that point that that still I back volatile. just through this that at to those need think we we're time. if $X.X could a is reserves,

last sandbag, or we the do adjust your right that agree can want So, thing doing in you is we're I we thing. models your the to And but accordingly. answers think you that hope question. disagree if

Ernest Rady

That was good question. a

Todd Thomas

yes – helpful? Yes, helpful. that's So that that's

right? the $X.XX, about to the midpoint Suites… there So seasonality perhaps? get don't know that's Embassy if I additional And is to then

Robert Barton

Yes.

that now of original they right, better what did, out there our is that Waikiki. than we're economics You're property Todd in to who in know the coming to who's forecast is going right the do that terms Outrigger town. keep And mentioned we we manages

team relationships Outrigger to a We over a the flies several they over year there. actually that from times have have Japan and

So they – on. there's a lot marketing of going

even But XX the mean And now with were we rooms XX% that occurred days seen, generally XX is reserve days of we've best all pre-COVID XX up that bookings out. is seeing days. probably to XX, I it's the

– know I'm would pre-COVID embassy see don't if have having we so that bring we $X.XX said foresight. another current reflect put So But that will down we that. year. hesitant anything to during very the probably this to in And the numbers historically again $X.XX, that,

Todd Thomas

environment. to helpful. did Adam, just I Adam, that into any expirations ahead XXXX, whether about And see I pick leasing whether to maybe comment portfolio, to or occupancy In the Okay. seeing about look too. flight the is stabilization, office I And for that's that guess move-outs beginning to shifting maybe starting Yes, up across throughout quality think portfolio and the then over the balance additional whether could translate there's you about you're as you the year known wanted in just you Steve this of general, the you you're XXXX demand well? to as Steve to as talked ask well.

Ernest Rady

cover please? that, Steve think should I

Steve Center

Todd. Good Yes. question,

the We've see. and highest tour I activity proposal still think to pending, you be side got muted. net as think – renewals we But seeing then going absorption now. the think attrition which given on see will activity. new will I that's is the XXXX two And some. and activity we're leasing I quarters to first continue, the be going There is be were will We've – dominated got good. by leasing XXXX

as and noted as – So again, earlier, terms then longer seeing well. I we're

that kind you'll sign of new we as deals. So see

Adam Wyll

off QX And is to start a already. good

Steve Center

Yes.

Ernest Rady

Just we're Adam blessed a and do good compliment, so Steve job. a a Steve properties job. does as with great and great

Todd Thomas

of Steve, will expect that you to weigh XXXX, stabilize trough occupancy? you attrition on then expect that do in you – to or Do see additional in begin see XXXX occupancy some to and do think rebound continue or XXXX you'll in the

Steve Center

Just what got XXXX in I'm me. looking of at I've and now XXXX front

of be new me may and there remainder what I this it's I in think the attrition got predict leasing beyond front I've modest I a can't the given move-outs. know but XXXX, quarter for what of positive.

I So of space, your much is will keeping premium those their when not for yet think tenants sign XX tenants of losing think smaller And you'll I what and and see is The the rebound, good paying attrition It's news tenants to competition. up stabilize. they're those we're rents. rightsizing. is, the

but it's seen rent not where moving it's through companies see So anomaly, market some kind model. operating positive. this slippage in of just I more growth. their rightsizing forward. itself. seeing occupancy, this They're is some and part where changed softness I've in It's am you of playing then the have thing

We moving have sign should an to existing few XX,XXX And in weeks. and tenant next that's that XX,XXX feet feet. the vacate going to

There's hopefully, I'm be going much at going to and net absorption leasing said, before, And better, like getting attrition is things looking there's outpaces be, that are more things modest then the activity. I attrition. So I now. to are right net the think absorption new

Todd Thomas

Okay. last Ernest. for question And just

the commercial capital opportunistic in surface general. There's begin investment And been think any any in mean, markets estate company deploying I capital you've If years, to incremental volatility today. how so, pipeline if over forward? Are of and you sitting we should going cash lot the million opportunities real of you today? about the in about seeing could $XX in anything a the on fairly comment,

Ernest Rady

that's a to At Barton a EBITDA. governed way face. Todd, find X.Xx good also a Yes. all we our put same shareholders' smile Bob -- to and We're time, our the very is dedicated to put smile question. by greed, want on on a

is opportunity we've So taking advantage I to opportunity and presents compelling, during something that itself. we're our looking All to have which along, that weigh is the with got that times deal of if liquidity at above. that that an turbulent we'd losing comes say can certainly are

working we're on it. So

Todd Thomas

you. Okay. Thank

Ernest Rady

your you, Thank for Thank interest. you Todd.

Operator

over There are Rady, you. to at time. no call Mr. further turn the back I questions this

Ernest Rady

you much greatly assets, Thank Hey you. a job American earlier, what And does that's our interest. way on. shareholders help great is Thank our as keep we We're and to to find I make and guys smile, you at very their working appreciative. a job. said you to

So you Thank your all we'll you quarter. for next you. interest, thank see and

Operator

call. today's Ladies gentlemen, conference concludes and this

now may disconnect. You

American Assets Trust (AAT) 26 Jul 232023 Q2 Earnings call transcript