Net income available to common stockholders of $11.1
million for the first quarter, or $0.24 per diluted
share
American Assets Trust, Inc. (NYSE: AAT) (the “company”) today
reported financial results for its first quarter ended
March 31, 2019.
First Quarter Highlights
- Net income available to common stockholders of $11.1
million for the first quarter, or $0.24 per diluted
share
- Funds From Operations increased 10% year-over-year to
$0.56 per diluted share for the first quarter
- Same-store cash NOI increased 1% year-over-year for the
first quarter
- Leased approximately 38,000 comparable office square
feet at an average straight-line basis and cash-basis contractual
rent increase of 15% and 4%, respectively, for the first
quarter
- Leased approximately 48,000 comparable retail square
feet at an average straight-line basis and cash-basis contractual
rent increase of 15% and 6%, respectively, for the first
quarter
- Credit agreement amended to extend maturity date and
decrease credit spreads on $100 million term loan, effective
January 9, 2019
- Recognized approximately $4.5 million of lease
termination fees in January 2019 in connection with the termination
of ground lease for, and ground lessee’s surrender of, the former
Sears building at Carmel Mountain Plaza in San Diego; and
subsequently leased entirety of such building (approximately
108,000 square feet) to a national home decor
retailer.
Financial Results
Net income attributable to common stockholders was $11.1
million, or $0.24 per basic and diluted share for the first quarter
of 2019 compared to net loss of $(0.5) million, or $(0.01) per
basic and diluted share for the first quarter of 2018. The
year-over-year increase is primarily due to an increase in lease
termination fees at Carmel Mountain Plaza attributed to the
termination of our former ground lease and a decrease in
depreciation expense at Waikele Center attributed to the
redevelopment of the Kmart space.
During the first quarter of 2019, the company generated funds
from operations (“FFO”) for common stockholders of $35.7 million,
or $0.56 per diluted share, compared to $32.5 million, or $0.51 per
diluted share, for the first quarter of 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:
|
March 31, 2019 |
December 31, 2018 |
March 31, 2018 |
Total
Portfolio |
|
|
|
Retail |
97.1 |
% |
93.9 |
% |
96.6 |
% |
Office |
92.3 |
% |
90.9 |
% |
94.6 |
% |
Multifamily |
93.9 |
% |
93.6 |
% |
92.7 |
% |
Mixed-Use: |
|
|
|
Retail |
98.2 |
% |
96.1 |
% |
96.9 |
% |
Hotel |
91.8 |
% |
93.0 |
% |
94.3 |
% |
|
|
|
|
Same-Store Portfolio |
|
|
Retail (1) |
96.7 |
% |
92.9 |
% |
97.8 |
% |
Office (2) |
94.1 |
% |
93.0 |
% |
94.6 |
% |
Multifamily |
93.9 |
% |
93.6 |
% |
92.7 |
% |
(1) Same-store retail leased percentages exclude Waikele Center,
due to significant redevelopment activity.(2) Same-store office
leased percentages exclude Torrey Point, which was placed into
operations and became available for occupancy in August 2018 and
will therefore be included in same-store office leased percentages
commencing in the fourth quarter of 2019.
During the first quarter of 2019, the company signed 29 leases
for approximately 229,900 square feet of retail and office space,
as well as 345 multifamily apartment leases. Renewals
accounted for 92% of the comparable retail leases, 83% of the
comparable office leases and 48% of the residential leases.
Retail and OfficeOn a comparable space basis (i.e. leases for
which there was a former tenant) during the first quarter 2019 and
trailing four quarters ended March 31, 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 |
Q1
2019 |
13 |
48,000 |
|
5.7 |
% |
|
$ |
49.14 |
$ |
46.49 |
|
15.2 |
% |
Last 4
Quarters |
57 |
244,000 |
|
5.9 |
% |
|
$ |
40.99 |
$ |
38.70 |
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
Office |
Q1
2019 |
6 |
38,000 |
|
4.2 |
% |
|
$ |
49.46 |
$ |
47.48 |
|
14.6 |
% |
Last 4
Quarters |
41 |
544,000 |
|
44.8 |
% |
|
$ |
67.56 |
$ |
46.67 |
|
66.6 |
% |
MultifamilyThe average monthly base rent per leased unit for
same-store properties for the first quarter of 2019 was $2,057
compared to an average monthly base rent per leased unit of $1,988
for the first quarter of 2018, an increase of approximately 3%.
Same-Store Cash Net Operating IncomeFor the
first quarter of 2019, same-store cash NOI increased 0.7%, compared
to the first quarter of 2018. The same-store cash NOI by segment
was as follows (in thousands):
|
Three Months Ended (1) |
|
|
|
March 31, |
|
|
|
2019 |
|
2018 |
|
Change |
Cash
Basis: |
|
|
|
|
|
Retail |
$ |
14,795 |
|
$ |
15,288 |
|
(3.2 |
)% |
Office |
18,479 |
|
18,225 |
|
1.4 |
|
Multifamily |
7,892 |
|
7,353 |
|
7.3 |
|
Mixed-Use |
— |
|
— |
|
— |
|
Same-store Cash NOI
(2) |
$ |
41,166 |
|
$ |
40,866 |
|
0.7 |
% |
(1) Same-store portfolio excludes (i) Waikele Center due to
significant redevelopment activity; (ii) Torrey Point, which was
placed into operations and became available for occupancy in August
2018; (iii) Waikiki Beach Walk - Embassy Suites™ and Waikiki Beach
Walk - Retail, due to significant spalling repair activity; and
(iv) land held for development.(2) Excluding lease termination fees
for the three months ended March 31, 2019, same-store cash NOI
would be 1.4%.
Same-store cash NOI is a non-GAAP supplemental earnings measure
which the company considers meaningful in measuring its operating
performance. A reconciliation of same-store cash NOI to net
income is attached to this press release.
Balance Sheet and LiquidityAt March 31,
2019, the company had gross real estate assets of $2.7 billion and
liquidity of $316.5 million, comprised of cash and cash equivalents
of $54.5 million and $262.0 million of availability on its line of
credit.
For the quarter ended March 31, 2019, we issued 162,531
shares of common stock through our at-the-market equity program at
a weighted average price per share of $45.53, resulting in net
proceeds of $7.0 million. Additionally, we issued 519,382 shares of
common stock through our at-the-market equity program that settled
after March 31, 2019 at a weighted average price per share of
$45.57, resulting in additional net proceeds of $23.4 million. We
intend to use the proceeds primarily to fund development activities
at Lloyd District Portfolio and Waikele Center.
DividendsThe company declared dividends on its
shares of common stock of $0.28 per share for the first quarter of
2019. The dividends were paid on March 28, 2019.
In addition, the company has declared a dividend on its common
stock of $0.28 per share for the second quarter of 2019. The
dividend will be paid on June 27, 2019 to stockholders of
record on June 13, 2019.
GuidanceThe company affirms its guidance range
for full year 2019 FFO per diluted share of $2.18 to $2.26 per
share, a midpoint increase of 6% from 2018 FFO per diluted share of
$2.09 per share. The company's guidance excludes any impact from
future acquisitions, dispositions, equity issuances or repurchases,
future debt financings or repayments.
The foregoing estimates are forward-looking and reflect
management's view of current and future market conditions,
including certain assumptions with respect to leasing activity,
rental rates, occupancy levels, interest rates, credit spreads and
the amount and timing of acquisition and development activities.
The company's actual results may differ materially from these
estimates.
Conference CallThe company will hold a
conference call to discuss the results for the first quarter of
2019 on Wednesday, May 1, 2019 at 8:00 a.m. Pacific Time
(“PT”). To participate in the event by telephone, please dial
1-877-868-5513 and use the pass code 8599255. A telephonic replay
of the conference call will be available beginning at 2:00 p.m. PT
on Wednesday, May 1, 2019 through Wednesday, May 8, 2019.
To access the replay, dial 1-855-859-2056 and use the pass code
8599255. A live on-demand audio webcast of the conference call will
be available on the company's website at
www.americanassetstrust.com. A replay of the call will also be
available on the company's website.
Supplemental InformationSupplemental financial
information regarding the company's first quarter 2019 results may
be found on the “Investors” page of the company's website at
www.americanassetstrust.com. This supplemental information
provides additional detail on items such as property occupancy,
financial performance by property and debt maturity schedules.
Financial InformationAmerican Assets
Trust, Inc.Consolidated Balance
Sheets(In Thousands, Except Share
Data)
|
March 31, 2019 |
|
December 31, 2018 |
Assets |
(unaudited) |
|
|
|
Real
estate, at cost |
|
|
|
|
|
Operating
real estate |
$ |
2,569,407 |
|
|
$ |
2,549,571 |
|
Construction in progress |
|
77,094 |
|
|
|
71,228 |
|
Held for
development |
|
9,392 |
|
|
|
9,392 |
|
|
|
2,655,893 |
|
|
|
2,630,191 |
|
Accumulated depreciation |
|
(609,020 |
) |
|
|
(590,338 |
) |
Net real
estate |
|
2,046,873 |
|
|
|
2,039,853 |
|
Cash and
cash equivalents |
|
54,538 |
|
|
|
47,956 |
|
Restricted cash |
|
9,777 |
|
|
|
9,316 |
|
Accounts
receivable, net |
|
9,137 |
|
|
|
9,289 |
|
Deferred
rent receivables, net |
|
40,554 |
|
|
|
39,815 |
|
Other
assets, net |
|
56,169 |
|
|
|
52,021 |
|
Total assets |
$ |
2,217,048 |
|
|
$ |
2,198,250 |
|
Liabilities and
equity |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
Secured
notes payable, net |
$ |
162,688 |
|
|
$ |
182,572 |
|
Unsecured
notes payable, net |
|
1,045,709 |
|
|
|
1,045,863 |
|
Unsecured
line of credit, net |
|
86,438 |
|
|
|
62,337 |
|
Accounts
payable and accrued expenses |
|
53,683 |
|
|
|
46,616 |
|
Security
deposits payable |
|
7,579 |
|
|
|
8,844 |
|
Other
liabilities and deferred credits, net |
|
55,618 |
|
|
|
49,547 |
|
Total
liabilities |
|
1,411,715 |
|
|
|
1,395,779 |
|
Commitments and contingencies |
|
|
|
|
|
Equity: |
|
|
|
|
|
American
Assets Trust, Inc. stockholders' equity |
|
|
|
|
|
Common stock, $0.01 par value, 490,000,000 shares authorized,
47,486,894 and 47,335,409 shares issued and outstanding at
March 31, 2019 and December 31, 2018, respectively |
|
475 |
|
|
|
474 |
|
Additional paid-in capital |
|
928,792 |
|
|
|
920,661 |
|
Accumulated dividends in excess of net income |
|
(130,841 |
) |
|
|
(128,778 |
) |
Accumulated other comprehensive income |
|
8,825 |
|
|
|
10,620 |
|
Total
American Assets Trust, Inc. stockholders' equity |
|
807,251 |
|
|
|
802,977 |
|
Noncontrolling interests |
|
(1,918 |
) |
|
|
(506 |
) |
Total
equity |
|
805,333 |
|
|
|
802,471 |
|
Total liabilities and
equity |
$ |
2,217,048 |
|
|
$ |
2,198,250 |
|
American Assets Trust, Inc.Unaudited
Consolidated Statements of Operations(In
Thousands, Except Shares and Per Share Data)
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Revenue: |
|
|
|
Rental
income |
$ |
76,831 |
|
|
$ |
76,201 |
|
Other
property income |
8,488 |
|
|
4,531 |
|
Total
revenue |
85,319 |
|
|
80,732 |
|
Expenses: |
|
|
|
Rental
expenses |
20,796 |
|
|
20,420 |
|
Real
estate taxes |
9,046 |
|
|
8,546 |
|
General
and administrative |
6,073 |
|
|
5,567 |
|
Depreciation and amortization |
20,583 |
|
|
33,279 |
|
Total
operating expenses |
56,498 |
|
|
67,812 |
|
Operating
income |
28,821 |
|
|
12,920 |
|
Interest
expense |
(13,349 |
) |
|
(13,820 |
) |
Other
income (expense), net |
(229 |
) |
|
209 |
|
Net income
(loss) |
15,243 |
|
|
(691 |
) |
Net
(income) loss attributable to restricted shares |
(93 |
) |
|
72 |
|
Net
(income) loss attributable to unitholders in the Operating
Partnership |
(4,055 |
) |
|
166 |
|
Net income (loss) attributable to
American Assets Trust, Inc. stockholders |
$ |
11,095 |
|
|
$ |
(453 |
) |
|
|
|
|
Net income
(loss) per share |
|
|
|
Basic
income (loss) attributable to common stockholders per share |
$ |
0.24 |
|
|
$ |
(0.01 |
) |
Weighted
average shares of common stock outstanding - basic |
47,004,465 |
|
|
46,935,820 |
|
|
|
|
|
Diluted
income (loss) attributable to common stockholders per share |
$ |
0.24 |
|
|
$ |
(0.01 |
) |
Weighted
average shares of common stock outstanding - diluted |
64,182,073 |
|
|
46,935,820 |
|
|
|
|
|
Dividends
declared per common share |
$ |
0.28 |
|
|
$ |
0.27 |
|
|
|
|
|
Reconciliation of Net Income to Funds From
OperationsThe company's FFO attributable to common
stockholders and operating partnership unitholders and
reconciliation to net income is as follows (in thousands except
shares and per share data, unaudited):
|
Three Months Ended |
|
March 31, 2019 |
Funds From
Operations (FFO) |
|
|
Net income |
$ |
15,243 |
|
Depreciation and
amortization of real estate assets |
|
20,583 |
|
FFO, as defined by
NAREIT |
$ |
35,826 |
|
Less: Nonforfeitable
dividends on restricted stock awards |
|
(91 |
) |
FFO attributable to
common stock and units |
$ |
35,735 |
|
FFO per diluted
share/unit |
$ |
0.56 |
|
Weighted average number
of common shares and units, diluted |
|
64,185,323 |
|
Reconciliation of Same-Store Cash NOI to Net
IncomeThe company's reconciliation of Same-Store Cash NOI
to Net Income is as follows (in thousands, unaudited):
|
Three Months Ended (1) |
|
March 31, |
|
2019 |
|
2018 |
Same-store cash
NOI |
$ |
41,166 |
|
|
$ |
40,866 |
|
Non-same-store cash NOI |
7,871 |
|
|
9,770 |
|
Tenant
improvement reimbursements (2) |
991 |
|
|
868 |
|
Cash NOI |
$ |
50,028 |
|
|
$ |
51,504 |
|
Non-cash revenue and other
operating expenses (3) |
5,449 |
|
|
262 |
|
General
and administrative |
(6,073 |
) |
|
(5,567 |
) |
Depreciation and amortization |
(20,583 |
) |
|
(33,279 |
) |
Interest
expense |
(13,349 |
) |
|
(13,820 |
) |
Other
income (expense), net |
(229 |
) |
|
209 |
|
Net income (loss) |
$ |
15,243 |
|
|
$ |
(691 |
) |
|
|
|
|
Number of properties included in same-store
analysis |
24 |
|
23 |
(1) Same-store portfolio excludes (i) Waikele Center, due to
significant redevelopment activity; (ii) Torrey Point, which was
placed into operations and became available for occupancy in August
2018; (iii) Waikiki Beach Walk - Embassy Suites™ and Waikiki Beach
Walk - Retail, due to significant spalling repair activity and (iv)
land held for development.(2) Tenant improvement reimbursements are
excluded from same-store cash NOI to provide a more accurate
measure of operating performance.(3) Represents adjustments related
to the straight-line rent income recognized during the period
offset by cash received during the period and the provision for bad
debts recorded for deferred rent receivable balances; the
amortization of above (below) market rents, the amortization of
lease incentives paid to tenants, the amortization of other lease
intangibles, lease termination fees at Carmel Mountain Plaza, and
straight-line rent expense for our leases of the Annex at The
Landmark at One Market.
Reported results are preliminary and not final until the filing
of the company's Form 10-Q with the Securities and Exchange
Commission and, therefore, remain subject to adjustment.
Use of Non-GAAP Information
Funds from OperationsThe company calculates FFO in accordance
with the standards established by the National Association of Real
Estate Investment Trusts, or NAREIT. FFO represents net income
(computed in accordance with GAAP), excluding gains (or losses)
from sales of depreciable operating property, impairment losses,
real estate related depreciation and amortization (excluding
amortization of deferred financing costs) and after adjustments for
unconsolidated partnerships and joint ventures.
FFO is a supplemental non-GAAP financial measure. Management
uses FFO as a supplemental performance measure because it believes
that FFO is beneficial to investors as a starting point in
measuring the company's operational performance. Specifically, in
excluding real estate related depreciation and amortization and
gains and losses from property dispositions, which do not relate to
or are not indicative of operating performance, FFO provides a
performance measure that, when compared year-over-year, captures
trends in occupancy rates, rental rates and operating costs. The
company also believes that, as a widely recognized measure of the
performance of REITs, FFO will be used by investors as a basis to
compare the company's operating performance with that of other
REITs. However, because FFO excludes depreciation and amortization
and captures neither the changes in the value of the company's
properties that result from use or market conditions nor the level
of capital expenditures and leasing commissions necessary to
maintain the operating performance of the company's properties, all
of which have real economic effects and could materially impact the
company's results from operations, the utility of FFO as a measure
of the company's performance is limited. In addition, other equity
REITs may not calculate FFO in accordance with the NAREIT
definition as the company does, and, accordingly, the company's FFO
may not be comparable to such other REITs' FFO. Accordingly,
FFO should be considered only as a supplement to net income as a
measure of the company's performance. FFO should not be used as a
measure of the company's liquidity, nor is it indicative of funds
available to fund the company's cash needs, including the company's
ability to pay dividends or service indebtedness. FFO also should
not be used as a supplement to or substitute for cash flow from
operating activities computed in accordance with GAAP.
Cash Net Operating IncomeThe company uses cash net operating
income ("NOI") internally to evaluate and compare the operating
performance of the company's properties. The company believes
cash NOI provides useful information to investors regarding the
company's financial condition and results of operations because it
reflects only those income and expense items that are incurred at
the property level, and when compared across periods, can be used
to determine trends in earnings of the company's properties as this
measure is not affected by (1) the non-cash revenue and expense
recognition items, (2) the cost of funds of the property
owner, (3) the impact of depreciation and amortization
expenses as well as gains or losses from the sale of operating real
estate assets that are included in net income computed in
accordance with GAAP or (4) general and administrative
expenses and other gains and losses that are specific to the
property owner. The company believes the exclusion of these
items from net income is useful because the resulting measure
captures the actual revenue generated and actual expenses incurred
in operating the company's properties as well as trends in
occupancy rates, rental rates and operating costs. Cash NOI is
a measure of the operating performance of the company's properties
but does not measure the company's performance as a whole.
Cash NOI is therefore not a substitute for net income as computed
in accordance with GAAP.
Cash NOI, is a non-GAAP financial measure of performance.
The company defines cash NOI as operating revenues (rental income,
tenant reimbursements, lease termination fees, ground lease rental
income and other property income) less property and related
expenses (property expenses, ground lease expense, property
marketing costs, real estate taxes and insurance), adjusted for
non-cash revenue and operating expense items such as straight-line
rent, amortization of lease intangibles, amortization of lease
incentives and other adjustments. Cash NOI also excludes
general and administrative expenses, depreciation and amortization,
interest expense, other nonproperty income and losses,
acquisition-related expense, gains and losses from property
dispositions, extraordinary items, tenant improvements, and leasing
commissions. Other REITs may use different methodologies for
calculating cash NOI, and accordingly, the company's cash NOI may
not be comparable to the cash NOIs of other REITs.
About American Assets Trust, Inc.American
Assets Trust, Inc. (the “company”) is a full service, vertically
integrated and self-administered real estate investment trust, or
REIT, headquartered in San Diego, California. The company has over
50 years of experience in acquiring, improving, developing and
managing premier retail, office and residential properties
throughout the United States in some of the nation’s most
dynamic, high-barrier-to-entry markets primarily in Southern
California, Northern California, Oregon, Washington,
Texas and Hawaii. The company's retail portfolio
comprises approximately 3.1 million rentable square feet, and its
office portfolio comprises approximately 2.7 million square feet.
In addition, the company owns one mixed-use property (including
approximately 97,000 rentable square feet of retail space and a
369-room all-suite hotel) and 2,112 multifamily units. In 2011, the
company was formed to succeed to the real estate business of
American Assets, Inc., a privately held corporation founded in 1967
and, as such, has significant experience, long-standing
relationships and extensive knowledge of its core markets,
submarkets and asset classes. For additional information, please
visit www.americanassetstrust.com.
Forward Looking StatementsThis press release
may contain forward-looking statements within the meaning of the
federal securities laws, which are based on current expectations,
forecasts and assumptions that involve risks and uncertainties that
could cause actual outcomes and results to differ materially.
Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward-looking
statements by the use of forward-looking terminology such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” or “potential” or the negative
of these words and phrases or similar words or phrases which are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. While forward-looking
statements reflect the company's good faith beliefs, assumptions
and expectations, they are not guarantees of future
performance. For a further discussion of these and other
factors that could cause the company's future results to differ
materially from any forward-looking statements, see the section
entitled “Risk Factors” in the company's most recent annual report
on Form 10-K, and other risks described in documents subsequently
filed by the company from time to time with the Securities and
Exchange Commission. The company disclaims any obligation to
publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions or factors, of new information,
data or methods, future events or other changes.
Source: American Assets Trust, Inc.
Investor and Media Contact:American Assets
TrustRobert F. BartonExecutive Vice President and Chief Financial
Officer858-350-2607
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