Good day, ladies and gentlemen. And welcome to the Q2 2015 American Assets Trust Incorporated Earnings Conference Call. My name is Sean and I’ll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a Q&A session towards the end of this conference. [Operator Instructions]. I would now like to turn the call over to Mr. Adam Wyll, Senior Vice President and General Counsel. Please proceed.

Good morning. I’d like to thank everyone for joining us today for American Assets Trust 2015 second quarter earnings conference call. Joining me on the call are Ernest Rady, and Bob Barton. These and the other members of our management team are available to take your questions at the conclusion of our prepared remarks. Our 2015 second quarter supplemental disclosure package provides a significant amount of valuable information with respect to the company’s operating and financial performance. The document is currently available on our website. Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information, as well as statements referring to expected or anticipated events or results. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, our future operations and our actual performance may differ materially from the information contained in our forward-looking statements and we can give no assurance that these expectations will be attained. Risks inherent in these assumptions include, but are not limited to future economic conditions, including interest rates, real estate conditions and the risks and cost of construction. The earnings release and supplemental reporting package that we issued yesterday, in our Annual Report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of Risk Factors that may affect our financial conditions and results of operations. Additionally this call will contain non-GAAP financial information including funds from operations or FFO, earnings before interest, taxes, depreciation and amortization or EBITDA and net operating income or NOI. American Assets is providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Explanations of such non-GAAP items and reconciliations to net income are contained in the company’s supplemental operating and financial data for the second quarter of 2015 furnished to the Securities and Exchange Commission and this information is available on the company’s website at www.americanassetstrust.com. I’ll now turn the call over to our Executive Chairman, Ernest Rady to begin our discussion of second quarter results. Ernest?

Thanks Adam and good morning everyone. Thank you all for joining American Assets Trust’s second quarter 2015 earnings call. The performance of our premier portfolio of retail, office and multifamily assets continue to provide industry leading returns for our shareholders as expected. And we believe we’ll continue into the foreseeable future. Our FFO per share, refunds from operations per share increased 12.8% and same-store NOI increased 9.3% year-over-year for the three months ended June 30. Our FFO compounded and annual growth rate since our IPO almost five years ago has been approximately 14%. Some of you had heard me say that we hope to increase that metric by 5%. And that would produce a 10% return for our stockholders over the years. Well, I guess, we under-hoped and over-delivered. Our strategy continues to be that of excellence of all that we do, whether it, be high quality assets in coastal West Coast markets or our focus on NAV creation, first followed by a prudent balance sheet management which continues to produce a continuous growing stream of cash flows. I’m excited that we have finally announced the groundbreaking Torrey Point formally referred to as Sorrento Point, a project that has taken more than 17 years to solidify the necessary entitlements and permits to begin construction, amen. We anticipate the completion of this 90,000 square-foot project by the first quarter of 2017. We anticipate that this project should command the highest office rents in all of San Diego County with its superior location perched on a bluff overlooking the sandy Geet Olins [ph] lagoon and the Pacific Ocean on the western side and will commence signage on the eastern side overlooking the Interstate 5 Freeway. That will be viewed by over 0.5 million cars each day. Exceeding that level of excitement is the near total completion of our Hassalo on Eight Project in Portland, Oregon. Our first residence moved into the Velomor building on July 2. The Astor and Elwood buildings will welcome the residents in mid-October. Lease-up of units in Velomor now in excess of 60% has exceeded our pro forma substantially. We are really excited about the lease-up progress to date and very optimistic about the future of this. On top of that, we’re grateful to have a great team in Portland, Oregon helping us to be so successful. On behalf of all of us at American Assets Trust, we thank you for your confidence in allowing us to manage your company. And we look forward to your continued support. John Chamberlain, our President and CEO, will not be on today’s call as he is on a once in a lifetime vacation. In John’s absence, I would now like to turn it over to our Executive Vice President and Chief Financial Officer, Bob Barton. Bob, you could take it from here.

Good morning and thank you Ernest. Overall conditions in our core markets Seattle, Portland, San Francisco, San Diego and Oahu continue to show significant signs of strength in all three of our asset classes. We expect this to continue into the foreseeable future. Rental income growth in the second quarter was strong at 8% as was the same-store growth at 9.3%. In terms of leasing, it was also a good quarter. We completed 19 retail transactions, 17 of which were with comparable leases at average rents of $33.59, 19% more than the $28.23 per foot leases representing the last year in the former lease. We also completed 22 office leases, 16 of which were with comparable leases at average rents of $60.13 which was 40.1% more than the $42.93 per-foot representing the last year in the former lease. In our multifamily portfolio, the average monthly base rent per leased unit was $1,597 compared to an average monthly base rent per leased unit of $1,438 at June 30, 2014, an increase of 11% and a 5.4% increase over Q1 2015. Let’s talk about our developments for a moment. In San Diego, construction commenced on Sorrento Point now officially renamed Torrey Point on July 15. This two-building approximately 90,000 square-foot project is expected to be completed in the first quarter of 2017. We expect this to be the crown jewel of office space in San Diego County combined with a strong development yield ranging from 8.25% to 9.25%. In Portland, Oregon, our Hassalo on Eight Project welcomed its first residence to the Velomor building on July 2, after nearly 24 months of construction, four days ahead of schedule. We expect to be finished on time and on budget at the end of September with the remaining punch-list items during October. Approximately 60…

[Operator Instructions]. First question you have comes from the line of Craig Schmidt of Bank of America. Please proceed.

Thank you. How long do you think it will be before you’ll get more details around the next phase of the Lloyd District development?

Good morning Craig. Thanks for tuning in. We are working on the design part of it now. And there are several alternatives. I would say it would take probably another 12 months before we get an absolute fix on it. I’m certain that a significant portion of the next phase which we call Oregon Square would be apartments. We’re also looking at a portion of that Oregon Square having different but complimentary uses. And those complimentary uses and availability of them for us are uncertain at the moment. And we also want to measure how successful Hassalo is, that Hassalo is exceedingly successful. And beyond our wildest thought, it would have been that Oregon Square ought to go all apartments. So, we’re looking at all alternatives and studying it on an as-we-go basis. But certainly it is a significant opportunity and thank you for that question.

And do you have a sense of the 67% of leased, where those residents are coming from?

Well, we estimate that half of them now are coming from out of town and half of them from in-town. And when we started that project, we hired a surveyor to tell us what type of units, should we have in the project. And it looks like we’ve nailed that accurately. The types of tenants that are coming to our project are those that were projected in the survey.

Okay, thank you.

Thank you.

Thanks Craig.

Thank you. The next question you have comes from the line of Paul Morgan of Canaccord Genuity. Please proceed.

Good morning, Paul.

Hi, good morning. Just on the ATM, I mean, you ramped it up a little bit in terms of the issuance in the second quarter. I think, you talked about it at the source of financing for the developments. Maybe if you could give a little bit color on how we should think about it going forward now that you have another development project you broke ground on. And you mentioned you like to keep pushing that EBITDA down I mean, should we expect for Torrey Point the ATM to be kind of a primary funding mechanism?

Well, I’ll tell you, Bob can answer that best. But we have constant debate going on here versus leverage versus equity. And we try to find a successful balance, the best balance for the stockholders in the short and long run. Being cautious of course is certainly part of our profile. But also the attraction of the inexpensive money is also a great allure. Bob, do you want to add to that?

Sure. Yes, Paul, we will probably issue some on the ATM it will probably be around $30 million between now and year-end, maybe a little bit less, maybe a little bit more. But I think from our perspective, we’re very cautious on using that ATM. And we take it seriously. So, we look at NAV first, net asset value creation first. And we know that, and just to put it in perspective is that we know that we’re creating approximately $2 per share of net asset value on the Hassalo project. And if you look at the total ATM issuance since we had our first - since we first started using the ATM probably two and half years ago, and that’s approximately $160 million. And the dilution from that is about $0.22 to $0.23. So, if let’s say I put another $30 million out there between now and year-end or little more little less, and let’s say I end up with $0.40 of dilution, I don’t think we’re going to get there but, so that would leave me with $1.60 of net asset value creation. That’s to me, in my mind that’s being prudent. And we’re keeping our leverage down. If we were to create $1.60, and then dilute it by $1.60, then we’re just spinning our wheels that, doesn’t make any sense whatsoever. We are focused on creating net asset value first.

Great. Thanks. And then…

There are strong advocates in the company for non-NAV dilution.

I appreciate that. Do you have any color at Hassalo on the rents for the leases that you’ve signed so far relative to your pro formas going in?

Yes. Paul, the rents are at least what we projected. And we’ve decided that we have so many apartments to rent that we would hold very close, not - I think we’ve exceeded the projections by a tad but we’d hold very close to that because the first project we’re renting is during the rental season. The second project and the third project we’re going to be opening are going to be at the end of the rental season. So I think the most important thing for us at the first of this rental venture is to filling it up as quick as, we can, the most expensive part of real-estate is vacancy. So we’re holding the rents for now until we get the, at what we projected until we are enjoyed the success that we hope for.

Okay, great. Thank you.

Thank you.

Thank you. Your next question comes from the line of Jason White of Greet Street Advisors. Please proceed.

Hi, Jason.

Hi, guys, just following up on that last question a bit.

Great.

Are there any concessions or free rent given for the current loans? I know it sounded like, Ernest, there is ability going forward to change that based on leasing velocity. But where are we currently and is there any free rent or any period, like that being given?

There is free rent, there is an incentive Jason, a modest incentive to sign a lease now because the place is a beehive of activity. Construction now is just slowing to the point where it’s habitable. Up until now to show somebody a tenant we had to arrange with the construction company to make that available. So, I would say the concessions now are not only an incentive to rent but as compensation for the discomfort of moving into a construction zone. So, I hope that answers your question, the concessions are minimum but I think it’s important while we’ve still got the fur flying everywhere to say this is your compensation for the discomfort that you’re going to have during the completion of the construction.

Yes, that helps. I just had two other quick questions on Hassalo. First one is as it you sign these - as you guys take deposits there, officially leases, right, I think people put down $400 and with kind of a promise to sign later. What has been the conversion rate of those deposits? And then I think the second question is out of the 157 that you have leased, how many of those are deposits and how many of those are executed leases?

I don’t have that answer but we’ll get back to you. You have it Bob?

Yes, no, off the top of my head, I don’t have that, no.

Okay.

But I know the number of dropouts has been minimal and the conversation has been overwhelmingly significant. So, we’ve lost some but not many.

I would add to that Ernest, is that from our team that’s just doing a stellar performance up there in Portland is that on our weekly call, our last weekly call what they reported to us is that their closing ratio is approximately 50%. So, when somebody walks in, they tour the property, they got close to 50% if not north of 50% closing ratio. And the industry standard is probably somewhere between 25% and 30%. So, we’re very pleased with that beehive as Ernest refers to of activity at Hassalo.

The project has been very well received.

Great, thank you.

Thank you.

Thanks Jason for your interest.

Thank you. Next question comes from the line of Todd Thomas of KeyBanc Capital Markets. Please proceed.

Hi Todd.

Hi, thanks good morning. Just a question for Bob, back to the ATM, you mentioned that your first goal, you look at NAV creation first. But you’re talking about issuing stock, maybe $30 million or so, under the ATM. I think the stock is trading at more than a 10% discount to your own NAV. Why not sell assets that are trading at a premium and recycle that capital?

Well, actually we are considering that. We’re looking at selling Rancho Carmel Plaza, to tell you the truth, that’s one of the low hanging fruit we’ve got for some time. Great asset locally but from our perspective, we think that this might be the right time to dispose of it.

But as a general rule Todd, the assets we have are stellar. To replace them would be a terrific job. So, the odd asset may be for sale but generally speaking, the core portfolio that we have is the essence of the company. So, asset disposals are really not on our agenda. We can borrow money inexpensively there is a modest amount of dilution that’s possible if we raise equity. We have every financing opportunity open to us that’s available to anyone else. So, and selling these assets, it would be is like selling the crown jewels.

Okay. And then just back to Hassalo. I think, Ernest, you mentioned that the lease up was exceeding expectations, the pace of lease up. I mean, can you just talk about what that means for the stabilization timeframe? And then any update and apologies if I missed it but any update on the 47,000 square feet of the ground floor retail there?

Todd, we’re not sure exactly what’s going to happen on the lease up because right now we’re in the leasing season. But we only have one building available. And it’s in, in fact in the war-zone. The second buildings will be coming on as a leasing season comes to its tail-end. So we’re not sure exactly how it’s going to happen. So there maybe three months when leasing will be buoyant or there maybe three months when leasing is less than buoyant because of the seasonal circumstance that it’s dealing with. But I would say, at the end of that leasing season, downturn or the end of the non-leasing season I think it would be extremely successful. As far as the leasing of the commercial goes, I’m going to ask Chris Sullivan to handle that, who’s handling that project.

Yes, as the approximate 47,000 square feet on the ground floor retail and restaurant section, about half of that amount now is tied up in lease process and NOI. So more or less half of it is strongly committed for and we’re just working our way through the documentation.

And what does the merchandising look like, you mentioned restaurants, is there still going to be a grocery component?

Yes, the mix is a local boutique, organic grocery store that would serve the project. And then you have a mix of local eateries that are in there and there is a mix of a few financial service tenants that are in there as potentially a mix of few fitness potentials that are there as well. So, the idea of the project like that is the use is down on the ground floor, our uses that need to service the community, all your typical tenants are across the street in the mall, which is a tremendous draw to the area. So, really our balance of our tenant mix is to serve the tenants in that facility as well as the dining needs to that office quarter there which is approximately 12,000 people walking distance to the project on a daily need situation.

Okay. And then just last question. Bob, you talked about some of the airline and tourism traffic that’s been reported. Are you seeing any change in bookings at the Embassy Suites? How are bookings for 2016 today versus where they were for 2015 the same time last year, are you able to share that information?

I spoke with our General Manager two days ago and I know that our bookings compared to last year looking 90 days out and then into early into ‘16 which is, it could change one way or the other but we’re ahead of where we were a year ago.

Okay, thanks.

What’s happening in mind Todd that that part of our portfolio is the most cyclical if not the only cyclical part of it, so, it’s subject to short swings one way or the other. But it just gets better and better over the mid-term. We love that portfolio. Thank you.

Thank you. Your next question comes from the line of Haendel Juste of Morgan Stanley. Please proceed.

Hi, good morning guys.

Good morning.

Thanks for taking my questions I had a couple quick ones here. First one is on the transaction market. So understanding that competition for higher-quality well located assets remains fierce and there is tons of capital chasing those high-quality assets. But we’ve also heard from some of your retail peers that they’ve noticed that more sellers appear willing to talk given perhaps interest rate or cap rate concerns. So I’m curious if you guys are seeing any change in the willingness of some of the sellers you’re talking to or targeted and their willingness to come to the table or talk or any change in the tenor of conversations you’ve been having?

Haendel, it’s difficult to answer that question, it’s difficult for me to answer that question because coming to the table is not coming to table with a reasonable price offering. And some of the, if there are people willing to come to the table, it’s still it’s a wish for prices, which we find difficult to comprehend or digest. So, what we’re doing is increasing our own, the value of our own portfolio, Jerry, why don’t you tell them how many projects you have going now that are enhancing our existing portfolio?

Sure.

This is Jerry Gammieri, who is the Head of Construction.

Right now portfolio-wide we have 42 CapEx projects totaling about $24 million and that’s a collection of elevator upgrades, LED conversions, upgrading common areas like we refer to it as polishing the gold.

Yes. So, our strategy is to spend our available funds on improving or polishing the gold as Jerry calls it rather than doing the transaction which would not be accretive to net asset value. So, we hope that the prices do get reasonable. We’ll have the opportunities available to us. In the meantime, we keep our finger on the marketplace and hope for but nobody has, we haven’t seen anything that’s compelling.

It sounds like no real change then from what you’re seeing. Okay, thank you for that. And then one more question on trends. I was curious on some additional insight into your Hawaii retail portfolio. Anything you can tell us about demand, pricing power, your renewal trends there have been a bit lumpy of late. Is that timing, space availability issues or is there anything else we should be perhaps concerned or aware of there?

This is Chris Sullivan again. On Hawaii, Waikele has been strong on renewals there. We’ve actually been able to advance ramps. So when you say it was lumpy, is there a specific one?

No, I was looking at the general trends in your Hawaii retail renewal over the last couple quarters.

What I was going to say, Waikele has been very strong. We’ve been getting a really good tailwind on for neighbor at the outlets there, if you know the project the Waikele premium outlets have signed and just finished their remodel of that project. And it’s nice to have that one looking a lot better as we get a lot of tenants out of that. But our renewals out there have been pretty strong on that case by case basis on our shop tenants out there. We’re pretty happy with it. Beach Walk is the bull’s-eye of Waikiki we’ve turned that pretty well there. So, at this point in Hawaiian cycle we’re looking pretty good.

It’s difficult to appreciate what a bull’s-eye Beach Walk is without seeing it. It’s surrounded by high-rise hotels. And this is the one pearl in the oyster sitting in the middle of all these hotel rooms. So I mean, it is main and main on Waikiki.

And it’s also in Hawaii right now in the cycle, when you look at what Ala Moana has gone through with their bringing more tenants to the island, the first time bringing in new tenants helps because those tenants would do two or three more stores in the future years. It’s a constant redevelopment in new tenants coming in on Kalakaua which is the Fifth Avenue of Waikiki, so Hawaii is in a real good building boom right now from a retail standpoint.

I appreciate the color.

Well, thank you.

It was kind of an Investor Day next fall.

Let’s say maybe bottom deal on the run rate at the Embassy Suite and we’ve got our RevPAR up. Just delete that.

All right, thank you.

Thank you.

Thank you. Your next question comes from the line of Rich Moore of RBC Capital Market. Please proceed.

Hi, good morning guys.

Good morning.

First of all, I’m surprised you guys let John take vacation. Does he have to work that off on weekends going forward?

We had him in hand-cuffs, and chained to his office. But he got his hands on a saw, on what you call a club, a hack-saw and he got out of here. So, we wish him very well.

Yes, he is a tough character. Congratulations, Bob, on getting the ratings from the rating agencies. And I’m curious when you might do a bond? I mean, as I look at what you have on the line of credit and what’s coming due, it doesn’t seem like there would be any need to do a bond anytime soon. But maybe I’m missing something. I mean, what’s your expectation?

Yes, I mean, right now we don’t have a need for it. I think it’s part of getting - to make sure we have access to all the tools in the toolbox. I mean our next maturity - we have no maturities in 2015. And our next maturity is First & Main, I think is July of 2017 and that’s at 3.97%. So, it doesn’t make sense to pay that off right now. But it’s there, if we find that acquisition, we keep looking for, we could use it, then use it prudently and keep our leverage in check. But there is nothing on, on the near future.

But Rich, every board meeting, the board reviews all the opportunities that we have for access to capital. So, it’s something that’s on the front-burner and is discussed not less frequently than every quarter.

Rich, that reminds me, I wanted to let you know that on Friday this week we will be filing an amendment to our 2014 10-K to correct the typographical error on the consolidated statements of comprehensive income for the limited partnership for the LP, which was and is a voluntary filing. The amendment has no impact to the audit opinions provided by our auditors and has absolutely no impact to the REIT’s financial statements. And if you do have any questions, please let me know.

Okay, great, great. Thank you for that, Bob. Okay, so no bond probably near term. Then remind me, did either your Sears or your K-Mart box go into heritage [ph]?

No.

No.

No. So, is there any further update on you being able to do anything with Sears on either of those two boxes?

No.

We keep trying but there is nothing at the current time.

Okay, all right, good, thanks. And then the last thing, I know you guys aren’t finding anything good to buy because of pricing, but tell us a little bit about what’s out there in terms of volume, I mean in your different asset classes. What are you seeing in terms of what is for sale from a volume standpoint?

We’re on everybody’s e-mail list for the offering. As far as apartment goes, very little, as far as office goes, there seems to be a lot of office for sale. As far as shopping center goes, it’s still pretty major. Pricing is really stiff. And we have to again, we focus on NAV first. So, when we look at it, even if the Cap rate is low we have to get over our weighted average cost to capital within a relatively short period of time otherwise we’re destroying shareholder value. I mean, and John, he still looks at probably $1 billion a week of deals that are coming by his desk and we do a quick analysis of those, and they just don’t make sense. We looked at just to give you some color, we looked at a deal that was a portfolio filed retail properties, and that wanted to start with a three-handle cap rate. And it just didn’t pencil out nor did it make any sense.

Were those California, Bob, or were those Hawaii?

No, that was California, Southern California.

So, we keep looking but in effect, we keep enhancing and adding to our own portfolio by improving our portfolio by spending on properties that we already own.

Right, got you.

And Rich, just to give you some additional color on that, while it started with the three, the growth didn’t in over a decade didn’t get anywhere near your weighted average cost of capital. It just didn’t make any sense. And so, I think that while, I think there was another analyst that had a comment that he’s seeing more deals or more sellers come into the table, but there is a disconnect between what their expectations are what people are willing to pay for it.

Very good. Got you. Thank you guys, appreciate the color.

Thank you, Rich.

Thank you.

Thank you. Your next question comes from the line of Mitch Germain of JMP Securities. Please proceed.

Good morning guys. Just a quick one from me. Bob, what’s the roadmap to get to the, to get about a turn of leverage off of your balance sheet? How do we get there?

Well, if we do nothing at all Mitch, when Hassalo gets stabilized in the - late in the third, beginning of the fourth quarter we will be there. We will be down to about 5.6 net debt to EBITDA.

Excellent, I appreciate it.

Sure.

Thanks for the question.

Thank you. We have no further questions. I would now like to turn the call over to Ernest Rady for closing remarks.

Again, thank you all for your interest. We’re so happy to present you with these results that have been the work product of everybody at American Assets Trust, who has just done a great job. And a special thanks to the Portland team who have really created a great product for us. So, again, thanks for your interest. We hope to see you soon. Come to Portland and take a look at what we’re so proud of. Good morning everybody. And again, have a good day.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good-day.