Good day, and welcome to the American Assets Trust Third Quarter 2022 Earnings Conference Call. As a reminder, today's conference call is being recorded. All participants will be in a listen-only mode. 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 Mr. Adam Wyll, President and COO for American Assets Trust. Thank you. Mr. Wyll, you may begin.

Thank you, operator. Good morning, everyone. Welcome to American Assets Trust Third Quarter 2022 Earnings Call. Yesterday afternoon, our earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investors section of our website americanassetstrust.com. And with that quick intro, I'll turn the call over to Ernest Rady, our Chairman and CEO to begin the discussion of our third quarter 2022 results. Ernest?

Thanks, Adam, and good morning everyone. As you all are aware, we are seeing considerable volatility in the capital markets and uncertainty in the economy that seems likely to continue for the next few quarters at a minimum, given persistent inflation, rising interest rates and national and global politics, not to mention what I consider to have been excessive and unprecedented fiscal stimulus in the United States. These are times unlike any other that I've seen and it is clear there is no monetary policy playbook for a clear and obvious course correction. But that's why I feel more than ever quality matters: quality of our assets, quality of our balance sheet and more than anything else, quality of our people who are the stewards of our organization that work hard to optimize our long-term growth, shareholder wealth creation and investing and improving what we consider to be among the best assets in our markets for each of our asset classes. As you've likely heard about an ongoing flight to quality in commercial real estate, we know that our irreplaceable properties are sought after by tenants, not just based on being the most desirable product, but also amongst the most desirable locations, amenities, access to public transportation, passive growth and sustainability elements. Of course, we also treat our tenants very well and are flexible with tenant lease requirements which we believe also differentiates us from our peers. Though we may be in for a prolonged macroeconomic challenges, we continue to believe that these factors will continue to contribute to our relative outperformance in the long-term. In Q3 2022, we are encouraged by operating from a fundamentals and earnings trajectory as we built on our solid growth in Q1 and Q2. As you'll hear in a bit, we are now estimating…

Thank you, Ernest. As Ernest alluded and as we continue to reiterate, despite the headwinds of today's economic conditions and capital market challenges, we believe our underlying fundamentals and asset quality support a favorable long-term view of American Assets Trust. In addition to our asset quality and strong balance sheet, we have minimal lease maturities in 2023, single-digit percentages for both office and retail and low single-digit percentages assuming options are exercised. A highly diversified tenant credit and a well-staggered debt maturity schedule, not to mention having a diversified portfolio that helped us navigate through COVID, as certain of our segments proved more resilient than others at varying times. Meanwhile since Labor Day we have seen incremental progress of return to work in our office portfolio from Q2 to Q3 with strength in San Diego and Portland and fairly strong utilization at Landmark in San Francisco by our two office tenants at about 75% Tuesday through Thursday and 50% Monday and Friday, as this building serves as a hub for one tenant in San Francisco and as the other's headquarter. Meanwhile, Bellevue continues to lag office utilization relative to our other markets. Of course, we still believe there's meaningful upside to our office utilization looking out several quarters, as employers continue to convey their intentions to us for their employees being in the office. And as we anticipate employers ultimately having more leverage with employees with our view of softening and more balanced labor markets over the next few quarters. In Q3, our San Diego multifamily portfolio continued its favorable rent growth, where we saw leases on vacant units rent at an average of approximately 31% over the prior rates, while rates on renewed units increased an average of 13% over prior rents with virtually no concessions in Q3. Additionally,…

Thanks, Adam. Good morning, everybody. Last night, we reported third quarter 2022 FFO per share of $0.63 and third quarter 2022, net income attributable to common stockholders per share of $0.21. Third quarter FFO increased approximately $0.05 over the second quarter of '22 and is comprised of the following: First, the Embassy Suites Waikiki hotel increased by approximately $0.02 per FFO share during the high season of Q3 over Q2. And second, two items that we look at as nonrecurring revenue and determining a run rate are. First, accelerated revenue recognition related to TI over straight-line rent related to the early termination of a tenant at City Center Bellevue was approximately $0.02 per FFO share. And secondly, an accelerated deferral rent payment was received by a tenant at first and main in Q3 '22 that generated approximately $0.01 per FFO share. Same-store cash NOI in Q3 '22 ended at approximately 11.3% growth year-over-year for the third quarter. Same-store office was approximately 14.8% in Q3 as a result of the remaining lease abatements burning off of one of our large tenants at our Landmark building in San Francisco. The retail sector had a negative 3.8% decrease in same-store cash NOI in Q3. But when excluding prior year COVID-related accounts receivable collections, real estate tax refund at Alamo Quarry in 2021, the retail same-store cash NOI percentage increases to a positive 1% growth year-over-year. Retail growth is much stronger on a comparative year over base, when excluding those onetime items. Let's talk about liquidity. At the end of the third quarter of '22, we had liquidity of approximately $427 million comprised of approximately $63 million in cash and cash equivalents and $364 million of availability on our revolving line of credit. Our leverage which we measure in terms of net debt to…

Thanks, Bob. At the end of the third quarter our office portfolio remains stable with our same-store portfolio remaining at approximately 96% leased. The quality of our portfolio continues to yield strong rent growth. In the third quarter we executed 13 leases totaling approximately 59,000 rentable square feet including on comparable new lease for approximately 18,000 rentable square feet with increases over prior rent of 55% on a straight-line basis approximately 25,000 rentable square feet of comparable renewal leases with increases over prior rent of 19.6% on a straight-line basis and approximately 16000 rental square feet of non-comparable new leases. Office leasing spreads continue to be strong in Q3 with leasing spreads of 24% increase on a cash basis over the prior rent and a 35% increase on a GAAP basis. As we shared last quarter, we have expanded access to medical office users in select markets and buildings in response to very tight market conditions producing longer-term leases at premium rents relative to traditional office tenants. In Q3, we renewed an existing medical user in approximately 4,000 rentable square feet. And earlier this month we expanded them into an additional 7,400 square feet. The triple net rate for this expansion is approximately 40% greater than comparable office lease. We have a lease out for signature for a 7,400 rental square foot medical use at Solana Crossing at a triple net rate that is 35% higher than a comparable office lease. And we are continuing to invest in our properties. In addition to the redevelopment of One Beach in San Francisco and the development of Tower III at La Jolla Commons in San Diego, we are underway on the following projects: major renovations at Eastgate Office Park; new amenities at City Center Bellevue including a fitness center and bike club with showers and lockers and a conference center; renovations and common area enhancements at Solana Crossing; a new fitness center at Corporate Campus East III; new amenities at First & Main and Lloyd Center Tower in Portland, including a fitness center, conference center and lounge at each building. We continue to believe the strategic investments in our office portfolio will position us to continue to capture more than our fair share of net absorption at premium rents despite current market headwinds. I'll now turn the call back over to the operator for Q&A.

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

Good morning, Todd

Hi, thanks. Hi. Good morning. Bob just in the context of the updated guidance I was just wondering if you could provide updated same-store forecast for the various segments like you have in prior quarters?

Yes, we can -- we have the information available. Let's see. For prior quarters -- well one of the comments that I have is that if you compare the 2021 like that real estate property tax refund that we received I mentioned that the retail would be on a positive approximately 4.2% that we expect for year end 2022. And total same-store cash NOI of 8.6% at year end and approximately 10.4% excluding the Alamo real estate property tax at year end. Does that answer your question, or you were looking for like quarter-by-quarter?

Yes. Yes. I think -- I mean you're tracking pretty well ahead I guess on all four segments that you've discussed from a same-store standpoint, and I just wanted to know if you were updating those forecasts for the full year. That's helpful on the retail side, but what are you expecting I guess for office multi mixed use? And in general it just seems like you're continuing to track well ahead of expectations from a same-store standpoint for the year.

Yes. For the year 2022, our expectation is that office would be 8.8%. Again, these are approximations. Retail would be 2.3%, without factoring in the prior year 2021 real estate tax rate fund at Alamo. Multifamily, we think will come in approximately 11%. And we think mixed use, will end the year approximately 56%, but we'll put in the actual numbers on Q4 call.

All right. Got it. That's helpful. And then with regards to -- two asset-specific questions. I guess first, the leasing momentum that you discussed at Hassalo has that continued in October in terms of rent levels and concessions?

October has been a bit of a slow month, but the metrics are still in place.

Okay. And then for the hotel, you're expecting sort of a $0.02 decrease I guess sequentially or – sorry, $0.03 decrease sequentially as you head into the fourth quarter. We're almost through October. Can you just provide a little bit of an update in terms of, occupancy and rate and what you're seeing there, heading into the towards the end of the year?

Bob?

Yes. I think the occupancy and rate are holding and it's just a question of our Japanese tourism. October and November -- I mean November, is typically a shoulder month. It's a month that is not as strong obviously, as the summer. I think October is on track. We may see some pullback on November, but we're still moving forward on that. So we're very positive on Waikiki Beach Walk. And the fact that we were -- for the first three months -- for the first three quarters of this year, we were 99% of pre-COVID on a year-to-date basis compared to pre-COVID. And so we're just looking to see will that trend continue into Q4.

Okay. And then just Bob lastly, I guess the term loans B and C $150 million, that matures in May of next year. What are your current thoughts there on refinancing those two term loans?

Yes. Our current thought is we will obviously, refinance. We have a great banking syndicate. So I mean it's likely that we will enter into a -- refinance those possibly add a little bit to it. And it will probably be a term of two, plus a one-year option. I think what we think is the right thing for our company, is to do appraise just to get you through the upcoming recession, if there is one and then be set up ready to go as we come out of this recession.

Okay. And then any -- I realized there's a lot of movement potentially between now and then, but what sort of change in rates or pricing would you anticipate today, if you went out to the market for that relative to the 2.65% on those two term loans?

Well, it's definitely going to be higher. And we're still pricing that out as we speak. So, I don't have a number for you, but it will be higher.

Okay. All right. Thank you.

Thank you, Todd.

Thank you, Todd.

This concludes our question-and-answer session. I would like to turn the conference back over to Chairman Ernest Rady for any closing remarks. End of Q&A:

Thank you, for your interest. Thank you for allowing us to manage the company. I do have to express my concern, that there's this disconnect between the market value of our stock and the market value of our assets, and the quality of the assets and the management. We hope at some point this gap narrows. In the meantime, it is disconcerting. But thanks for your interest, and we look for many more years of being able to report good results. And good job Bob, Steve and all. Bye-bye.

The conference has now concluded. Thank you, for attending today's presentation and you may now disconnect.