American Assets Trust (NYSE:AAT) reported first-quarter 2026 funds from operations (FFO) of $0.51 per diluted share and net income attributable to common stockholders of $0.08 per share, as management pointed to steady performance across its diversified portfolio and increased leasing momentum in office.
President and CEO Adam Wyll said the company “started 2026 in line with our expectations,” highlighting encouraging office leasing activity, high retail occupancy, and “steady results” at Waikiki Beach Walk amid what he described as a “still mixed tourism backdrop.”
Balance sheet: expanded credit facility and no maturities until 2027
EVP and CFO Robert Barton said the company ended the quarter with approximately $518 million of liquidity, including $118 million of cash and $400 million available under the revolving credit facility (prior to the April 1 upsizing). Barton reported net debt to EBITDA of 6.9x on a trailing 12-month basis, noting the company’s long-term target remains 5.5x or below. Interest and fixed charge coverage were both 3.0x, he said.
Office leasing activity continues, with Genentech vacate shifting the outlook
Wyll said demand remains concentrated “at the top of the market” in well-located, amenitized buildings with strong ownership, and argued the company’s coastal office portfolio is aligned with what tenants are seeking today. He also said artificial intelligence is driving investment and business formation across technology and related ecosystems, and that “the net effect in our markets has been constructive,” while emphasizing that office users are placing a higher bar on location and amenities.
American Assets Trust ended the quarter 84.5% leased in its office portfolio and 86% leased in its same-store office portfolio. Same-store office cash NOI was “essentially flat” year-over-year, Wyll said, modestly ahead of internal expectations and reflecting previously discussed move-outs.
During the quarter, the company executed about 237,000 square feet of office leases with comparable cash leasing spreads of 4.8% and straight-line leasing spreads of 10.6%, Wyll said. He added that of 14 non-comparable office leases in the quarter (disclosed separately in the supplemental materials), 12 were new tenants and nine were associated with the company’s Spec Suite program.
Looking ahead, Wyll said the company entered the second quarter with roughly:
- 244,000 square feet of previously signed office leases not yet commenced
- 122,000 square feet in lease documentation
- A proposal pipeline of more than 200,000 square feet
At La Jolla Commons Tower III, Wyll said the building was 49% leased with proposals out on another 30% of the building. He said the UTC submarket has limited large-block availability outside of Tower III and “no meaningful new supply on the horizon,” which management believes positions the property to capture larger requirements.
In response to analyst questions, management provided additional color on Tower III’s pipeline, saying it was in proposals with “two full floor users and two multi-floor users,” and that competition is “very narrow.” Management also said there was only “one suite left” on the fourth-floor Spec Suite program and that a fifth-floor spec suite was “pre-leased” despite not being completed until September.
At One Beach Street, Wyll said the building was 36% leased. He noted one larger opportunity referenced previously did not move forward, and said the leasing strategy had shifted toward building a broader pipeline of smaller and mid-sized tenants while advancing Spec Suite build-outs with permits in hand and work underway.
Wyll reiterated a prior goal of ending the year at 85% to 88% leased across the office portfolio, but said the company learned that Genentech at Lloyd District (about 67,000 square feet) “reversed course” on a short-term renewal and will vacate in the fourth quarter. As a result, he said the company is now targeting the lower end of that year-end leasing range.
Barton added that, beyond Genentech, there are three known move-outs that are already “in lease documentation at City Center Bellevue,” totaling 28,000 square feet. He also said he was tracking 173,000 square feet across 17 deals, including relocations tied to tenant expansions that involve tenants “giving space back.”
Retail occupancy stays high; temporary vacancies pressured NOI
Wyll said retail remained “a source of consistent, reliable performance,” with the retail portfolio ending the quarter 98% leased. The company executed about 39,000 square feet of retail leasing, and Wyll said average base rents reached a new portfolio record of $30 per square foot.
Same-store cash NOI in retail was modestly below the prior-year period, which Wyll attributed primarily to temporary vacancy impacts from two former Party City spaces and a former Discount Tire space. He said the Discount Tire space and one of the two Party City spaces have already been re-leased, with cash rents expected to commence later this year. Wyll also noted that less than 3% of retail square footage expires this year.
Barton quantified the retail decline, saying retail NOI fell 0.7% year-over-year due to known vacancies at Gateway Marketplace and Solana Beach Town Center, “both of which have now been addressed through executed leasing.”
Multifamily up year-over-year; Waikiki mixed-use pressured by hotel results
Wyll said same-store cash NOI in multifamily increased 3% year-over-year, which he described as a solid result given competitive supply in San Diego and Portland. Excluding the RV park, the multifamily portfolio ended the quarter 96% leased. In San Diego, apartment communities ended the quarter 98% leased, and Wyll said net effective rents in San Diego (excluding the newest acquisition, Genesee Park) were up just over 1% compared to the prior-year period.
In Portland, Wyll said Hassalo on Eighth ended the quarter 93% leased, up 4% from a year ago, while net effective rents were essentially flat. He characterized 2026 as “more of a stabilization year for multifamily than a recovery year,” with a focus on occupancy, pricing optimization, and controlling expenses.
At Waikiki Beach Walk, Wyll said the retail component performed well year-over-year but was partially offset by softness on the hotel side, resulting in mixed-use cash NOI down modestly from the prior-year period.
Barton said mixed-use NOI declined 2.7% year-over-year. He attributed the result to a 2% increase in the retail component offset by lower average daily rate (ADR) and higher operating expenses at Embassy Suites Waikiki. He reported first-quarter hotel occupancy improved to 92% from 85% a year earlier, while RevPAR increased 2% to $305 and ADR declined 6% to $332. NOI was approximately $2.4 million compared to $2.6 million last year, he said.
On the Q&A, Barton said the hotel continues to outperform its competitive set, citing occupancy of 91% versus 79% for the comp set, while adding that “everybody’s feeling the impact.” He also cited two “Kona” rainstorms in March that brought “significant flooding,” along with the continuing impact of the Japanese yen on travel patterns. Wyll added that Japanese tourism has been slower to recover, saying it used to be closer to 40% of Waikiki tourism and is now about 20%.
Dividend maintained despite elevated payout ratio; 2026 guidance reaffirmed
Wyll said the board approved a quarterly dividend of $0.34 per share, payable June 18 to shareholders of record as of June 4. He acknowledged the payout ratio remained elevated, attributing it largely to leasing-related capital tied to signed leases and the Spec Suite program.
Barton said the first-quarter dividend payout ratio was about 111%, driven primarily by the timing of tenant improvements, leasing commissions, Spec Suite spending, and recurring capital needs. As signed leases commence and convert to cash rent, Barton said management expects the payout ratio to moderate, with the remaining three quarters trending in the low-to-mid 90% range and the full year likely in the upper 90% range. He noted that since the company’s IPO in 2011, the payout ratio has generally been about 65% to 85%.
The company reaffirmed full-year 2026 FFO guidance of $1.96 to $2.10 per share (midpoint $2.03). Barton said the outlook assumes continued stability across the portfolio supported by leasing activity, contractual rent growth, and cost discipline, and he outlined factors that could support results trending toward the upper end of the range, including continued rent payments from retail tenants currently reserved for bad debt, earlier-than-expected office lease commencements, multifamily outperformance on occupancy and/or rent growth, and improved tourism demand benefiting Embassy Suites Waikiki.
About American Assets Trust (NYSE:AAT)
American Assets Trust, Inc is a publicly traded real estate investment trust (REIT) that acquires, develops and manages a diversified portfolio of commercial properties across multiple asset classes. The company’s holdings include retail centers, office buildings, multifamily communities and select hotel and resort properties. American Assets Trust pursues an integrated strategy combining proactive redevelopment, leasing initiatives and sustainable design to enhance asset value and drive long-term growth.
Founded in 1998 and headquartered in San Diego, California, American Assets Trust has built a presence in key markets along the West Coast and select western U.S.
