Financial Analysis

COMMITMENTS AND CONTINGENCIES Legal We are sometimes involved in various disputes, lawsuits, warranty claims, environmental considerations, and other matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters. We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum amount within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also, under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us as owner of the properties due to certain matters relating to the operation of the properties by the tenant. Commitments See Note 12, Leases for description of our leases, as a lessee. We have management agreements with Outrigger Hote …

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DEBT Debt of American Assets Trust, Inc. American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's obligations under the (i) 3.375% and 6.150% senior notes, (ii) senior guaranteed notes, and (iii) fourth amended and restated credit facility, each discussed below. Debt of American Assets Trust, L.P. Secured notes payable The following table is a summary of our total secured notes payable outstanding as of June 30, 2026 and December 31, 2025 (in thousands): Principal Balance as of Stated Interest Rate Stated Maturity Date Description of Debt June 30, 2026 December 31, 2025 as of June 30, 2026 City Center Bellevue (1) $ 75,000 $ 75,000 5.08 % October 1, 2027 75,000 75,000 Debt issuance costs, net of accumulated amortization of $768 and $723, respectively (105) (151) Total Secured Notes Payable Outstanding $ 74,895 $ 74,849 (1) Interest only. The Operating Partnership has provided a carve-out guarantee on the mortgage at City Center Bellevue. Certain loans require the Operating Partnership to comply with various financial covenants. As of June 30, 2026, the Operating Partnership was in compliance with these financial covenants. Unsecured notes payable The following table is a summary of the Operating Partnership's total unsecured notes payable outstanding as of June 30, 2026 and December 31, 2025 (in thousands): Description of Deb …

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FAIR VALUE OF FINANCIAL INSTRUMENTS A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy for inputs used in measuring fair value is as follows: 1. Level 1 Inputsquoted prices in active markets for identical assets or liabilities 2. Level 2 Inputsobservable inputs other than quoted prices in active markets for identical assets and liabilities 3. Level 3 Inputsunobservable inputs The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs. We measure the fair value of this liability based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques. The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to t …

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INCOME TAXES We elected to be taxed as a REIT and operate in a manner that allows us to qualify as a REIT for federal income tax purposes commencing with our initial taxable year. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. Taxable income from non-REIT activities managed through our TRS is subject to federal and state income taxes. We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes. We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases. Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic 740, Income Taxes . A deferred tax asset is included in our consolidated balance sheets of $1.0 million and $1.0 million, and a deferred tax liability is included in our consolidated balance sheets of $0.6 million and $0.6 million as of June 30, 2026 and December 31, 2025, respectively, in relation to real estate asset basis differences and prepaid expenses for our TRS. Income tax expense is recorded in other income, net on our consolidated statements of comprehensive income. For the three and six months ended June 30, 2026, we recorded income tax …

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LEASES Lessor Operating Leases We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases. Our leases with office, retail, mixed-use and residential tenants are classified as operating leases. Leases at our office and retail properties and the retail portion of our mixed-use property generally range from three years to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents, usually provide for cost recoveries for the tenants share of certain operating costs. Our leases may also include variable lease payments in the form of percentage rents based on the tenants level of sales achieved in excess of a breakpoint threshold. Leases on apartments generally range from seven months to fifteen months, with a majority having 12-month lease terms. Rooms at the hotel portion of our mixed-use property are rented on a nightly basis. Leases at our office and retail properties and the retail portion of our mixed-use property may contain lease extension options, at our lessee's discretion. The extension options are generally for three years to ten years and contain primarily rent at fixed rates or the prevailing market rent. The extension options are generally exercisable six months to twelve months prior to the expiration of the lease …

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Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures. This pronouncement requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, and should be applied either prospectively or retrospectively, with early adoption permitted. The company is currently evaluating the impact of adopting ASU 2024-03.

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RELATED PARTY TRANSACTIONS At Torrey Point, the company leases space to American Assets, Inc. (AAI), an entity owned and controlled by Mr. Rady, our Executive Chairman, with an initial lease term of ten years at an average annual rental rate of $0.2 million. Rental revenue recognized on the lease of $0.1 million and $0.1 million for the six months ended June 30, 2026 and 2025, respectively, is included in rental income on the consolidated statements of comprehensive income. The Waikiki Beach Walk entities have a 47.7% investment in WBW CHP LLC, an entity that was formed to, among other things, construct a chilled water plant to provide air conditioning to the property and other adjacent facilities. The operating expenses of WBW CHP LLC are recovered through reimbursements from its members, and reimbursements to WBW CHP LLC of $0.5 million and $0.6 million for the six months ended June 30, 2026 and 2025, respectively, are included in rental expenses on the consolidated statements of comprehensive income. …

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SEGMENT REPORTING For the three and six months ended June 30, 2026, the chief operating decision maker (CODM) for the company was comprised of our President and Chief Executive Officer and our Chief Financial Officer. Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We review operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. However, we have aggregated our properties into reportable segments as the properties share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies. We operate in four reportable business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including te …

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization American Assets Trust, Inc. (which may be referred to in these financial statements as the company, we, us, or our) is a Maryland corporation formed on July 16, 2010 that did not have any operating activity until the consummation of our initial public offering on January 19, 2011. The company is the sole general partner of American Assets Trust, L.P., a Maryland limited partnership formed on July 16, 2010 (the Operating Partnership). The companys operations are carried on through our Operating Partnership and its subsidiaries, including our taxable real estate investment trust (REIT) subsidiary (TRS). Since the formation of our Operating Partnership, the company has controlled our Operating Partnership as its general partner and has consolidated its assets, liabilities and results of operations. We are a full service, vertically integrated, and self-administered REIT with approximately 232 employees providing substantial in-house expertise in asset management, property management, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing. As of June 30, 2026, we owned or had a controlling interest in 31 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of June 30, 2026, we owned land at two of our properties that we classify as held for development and/or construction in progr …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing