Q3 2021 American Assets Trust Inc Earnings Call

October 27, 2021

Yeah.

Thank you for standing by welcome to the third quarter 2021 American Assets Trust, Inc. Earnings Conference call. At this time, all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program is being recorded.

I would now like to introduce your host for todays program, Adam while President and Chief Operating Officer. Please go ahead Sir.

Thank you and good morning, everyone welcome to American assets Trust third quarter 2021 earnings call yesterday afternoon, our earnings release and supplemental information were furnished to the SEC form 8-K. Both are now available on the investors section of our website American assets Trust's Dot com.

On a replay and on demand webcast will also be available for this call over the next week.

During this call we will discuss non-GAAP financial measures, which are reconciled to our GAAP financial results in our earnings release and supplemental information.

We'll also be making forward looking statements based on our current expectations, which statements are subject to risks and uncertainties discussed in our SEC filings.

You are cautioned not to place undue reliance on these forward looking statements actual events could cause our results to differ materially from these forward looking statements for a number of reasons, including as it may relate to the continuing impact of COVID-19, and with that I'll turn the call over to Ernest Rady, Our chairman and CEO to begin the discussion of our third quarter 2021 results. Thanks.

Adam and good morning, everyone. I am pleased to report that we continue to make great progress on all fronts as we rebound from the impact of COVID-19, we knew with the onset of the pandemic that we would not be impervious to its economic impact, but we were confident.

But the high quality irreplaceable properties and asset class diversity of our portfolio combined with the strength of our balance sheet and ample liquidity would help us pull through and maybe even come out on the other side better off than at the beginning we continue to be optimistic as we meaningfully rebounded in <unk>.

2021 and anticipate further growth in 'twenty, one 'twenty two and beyond that's why we've aggregated a portfolio comprised of a well balanced collection the office.

Retail multifamily and mixed use properties located in dynamic dynamic high barrier to entry markets, where we believed that the demographics tenant demand and local economies remains strong relative to others.

These are more resilient in our view to economic downturns as they are in the path of growth.

Occasion.

And innovation and importantly can likely withstand the impact of long term inflation and perhaps even benefit from the benefits of long term inflation.

Along those lines during the past quarter, we used our liquidity to acquire two complementary and accretive office property in Bellevue Washington.

A market that we remain very bullish on <unk>.

And in which we expect continued rent growth.

Meanwhile, our development of La Jolla Commons three into an 11 story approximately 210000 square foot class a office tower remains on time and on budget for a Q2 or Q3 'twenty twenty-three delivery. We are encouraged about the leasing prospects in the U S.

Disease sub market for high quality large blocks of space.

Both Tech and life Science funding continues at record levels and think tenants continue to expand but we don't have specific news to share on that front. At this time. The same holds true for our one Beach Street development on the North waterfront of San Francisco, which we believe to be a unique.

Opportunity for a full building tenant with delivery expected in Q2 or Q3 of 2022.

Additionally, I'm happy to inform you that our board of directors has improved the quarterly dividend of <unk> 30 cents a share for the third quarter, which we believe is supported by our expectations for operations to continue.

Lending positively it will be paid on December 20, <unk> to shareholders of record on December nine.

Adam Bob and Steve will go into more detail on our various awesome asset segments collections and financial results and guidance and I will be available and we'll all be available for any questions that you may have at the conclusion of our prepared remarks on behalf of all of US at American assets Trust. We thank you for your <unk>.

Confidence in allowing us to manage your company and for your continued support now more than ever as we gain as we aim to grow our earnings and net asset values for our shareholders on an accretive basis I'm now going to turn the call back over to Adam.

Adam Please thanks on us as we look at our portfolio, we're always reminded of the importance of owning and operating the preeminent properties in each of our markets. That's why we focused on continuing to enhance our best in class community shopping centers to promote a better experience for our shoppers with the expectation that this will further strengthen our properties as the dominant centers in our sub.

Markets.

And we understand the importance of modern state of the art amenities in our office projects, which assist our tenants and the hiring and retention of talent and what is currently a very competitive job market, we feel strongly that consistently improving in a minute sizing our properties, including incorporating sustainability in health and wellness elements, it's critical to remaining competitive in the <unk>.

Place in order to attract the highest quality and highest credit tenants. Meanwhile, we are encouraged by our approximately 97% collection percentage in Q3 increased leasing activity across all asset classes fewer tenant failures and bankruptcies than we expected and many modified leases hitting percentage rent thresholds sooner than expected.

And are collecting of approximately 96% of deferred rents due during the third quarter all validating the strategies, we implemented during COVID-19 to support our struggling retailers through the government mandated closures as we were fortunate to have the financial ability to do so.

Briefly on the retail front, we've seen an improved leasing environment over the past few quarters with positive activity engagement with new retailers for many of our vacancies, including recently signed new deals with Columbia Sportswear Williams Sonoma total wine and first Hawaiian bank to name a few and renewals with nordstroms Petco and whole Earth.

Among others as well as many other new deals and renewals in the lease documentation process retailers are choosing our best in class locations to improve their sales all the while we remained selective in terms of merchandising our shopping centers for the longer term.

Crystal event and his team have done a tremendous job on that front. Despite some of the continuing headwinds at our Waikiki Beach walk retail.

On the multifamily front as of quarter end, we were 96% leased it has a low in Portland, and 98% leased in San Diego multifamily portfolio all of the Master lease units in San Diego that you've heard US discuss previously were absorbed by early August the multifamily collections have been particularly challenging in Portland due to Covid related government.

<unk>, we have started receiving meaningful checks from government rental assistant programs to drive down our outstanding amounts owed and expect more checks to come we are confident that Abigail strong leadership at San Diego multifamily and Tonya's, New energy. It has a level drive improvements at our multifamily properties, both operationally and financially.

With that I'll turn the call over to Bob to discuss Q3 financial results in more detail.

Thanks, Adam and good morning, everyone.

We reported third quarter 2021, <unk> per share of 57.

In third quarter 2021, net income attributable to common stockholders per share of <unk> 17.

Third quarter results are primarily comprised of the following.

Actual <unk> increased in the third quarter by approximately 11.4.

4% on a F F O per share basis to 57 cents per <unk> share compared to the second quarter of 2021.

I'm merely from the following four items.

The acquisitions of Eastgate Office Park in Corpus campus East three and Bellevue, Washington on July 7th in September 10th respectively added approximately two three cents of <unk> per share in Q3 second Alamo quarry in San Antonio added approximate.

One seven.

<unk> per share in Q3, resulting from 2019 and 2020 real estate tax refunds received during the third quarter of 2021, which.

Which reduced Alamo quarry as real estate tax expense.

<unk> decrease of bad debt expense at Carmel Mountain Plaza added approximately half a cent per <unk> Boe share in Q3.

And fourth the embassy suites, and Waikiki Beach walk added approximately 1.2 cents a bet that Boe per share in Q3 due to the seasonality over the summer months.

So let me give you an update on our Waikiki Embassy suites hotel due to the impact of the Delta variance Hawaiian Governor Eggy made a formal announcement on the third week in August that if you have plans or thinking of coming to Hawaii. Please don't come until we tell you otherwise.

It was not a mandate, but it did create a detrimental impact to our visitors to Hawaii and resulted in huge cancellation starting in August and into September.

Our results for Q3 at Embassy suites hotel were expected to be much higher.

Overall occupancy ADR and Revpar continued to increase and heading in the right direction.

As of October 19th Governor Eggy made another formal announcement to begin walking welcoming all essential and nonessential travel starting November one 2021.

We look forward to welcoming the fully vaccinated individuals and ramping up our visitor industry.

Our Q2 earnings call I mentioned that Japan, who was at an approximately 9% fully vaccinated is now over 65% fully vaccinated and is expected to hit 80% by November.

All emergency measures in Japan were lifted on September 30th and lifted the intensive anti virus measures.

Marks the first time since April that Japan is free of Corona virus declarations and intensive measures.

We expect to start seeing the Japanese tourists beginning to slowly start revisiting the Hawaiian islands, beginning in November including Waikiki.

Now as we look at our consolidated statement of operations for the three months ended September 32021, our total revenue increased approximately $6 5 million over Q2, 'twenty, one which is approximately a 7% increase approximately 43% of that was from the two new office.

Acquisitions same.

Same store cash NOI overall was strong at 14% year over year with office consistently strong before during and post COVID-19 and retail showing strong signs of recovery.

All type family was flat primarily year over year as a result of higher bad debt expense at our hassle on eighth apartments in Portland.

It was still approximately 5% higher than Q2 2021.

As previously disclosed we acquired Corpus campus East three on September 10th comprised of an approximately 161000 square foot multi tenant office campus located just off Interstate 405, and $5 23 way interchange lessen.

Five minutes away from downtown Bellevue, Washington.

The four building campus is currently 86% lease to a diversified tenant base.

We saw as an opportunity went in place rents were compared to what we were seeing in the marketplace.

The purchase price of approximately 84 million was paid with cash on the balance sheet.

Going in cap rate was north of 3% as a result of the existing vacancy.

Our expectation based on our underwriting is that this asset will produce a five year average cap rate over 6% and a strong unlevered IRR of 7%.

Let's talk about liquidity.

At the end of the third quarter, we had liquidity of approximately $522 million comprised of.

Approximately $172 million in cash and cash equivalents and $350 million of availability on our line of credit.

Our leverage which we measure in terms of net debt net debt to EBITDA was six four times. Our focus is to maintain our net debt to EBITDA at five five times or below our.

Our interest coverage and fixed charge coverage ratio ended the quarter at three nine times.

As we approach year end, we are providing our 2021 guidance the full year range of 2021.

Is $1 91 to $1 93.

<unk> share with the midpoint of $1 92 per <unk> share.

With that mid point, we would expect Q4 2021 to be approximately 46 per <unk> share.

The 11th stance estimated difference in Q4 F F Boe per share it would be attributable to the following.

Approximately a negative two and a half cents of <unk> per share relating to nonrecurring collection of prior rents at one of our theaters in Q3 that will not occur in Q4 2021.

Secondly, our mixed use properties are expected to be down approximately three seven.

<unk> per share relating to the normal seasonality of the embassy suites hotel and the related parking.

Third Alamo quarry is expected to be down approximately two cents.

<unk> per share relating to the nonrecurring nonrecurring property tax refund.

It was received in Q3 2021.

For 2019 and 2020.

And we expect G&A and interest expense.

To increase and therefore decreased.

By approximately <unk> <unk> per <unk> share.

Additionally, we plan to issue 2022 full year guidance subject to board approval. When we announce year end 2021 results in February of 2022.

Historically, we have issued our full year guidance on the Q3 earnings call.

We believe resetting the issuance and cadence of our guidance to the Q4 earnings call going forward is more in alignment with our peers and also gives us more clarity as to the following year guidance.

As always our guidance in these prepared remarks exclude any impact from future acquisitions dispositions equity issuances or repurchases.

<unk> debt refinancings.

Payments other than what we've already discussed.

We will continue our best to be as transparent as possible and share with you. Our analysis interpretations of our quarterly numbers I'll now turn the call over to Steve Center, Our Vice President of office properties for a brief update on our office segment Steve.

Thanks, Bob.

Our office portfolio grew by approximately 440000 square feet.

13% in Q3 with the two new office acquisitions.

And these assets on an ordered approximately 92% leased that approximately 20% rolling through 2022, which provide us with the opportunity to deliver start raise from approximately 10% to 30% over ending rents.

At the end of the third quarter at one beach, which remains under redevelopment our office portfolio stood at approximately 93% leased with one 5% expiring through the end of 2021.

29% expiring in 2022.

And proposal activity that has increased significantly.

Our office portfolio is one of the disarm out in the second and third quarters, we executed 57000, rentable square feet of comparable new and renewal leases with increases over prior rent at a nine 2% and 14, 5% on a cash and straight line basis, respectively.

You start with sort of the 2022 rollover are estimated to be approximately 18% rates.

You had unemployment multiple initiatives to drive rent growth and occupancy, including renovating buildings with significant vacancy.

Adding or enhancing amenities aggregating and white boxing larger blocks of space, where there is a scarcity such blocks and improving our smaller spaces to be move in ready.

We have a few examples we are just completing renovations of two buildings at Torrey reserve in San Diego those two buildings represent 80% of the total project agency.

Now have leases signed or in documentation for over half of that vacancy at premium rates.

We will be completing similar renovations leasing office park, where leasing activity is already robust.

Anticipate taking this property to the next level of quality.

We are adding new fitness and conference facilities at Torrey Reserve City Center, Bellevue and corporate campus East III and will be further enhancing the in place in Miami is building in East Gate.

We believe that our continued strategic investments in our portfolio will position us to capture more than our fair share of that assortment at premium brands as the markets improve.

And we have more to look forward to with redevelopment and development. In addition to <unk> III <unk> III.

<unk> previously mentioned by Ernest construction is nearly complete on the redevelopment of seven tower in a square in the Lloyd's market in Portland, which will add another 32000 rentable square feet of office portfolio.

In summary, our office portfolio is on us as we move forward into the rest of 2021 and beyond.

Operator, I'll now turn the call over to you for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. Thank you for your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.

First question comes from the line of Todd Thomas from Keybanc Capital markets. Your question. Please.

Hi, Good morning. This is probably the underlying for Todd Thomas at.

It seems that the multifamily portfolio continues to recover rents were up nicely on a sequential basis and occupancy has also rebounded.

Annualized multifamily NOI is still just a touch under the 22 NOI forecast that you recently disclosed is it fair to assume that multifamily is tracking ahead or do you expect it to pull back a bit in the near term.

This is ernest.

Actually multifamily is looking like it's on and.

Uptrend.

The rental market is tightened San Diego Abigail is nodding their head and affirmation.

And Portland, which adds a degree of uncertainty is still doing much better than it did during the.

Sure.

The height of the pandemic.

The problems that went through so we're very optimistic on our multifamily portfolio and thank you for asking.

Thank you just one more here can you. Please comment on one Beach Street noticed the percent lease rate dropped from 15 to zero was their tenant fallout and can you discuss the leasing environment a bit more broadly have you.

Seen any delays in lease signings are accompanied indicating to you that they're rethinking their office needs.

That was a strategic lease termination, we had an existing tenant on the third floor that the construction activity, so significant outages to disruptive and rather than then.

Right over it we came to mutually agree upon agreed upon termination settlement move them out and that accelerates construction and also lowers cost because we were having to work around that tenant in place. So that was a strategic termination.

Hope that answers your question, if you want any more detail.

Oh.

No that's fine. Thank you appreciate it.

It's going to be a beautiful building by the way and we're really excited about it and it's the right thing right thing for the market and you have to see it to see how well it's turning now relative to what it was I would add to that that is having the full building versus a big block of space with another tenant the building is more desirable.

Again, thank you for the next questions.

Thank you.

Thank you. Our next question comes from the line of Hendel St. Just from Mizuho. Your question. Please.

Hi, Good morning, this is James.

Thank you for taking my question.

To provide more detail on what is driving the changes in that collection.

Retail.

Steve just one on July 19.

Thank you Chris.

Okay.

Thank you.

Dropped meaningfully from any vice President in July 272% in October.

You're not coming through clearly so I don't know how to handle this but maybe you can answer it generally.

General in general.

Retail to turn it back on.

The critical thing I always breaches.

Gone back people are spending money in our collections.

Come back up significantly with the majority of our tenants.

Paying their rent without a fight I Didnt really you asked a lot of other questions in there on some numbers I might have to rely on China.

China on that or if we can't we're just going to guess that the answers you're looking for but if you don't receive them. Please do call Bob Barton.

And hopefully the transmission will be clear and we will be able to.

I understand the question Bob do you want to just give some overview.

Yes.

This is a linear rate.

Yeah, Hi, this is Lenny I'm, sorry about that.

Yes, Hi, Larry I'm not sure if it's on your end or are in but we've got a lot of echo. So we're kind of at a loss here, but generally what you are saying is correct me if I'm wrong is you're asking about the change in the percentage occupancy.

From Q2 to Q3 is that correct.

Yeah. Thank collection.

Yeah, I mean, if you look look on the earnings release page four I mean office is is flat, but I don't know if there's much room to go from 99, 5% to 99.

<unk>, 5% I mean, I think it's I think.

Office is strong.

Retails on track, we're having much better collections.

And I think in.

If you read through Adam's comments. He mentioned many of the tenants that we have recently signed and the retail so retail is coming along it's still it's still a tough go from some perspective only because.

We're coming out of Covid so.

We have some modifications, but I think we're past the negotiation standpoint, now everybody's coming back to the.

Each of our centers.

We're starting to see the theaters.

Start to have people back in them, especially with the issuance of the bond movie.

<unk>.

And multifamily I think Abigail and Ernest spoke on that so that continues to be on an upward trend overall and mixed use the highs and the lows over Q3.

<unk>.

That's the high season for the embassy suites.

So we always expect to be up over Q in Q3 about <unk>, our occupancy we manage towards 88% year round and we adjust the rate accordingly based on the demand in the season that we're entering into so I hope that answers your questions with you I've always said.

When it comes to retail we're going to do as well as anybody and that's how it's playing out we're doing it as well as anybody period.

So the quality.

It's coming through.

And since we're having trouble communicating please if you have any additional questions call Bob directly.

One answer all your questions as clearly as recap.

Thank you. Our next question comes from the line of Richard Hill from Morgan Stanley. Your question. Please.

Hey, Adam you have Adam Kramer on for Richard Good morning, guys Hope, you're all well.

So look I appreciate kind of providing the 'twenty one guide, but kind of wanted to discuss your expectations for 'twenty, two and obviously recognizing you haven't provided formal guidance at this point.

But in the most recent investor deck.

Expectations for 'twenty, two NOI were lowered slightly.

Versus the prior presentation. So I just wanted to ask about that change in 'twenty two NOI expectations.

And then kind of related to that your thoughts around the recovery to pre COVID-19 NOI in multifamily and retail.

This is <unk> from my point of view 2022 is going to be a formative year.

And we are.

Confident if not hopeful that 'twenty 2023, and it's going to provide some significantly good news, which we cap.

Comment on now because they are in process, Bob do you want to add anything.

Yes.

First of all to your question on the bridge debt.

Tried to keep people informed about and be as transparent as possible through this COVID-19 period.

I think we're still on track for that bridge I don't think were too far off we made some adjustments in the third quarter on that which we did did publish but some went down some went up it's more of a timing issue than anything.

When you drop in the G&A and interest expense, which is not on the bridge and come down to our Napa <unk>, Paul I think we're still on track.

While you have a little bit of noise.

In the third quarter and the fourth quarter trying.

Turning to come out with a run rate that's what we're just.

Finalizing that now and we think that it's likely that we will issue the guidance for 2022 on the fourth.

Fourth quarter earnings call.

It shouldnt be too far off of what you've seen so far from a macro point of view at the moment there are significant inflation in the cost of construction.

Our portfolio were to be valued at 400.

$4 billion 5 billion.

And you add the 14% inflation the replacement cost of this real estate has increased the timing of that translating into increased rent.

Your guess is as good as mine, but we are really happy with what we own.

Got it got it that's really helpful. And then just Ernest you kind of mentioned about the kind of inflation and cost of construction as a really good point. So maybe if I could just kind of price you guys on that a little bit.

I think you mentioned kind of the development projects are on schedule.

Kind of what are you seeing in terms of kind of cost of labor cost for construction costs for materials raw materials.

Is that kind of having an impact.

And then maybe if you can kind of quantify what that impact has been so far or what youre kind of seeing.

Our expectations for these projects.

We were fortunate in that we bought out most of what we're spending this year last year at the height of the pandemic. We are seeing on a go forward basis significant inflation in construction costs.

Jerry <unk>, who heads that department to cover it in more detail if you prefer.

Yes.

Ernest point, we were very successful in buying out the majority of these projects.

Free this construction inflation, which has occurred over the last year.

It is a real problem industry wide, but I think.

On the two development projects that we have under construction now one beach and Jolla Commons three we were very successful in making a goodbye and as Ernie alluded to earlier those costs today are up.

In excess of probably close to 15% beyond what we bought it at so we feel pretty good about where we are.

Great and grateful.

Got it got it and then just a final one from me.

Obviously kind of figure out congrats to you guys on closing those two deals in Bellevue just wanted to ask about kind of the outlook for further acquisitions I recognize kind of the.

Liquidity.

Bridge that you gave earlier, which is really helpful. But just kind of outlook for further acquisitions appetite for further acquisitions and what youre kind of seeing in the in the market now.

What you are asking us to expose is a debate that goes on continuously within the company Bob doesn't want to spend any money because he wants us to have liquidity.

Assets, because I think inflation is going to create value for our stockholders. So we're.

Anything that we buy is going to have to be compelling and accretive and.

We're looking every day and every day Bob.

That.

Our net debt to EBITDA or cash et cetera, et cetera. So we'll keep you informed if the debate continues.

Yes.

But is that a good way.

Let me clarify that is that we got.

Thank you Sir.

Okay.

I love those guys.

And I'll just spend money what its accretive for the investors that we do focus on a conservative debt profile.

That's a fair summary, thank you Bob.

Got it and I really appreciate the time really appreciate the time. Thank you guys.

Thank you thanks for the question.

Thank you once again, if you have a question. Please press Star then one our next question comes from the line of Victoria Francis from Bank of America. Your question. Please.

Good morning. My question is on your multifamily leasing strategy.

Occupancy was up 9% this quarter to 97% the average wrap with go down year over year are you focused on regaining occupancy and do you think you can push rents from here.

To what extent do you think your multifamily portfolio has pricing power.

You want me to handle that Abigail is at IHOP book actually went ahead.

Okay.

I'm going to go where you want to go.

Okay, well first of all.

Last year, the rental increases were constricted by government regulation. Those are now coming off gradually last year collections were aided by a.

Government payments.

Those will probably come to a NAND, but in the market in San Diego There is a very tight rental market a very tight housing market, which provides us an opportunity provided there is no more government regulation to increase rents.

More than certainly they did last year. In addition to that we are spending money on our project to take them to another level I think those two and I hope those those two factors will allow us to.

Give us provide a pleasant surprise as far as rental income Abigail do you want to add something to that.

Hi, Victoria.

Thank you.

Okay.

And importantly, it's not only high.

Sure.

It also ensures that the rental rates are trending.

Turning upwards with not only the county.

So I think effectively Brent occupancy.

A determining factor, but obviously our rental rates are wider push upwards.

Yes.

And well take annually.

You'll hear us actually.

Hi, this is higher than that of the county market rate and loss to lease is actually crazy.

I mean in comparison to the market and we have continued to push forward.

The same proportion as well thank you guys.

Strategy.

Right.

Sure obviously.

Hi, reposition and offer great experiences she's a resident.

Alright.

That's very well put and Abigail and I think the long and the short of this we're going to get what we can.

And we're going to earn and by improving the properties, we have and Abigail let's put it in.

Portland has put in place excellent management.

So we're optimistic.

Actually more than optimistic if you want all the truth.

Great. Thank you very much.

Thank you. Our next question comes from the line of Tammy <unk> from Wells Fargo Securities. Your question. Please.

Thanks, Good morning.

Maybe just going back on the $70 million of cash on the balance sheet.

I guess I'm, just wondering is that earmarked for the development program or or what do you think the capacity for acquisition.

On the balance sheet today.

Well.

Had a question at comparable to that earlier.

There was a constant debate, obviously, we have more than enough cash on the balance sheet to complete our construction.

And then we would love to acquire something both Bob and I would love to acquire something Thats accretive for our stockholders. We do have in mind, our liquidity as being a significant factor in the valuation of our securities so with that in mind.

Trying to do what we can to enhance the value of real estate the replacement cost of real estate.

I hate to use the word but its going up dramatically, maybe even going through the roof. So anything you can buy the date is going to cost a heck of a lot more to replace tomorrow.

That's what drives me and of course, Bob provides a balanced approach and that liquidity is important also so we weigh those two factors going forward and we hope we can make the right decisions for all our stockholders.

Okay, great. Thanks, and then.

On the balance sheet in the library.

My third quarter versus the second quarter, presumably.

Some of the cash on the balance sheet to work I guess I'm wondering Bob.

Ivan.

All right.

We had trouble hearing you did you hear thought yes.

We've got that echo going on here.

Yes, when it will happen.

We'll try to give some more insight on that in 2000.

In our 2022 guidance.

We're going through that at this point in time.

Where we are now we may tick up a little bit.

Our coming down keep in mind, we have.

Cash system put to work.

La Jolla Commons III development on one beach.

And we don't have a offsetting earnings coming in at this point in time so.

Where we are now is that we expect at one beach will be completed in 'twenty, two and we're expecting to see revenue from <unk> coming in in 2003 or the Hawaii comments three in University Town Center here in San Diego, which is a dynamic a very strong market.

Expect that to be finished completed in 'twenty three with revenue coming in in 2004, so while it may tick up a little bit it's going to come back down and we do see in our corporate operating model, where we will hit that five five so.

Can't give you the E.

I'd, rather give that to later in 'twenty two guidance next quarter. That's just a macro strategy youll recall that we offered.

When private placement that became more expensive than public issuance, we offered a half a billion dollars.

On which were four five times oversubscribed and that was locked that interest rate is locked in for at three and three eights for 10 years I think that is going to prove to be a really good move as inflation becomes more of a factor in the fed's tightening interest rates were going to be very glad we have that.

That fixed rate for 10 years also as the replacement cost of our real estate increases significantly.

Got it thank you.

Maybe just one more Bob you mentioned I think that higher G&A and interest expenses.

Or contributing to sort of the drop in Q3, and Q4 versus Q3, SFO I guess I'm just wondering if you can elaborate on what's driving that.

Yes.

With Covid, we're expecting higher costs in the fourth quarter G&A.

Ed.

Just to replace some of our people.

<unk>.

The market is strong out there.

Lease.

In terms of interest.

We have we have the right and even on our line of credit.

Costs are going up.

So what we're seeing all in all is that we expect some some of these costs to increase in the fourth quarter hopefully its not as much as that.

We always want to under.

Under promise and over deliver so we will do the best we can to keep our G&A down and get the best cost of capital.

As we go forward, but we're going through is no different than what the economy is going through.

It's an inflationary environment inflationary environment works against us in the short term expenditure, but it works for us in the long term replacement cost of our properties.

And that's a good question.

Okay.

Thank you very much for your time.

Thank you.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Ernest Rady, Chairman and CEO for any further remarks.

Okay. Thank you all for your interest we've all been through a very difficult period.

Always hoped.

And.

I've said that you know we had difficult times before and we will come out at the other end of this better off than we went in and I'm still hopeful that the case if not confident that is the case with the properties we have the.

Projects, we have in place.

What we see in the economy and the strong markets, we have I'm really.

I'm really excited and glatt, where with what we have where we have and the team we have working on so thank you all very much for your interest.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

[music].

We recorded I would now like to introduce your host for todays program, Adam Walsh, President and Chief Operating Officer. Please go ahead Sir.

Thank you and good morning, everyone welcome to American assets Trust third quarter 2021 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 American assets Trust's Dot com.

Telephonic replay and on demand webcast will also be available for this call over the next week.

During this call we will discuss non-GAAP financial measures, which are reconciled to our GAAP financial results in our earnings release and supplemental information.

We will also be making forward looking statements based on our current expectations, which statements are subject to risks and uncertainties discussed in our SEC filings.

And not to place undue reliance on these forward looking statements actual events could cause our results to differ materially from these forward looking statements for a number of reasons, including as it may relate to the continuing impact of COVID-19, and with that I'll turn the call over to Ernest Rady, Our chairman and CEO to begin the discussion of our third quarter 2021 results.

Thanks, Adam and good morning, everyone. I am pleased to report that we continue to make great progress on all fronts as we rebound from the impact of COVID-19, we knew with the onset of the pandemic that we would not be impervious to its economic impact, but we were confident that the high quality.

Irreplaceable properties and asset class diversity of our portfolio combined with the strength of our balance sheet and ample liquidity would help us pull through and maybe even come out on the other side better off than at the beginning we continue to be optimistic as we meaningfully rebounded.

In 2021, and then anticipate further growth in 'twenty, one 'twenty two and beyond that's why we've aggregated a portfolio comprised of a well balanced collection of office.

Retail multifamily and mixed use properties located in dynamic dynamic high barrier to entry markets, where we believed that the demographics and the demand and local economies remains strong relative to others.

Our properties are more resilient in our view to economic downturns as they are in the path of growth.

Education.

And innovation and.

And importantly can likely withstand the impact of long term inflation, perhaps even benefit from the benefits of long term inflation.

Along those lines during the past quarter, we used our liquidity to acquire two complementary and accretive office property in Bellevue Washington.

A market that we remain very bullish on and in which we expect continued rent growth. Meanwhile, our development of La Jolla Commons three.

Into an 11 story approximately 201000 square foot class a office tower remains on time and on budget for a Q2 or Q3 2023 deliveries. We are encouraged about the leasing prospects in the UTC submarket for high quality large blocks of <unk>.

Space for both Tech and life Science spending continues at record levels and think tenants continue to expand but we don't have specific news to share on that front. At this time. The same holds true for our one Beach Street development on the North waterfront of San Francisco, which we believe.

To be a unique opportunity for a full building tenant with delivery expected in Q2 or Q3 of 2022.

Additionally, I'm happy to inform you that our board of directors has improved the quarterly dividend of <unk> 30, a share for the third quarter, which we believe is supported by our expectations for operations to continue.

Trending positively it will be paid on December 20, <unk> to shareholders of record on December nine.

Adam Bob and Steve will go into more detail on our various asset segments collections and financial results and guidance and I will be available and we'll all be available for any questions that you may have at the conclusion of our prepared remarks on behalf of all of US at American assets Trust. We thank you for your.

Now going to turn the call back over to Adam Adam. Please thanks fair enough as we look at our portfolio. We're always reminded of the importance of owning and operating the preeminent properties in each of our markets. That's why we focused on continuing to enhance our best in class community shopping centers to promote a better experience for our shoppers with the expectation that this will firm.

<unk> strengthened our properties as the dominant centers in our Submarkets.

Place in order to attract the highest quality and highest credit tenants.

Meanwhile, we are encouraged by our approximately 97% collection percentage in Q3 increased leasing activity across all asset classes fewer tenant failures and bankruptcies than we expected and many modified leases had in percentage rent thresholds sooner than expected and.

And are collecting of approximately 96% of deferred rents due during the third quarter all validating the strategies, we implemented during COVID-19 to support our struggling retailers through the government mandated closures as we are fortunate to have the financial ability to do so.

Briefly on the retail front, we've seen an improved leasing environment over the past few quarters with positive activity engagement with new retailers for many of our vacancies, including recently signed new deals with Columbia Sportswear Williams Sonoma total line and first Hawaiian Bank to name a few and renewables with nordstroms Petco and whole Earth.

Among others as well as many other new deals and renewals in the lease documentation process.

Tailors are choosing our best in class locations to improve their sales all the while we remained selective in terms of merchandising our shopping centers for the longer term.

Chris Sullivan and his team have done a tremendous job on that front. Despite some of the continuing headwinds at our Waikiki Beach walk retail.

We have started receiving meaningful checks from government rental assistance programs to drive down our outstanding amounts owed and expect more checks to come we are confident that Abigail strong leadership at San Diego multifamily and Tonya's, New energy. It has a level will drive improvements at our multifamily properties, both operationally and financially with that.

I'll turn the call over to Bob to discuss Q3 financial results in more detail.

Thanks, Adam and good morning, everyone.

Last night, we reported third quarter 2021, <unk> per share of <unk> 57.

And third quarter of 2021 net income attributable to common stockholders per share of <unk> 17.

Third quarter results are primarily comprised of the following.

Actual <unk> increased in the third quarter by approximately 11 point or.

4% on a <unk> per share basis to <unk> 57 cents per <unk> share compared to the second quarter of 2021.

Primarily from the following four items first the acquisitions of Eastgate Office Park in Corpus campus East III in Bellevue, Washington on July 7th in September 10th respectively added approximately two three cents of <unk> per share in Q3.

Alamo quarry in San Antonio added approximately one seven.

<unk> per share in Q3, resulting from 2019 and 2020 real estate tax refunds received during the third quarter of 2021.

Reduced Alamo quarry as real estate tax expense.

Third decrease of bad debt expense at Carmel Mountain Plaza added approximately half a cent per <unk> share in Q3.

And fourth the embassy suites, and Waikiki Beach walk added approximately 1.2 cents of <unk> <unk> per share in Q3 due to the seasonality over the summer months.

<unk> me give you an update on our Waikiki Embassy suites hotel due to the impact of the Delta variance Hawaiian Governor Eggy made a formal announcement on the third week in August that if you have plans or thinking of coming to Hawaii. Please don't come until we tell you otherwise.

It was not a mandate, but it did create a detrimental impact to our visitors to Hawaii and resulted in huge cancellation starting in August and into September our.

Our results for Q3 at Embassy suites hotel were expected to be much higher.

Overall occupancy ADR and Revpar continued to increase our and heading in the right direction.

As of October 19th Governor Eggy made another formal announcement to begin wealthy welcoming all essential and nonessential travel starting November one 2021.

We look forward to welcoming the fully vaccinated individuals and ramping up our visitor industry.

On our Q2 earnings call I mentioned that Japan, who was at an approximately 9% fully vaccinated is now over 65% fully vaccinated and is expected to hit 80% by November.

All emergency measures in Japan were lifted on September 30th and lifted the intensive anti virus measures.

It marks the first time since April that Japan is free of Corona virus declarations and intensive measures.

We expect to start seeing the Japanese tourists beginning to slowly start revisiting the Hawaiian islands, beginning in November including Waikiki.

Acquisitions.

Same store cash NOI overall is strong at 14% year over year with office consistently strong before during and post COVID-19 and retail showing strong signs of recovery.

<unk> family was flat primarily year over year as a result of higher bad debt expense at our hassle on eighth apartments in Portland, but it was still approximately 5% higher than Q2 2021.

It's away from downtown Bellevue, Washington.

Building campus is currently 86% lease to a diversified tenant base, which we saw as an opportunity when in place rents were compared to what we were seeing in the marketplace.

The purchase price of approximately $84 million was paid with cash on the balance sheet. The going in cap rate was north of 3% as a result of the existing vacancy.

Our expectation based on our underwriting is that this asset will produce a five year average cap rate over 6% and a strong unlevered IRR of 7%.

Let's talk about liquidity.

At the end of the third quarter, we had liquidity of approximately $522 million comprised of.

Approximately $172 million in cash and cash equivalents and $350 million of availability on our line of credit.

Our leverage which we measure in terms of net debt net debt to EBITDA was six four times. Our focus is to maintain our net debt to EBITDA at five five times or below our.

Our interest coverage and fixed charge coverage ratio ended the quarter at three nine times.

As we approach year end, we are providing our 2021 guidance the full year range of 2021.

Is $1 91 to $1 93.

<unk> share with the midpoint of $1 92 per <unk> share.

With that mid point, we would expect Q4 2021 to be approximately 46 per <unk> share.

The 11th estimated difference in Q4 <unk> per share would be attributable to the following.

Approximately a negative two and a half cents of <unk> <unk> per share relating to nonrecurring collection of prior rents at one of our theaters in Q3 that will not occur in Q4 2021.

Secondly, our mixed use properties are expected to be down approximately three seven.

<unk> per share relating to the normal seasonality of the embassy suites hotel and the related parking.

Third Alamo quarry is expected to be down approximately <unk> <unk>.

<unk> per share relating to the nonrecourse nonrecurring property tax refund Atlas received in Q3 2021.

2019 and 2020.

And we expect G&A and interest expense.

To increase and therefore decreased <unk>.

By approximately <unk> <unk> per <unk> share.

Additionally, we plan to issue 2022 full year guidance subject to board approval. When we announce year end 2021 results in February of 2022.

Historically, we have issued our full year guidance on the Q3 earnings call.

As always our guidance in these prepared remarks exclude any impact from future acquisitions dispositions equity issuances or repurchases for future debt refinancings or REIT.

Payments other than what we've already discussed.

We will continue our best to be as transparent as possible and share with you. Our analysis interpretations of our quarterly numbers I will now turn the call over to Steve Center, Our Vice President of office properties for a brief update on our office segment Steve.

Thanks, Bob our office portfolio grew by approximately 440000 square feet or nearly 13% in Q3 with the two new office acquisitions.

<unk> assets on an ordered approximately 92% leased with approximately 20% rolling through 2022, which provides us with the opportunity to deliver start raise from approximately 10% to 30% over ending reps.

At the end of the third quarter at one beach, which remains under redevelopment our office portfolio stood at approximately 93% leased with one 5% expiring through the end of 2021.

8% expiring in 2022.

Sure and proposal activity that has increased significantly.

Our office portfolio is one of the <unk> rollout in the second and third quarters, we executed 57000, rentable square feet comparable new and renewal leases with increases over prior rent of nine 2% and 14, 5% on a cash and straight line basis, respectively.

We used our rates for the 2021 rollover are estimated to be approximately 17% above the ending rates. In fact, we are at least documentation of our over half of the space Rolling in 2021, as our raised nearly 28% over any rates.

Neustar is sort of the 2022 rollover are estimated to be approximately 18% rates.

You had unemployment multiple initiatives to drive rent growth and occupancy, including renovating buildings with significant vacancy.

Adding or enhancing amenities aggregating and white boxing larger blocks of space, where there is a scarcity such blocks and improving our smaller spaces to be move in ready.

By way of a few examples we are just completing renovations a few building inventory reserves and Diego those two buildings represent 80% of the total project agency, we now have leases signed or in documentation for over half of that vacancy at premium rates we.

We will be completing similar renovations of these acquired where leasing activity is already robust, but we anticipate taking this property to the next level of quality.

We are adding new fitness and conference facilities at Torrey Reserve City Center, Bellevue and corporate campus lease three.

Further enhancing the employee severities building in East Gate.

We believe that our continued strategic investments in our portfolio will position us to capture more than our fair share of that absorption at premium brands as the markets improve and we have more to look forward to with redevelopment and development. In addition to one lease III <unk> III previously mentioned by Ernest construction is nearly complete on the redevelopment of seven.

Tyler and elsewhere in the Lloyd's R&R markets, Portland, which will add another early 2000 rentable square feet of office portfolio.

In summary, our office portfolios on us as we move forward into the rest of 2021 and beyond.

Operator, I'll now turn the call over to you for questions.

Ladies and gentlemen, if you have any questions at this time. Please press Star then one on your Touchtone telephone answer your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.

First question comes from the line of Todd Thomas from Keybanc Capital markets. Your question. Please.

Hi, Good morning. This is Ravi gave you on the line for Todd Thomas It.

It seems that the multifamily portfolio continues to recover rents were up nicely on a sequential basis and occupancy has also rebounded.

Annualized multifamily NOI, there's still just a touch under the 22 NOI forecast that you recently disclosed is it fair to assume that multifamily is tracking ahead or do you expect it to pull back a bit in the near term.

This is ernest.

Actually multifamily is looking like it's on an uptrend. So rental market has tightened San Diego Abigail is nodding their head and affirmation.

And Portland, which adds a degree of uncertainty is still doing much better than it did during the.

The.

The height of the pandemic.

Okay. The problems that went through so we're very optimistic on our multifamily portfolio and thank you for asking.

Thank you just one more here can you. Please comment on one Beach Street noticed the percent lease rate dropped $3 15 to zero was there a tenant fallout and can you discuss the leasing environment a bit more broadly have you seen any delays in lease signings are accompanies indicating to you that they're rethinking their office needs.

That was a strategic lease termination, we had an existing tenant on the third floor that the construction activity is so significant outages to disruptive and rather than then.

Fight over it we came to a mutually agreed upon agreed upon termination settlement move them out and that accelerates construction and also lowers cost because we were having to work around that tenant in place. So that was a strategic termination.

I hope that answers your question.

Any more detail.

Oh no.

That's fine. Thank you I appreciate it.

It's going to be a beautiful building by the way and we're really excited about it and it's the right thing right thing for the market and you have to see it to see how well it's turning now relative to what it was I would add to that that as having a full building versus a big block of space with another tenant the building is more desirable.

Again, thank all of those questions.

Thank you.

Okay.

Thank you. Our next question comes from the line of Handel St. Juste from Mizuho. Your question. Please.

Hi, Good morning, this is Jay.

Thank you for taking my question can you provide more detail on what is driving the changes in that collection.

Retail.

Nancy Please one on July 19.

96% in October as well as mix.

We dropped meaningfully from any vice President in July 272% in October.

You're not coming through clearly so I don't know how to handle this but maybe you can answer it generally.

It is general in general.

I will turn it back on.

The critical thing I always breaches score gone back nuclear spending money in our collections.

Come back up significantly with the majority of our tenants.

The ramp without a fight I Didnt really you asked a lot of other questions in there on some numbers I might have to rely on.

To chime in on that or if we can't we're just going to guess that the answers you're looking for but if you don't receive them. Please do call Bob Barton.

And hopefully the transmission will be clear and we will be able to.

I understand the question Bob do you want to just give some overview.

Yes.

Okay.

This is a linear rate.

Yeah, sorry about that.

Yes, Hi, Larry I'm not sure if it's on your end or are in but we've got a lot of echo so we're kind of at.

At a loss here, but generally what youre, saying is correct me if I'm wrong is you're asking about the change in the percentage occupancy.

From Q2 to Q3 is that correct.

Yeah. Thank collection.

Yeah, I mean, if you look on the earnings release page four I mean office is is flat, but not as much room to go from 99, 5% to 99.

5% I mean, I think it's I think.

Office is strong.

Retails on track, we're having much better collections.

And I think in.

<unk>.

We have some modifications, but I think we're past the negotiation standpoint, now everybody's coming back to the.

Each of our centers.

We're starting to see the theaters.

Start to have people back in them, especially with the issuance of the bond movie.

Recently.

And multifamily I think Abigail and Ernest spoke on that so that continues to be on an upward trend overall and mixed use the highs and the lows.

For Q3.

<unk>.

That's the high season for the embassy suites.

So we always expect to be up over Q in Q3 about <unk> of that therefore, our occupancy we manage towards 88% year round and we adjust the rate accordingly based on the demand in the season that we're entering into so I hope that answers your questions with you I've always said.

When it comes to retail we're going to do as well as anybody and that's how it's playing out we're doing as well as anybody period, so the quality of our portfolio.

It's coming through.

And since we are having trouble communicating please if you have any additional questions call Bob directly.

One answer all your questions as clearly as recap.

Thank you.

Thank you. Our next question comes from the line of Richard Hill from Morgan Stanley. Your question. Please.

Hey, Adam you have Adam Kramer on for Richard.

Guys I hope you're all well.

I appreciate kind of providing the 'twenty, one guide, but kind of wanted to discuss your expectations for 'twenty, two and obviously recognizing you haven't provided formal guidance at this point.

And the most recent investor deck.

Expectations for 'twenty, two NOI were lowered slightly versus the prior presentation. So I just wanted to ask about that change in 'twenty two NOI expectations.

And then kind of related to that your thoughts around the recovery to pre COVID-19 NOI in multifamily and retail.

From <unk> <unk> from my point of view 2022 is going to be a formative year and we are.

Confidence if not hopeful that 'twenty 2023, and it's going to provide some significantly good news, which we cap.

Comment on now because they are in process, Bob do you want to add anything.

Yes.

First of all to your question on the bridge debt.

Tried to keep people informed about and be as transparent as possible through this COVID-19 period.

I think we're still on track for that bridge I don't think were too far off we made some adjustments in the third quarter on that which we did did publish but some went down somewhat up it's more of a timing issue than anything else.

When you drop in the G&A and interest expense, which is not on the bridge and come down to <unk> I think we're still on track.

While you have a little bit of noise.

In the third quarter and the fourth quarter trying trying to come out with a run rate that's what we're just <unk>.

Finalizing that now and we think that it's likely that we will issue the guidance for 2022 on the fourth.

Fourth quarter earnings call.

It shouldn't be too far off of what you've seen so far from a macro point of view at the moment there are significant inflation in the cost of construction.

Our portfolio were to be valued at 400.

$4 billion 5 billion.

And you add the 14% inflation the replacement cost of this real estate is increase the timing of that translating into increased rent.

Your guess is as good as mine, but we are really happy with what we own.

Got it got it that's really helpful. And then just Ernest you kind of mentioned about the kind of inflation and cost of construction and a really good point. So maybe if I could just kind of price you guys on that a little bit.

I think you mentioned kind of the development projects are on schedule.

Kind of what are you seeing in terms of kind of cost of labor cost for construction costs for materials raw materials.

Is that kind of having an impact.

And then maybe if you could kind of quantify what that impact has been so far or what youre kind of seeing.

Our expectations for these projects.

We were fortunate in that we bought out most of what we're spending this year last year at the height of pandemic. We are seeing on a go forward basis significant inflation in construction costs and I am going to ask Jerry <unk>, who heads that department to cover it in more detail if you prefer.

Yes.

The Ernest point, we were very successful in buying out the majority of these projects.

This construction inflation, which has occurred over the last year.

It is a real problem industry wide, but I think.

On the two development projects that we have under construction now one beach and the Jolla Commons III, we were very successful in making a goodbye and as Ernie alluded to earlier those costs today are up in excess of probably close to 15% beyond what we bought it at so we feel pretty good about where we are.

Great and grateful.

Got it got it and then just a final one for me.

Obviously kind of congrats congrats you guys on closing those two deals in Bellevue I'm just wanted to ask about kind of the outlook for further acquisitions I recognize kind of the liquidity.

Bridge that you kind of gave earlier, which is really helpful. But just kind of outlook for further acquisitions appetite for further acquisitions and what youre kind of seeing in the in the market now.

But you are asking us to expose is a debate that goes on continuously within the company Bob doesn't want to spend any money because he wants us to have liquidity.

<unk> assets, because I think inflation is going to create value for our stockholders. So.

We're on the hunt anything that we buy is going to have to be compelling and accretive and.

We're looking at everyday and everyday Bob pub tells me that our net debt to EBITDA or cash et cetera et cetera. So we'll keep you informed as the debate continues.

Yes.

Yeah.

Is that a good way.

Let me clarify that is that yes, we've got we've got.

Thank you Sir.

Okay.

I love those guys.

I love to spend money when its accretive for the investors and we do focus on a conservative debt profile.

That's a fair summary, thank you Bob.

Got it and I really appreciate the time really appreciate the time. Thank you guys.

Thank you thanks for the question.

Thank you once again, if you have a question. Please press Star then one our next question comes from the line of Victoria Francis from Bank of America. Your question. Please.

Good morning. My question is on your multifamily leasing strategy.

Occupancy was up 9% this quarter to 97% the average ramp with go down year over year are you focused on regaining occupancy and do you think you can push rents from here.

To what extent do you think your multifamily portfolio has pricing power.

You want me to handle that Abigail <unk> handler actually one headwind.

Okay.

I am going to go where you want to go.

Okay, well first of all.

Last year, the rental increases were constricted by government regulation. Those are now coming off gradually last year collections were aided by a.

Government payments.

More than certainly they did last year. In addition to that we are spending money on our project to take them to another level I think those two and I hope those those two factors will allow us to.

Give us provide a pleasant surprise as far as rental income Abigail do you want to add something to that.

<unk>.

Thank you.

And importantly, it's not only at.

Hi, Sean occupancy.

Sure.

Grades are coming here.

Turning upwards with not only the county in the state, but also the local region.

So I think effectively burnt occupancy.

The determining factor, but obviously our rental rates are wider push upwards when do you think.

And multifamily portfolio here it actually.

Higher than that in the county market rates, our loss to lease is actually Chris.

I mean comparison into market and we are continuing to push forward.

And the same for Portland as well.

Our strategy.

Right on.

Right.

Sure.

Hi, reposition and offer great experiences to their residents.

<unk>.

Alright.

That's very well put and Abigail and I think along the chart of this we're going to get what we can and.

We're going to earn it by improving the properties, we have and Abigail let's put it in Portland has put in place excellent management.

So we're optimistic.

Actually more than optimistic if you want all the truth.

Great. Thank you very much.

Thank you. Our next question comes from the line of Tammy <unk> from Wells Fargo Securities. Your question. Please.

Thanks, Good morning.

Maybe just going back on the $70 million of cash on the balance sheet.

I guess I'm, just wondering is that earmarked for the development program or or what do you think the capacity for acquisition on.

On the balance sheet today.

Well.

I had a question comparable to that earlier and.

There is a constant debate, obviously, we have more than enough cash on the balance sheet to complete our construction and then we would love to acquire something both Bob and I would love to acquire something Thats accretive for our stockholders. We do have in mind, our liquidity as being a significant factor in the evaluation of our secured.

So with that in mind.

We're going to do what we can to enhance the value of real estate the replacement cost of real estate.

Hate to use the word but it is going up dramatically, maybe even going through the roof. So anything you can buy the date is going to cost a heck of a lot more to replace tomorrow and that's what drives me and of course, Bob provides a balanced approach and that liquidity is important also so we weigh those two factors going forward and we hope we make the right decisions.

For all of our stockholders.

Okay, great. Thanks.

On the balance sheet.

Elaborate on that.

Okay.

Third quarter versus second quarter incrementally I E.

Some of the cash on the balance sheet to work I guess I'm wondering Bob when you think you can.

Yes.

All right.

We had trouble hearing you did you hear it Bob yes.

We've got that echo going on here.

Yes, when it will happen.

We'll try to give some more insight on that in 'twenty.

In our 2022 guidance.

We're going through that at this point in time.

Where we are now we may tick up a little bit and then it will start coming down keep in mind, we have cash system put to work.

La Jolla Commons redevelopment on one beach.

And we don't have a offsetting earnings coming in at this point in time so.

Where we are now is that we expect at one beach will be completed in 'twenty, two and we're expecting to see revenue from <unk> coming in in 'twenty, three or La Jolla comments three in University Town Center here in San Diego, which is a dynamic a very strong market leading.

Expect that to be finished completed in 'twenty three with revenue coming in in 'twenty four so while it may tick up a little bit it's going to come back down and we do see in our corporate operating model, where we will hit that five five so.

Can't give you the the.

I'd, rather give that to later in 'twenty two.

<unk> next quarter, just as a macro strategy youll recall that we offered.

When private placement that became more expensive than public issuance, we offered a half a billion dollars.

Bonds, which were four five times oversubscribed and that was blocked that interest rate is locked in for at three and three eights for 10 years I think that is going to prove to be a really good move as inflation becomes more of a factor in the feds have tightened interest rates were going to be very glad we have that.

That fixed rate for 10 years also as the replacement cost of our real estate increases.

<unk>.

Got it thank you maybe.

Maybe just one more and Bob you mentioned I think that higher G&A and interest expenses.

Or contributing to sort of a drop in Q3 and Q4 versus Q3, I guess I'm. Just wondering if you can elaborate on what's driving that.

Yes.

With Covid, we're expecting higher costs in the fourth quarter on G&A.

Just to replace some of our people.

The market is strong out there.

<unk>.

In terms of interest.

We have we have the right and even on our line of credit.

Costs are going up.

So what we're seeing all in all is that we expect some some of these costs to increase in the fourth quarter hopefully its not as much as that.

We always want to under.

Under promise and over deliver so we'll do the best we can to keep our G&A down.

Get the best cost of capital.

As we go forward, but we're going through is no different than what the economy is going through.

It's an inflationary environment inflationary environment works against us in the short term expenditure, but it works for us in the long term replacement cost of our properties.

And Thats a good.

Thank you very much for your time.

Thank you.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Ernest Rady, Chairman and CEO for any further remarks.

Okay. Thank you all for your interest we've all been through a very difficult period.

Always hold.

And.

I've said that you know we had difficult times before and we will come out at the other end of this better off than we went in and I'm still hopeful that the case if not confident that's the case with what the properties we have the.

Projects, we have in place.

And what we see in the economy and the strong markets, we have I'm really.

I'm really excited and glass, where with what we have where we have and the team we have working on it. So thank you all very much for your interest.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Q3 2021 American Assets Trust Inc Earnings Call

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