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American Assets Trust, Inc. Reports Fourth Quarter and Year-End 2012 Financial Results



2013-02-19 22:07:48 -


Company Release - 2/19/13

SAN DIEGO - American Assets Trust, Inc. (NYSE: AAT) (the "Company") today
reported financial results for its fourth quarter and year-end December 31,
2012.

Financial Results and Recent Developments

* Funds From Operations increased 36% and 29% to $0.38 and $1.35 per diluted
share/unit for the three months and year ended December 31, 2012,
respectively, compared to the same periods for the year ended December
31, 2011
* Increasing 2013 annual guidance to a range of $1.38 to $1.46 with a midpoint
of $1.42 of FFO per diluted share from our initial midpoint guidance of
$1.40 of FFO per diluted share
* Net income available to common stockholders of $28.6 million and $34.9
million for the three months and year ended December 31, 2012, respectively,
or $0.73 and $0.90 per diluted share, respectively
* Same-store GAAP NOI growth increased 13.0% and 5.8% for the three months and
year ended December 31, 2012, respectively, compared to the same periods for
the year ended December 31, 2011
* $21 million acquisition of Geary Marketplace,  a newly constructed,
approximately 35,000 square foot, 100% leased, grocery-anchored shopping
center in Walnut Creek, California, a high barrier to entry submarket in the
San Francisco Bay Area
* Sale of 160 King Street in San Francisco, California for approximately $94
million, resulting in a gain on sale of $36.7 million or approximately a
36% return on the initial acquisition price
* $111 million 10-year interest-only mortgage loan secured by City Center
Bellevue with a fixed rate of 3.98% closed on October 10, 2012

During the fourth quarter of 2012, the Company generated funds from operations
("FFO") for common stockholders and unitholders of $21.7 million, or $0.38 per
diluted share/unit compared to $16.3 million or $0.28 per diluted share/unit for
the quarter ended December 31, 2011.  For the year ended December 31, 2012, the
Company generated FFO for common stockholders and unitholders of $77.5 million,
or $1.35 per diluted share/unit compared to $57.3 million or $1.05 per diluted
share/unit for the year ended December 31, 2011. Unitholders refers to holders
of units of our operating partnership. The increase in FFO from the prior year
was largely due to additional operating income from our 2011 and 2012 office
acquisitions, primarily First & Main, Lloyd District Portfolio and City Center
Bellevue.

Net income attributable to common stockholders was $28.6 million, or $0.73 per
basic and diluted share, for the three months ended December 31, 2012 compared
to $0.3 million, or $0.01 per basic and diluted share, for the three months
ended December 31, 2011. For the year ended December 31, 2012, net income
attributable to common stockholders was $34.9 million, or $0.90 per basic and
diluted share compared to net income attributable to common stockholders of $2.9
million, or $0.08 per basic and diluted share, for the year ended December 31,
2011. The increase in net income attributable to common stockholders was largely
due to the gain on sale of 160 King Street during the fourth quarter of 2012.

FFO is a non-GAAP supplemental earnings measure which the Company considers
meaningful in measuring its operating performance.   A reconciliation of FFO to
net income is attached to this press release.

Portfolio Results

The portfolio leased status as of the end of the indicated quarter was as
follows:

  December 31, 2012 September 30, 2012 December 31, 2011
-------------------------------------------------------------
Total Portfolio

Retail 97.0% 96.9% 95.0%

Office 93.3% 93.7% 93.9%

Multifamily 94.7% 96.2% 91.8%

Mixed-Use:

Retail 95.5% 97.4% 99.2%

Hotel 88.9% 90.2% 88.4%



Same-Store Portfolio

Retail 96.9% 96.9% 94.8%

Office 93.3% 93.8% 96.6%

Multifamily 94.7% 96.2% 91.8%

Mixed-Use:

Retail 95.5% 97.4% -

Hotel 88.9% 90.2% -


During the fourth quarter of 2012, the Company signed 29 leases for
approximately 128,600 square feet of retail and office space, as well as 171
multifamily apartment leases.   Renewals accounted for 100.0% of the comparable
retail leases, 85.7% of the comparable office leases and 61.4% of the
residential leases.

Retail and Office
On a comparable space basis (i.e., leases for which there was a former tenant)
during the fourth quarter of 2012, our retail and office leasing spreads are
shown below:

Average
Cash GAAP
Basis % Straight-
Number Change Average Prior Average Line Basis
of Comparable Over Contractual Contractual % Change
Leases Leased Sq. Prior Rent Per Sq. Rent Per Sq. Over Prior
Q4 2012 Signed Ft. Rent Ft. Ft. Rent
-------------------------------------------------------------------------------
Retail 13 33,000 4.6% $33.32 $31.86 12.3%

Office 14 93,000 16.0% $39.76 $34.28 16.1%


Multifamily
At December 31, 2012, the average monthly base rent per leased unit was $1,399
compared to an average monthly base rent per leased unit of $1,370 at September
30, 2012 and $1,404 at December 31, 2011.

Same-Store Operating Income
For the three months and year ended December 31, 2012, same-store property
operating income increased approximately 13.0% and 5.8%, respectively, on a GAAP
basis, compared to the corresponding periods in 2011. The same-store property
operating income by segment was as follows (in thousands):

Three Months Ended
  ((1))         Year Ended ((2))

  December 31,         December 31,
------------------------- -------------------------
  2012   2011   Change   2012   2011   Change
------------ ------------ ---------- ------------ ------------ --------
Retail $ 17,827     $ 14,512     22.8   %   $ 60,105     $ 56,038     7.3  
%

Office 12,005     11,824     1.5       24,918     24,045     3.6

Multifamily 2,418     2,129     13.6       8,938     8,743     2.2

Mixed-Use 4,371     3,946     10.8       -     -     -
------------ ------------ ---------- ------------ ------------ --------
  $ 36,621     $ 32,411     13.0   %   $ 93,961     $ 88,826     5.8  
%
------------ ------------ ---------- ------------ ------------ --------
(1)   Same-store portfolio excludes One Beach Street, City Center Bellevue,
Geary Marketplace and land held for development. Valencia Corporate Center and
160 King Street are excluded from same-store portfolio, as they are classified
as discontinued operations for all periods presented.
(2)   Same-store portfolio excludes Solana Beach Towne Centre, Solana Beach
Corporate Centre, Waikiki Beach Walk entities, First & Main,  Lloyd District
Portfolio, One Beach Street, City Center Bellevue, Geary Marketplace and land
held for development. Valencia Corporate Center and 160 King Street are excluded
from same-store portfolio, as they are classified as discontinued operations for
all periods presented.

The increase in same-store retail net operating income is primarily due to an
increase in rental revenue attributed to an increase in average percentage
leased and higher average straight line rent for leases signed in 2012.
Additionally, there was a decrease in retail rental expenses specifically
related to an allowance recorded for an outstanding deferred rent receivable
from Kmart in 2011.

Same-store office property operating income increased due to higher average
straight line rent for leases signed in 2012.

Same-store multifamily property operating income increased for the year ended
December 31, 2012 compared to the corresponding period in 2011 due to an
increase in average percentage leased throughout 2012 and a decrease in
operating expenses.

Acquisitions and Dispositions

On December 4, 2012, the Company sold 160 King Street, an office property
located in San Francisco, California, for approximately $93.8 million and
recognized a gain on sale of approximately $36.7 million during the fourth
quarter of 2012. The sale was completed in connection with the reverse tax
deferred exchange structured for the acquisition of City Center Bellevue
pursuant to the provisions of Section 1031 of the Internal Revenue Code of
1986, as amended, and applicable state revenue and taxation code sections.
On December 19, 2012, we acquired Geary Marketplace in Walnut Creek, California,
one of the San Francisco Bay Area's most desirable submarkets.  Geary
Marketplace is a newly constructed, approximately 35,000 square foot, 100%
leased, grocery anchored shopping center.  The property sits within easy walking
distance (just 1/5 of a mile via the I-680 overpass) to the Pleasant Hill BART
station and Contra Costa Centre - one of the United States' top Transit Oriented
Developments. Contra Costa Centre is home to over 2.4 million square feet of
Class A office/commercial space, two full-service hotels and nearly 2,700 multi-
family residential units.  In total there are over 9,300 households within one
mile of the property.  The high barriers to entry for new developments in the
area and the population's strong household incomes ensure a high probability of
tenant retention for this well located, convenience based center.  The purchase
price was approximately $21.0 million, excluding closing costs of approximately
$0.02 million.

Balance Sheet and Liquidity

At December 31, 2012, the Company had gross real estate assets of $1.9 billion
and liquidity of $268.8 million, comprised of cash and cash equivalents of $42.5
million and approximately $226.3 million of availability on its line of credit.

Dividends

The Company declared dividends on its shares of common stock of $0.21 per share
for the fourth quarter of 2012.  The dividends were declared on October 30,
2012 to holders of record on December 14, 2012 and were paid on December 28,
2012.  Total dividends paid on shares of the Company's common stock for the year
ended December 31, 2012 were $0.84 per share.

In addition, the Company has declared a dividend on its common stock of $0.21
per share for the quarter ending March 31, 2013. The dividend will be paid on
March 29, 2013 to stockholders of record on March 15, 2013.

2013 Guidance

The Company increased full year 2013 FFO per diluted share to a range of $1.38
to $1.46 per share with a midpoint of $1.42 of FFO per diluted share from its
initial 2013 guidance of $1.35 to $1.44 with a midpoint of $1.40.  The Company's
guidance excludes any impact from future acquisitions, dispositions, equity
issuances or repurchases, debt financings or repayments. The Company will
discuss key assumptions regarding the increase in guidance tomorrow on the
conference call.

The foregoing estimates are forward-looking and reflect management's view of
current and future market conditions, including certain assumptions with respect
to leasing activity, rental rates, occupancy levels, interest rates and the
amount and timing of acquisition and development activities.  The Company's
actual results may differ materially from these estimates.

Conference Call

The Company will hold a conference call to discuss the results for the fourth
quarter and year end 2012 on Wednesday, February 20, 2013 at 8:00 a.m. Pacific
Time ("PT").  To participate in the event by telephone, please dial
1-866-825-3308 and use the pass code 68217226.  A telephonic replay of the
conference call will be available beginning at 10:00 a.m. PT on Wednesday,
February 20, 2013 through Wednesday, February 27, 2013. To access the replay,
dial 1-888-286-8010 and use the pass code 27279353.  A live on-demand audio
webcast of the conference call will be available on the Company's website at
www.americanassetstrust.com. A replay of the call will also be available on the
Company's website.


Supplemental Information

Supplemental financial information regarding the Company's fourth quarter 2012
results may be found in the "Investor Relations" section of the Company's
website at www.americanassetstrust.com.  This supplemental information provides
additional detail on items such as property occupancy, financial performance by
property and debt maturity schedules.


Financial Information
American Assets Trust, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Data)

December December 31,
  31, 2012      2011
------------------- -------------------
Assets

Real estate, at cost

Operating real estate $ 1,891,549     $ 1,600,643

Construction in progress   32,183       3,495

Held for development   14,944       24,675
------------------- -------------------
    1,938,676       1,628,813

Accumulated depreciation   (270,494 )     (224,867 )
------------------- -------------------
Net real estate   1,668,182       1,403,946

Cash and cash equivalents   42,479       112,723

Restricted cash   7,421       8,978

Marketable securities   -       28,235

Accounts receivable, net   6,440       6,810

Deferred rent receivables, net   29,395       22,344

Prepaid expenses and other assets   73,670       74,424

Assets of discontinued operations   -       51,821
------------------- -------------------
Total assets $ 1,827,587     $ 1,709,281
------------------- -------------------
Liabilities and equity

Liabilities:

Secured notes payable $ 1,044,682     $ 912,067

Accounts payable and accrued expenses   29,509       24,805

Security deposits payable   4,856       4,091

Other liabilities and deferred credits   62,811       55,579

Liabilities of discontinued operations   -       33,011
------------------- -------------------
Total liabilities   1,141,858       1,029,553
------------------- -------------------
Commitments and contingencies

Equity:

American Assets Trust, Inc.
stockholders' equity

Common stock $0.01 par value,
490,000,000 shares authorized,
39,664,212 and 39,283,796 shares
outstanding at December 31, 2012 and
December 31, 2011, respectively   397       393

Additional paid-in capital   663,589       653,645

Accumulated dividends in excess of net
income   (25,625 )     (28,007 )
------------------- -------------------
Total American Assets Trust, Inc.
stockholders' equity   638,361       626,031

Noncontrolling interests   47,368       53,697
------------------- -------------------
Total equity   685,729       679,728
------------------- -------------------
Total liabilities and equity $ 1,827,587     $ 1,709,281
------------------- -------------------
American Assets Trust, Inc.
Consolidated Statements of Income
(In Thousands, Except Shares and Per Share Data)

Three Months Ended December
  31,   Year Ended December 31,
----------------------------- ----------------------------
  2012   2011   2012   2011
-------------- -------------- -------------- -------------
Revenue:

Rental income $ 60,191     $ 51,458     $ 225,249     $ 194,168

Other property
income 2,929     2,380     10,217     8,617
-------------- -------------- -------------- -------------
Total revenue 63,120     53,838     235,466     202,785

Expenses:

Rental expenses 17,287     16,723     64,089     58,133

Real estate taxes 4,947     4,549     22,025     18,746

General and
administrative 4,063     3,091     15,593     13,627

Depreciation and
amortization 16,576     15,293     61,853     55,936
-------------- -------------- -------------- -------------
Total operating
expenses 42,873     39,656     163,560     146,442

Operating income 20,247     14,182     71,906     56,343

Interest expense (15,152 )   (14,236 )   (57,328 )   (54,580 )

Early extinguishment
of debt -     -     -     (25,867 )

Loan transfer and
consent fees -     -     -     (8,808 )

Gain on acquisition -     -     -     46,371

Other income
(expense), net (273 )   614     (629 )   212
-------------- -------------- -------------- -------------
Income from
continuing
operations 4,822     560     13,949     13,671

Discontinued
operations

Income from
discontinued
operations 279     95     932     1,672

Gain on sale of real
estate property 36,720     -     36,720     3,981
-------------- -------------- -------------- -------------
Results from
discontinued
operations 36,999     95     37,652     5,653
-------------- -------------- -------------- -------------
Net income 41,821     655     51,601     19,324

Net income
attributable to
restricted shares (133 )   (132 )   (529 )   (482 )

Net loss
attributable to
Predecessor's
noncontrolling
interests in
consolidated real
estate entities -     -     -     2,458

Net (income) loss
attributable to
Predecessor's
controlled owners'
equity -     -     -     (16,995 )

Net income
attributable to
unitholders in the
Operating
Partnership (13,111 )   (179 )   (16,133 )   (1,388 )
-------------- -------------- -------------- -------------
Net income
attributable to
American Assets $ 28,577   $ 344   $ 34,939   $ 2,917
Trust, Inc.
stockholders
-------------- -------------- -------------- -------------
Basic net income
(loss) from
continuing
operations
attributable to
common stockholders
per share $ 0.08     $ 0.01     $ 0.24     $ (0.02 )

Basic net income
from discontinued
operations
attributable to
common stockholders
per share 0.65     -     0.66     0.10
-------------- -------------- -------------- -------------
Basic net income
attributable to
common stockholders
per share $ 0.73     $ 0.01     $ 0.90     $ 0.08
-------------- -------------- -------------- -------------
Weighted average
shares of common
stock outstanding -
basic 38,952,816     38,655,084     38,736,113     36,748,806
-------------- -------------- -------------- -------------
Diluted net income
(loss) from
continuing
operations
attributable to
common stockholders
per share $ 0.08     $ 0.01     $ 0.24     $ (0.02 )

Diluted net income
from discontinued
operations
attributable to
common stockholders
per share 0.65     -     0.66     0.10
-------------- -------------- -------------- -------------
Diluted net income
attributable to
common stockholders
per share $ 0.73     $ 0.01     $ 0.90     $ 0.08
-------------- -------------- -------------- -------------
Weighted average
shares of common
stock outstanding -
diluted 57,054,425     57,051,173     57,053,909     54,219,807
-------------- -------------- -------------- -------------
Dividends declared
per common share $ 0.21     $ 0.21     $ 0.84     $ 0.80
-------------- -------------- -------------- -------------

Reconciliation of Net Income to Funds From Operations
The Company's FFO attributable to common stockholders and operating partnership
unitholders and a reconciliation to net income is as follows (in thousands
except shares and per share data):

Three Months
  Ended     Year Ended

December 31, December 31,
  2012     2012
-------------------- ------------------
Funds From Operations (FFO)

Net income $ 41,821     $ 51,601

Depreciation and amortization of real
estate assets ((1))   16,656       63,011

Gain on sale of real estate   (36,720 )     (36,720 )
-------------------- ------------------
FFO, as defined by NAREIT $ 21,757     $ 77,892

Less: Nonforfeitable dividends on
incentive stock awards   (88 )     (354 )
-------------------- ------------------
FFO attributable to common stock and
units $ 21,669     $ 77,538
-------------------- ------------------
FFO per diluted share/unit $ 0.38     $ 1.35
-------------------- ------------------
Weighted average number of common
shares and units, diluted   57,266,950       57,262,767
-------------------- ------------------
(1)        The year ended December 31, 2012 includes depreciation and
amortization on 160 King Street, which was sold on December 4, 2012.  The year
ended December 31, 2011 includes depreciation and amortization on 160 King
Street and Valencia Corporate Center, which was sold on August 30, 2011.  160
King Street and Valencia Corporate Center are classified as discontinued
operations.

Reported results are preliminary and not final until the filing of the Company's
Form 10-K with the Securities and Exchange Commission and, therefore, remain
subject to adjustment.

Use of Non-GAAP Information
The Company calculates FFO in accordance with the standards established by the
National Association of Real Estate Investment Trusts, or NAREIT. FFO represents
net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from sales of depreciable operating property, impairment losses, real
estate related depreciation and amortization (excluding amortization of deferred
financing costs) and after adjustments for unconsolidated partnerships and joint
ventures.

FFO is a supplemental non-GAAP financial measure. Management uses FFO as a
supplemental performance measure because it believes that FFO is beneficial to
investors as a starting point in measuring the Company's operational
performance. Specifically, in excluding real estate related depreciation and
amortization and gains and losses from property dispositions, which do not
relate to or are not indicative of operating performance, FFO provides a
performance measure that, when compared year over year, captures trends in
occupancy rates, rental rates and operating costs. The Company also believes
that, as a widely recognized measure of the performance of REITs, FFO will be
used by investors as a basis to compare the Company's operating performance with
that of other REITs. However, because FFO excludes depreciation and amortization
and captures neither the changes in the value of the Company's properties that
result from use or market conditions nor the level of capital expenditures and
leasing commissions necessary to maintain the operating performance of the
Company's properties, all of which have real economic effects and could
materially impact the Company's results from operations, the utility of FFO as a
measure of the Company's performance is limited. In addition, other equity REITs
may not calculate FFO in accordance with the NAREIT definition as the Company
does, and, accordingly, the Company's FFO may not be comparable to such other
REITs' FFO. Accordingly, FFO should be considered only as a supplement to net
income as a measure of the Company's performance. FFO should not be used as a
measure of the Company's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including the Company's ability to pay dividends
or service indebtedness. FFO also should not be used as a supplement to or
substitute for cash flow from operating activities computed in accordance with
GAAP.

About American Assets Trust, Inc.
American Assets Trust, Inc. (the "Company") is a full service, vertically
integrated and self-administered real estate investment trust, or REIT,
headquartered in San Diego, California. For over 40 years, the Company has been
acquiring, improving, developing and managing premier retail, office and
residential properties throughout the United States in some of the nation's most
dynamic, high-barrier-to-entry markets primarily in Southern California,
Northern California, Oregon, Washington and Hawaii. The Company's retail
portfolio comprises approximately 3.1 million rentable square feet, and its
office portfolio comprises approximately 2.6 million square feet. In addition,
the Company owns one mixed-use property (including approximately 97,000 rentable
square feet of retail space and a 369-room all-suite hotel) and over 900
multifamily units. In 2011, the Company was formed to succeed to the real estate
business of American Assets, Inc., a privately held corporation founded in 1967
and, as such, has significant experience, long-standing relationships and
extensive knowledge of its core markets, submarkets and asset classes. For
additional information, please visit www.americanassetstrust.com.

Forward Looking Statements
This press release may contain forward-looking statements within the meaning of
the federal securities laws, which are based on current expectations, forecasts
and assumptions that involve risks and uncertainties that could cause actual
outcomes and results to differ materially.  Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward-looking statements by
the use of forward-looking terminology such as "may," "will,"
"should,"
"expects," "intends," "plans," "anticipates,"
"believes," "estimates,"
"predicts," or "potential" or the negative of these words and phrases or
similar
words or phrases which are predictions of or indicate future events or trends
and which do not relate solely to historical matters. While forward-looking
statements reflect the Company's good faith beliefs, assumptions and
expectations, they are not guarantees of future performance.  For a further
discussion of these and other factors that could cause the Company's future
results to differ materially from any forward-looking statements, see the
section entitled "Risk Factors" in the Company's most recent annual report on
Form 10-K, and other risks described in documents subsequently filed by the
Company from time to time with the Securities and Exchange Commission.  The
Company disclaims any obligation to publicly update or revise any forward-
looking statement to reflect changes in underlying assumptions or factors, of
new information, data or methods, future events or other changes.

Source:  American Assets Trust, Inc.

Investor and Media Contact:
American Assets Trust
Robert F. Barton
Executive Vice President and Chief Financial Officer
858-350-2607


AAT Logo:
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