American Assets (AAT) Q2 2025 Earnings Transcript

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DATE

• Wednesday, July 30, 2025, at 11 a.m. EDT

CALL PARTICIPANTS

• President and Chief Executive Officer — Adam Wyll
• Chief Financial Officer — Bob Barton
• Executive Chairman — Ernest Rady
• Executive Vice President, Office Leasing — Steve Center
• Senior Vice President, Multifamily — Abigail

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RISKS

• Bob Barton reported, "Our same-store multifamily portfolio's NOI (non-GAAP) declined by 3.9%, reflecting lower rental income at the Hasselhoe on Eighth property and higher operating expenses at Pacific Ridge."
• Bob Barton noted, "Our same-store mixed-use portfolio's NOI (non-GAAP) declined by approximately 5%, primarily due to lower than anticipated ADR at Embassy Suites Waikiki."
• Adam Wyll said the hotel segment was impacted by "lower paid occupancy and RevPAR amid ongoing softness in domestic leisure demand, heightened rate competition across Waikiki, and global economic uncertainty."

TAKEAWAYS

• Funds from Operations (FFO) per Share: FFO per diluted share was $0.52, flat sequentially; excluding approximately $800,000 in lease termination fees, FFO (non-GAAP) declined by $0.01 per share sequentially due to lost contributions from the Del Monte Center sale.
• Same-Store Cash NOI: Same-store cash NOI for all sectors combined was approximately flat year over year; retail segment cash NOI grew 4.5%, office segment was flat, multifamily segment declined by 3.9%, and mixed-use segment declined by 5%.
• Office Portfolio Leasing Activity: Portfolio ended the quarter 82% leased; same-store office at 87% leased. Completed 102,000 square feet of leasing. Cash rent spreads decreased 2%, while straight-line spreads rose 10%.
• Retail Portfolio Performance: Ended the quarter 98% leased. Executed over 220,000 square feet in new or renewal leases. Cash rent spreads increased over 7%, and straight-line spreads rose 22%.
• Multifamily Leasing and Rents: Portfolio approximately 94% leased. Achieved 7% rent increases on renewals and 4% on new leases, resulting in a blended rent increase of 6%. Excluding Genesee Park, blended rent increase was 4%, and net effective rents rose approximately 2%.
• Mixed-Use (Waikiki Beach Walk) Results: Overall NOI declined 5%. Retail component NOI increased 7%. Hotel net operating income (non-GAAP) decreased by approximately 15%. Paid occupancy held at 86%, RevPAR was $305 (down 4%), and ADR was $355 (down 3%).
• Liquidity: Total available liquidity of $544 million, comprising $144 million in cash and $400 million in revolver availability.
• Leverage Ratios: Net debt to EBITDA at 6.3x trailing twelve months and 6.6x annualized; long-term target is 5.5x or lower. Interest and fixed charge coverage ratios were both 3.1x on a trailing twelve-month basis.
• Dividend Declaration: Board approved a quarterly dividend of $0.34 per share for Q3, payable Sept. 18 to shareholders of record as of Sept. 4.
• Updated 2025 FFO Guidance: Increased full-year guidance range to $1.89–$2.01 per FFO share (midpoint $1.95), up from initial midpoint of $1.94. Upside for full-year guidance depends on continued rent collections on reserved leases, better-than-forecast multifamily results, and tourism recovery in Hawaii; $0.02 per share of FFO was reserved for potential rent issues with certain office and retail tenants, none of which have been used year to date.

SUMMARY

American Assets Trust (NYSE:AAT) management highlighted that the leasing pipeline is being driven by increased demand from technology and AI tenants, especially in the San Francisco office market. Executives stated that recent improvements in office leasing at One Beach and La Jolla Commons 3 are attributed to ongoing renovations and the addition of tenant amenities designed to meet demand for move-in ready, amenitized space. The company confirmed that the $0.30 per share pipeline of potential incremental FFO (non-GAAP) is primarily related to leasing up vacant office space in La Jolla Commons 3, One Beach, and suburban Bellevue assets, with signed but not yet commenced leases representing 5% of office GLA and expected to bolster future results. Management reiterated that acquisition capital is currently favored for multifamily or retail, with no imminent office investments anticipated, and surplus cash is being held for opportunistic deployment. Hotel weakness in Hawaii was directly linked to unfavorable currency exchange rates and subdued Japanese tourism; management noted the hotel continues to outperform its competitive set despite sector-wide headwinds.

• Steve Center stated, "tour activity is way up" at One Beach due to renovations and spec suite development, and average deal size is rising, supporting expectations for increased leasing velocity as activity shifts toward larger tenants.
• Bob Barton said, "We hope to outperform what we currently have in guidance, but I don't see any significant differences," indicating no major segment-level adjustments to same-store NOI expectations relative to year-start guidance.
• Ernest Rady confirmed a preference for future acquisitions in multifamily and retail segments, stating, "our preference is for, at the moment, not office because we have our opportunities ahead of us in office."
• Adam Wyll confirmed that AI and technology companies are the main sources of San Francisco office leasing demand, remarking, "That's the primary driver of this most recent activity."
• Abigail highlighted the company's multifamily assets in San Diego are "operating a little bit higher than what we are seeing countywide," attributing this to irreplaceable locations and experienced management, but acknowledged rent growth on new leases is moderating as market supply normalizes.

INDUSTRY GLOSSARY

• NOI (Net Operating Income): The income generated from property operations after operating expenses but before interest and taxes.
• FFO (Funds from Operations): A key REIT performance metric, calculated as net income plus depreciation and amortization, minus gains on sales of properties.
• RevPAR (Revenue per Available Room): A hotel performance metric calculated by dividing total room revenue by total available rooms.
• ADR (Average Daily Rate): A hotel metric representing the average rental revenue earned per occupied room per day.
• GLA (Gross Leasable Area): Total floor area designed for tenant occupancy and exclusive use.

Full Conference Call Transcript

Adam Wyll: Good morning, everyone. At American Assets Trust, we approach every cycle with the same mindset: investing in our high-quality assets, maintaining balance sheet strength, and creating long-term value for our shareholders. We believe it continues to serve us well today as we navigate elevated interest rates, persistent inflation, tariff uncertainty, and evolving tenant demand. In 2025, our results came in just above our own expectations. FFO per diluted share was $0.52, and same-store cash NOI was approximately flat for Q2 and up 1.4% year-to-date compared to the prior year. These results reflect steady performance in a mixed operating environment and underscore the resilience of our portfolio and the value of our disciplined approach to asset management.

Turning to the portfolio, our office portfolio ended the quarter 82% leased, and our same-store office portfolio, which excludes One Beach and La Jolla Commons 3, ended the quarter 87% leased. Same-store office cash NOI was approximately flat for the quarter and up over 2% year-to-date as compared to the prior year. We completed approximately 102,000 square feet of leasing during the quarter with comparable rent spreads decreasing 2% on a cash basis and increasing 10% on a straight-line basis.

Notably, the negative cash basis rent spread was primarily attributable to a deal backfilling a 12,000 square foot first in main space with just two months of downtime, no TIs, and a lower start rate than the prior tenant, but with 5% annual bumps. We entered Q3 with solid momentum, including approximately 17,000 square feet of executed leases and an additional 111,000 square feet in active lease documentation. Leasing interest continues to build across our office portfolio, reflected in growing prospect engagement and inbound RFP volume.

Across our office portfolio, demand remains concentrated in less than full-floor requirements, and winning in this environment depends on several fundamentals: ownership with the financial strength to fund tenant improvements and commissions, a reputation for operational excellence and responsive service, completed renovations and amenities, availability of move-in ready suites requiring only light customization, hands-on construction management that minimizes cost and schedule uncertainty, and an efficient, solutions-oriented lease negotiation process because time kills deals. Of course, our near-term focus remains on driving occupancy, enhancing the tenant experience, and positioning the portfolio to perform well under current utilization patterns, even if broader office attendance has reached a near-term equilibrium. We remain confident in our coastal high-barrier markets over the long term, as employers continue to prioritize high-quality, collaborative, and amenitized environments to support productivity and talent retention.

In fact, this year, two of the world's largest real estate brokerage firms, neither of which represent us as a landlord, chose our San Diego properties for their new headquarters in the market. We view this as a meaningful validation of the quality, positioning, and upkeep of our office portfolio and the strength of our tenant experience.

In retail, our portfolio continues to perform well, backed by healthy consumer demand in our trade areas. We ended the quarter 98% leased, with same-store cash NOI growth of 4.5%. We executed over 220,000 square feet of new renewal leases in Q2 with spreads increasing over 7% on a cash basis and 22% on a straight-line basis. Rent collections remain strong, and all tenants on our reserve list, including At Home at Carmel Mountain Plaza, were current through Q2. Meanwhile, we are actively engaged with At Home in a mutually beneficial lease structure moving forward for their sole location in San Diego.

In addition, in Q2, we backfilled the former Party City space at Gateway Marketplace with rents approximately 30% above prior levels. We continue to see durable demand for our retail centers, supported by strong local employment and favorable demographics. With limited new supply and consistent foot traffic, we expect these trends to continue.

Our multifamily portfolio performed in line with expectations. In San Diego, recently delivered new supply has created a more competitive leasing environment, and we are navigating elevated operating costs and increased concessions. Still, our communities demonstrated strong stability, ending the quarter approximately 94% leased. We achieved rent increases of 7% on renewals and 4% on new leases, a blended rent increase of 6%. Excluding our Genesee Park acquisition, rent increases were 6% on renewals, 2% on new leases, or a 4% blended increase, and an approximately 2% increase in net effective rents compared to the same quarter last year.

Occupancy at Pacific Ridge temporarily dipped just below 85% in July due to the seasonal student turnover, but it is expected to rebound above 90% by August. The community remains at about 92% leased right now. As previously disclosed, we acquired Genesee Park based on our conviction in the long-term fundamentals of the Coastal San Diego market, the opportunity to meaningfully mark to market rents, and the potential for future densification. We are pleased that the asset continues to perform in line with our underwriting assumptions.

Up in Portland, Hasselhoe and Eighth ended Q2 91% leased, with blended rent growth of approximately 1%. While the market continues to work through elevated supply and a slower pace of job growth, we are encouraged by steady leasing activity and solid retention. Competition from suburban product remains a factor, but with occupancy holding in the low nineties and signs of stabilization emerging, we see plenty of room for improvement, hopefully, in the quarters ahead.

At our fee-owned mixed-use Waikiki Beach Walk in Oahu, we are pleased to report no damage or injuries from the tsunami warning last night. NOI declined 5% compared to Q2 last year, driven by softer performance at our Embassy Suites. While the NOI of the retail component grew 7% year over year, the hotel was down approximately 15%, reflecting lower paid occupancy and RevPAR amid ongoing softness in domestic leisure demand, heightened rate competition across Waikiki, and global economic uncertainty. Elevated labor costs and room expenses also impacted margins during the quarter. That said, our Embassy Suites continue to lead its competitive set in RevPAR, underscoring the strength of the asset, its prime location, and its appeal to value-driven travelers.

We remain confident in the property's long-term positioning as the market stabilizes.

A few final items. I am pleased to share the Board approved a quarterly dividend of $0.34 per share for Q3, payable on September 18 to shareholders of record as of September 4. This reflects our continued confidence in the long-term stability and cash flows of the portfolio. Additionally, in Q2, we published our 2024 sustainability report, highlighting our progress and commitments across environmental, social, governance, and human capital initiatives. We remain proud of the role our company plays in advancing responsible business practices.

In closing, while external conditions remain dynamic, we will continue to manage with flexibility and a long-term view, always grounded in the fundamentals that have served us and our portfolio well across countless cycles. Our team is known for executing with this discipline and foresight. On behalf of the management team, including Ernest who is joining us today, thank you for your continued support. And by the way, you guys, I think the team is doing a really good job. So I am grateful.

Bob Barton: Yep. Thanks, Adam and Ernest. Good morning, everyone. Last night, we reported second quarter 2025 FFO per share of $0.52. Second quarter 2025 net income attributable to common stockholders per share was $0.09. Second quarter 2025 FFO remained flat compared to Q1 2025. However, excluding the approximately $800,000 in lease termination fees recognized in Q2 2025, FFO declined by approximately $0.01 per share. The decrease primarily reflects the sale of Del Monte Center on February 25, 2025, with two months of FFO contribution in Q1 that was no longer present in Q2. Same-store cash NOI for all sectors combined was approximately flat year over year in 2025 compared with the same period in 2024.

Breaking Q2 out by segment, and each as compared to Q2 2024, our same-store office portfolio's NOI was approximately flat, primarily due to the known move-out of clear results at first in May on April 30, 2025. A portion of the vacated space has already been backfilled, as Adam mentioned earlier. Our same-store retail portfolio's NOI increased by 4%, primarily driven by the commencement of new leases and contractual rent escalations at both Alamo Quarry and Carmel Mountain Plaza. Additionally, the retail portfolio also benefited from lower operating expenses at Carmel Mountain Plaza and Alamo Quarry, further contributing to the year-over-year growth.

Our same-store multifamily portfolio's NOI declined by 3.9%, primarily due to lower rental income at our Hasselhoe on Eighth property in Portland and higher operating expenses at our Pacific Ridge property in San Diego. Our same-store mixed-use portfolio's NOI declined by approximately 5%, primarily driven by lower than anticipated ADR at Embassy Suites Waikiki. Specifically, and compared to Q2 2024, paid occupancy for Q2 2025 was approximately flat at 86%. RevPAR for Q2 2025 was $305, down 4%, though we exceeded our competitive set in Q2 by $62 per room. ADR for Q2 2025 was $355, down 3%, and we exceeded our competitive set in Q2 by $86 per room.

Net operating income for Q2 2025 was approximately $2.9 million, down half a million. Based on our STARS reports that we see monthly, most, if not all, of the hotels in Waikiki are experiencing similar trends. The Japanese yen remains around $147 to the US dollar. Rising airfare and hotel costs are prompting some domestic travelers to reconsider trips to Hawaii, instead choosing international destinations supported by a strong dollar or opting for all-inclusive cruises. That said, the unique appeal, aloha spirit, and safety of Oahu and the neighboring islands continue to attract visitors. We view these headwinds as temporary and remain confident in the long-term strength of Hawaii's tourism market.

Let's talk about liquidity. As of the end of the second quarter, we had total liquidity of approximately $544 million, consisting of roughly $144 million in cash and cash equivalents and $400 million of availability under our revolving line of credit. Additionally, our net debt to EBITDA ratio was 6.3 times on a trailing twelve-month basis and 6.6 times on a quarter annualized basis. Our long-term goal remains to reduce and maintain net debt to EBITDA at five and a half times or lower. Our interest coverage and fixed charge coverage ratios were both 3.1 times on a trailing twelve-month basis.

Let's talk about our 2025 guidance. We are increasing our full-year 2025 guidance range to $1.89 to $2.01 per FFO share, with a midpoint of $1.95 per FFO share, an increase of $0.01 over our initial midpoint of $1.94. This outlook reflects steady momentum across our core sectors, supported by leasing activity, rent escalations, and disciplined operations. Our guidance assumes a stable environment. Based on year-to-date performance and current visibility, we believe we are well-positioned to meet our full-year goals.

While the updated guidance reflects our best estimate today, outperforming toward the high end would require several favorable developments, including, first, the majority of office or retail tenants for whom we have established credit reserves must continue to meet their rent obligations throughout the year. As of Q2 2025, we have reserved approximately $0.02 per share of FFO, split evenly between office and retail tenants. Year-to-date, none of these reserves have been utilized. Second, our multifamily segment would need to exceed expectations, driven by improved occupancy, continued rent growth, and better-than-forecasted expense management. Third, a meaningful recovery in tourism in the last half of the year would support stronger performance at our Embassy Suites property.

We remain optimistic that both domestic and international travel will improve either later this year or in the years ahead. Together, these levers represent upside potential, and we will continue to monitor each closely as the year progresses. As a reminder, our guidance in these prepared remarks excludes the impact of any future acquisitions, dispositions, equity issuances, or repurchases, and debt refinancings or repayments, except for those already discussed. We remain committed to transparency and will continue to provide clear insights into our quarterly results and the key assumptions that inform our outlook.

Additionally, please note that any non-GAAP financial metrics discussed today, such as net operating income or NOI, are reconciled to the most directly comparable GAAP measures in our earnings release and supplemental materials. I'll now turn the call back over to the operator for Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. Please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Todd Thomas with KeyBanc Capital Markets. Hi. Good morning, everyone.

Todd Thomas: This is AJ on for Todd. I appreciate you guys taking my question. May the first one, just with regards to guidance, Bob, maybe for you. Are there any changes to the same-store NOI growth outlook for the various segments relative to the forecast provided with initial guidance, I think back in Q4 2024? Just any adjustments to those assumptions.

Bob Barton: You know, thanks for the question. Yeah. We're still on track. There's obviously noise going on with some of the termination fees that we've had. But from my perspective, we're still on track. We hope to outperform what we currently have in guidance, but I don't see any significant differences. Adam, you have any input on that?

Adam Wyll: No. I think we might find, AJ, that a few of our segments may outperform the guidance Bob gave on same-store NOI and others may underperform. For instance, the hotel is not going to do as well as we expected based on what's going on in the world these days. But office seems to be trending better. We'll see how it shakes out over the last two quarters.

Todd Thomas: Okay. Appreciate that color. And, Adam, maybe sticking with you, you know, last quarter, you noted an uptick in the touring around the La Jolla Commons 3 and One Beach. Can you just discuss the leasing pipeline and interest level for those two specifically? Any year-end leasing goals you may be able to share with us?

Adam Wyll: Yeah. We are seeing increased touring activity and prospect and RFP activity, but I'll have Steve kind of chime in a little bit more on that. He's a little more dialed in.

Steve Center: Sure. Starting with One Beach, and we had talked about it before that the deal size is moving up to a point where it makes sense for us to be engaged on deals. Previously, it was two thousand, four six thousand foot spaces. Our floor plates are 35,000 feet. You're seeing the average deal size tick up. The greatest amount of activity is from 20 to 60 feet right now, which is right in our wheelhouse. So to that end, in this market, you have to have spaces that are ready to go. And Adam touched on it earlier. So we're moving forward with our plans to develop parking and amenities on the first floor of the building.

And then to spec out improvements on the first and second floors in anticipation of this demand so that when they're ready to go, they're within a few months of moving in. So and to that end, because we've made that commitment and the brokers are communicating it, and we have our segmentation breaking the building up into smaller components, our tour activity is way up. In fact, we had a full building tour yesterday afternoon. So that's encouraging.

And then moving on to La Jolla Commons 3, keep in mind, our amenities aren't even complete yet. The restaurant Florette will be complete this fall, probably October, and open up, and that's a key component to attracting tenants to the campus. And then second, we have a major conference center under construction that'll be completed with Jerry in September. Absolutely. Same time frame. Yeah. So with that, we think you'll see acceleration. And, Lisa, that being said, we have three of our spec suites, one on two and two on the fourth floor. They're under construction. We're deep in negotiations and space planning on.

We're about 9% of the property, and we have some existing tenant demand that may come about with the merger of an accounting firm with another accounting firm that's a ten-year lease with us in Tower 1. That is going to grow past Tower One's ability to accommodate them. So that may bleed into Tower 3. We have a second tenant as well that's contemplating similar growth, different situation. They're just growing as a law firm. And they may not be able to be fully housed in Tower 1. So really, the 930,000-foot three-building campus is coming into play. It's not just a 200,000-foot 10-story tower. It's a campus, and it's very dynamic.

And it's really attractive long-term for some larger tenants as well, given the flexibility that comes with being part of something of that scale.

Todd Thomas: I appreciate that color. It's really helpful. And then maybe just moving on to the occupancy at 14 acres increased significantly in the quarter. Can you just talk about the leasing that was completed there and maybe, with the renovations completed at that asset and the other Bellevue properties that were acquired within the last few years, what's the demand response you're seeing? Is that, you know, is it as anticipated? What are the leasing goals for those assets? Specifically 14 acres and Timber Spring?

Steve Center: Great question. We'll start out with 14 acres. You touched on it. Jerry and I talked about it this morning. The renovation is complete. It's beautiful. And so with that, tour activity's up, and we, Adam, touched on, we've been very active in developing a spec suite program there as well. In all the multi-tenant spaces less than full floor. And with that, we get the plans done, tenants engaged. They've seen the commitment to spend money on the renovations. And so long story short, we've done several leases, and we've got several pending for these spaces that we've designed, and they're really minor modifications to the spec suites that we've designed.

So we're moving ahead very quickly, and keep in mind, this is a 44% vacant submarket with negative net absorption, and yet we've got a lot of activity there. So we're excited about that.

And just to use that, you know, Todd, I'm glad Todd wrote up his remarks early because it gives me a chance to contemplate how it looks to everyone. And he noted that we went backwards by 70 basis points in terms of occupancy, and he noted that to give back a clear result, had a 113,000 feet of known givebacks this quarter, and we accounted through new leasing. We accounted for all the 28,000 feet of that. So backs were 280 basis points. We made up 210 basis points with just new leasing. So this quarter, 81% of our leases were new leases. Not only comparable but non-comparable. So we've got great leasing activity.

That's moving on to the I 520 Corridor. It's a bit healthier than the I 90 Corridor, and that's where Bellspring 520, which is now Timber Springs and Timber Ridge are. Timber Ridge is now 97% leased with the site tech lease that we just signed last quarter. And then Timber Springs is close to, we'll be approaching 87 or 88% leased for the lease. We think we just sent out final draft for a full floor lease there. So we made great progress there. And, again, that's a negative net absorption market with higher vacancy, and yet we're making really good progress.

Todd Thomas: Perfect. I appreciate the time. Thanks, guys.

Operator: Next question comes from Haendel St. Juste from Mizuho. Hi.

Ravi Vaidya: Hi. Good morning, guys. This is Ravi on the line for Haendel. Hope you guys are doing well. I wanted to ask about the multifamily portfolio. I think I heard in your prepared remarks that the new lease spreads were below renewal spreads. I guess that would have maybe anticipated to hear the opposite. And, you know, given the perpetual high interest rates and unaffordability with housing, I thought we would have seen maybe some heightened demand for multifamily. Can you maybe offer some further commentary and color?

Adam Wyll: Yeah. Hey, Ravi. It's Adam. You know, we're navigating different markets. Right? So we're in San Diego and Portland. Portland's had its share of struggles. That's been compounded with the extra supply. So, you know, obviously, we're doing the best we can there. Rents have kind of stabilized. And we expect some growth later this year or into next year once the markets kind of absorbed that excess supply. San Diego is a different story, though, where we've seen, like, an incredible surge over the past several years. And it's starting to equalize somewhat now. Now that there's a lot more supply being absorbed as well here.

But maybe Abigail can add a little color on the difference between the renewals and the new rates that we're seeing, which are still growing positively. But not as much as they had been over the past few years. Abigail, do you see anything there you can share?

Abigail: Hi. Good morning. I think Adam hit the nail on the head with answering that question. In San Diego, our rental rates across the portfolio are operating a little bit higher than what we are seeing countywide. Excuse me. And with some of the properties, we have some caps that are in place. But at Pacific Ridge, throughout the good part about our property is, as mentioned before, is that we are in unbeatable locations. We've got irreplaceable products, experienced, and knowledgeable management teams that attract residents near and far, and we maintain our communities in top order.

And so I think we'll continue to see favorable growth as much as we can and continue to thrive in this current marketplace. It's a desirable location, and we've got great properties throughout.

Ravi Vaidya: Got it. Thanks for the color there. I wanted to ask about the hotel in Hawaii and some of the demand drivers there. It seems like a weekend, you know, north of 145. The conversion rate between the yen and the dollar is weighing on demand from that market. Is there a number where you think that demand will pick up? Like, is it one twenty? Is it one ten? Is it something that you guys are kind of forecasting in terms of maybe future demand?

Adam Wyll: It's really tough to predict, Ravi. As you know, Japan or Asia pre-pandemic, and I think right now, it's kind of in the mid-teens. And it's incrementally picking up. But the dollar is getting a little weaker, so that's helping somewhat on the margin. We're anticipating more action next year, but it really remains to be seen because there's so much going on in the world with geopolitics and economic uncertainty. We're hopeful, we're doing our best to kind of cater to those large Asian package groups. But I think to expect anything meaningful this year would be a stretch. You have anything to add to that, Bob?

Bob Barton: Yeah, Ravi. I mean, we're down, as you noted, this quarter. And we're actually, I mean, to be honest with you, we're down about where we were prior to COVID. Or just the beginning of COVID, which I'm scratching my head on. But the reality is that, you know, if the Japanese yen's at $1.47, and we used to be at $1.08 pre-COVID, the medium income from Japan tourism is still going to be slow. They have a choice to go other places. The people that are wealthy from Japan are willing to make the strike coming out here.

But having said that, I think there's also a lot of uncertainty, you know, all the tariffs, things going on across the world. I think people are just taking a pause. And like I said in my comments, I mean, they have other choices in where to go. But, also, too, as I've noted, you know, on these STAR reports that we get, Ravi, which really tracks all the comparable hotels, and we have all the comparable hotels in Waikiki. And in our competitive set, we have probably 10, 12 hotels, all, you know, it's a combination of on the beach and off the beach. We outperform all of them in terms of RevPAR, in terms of ADR.

So I'm not overly concerned about it. I think it's just a point in time that we're all going through. And we're still doing better than most of them.

Ravi Vaidya: Got it. That's really helpful. And lastly, in the past, I think you've said that there's about $0.30 of leasing upside in terms of a pipeline going forward. Maybe in what segments do you think that total pipeline is expected to materialize first?

Adam Wyll: That $0.30, Ravi, was predominantly office, leasing up La Jolla Commons 3, One Beach, and our suburban Bellevue assets. Gets you to about $0.30. And I guess I could mention too that we've got probably 5% of our office GLA is signed leases but have not commenced yet. So there is going to be a meaningful uptick coming down the road once those.

Ravi Vaidya: Got it. Thanks so much, guys. Appreciate it.

Operator: Our next question comes from Reny Pire with Green Street Advisors.

Reny Pire: Hey. Good morning, everyone. Thank you for taking the question. So it seems like AAT was pretty busy on the acquisitions and dispositions front earlier this year, and there's a healthy balance of cash, you know, on the balance sheet at the moment. Any plans to put that to work? And if so, which property types or markets do you think provide the best risk-adjusted returns?

Ernest Rady: Right. We're always looking. This is Ernest. We're always looking. We have to find something that offers significant upside. We don't want to spend the money just for the sake of spending the money. And our preference is for, at the moment, not office because we have our opportunities ahead of us in office. But we're looking at multifamily. And we'd certainly consider retail if it became available. And, of course, Reny, that money is working for us in the bank earning interest right now. As we evaluate options, and it gives us pretty solid comfort having that balance sheet strength.

Reny Pire: Got it. All fair points. And then one more question. In regards to the touring activity you're seeing at One Beach and I guess for San Francisco as a whole, could you talk about the tenant industries that you're getting most touring from? Is AI starting to step up as a more likely tenant for the One Beach asset?

Adam Wyll: That's the primary driver of this most recent activity. I mean, I think they've contributed 5 million square feet of leasing thus far, but it's predicted it could be as big as 20-25 million square feet in the next few years. So it's growing by leaps and bounds. But it's also, you're seeing, well, Databricks is an AI company as well. So, yeah, it's largely AI. It's technology. On the law firm side, you're actually seeing right-sizing and consolidation for the most part. Financial services as well. So it's really tech-driven.

Reny Pire: Great. Thanks for the color. That's all for me.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Adam Wyll for any closing remarks.

Adam Wyll: Well, on behalf of everyone at American Assets Trust, we appreciate your support and your joining us today. Have a great week.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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