American Assets Trust, Inc.

Welcome to the American Assets Trust Incorporated first quarter 2024 earnings call. As a reminder, today's conference call is being recorded. Please note that statements made on this conference call include forward-looking statements based on current expectations, which statements are subject to risk and uncertainties discussed in the company's filings with the SEC. Your caution not to place undue reliance on these forward-looking statements as actual results could cause the company's results to differ materially from these. forward-looking statements. Yesterday afternoon, American Assets Trust earnings release and supplemental information were furnished to the SEC on Form 8K. Both are now available on the Investor Relations section of its website, AmericanAssetsTrust.com. It is now my pleasure to turn the conference over to Mr. Ernest Rady, Chairman and CEO of American Assets Trust. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. As we reflect on the first quarter of 2024, I am pleased to report, no, very pleased to report, that despite the challenging economic backdrop, American Assets Trust had a healthy start through this year. Our financial and operational performance met expectations in quarter one, and we are increasing our guidance for the rest of the year. No doubt a testament to the resilience of our diversified Addis asset strategy and of course our people as well in navigating through market turbulence our strategy honed over the years has proven to create a stable foundation we owe this resilience to several key factors the strength of our diverse portfolio spanning irreplaceable assets a conservative balance sheet bolstered by ample liquidity an efficient operating platform and just as important, no more important, our talented team. Each element guides us in exercising prudent business decisions, ensuring we maintain discipline in all aspects of our operations. This is as important as ever right now, particularly in the face of stubborn inflation and the unpredictable timing of the Fed's rates cuts, if not even the potential for the Fed raising rates. We strive to position ourselves as best as possible to be ready for whatever economic circumstances may arise in the future. Candidly, I've long believed that inflation is a tailwind for commercial real estate, particularly as replacement costs for properties like ours soar and rents continue to rise over time. Of course, diversification has long been central to our strategy. It not only provides income stability but also diversifies our tenant base, offering portfolio flexibility and acts as a hedge against economic uncertainties. Additionally, it sets up for potential capital growth opportunities while bolstering our overall competitiveness in the market, especially during periods when public investors seek high-quality portfolios. My colleagues Adam, Bob, and Steve will cover our various various asset segments, financial results, and updated guidance shortly. But first, I am pleased to announce that our Board of Directors, your Board of Directors, has approved a quarterly dividend of 33.5 cents per share for the second quarter. This decision reflects our confidence in our financial performance and underscores the Board's belief in our continued success. The dividend will be paid on June 20 to shareholders of record June 6. I'd like to express our sincere gratitude for your confidence and support in allowing us to steward your company. Now I'll hand over to Adam to commence a deeper dive into our quarterly performance feature outlook. Adam, please.

Thank you. As Ernest mentioned, there is undoubtedly an ongoing flight to quality in commercial real estate. We fully embrace the sentiment, acknowledging the appeal of our exceptional properties that are highly sought after by both our tenants and their customers. Situated in prime locations near world-renowned universities and innovation centers, Our properties offer top-tier amenities, sustainability features, and readily available transit access, solidifying their status as premier offerings within our markets. And it certainly helps that we have the balance sheet to give tenants and brokers comfort that their tenant improvement allowances and leasing commissions will get paid, something that meaningfully differentiates us from many of our competitors. Along those lines in our office portfolio, almost 50% of which has LEED Platinum designation, we have continued to see a rise in office utilization across our over 4 million square feet of office property since year end. We are told by our tenants and their employees that the increased usage was driven meaningfully by our upgraded and repositioned buildings, functional outdoor spaces, fitness centers, integrated technology and conference centers, and cafe offerings at our office campuses that are enhancing the user experience. We also work very closely with our tenants to further motivate their employee base to spend more time at the office. We believe this has translated into higher utilization than competing projects in our markets, and we will look to continue helping our tenants justify the commutes to the office. Specifically, based on estimates that we received from both tenants and our own records, office utilization by our tenants in San Diego is between 70% and 80%. In Portland, it's between 65% and 75%. In Bellevue, it's between 60% and 65%, and in San Francisco, driven by our two anchor tenants at Landmark, it's holding steady at about 70% to 80%. No doubt foot traffic and use of amenity spaces at our properties have incrementally increased over the past several quarters. On the retail front, which comprises 27% of our portfolio NOI, we are about 95% leased and have already renewed more than half of the retail lease expirations in our portfolio this year. with none remaining in excess of 5,000 square feet that aren't pending execution. As expected, our comparable retail leasing spreads have maintained their positive trajectory with a 2% increase on a cash basis and a 22% increase on a straight line basis for Q1 deals. For what it's worth, excluding our renewal of one tenant at Kalakaua in Oahu that revised rents from $50,000 a month to $40,000 a month, our retail leasing spreads have would have increased 6% and 28% respectively. We believe our retail portfolio has been a source of resilience with its ability to generate steady, if not reliable growth as we achieved our highest ever average base rent for our retail segment in Q1 since our IPO. Certainly this is a testament to our best in class and efficiently managed retail properties that are absolutely dominant in their trade areas. Moving on to our multifamily portfolio and specifically with respect to our San Diego communities, in Q1, we ended the quarter with an occupancy percentage of 95% and leased percentage of 97%. We saw leases on vacant units rent at an average rate of an approximately 5% decrease from prior rents. This due in part to prior comparable master leases and prior month-to-month tenancies with higher rents. and several affordable units leased in Q1 included in the calculations and general softness in Q1, while rates on renewed units increased an average of 6% over prior rents for a blended average just over flat with minimal concessions offered. Net effective rents for our San Diego multifamily leases are now 7.5% higher year over year compared to the first quarter of 2023. January began with softer rents, as expected. However, we've seen those rates picking up over the last month and are hopeful that trend will continue into our stronger spring and summer leasing seasons. Of note, a little over one-third of our San Diego apartments have had the same tenant for over three years, and those rents are, on average, about 24% below current market rates. So we expect the opportunity to push rents on those renewals to continue for the foreseeable future, particularly with the state-imposed rent caps in place. In Q1 in Portland at our Haslow and 8th multifamily community, we saw a blended decrease of approximately 2% between new move-ins and renewals as we worked to push our lease percentage to just under 97% as of the end of Q1 with minimal concessions offered. We are hopeful that lower availability will enable us to continue to minimize concessions and help us push rents into Q2 with a goal of seeing a flat or possibly a slight increase in rates on a blended basis. Net effective rents for our multifamily leases at Hasolo are up 1.5% year-over-year compared to the first quarter of 2023. No doubt Portland has had its share of challenges the past few years from regulatory and political issues to labor shortages and civil disobedience, but there are some silver linings. First, Portland's new multifamily developments are getting absorbed with a small pipeline for new deliveries in Portland after this year, which could set the stage for future rent gains in the market later this year or next. Second, Portland remains very affordable compared to other major West Coast cities, not to mention with its beautiful natural surroundings and parks. And third, population loss in Portland, based on its challenges, attributable to some degree due to poor government policies on drugs, homelessness, and police force, has begun improving. We think eventually Portland heads towards a gradual economic recovery and growth as it rebounds from some of the issues it's been facing, particularly with the current mayor not running for re-election this fall. Meanwhile, it's worth noting that our multifamily portfolio achieved its highest ever average base rents in Q1 since our IPO. Finally, you'll note that we added a property into our redevelopment pipeline in our supplemental, and that is for the potential addition of multifamily units at our Lomas Santa Fe Plaza retail shopping center in Solana Beach. There's nothing imminent on that front, but we have started a process in which we identified existing assets in our portfolio that we could potentially densify into mixed-use properties. Many of our properties are encumbered by REAs, CC&Rs, or zoning that prohibit multifamily uses. So we've begun clearing those restrictions. And we know for coastal opportunities like Loma Santa Fe Plaza, we'll have to work through both local municipality as well as California Coastal Commission requirements. These processes could take four to six years, if not longer, to get the entitlements, even in areas starved for housing. The goal is for these potential developments to present compelling and accretive opportunities down the road when all the entitlements are achieved. It's all part of our barriers to entry thesis. These are truly irreplaceable infill development opportunities, particularly with the regulatory burdens that one must overcome to build. With that, I'll turn the call over to Bob to discuss financial results and updated guidance in more detail.