American Assets Trust (NYSE:AAT) reported fourth-quarter and full-year 2025 results that management described as a “reset” year, reflecting known offsets such as the roll-off of one-time revenue items and the end of capitalized interest on certain projects. President and CEO Adam Wyll said the company generated funds from operations (FFO) of $2.00 per share for the full year, about 3% above initial expectations, supported by strong collections and disciplined expense management.
For the fourth quarter, the company reported FFO of $0.47 per share and net income attributable to common shareholders of $0.05 per share, according to CFO Bob. Full-year net income attributable to common shareholders was $0.92 per share. Bob noted fourth-quarter FFO declined by about $0.02 from the third quarter, primarily due to termination fees recognized in Q3 that did not recur in Q4.
Same-store NOI trends show strength in office and retail
- Office: Same-store cash NOI increased 2.3% for the year, driven by higher base rent and improved expense recoveries, including contributions from the Databricks expansion and new leasing at City Center Bellevue. These were partially offset by known move-outs at First & Main, Torrey Reserve, and Eastgate.
- Retail: Same-store cash NOI increased 1.2% for the year. Bob said strong first-half growth was partially offset by four tenant move-outs in the second half (two at Waikele Center and two at Gateway Marketplace). The Gateway spaces have been backfilled through a Hobby Lobby expansion and a new lease with Wingstop, both scheduled to commence rent on July 1, 2026.
- Multifamily: Same-store cash NOI declined 3.2% for the year, driven by flat to modestly lower rents, elevated concessions amid new supply in San Diego and Portland, and higher operating expenses.
- Mixed-use/Waikiki: Mixed-use NOI declined 6.7% year over year. Occupancy averaged about 82% (down 360 basis points), ADR was essentially flat at about $370, and RevPAR fell about 7% to roughly $296. Bob said the company continued to outperform its Waikiki comp set despite the softer year and cited continued pressure from Japan-related travel and higher operating expenses. The retail portion of Waikiki Beach Walk increased 8% year over year.
Office leasing activity improves, with development leasing a focus
Wyll said leasing conversations became more active in the second half of 2025, with decision timelines improving and demand increasingly concentrated in well-located Class A assets. The office portfolio ended the quarter 83% leased, and the same-store office portfolio was 86% leased, up about 150 basis points from Q3. The company also reported about 140,000 square feet of signed office leases that had not yet commenced paying cash rents.
Same-store office NOI increased just over 1% for the quarter and nearly 2.5% for the full year. During the fourth quarter, the company executed 23 office leases totaling more than 193,000 square feet, delivering cash leasing spreads of 6.6% and GAAP leasing spreads of 11.5%. Management said it achieved its “highest ever” average base rents in the office portfolio. For the full year, office leasing volume rose 55% versus 2024, with cash spreads of 6.4% and GAAP spreads of 14%.
Management highlighted progress at key projects. La Jolla Commons Tower III ended the quarter 35% leased, with another 15% in lease documentation. One Beach Street ended the quarter 15% leased, and the company subsequently executed leases for an additional 21%, bringing it to 36% leased, with proposals for another 46% in negotiation. The company said it is advancing spec suite development at One Beach Street to meet demand for move-in-ready space.
In Q&A, executives emphasized that office leasing today carries a higher capital burden than pre-pandemic, including tenant improvements (TIs), commissions, and amenity investments. Addressing elevated TI levels on renewals, executives pointed to two early extensions that skewed results: Autodesk and Smartsheet. According to management, Autodesk extended a critical 45,000-square-foot space with $35 per foot in TIs, and Smartsheet also extended a key gathering space. Executives said those renewals were not indicative of a broader trend.
Heading into 2026, the company said it started the first quarter having already executed about 68,000 square feet of leases and having another 214,000 square feet in lease documentation. Management is targeting 86% to 88% leased across the entire office portfolio by year-end, about a 400-basis-point increase at the midpoint versus the end of 2025. Executives said returning to “90% plus” occupancy in the next two years was “within the realm of reason,” but they did not want to overpromise.
Retail remains near full, multifamily manages supply pressure
Retail continued to be a key stability point for the company, representing 26% of portfolio NOI. The retail portfolio ended the year 98% leased. Fourth-quarter retail leasing totaled 43,000 square feet, with positive cash and GAAP leasing spreads, and full-year leasing spreads of 7% on a cash basis and 22% on a GAAP basis. Management said performance has been supported by healthy sales and steady traffic, and it expects national retail availability to remain near record lows due to limited new supply. The company cited a well-laddered expiration profile, with just 4% of retail square footage expiring in 2026.
In multifamily, the company ended the year 95.5% leased (excluding the RV park) and posted about 1% year-over-year net effective rent growth versus Q4 2024. Management said elevated new supply in San Diego and Portland continues to constrain near-term rent growth and that it is not assuming a rapid improvement in 2026, instead focusing on occupancy, revenue management, and expense control. Genesee Park, a San Diego multifamily acquisition closed in the first quarter of 2025, ended the year 97% occupied and was described as performing in line with underwriting. In Portland, Hassalo on Eighth ended the year 91.5% leased, with blended net effective rents approximately flat between new leases and renewals.
Balance sheet, dividend outlook, and 2026 guidance
As of the end of the fourth quarter, the company reported liquidity of about $529 million, including roughly $129 million in cash and $400 million of revolving credit availability. Bob said the company is renewing its credit facility, which matures in early July, and expects to close a recast in the second quarter. In response to analyst questions, management said it expects the pricing grid to stay the same and is considering whether to maintain $400 million of capacity or increase to $500 million, noting support from its bank syndicate.
Leverage, measured as net debt to EBITDA, was 6.9x on a trailing 12-month basis (7.1x on a quarter annualized basis). Management reiterated a long-term objective of 5.5x or below and said progress is expected as key office developments lease up, including La Jolla Commons III and One Beach Street.
The board declared a quarterly dividend of $0.34 per share for the first quarter, payable March 19 to shareholders of record March 5. Management said it expects to maintain the dividend at current levels, with dividend coverage expected to improve as office developments stabilize. Bob said the 2025 payout ratio was just under 100% (driven primarily by elevated CapEx), while the 2026 outlook implies a payout ratio of about 89%, with a longer-term goal of 85%.
For 2026, the company introduced FFO guidance of $1.96 to $2.10 per share, with a midpoint of $2.03, representing about a 1% to 1.5% increase over 2025. Bob said same-store cash NOI growth (excluding reserves) is expected to be 2.2% in 2026, including expected same-store contributions by segment of:
- Office: +3.3% (about +$0.06 per share)
- Retail: +1.7% (about +$0.02 per share)
- Multifamily: +2.2% (about +$0.01 per share)
- Mixed-use: -3.3% (about -$0.01 per share)
For the Embassy Suites in Waikiki, the 2026 outlook assumes about 2.5% revenue growth and 4% expense growth, with occupancy expected to increase about 1%, ADR roughly flat (about 0.5% increase from $360 to $362), and RevPAR rising about 2% (from $296 to $302).
Management also discussed guidance items including non-same-store NOI contributions from La Jolla Commons III and Genesee Park (about $0.03 per share), budgeted credit reserves (a $0.04 per share reduction, split between office and retail), lower G&A expected to benefit FFO by about $0.04 per share, and higher interest expense related to the end of capitalized interest for La Jolla Commons III (about a $0.02 per share reduction). Executives said upside to the guidance range could come from faster conversion of speculative office leasing, continued collections from tenants reserved against, and better-than-budgeted multifamily or mixed-use performance.
Wyll also addressed frustration with the company’s share price, saying public market valuation does not, in management’s view, reflect the quality of the company’s coastal portfolio and long-term growth prospects. He said the company would remain pragmatic about asset sales but would not sell at a discount “just to check a box,” emphasizing disciplined execution and balance sheet improvement as priorities.
About American Assets Trust (NYSE:AAT)
American Assets Trust, Inc is a publicly traded real estate investment trust (REIT) that acquires, develops and manages a diversified portfolio of commercial properties across multiple asset classes. The company’s holdings include retail centers, office buildings, multifamily communities and select hotel and resort properties. American Assets Trust pursues an integrated strategy combining proactive redevelopment, leasing initiatives and sustainable design to enhance asset value and drive long-term growth.
Founded in 1998 and headquartered in San Diego, California, American Assets Trust has built a presence in key markets along the West Coast and select western U.S.
