American Assets Trust, Inc. Reports Second Quarter 2017 Financial Results
Net income available to common stockholders of
Funds From Operations per diluted share increases 9% and 6% year-over-year for the three and six months ended June 30, 2017, respectively
Same-store cash NOI increases 3% and 1% year-over-year for the three and six months ended June 30, 2017, respectively
Acquisition of the
Acquisition of Gateway Marketplace in
Financial Results and Recent Developments
- Net income available to common stockholders of
$5.5 million and$12.9 million for the three and six months ended June 30, 2017, respectively, or$0.12 and$0.28 per diluted share, respectively - Funds From Operations increased 9% and 6% year-over-year to
$0.49 and$0.94 per diluted share for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016 - Same-store GAAP NOI increased 2% and 1% for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016
- Same-store cash NOI increased 3% and 1% for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016
- Leased approximately 88,700 comparable office square feet at an average GAAP-basis and cash-basis contractual rent increase of 47% and 33%, respectively, during the three months ended June 30, 2017
- Leased approximately 207,000 comparable retail square feet at an average GAAP-basis contractual rent increase of 5% and cash-basis contractual rent decrease of 13% during the three months ended June 30, 2017
- Entered into first office lease at
Torrey Point for approximately 32,000 square feet, or 36% of the new development’s rentable square footage - Acquisition of the
Pacific Ridge Apartments inSan Diego, California - Acquisition of Gateway Marketplace in
Chula Vista, California subsequent to quarter end
Net income attributable to common stockholders was
During the second quarter of 2017, the company generated funds from operations (“FFO”) for common stockholders of
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:
June 30, 2017 | March 31, 2017 | June 30, 2016 | ||||
Total Portfolio | ||||||
Retail (1) | 96.8 | % | 96.9 | % | 98.2 | % |
Office | 88.7 | % | 89.3 | % | 90.4 | % |
Multifamily (2)(3) | 92.6 | % | 93.4 | % | 92.5 | % |
Mixed-Use: | ||||||
Retail | 95.7 | % | 94.1 | % | 98.3 | % |
Hotel | 91.3 | % | 91.5 | % | 88.4 | % |
Same-Store Portfolio | ||||||
Retail (1) | 97.1 | % | 97.2 | % | 98.6 | % |
Office | 88.7 | % | 89.3 | % | 90.4 | % |
Multifamily (2)(3) | 93.3 | % | 94.0 | % | 97.2 | % |
Mixed-Use: | ||||||
Retail | 95.7 | % | 94.1 | % | 98.3 | % |
Hotel | 91.3 | % | 91.5 | % | 88.4 | % |
(1) Total retail leased percentage includes the retail components of Hassalo on Eighth. The Elwood, Velomor and
(2) Total multifamily leased percentage includes Hassalo on Eighth, which became available for occupancy in July and October of 2015. Same-store multifamily leased percentages exclude Hassalo on Eighth and the
(3) Excluding the 21 off-line units associated with the Loma Palisades repositioning, total multifamily leased percentage was 93.5% and 94.6% at
During the second quarter of 2017, the company signed 41 leases for approximately 304,300 square feet of retail and office space, as well as 493 multifamily apartment leases. Renewals accounted for 80.0% of the comparable retail leases, 72.7% of the comparable office leases and 52.9% of the residential leases.
Retail and Office
On a comparable space basis (i.e. leases for which there was a former tenant) during the second quarter of 2017 and trailing four quarters ending June 30, 2017, our retail and office leasing spreads are shown below:
Number of Leases Signed |
Comparable Leased Sq. Ft. |
Average Cash Basis % Change Over Prior Rent |
Average Cash Contractual Rent Per Sq. Ft. |
Prior Average Cash Contractual Rent Per Sq. Ft. |
GAAP Straight-Line Basis % Change Over Prior Rent |
||||||
Retail | Q2 2017 | 25 | 207,000 | (12.8)% (1) | $30.31 | $34.77 | 5.2% (1) | ||||
Last 4 Quarters | 72 | 367,500 | (3.7)% (1) | $33.21 | $34.49 | 10.1% (1) | |||||
Office | Q2 2017 | 11 | 88,700 | 32.5% | $62.62 | $47.24 | 47.4% | ||||
Last 4 Quarters | 46 | 322,900 | 17.0% | $46.51 | $39.75 | 27.4% |
(1) Retail leasing spreads were significantly impacted by the
Multifamily
As of June 30, 2017, Hassalo on Eighth was approximately 90% leased with average monthly base rent per leased unit of
At June 30, 2017, the average monthly base rent per leased unit for same-store properties was
Same-Store Property Operating Income
For the three and six months ended
Three Months Ended (1) | Six Months Ended (2) | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
GAAP Basis: | |||||||||||||||||||||||
Retail | $ | 17,896 | $ | 17,893 | — | % | $ | 35,720 | $ | 36,237 | (1.4) | % | |||||||||||
Office | 18,318 | 17,735 | 3.3 | 30,939 | 29,469 | 5.0 | |||||||||||||||||
Multifamily | 3,407 | 3,240 | 5.2 | 6,604 | 6,359 | 3.9 | |||||||||||||||||
Mixed-Use | 5,946 | 5,956 | (0.2) | 11,374 | 12,218 | (6.9) | |||||||||||||||||
$ | 45,567 | $ | 44,824 | 1.7 | % | $ | 84,637 | $ | 84,283 | 0.4 | % | ||||||||||||
Cash Basis: | |||||||||||||||||||||||
Retail | $ | 17,907 | $ | 17,723 | 1.0 | % | $ | 35,455 | $ | 35,906 | (1.3) | % | |||||||||||
Office | 18,079 | 17,297 | 4.5 | 30,120 | 28,512 | 5.6 | |||||||||||||||||
Multifamily | 3,407 | 3,240 | 5.2 | 6,604 | 6,359 | 3.9 | |||||||||||||||||
Mixed-Use | 5,957 | 5,926 | 0.5 | 11,329 | 12,168 | (6.9) | |||||||||||||||||
$ | 45,350 | $ | 44,186 | 2.6 | % | $ | 83,508 | $ | 82,945 | 0.7 | % | ||||||||||||
(1) Same-store portfolio excludes (i) Hassalo on Eighth - Multifamily, which became available for occupancy in July and October of 2015; (ii) Hassalo on Eighth - Retail, which was placed in operations in April, July and October of 2016; (iii) the
(2) Same-store portfolio excludes (i) Torrey Reserve Campus due to significant redevelopment activity during the period; (ii) Hassalo on Eighth - Multifamily, which became available for occupancy in July and October of 2015; (iii) Hassalo on Eighth - Retail, which was placed in operations in April, July and October of 2016; (iv) the
On a same-store cash basis, retail property operating income increased for the three months ended
On a same-store basis, office property operating income increased for the six months ended
On a same-store basis, multifamily property operating income increased for the three and six months ended
On a same-store basis, mixed-use property operating income decreased for the six months ended
Development
Our development efforts at
On
Our development opportunities are subject to market conditions and actual results may vary.
Acquisitions
On
Private Placement of Notes
On
Net of the settlement of a treasury lock, the fixed economic interest rate for the Series E Notes is approximately 4.18% per annum, through maturity.
Balance Sheet and Liquidity
At June 30, 2017, the company had gross real estate assets of
Dividends
The company declared dividends on its shares of common stock of
In addition, the company has declared a dividend on its common stock of
Subsequent Events
On
On
Guidance
The company reaffirms its guidance for full year 2017 FFO per diluted share range of a range of
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, credit spreads 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 second quarter of 2017 on Wednesday, August 2, 2017 at
Supplemental Information
Supplemental financial information regarding the company's second quarter 2017 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
Consolidated Balance Sheets
(In Thousands, Except Share Data)
June 30, 2017 |
December 31, 2016 |
||||||
Assets | (unaudited) | ||||||
Real estate, at cost | |||||||
Operating real estate | $ | 2,477,653 | $ | 2,241,061 | |||
Construction in progress | 61,415 | 50,498 | |||||
Held for development | 9,447 | 9,447 | |||||
2,548,515 | 2,301,006 | ||||||
Accumulated depreciation | (502,551) | (469,460) | |||||
Net real estate | 2,045,964 | 1,831,546 | |||||
Cash and cash equivalents | 31,380 | 44,801 | |||||
Restricted cash | 9,211 | 9,950 | |||||
Accounts receivable, net | 6,483 | 9,330 | |||||
Deferred rent receivables, net | 37,924 | 38,452 | |||||
Other assets, net | 40,214 | 52,854 | |||||
Total assets | $ | 2,171,176 | $ | 1,986,933 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Secured notes payable, net | $ | 280,170 | $ | 445,180 | |||
Unsecured notes payable, net | 944,816 | 596,350 | |||||
Unsecured line of credit | — | 20,000 | |||||
Accounts payable and accrued expenses | 40,884 | 32,401 | |||||
Security deposits payable | 6,779 | 6,114 | |||||
Other liabilities and deferred credits, net | 46,164 | 48,337 | |||||
Total liabilities | 1,318,813 | 1,148,382 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
American Assets Trust, Inc. stockholders' equity | |||||||
Common stock, $0.01 par value, 490,000,000 shares authorized, 47,130,063 and 45,732,109 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively | 471 | 457 | |||||
Additional paid-in capital | 916,695 | 874,597 | |||||
Accumulated dividends in excess of net income | (88,595) | (77,296) | |||||
Accumulated other comprehensive income | 10,494 | 11,798 | |||||
Total American Assets Trust, Inc. stockholders' equity | 839,065 | 809,556 | |||||
Noncontrolling interests | 13,298 | 28,995 | |||||
Total equity | 852,363 | 838,551 | |||||
Total liabilities and equity | $ | 2,171,176 | $ | 1,986,933 | |||
Unaudited Consolidated Statements of Income
(In Thousands, Except Shares and Per Share Data)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue: | |||||||||||||||
Rental income | $ | 72,925 | $ | 68,221 | $ | 142,965 | $ | 135,466 | |||||||
Other property income | 4,181 | 3,598 | 7,933 | 7,084 | |||||||||||
Total revenue | 77,106 | 71,819 | 150,898 | 142,550 | |||||||||||
Expenses: | |||||||||||||||
Rental expenses | 19,841 | 19,590 | 39,700 | 38,043 | |||||||||||
Real estate taxes | 7,904 | 6,417 | 15,440 | 13,050 | |||||||||||
General and administrative | 5,131 | 4,394 | 10,213 | 8,943 | |||||||||||
Depreciation and amortization | 24,182 | 17,714 | 42,168 | 35,167 | |||||||||||
Total operating expenses | 57,058 | 48,115 | 107,521 | 95,203 | |||||||||||
Operating income | 20,048 | 23,704 | 43,377 | 47,347 | |||||||||||
Interest expense | (12,652) | (13,153) | (25,983) | (26,099) | |||||||||||
Other income, net | 192 | 99 | 502 | 123 | |||||||||||
Net income | 7,588 | 10,650 | 17,896 | 21,371 | |||||||||||
Net income attributable to restricted shares | (61) | (43) | (121) | (86) | |||||||||||
Net income attributable to unitholders in the Operating Partnership | (2,008) | (3,008) | (4,869) | (6,035) | |||||||||||
Net income attributable to American Assets Trust, Inc. stockholders | $ | 5,519 | $ | 7,599 | $ | 12,906 | $ | 15,250 | |||||||
Net income per share | |||||||||||||||
Basic income attributable to common stockholders per share | $ | 0.12 | $ | 0.17 | $ | 0.28 | $ | 0.34 | |||||||
Weighted average shares of common stock outstanding - basic | 46,871,377 | 45,235,292 | 46,524,510 | 45,234,583 | |||||||||||
Diluted income attributable to common stockholders per share | $ | 0.12 | $ | 0.17 | $ | 0.28 | $ | 0.34 | |||||||
Weighted average shares of common stock outstanding - diluted | 64,089,081 | 63,134,808 | 64,075,919 | 63,134,099 | |||||||||||
Dividends declared per common share | $ | 0.26 | $ | 0.25 | $ | 0.52 | $ | 0.50 | |||||||
Reconciliation of Net Income to Funds From Operations
The company's FFO attributable to common stockholders and operating partnership unitholders and reconciliation to net income is as follows (in thousands except shares and per share data, unaudited):
Three Months Ended | Six Months Ended | ||||||
June 30, 2017 | June 30, 2017 | ||||||
Funds From Operations (FFO) | |||||||
Net income | $ | 7,588 | $ | 17,896 | |||
Depreciation and amortization of real estate assets | 24,182 | 42,168 | |||||
FFO, as defined by NAREIT | $ | 31,770 | $ | 60,064 | |||
Less: Nonforfeitable dividends on incentive stock awards | (59) | (118) | |||||
FFO attributable to common stock and units | $ | 31,711 | $ | 59,946 | |||
FFO per diluted share/unit | $ | 0.49 | $ | 0.94 | |||
Weighted average number of common shares and units, diluted | 64,089,324 | 64,076,262 | |||||
Reported results are preliminary and not final until the filing of the company's Form 10-Q with the
Use of Non-GAAP Information
The company calculates FFO in accordance with the standards established by the
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.
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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
Investor and Media Contact:
Executive Vice President and Chief Financial Officer
858-350-2607