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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019March 31, 2020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             

AMERICAN ASSETS TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
Commission file number: 001-35030
001-35030

AMERICAN ASSETS TRUST, L.P.
(Exact Name of Registrant as Specified in its Charter)
Commission file number: 333-202342-01
 
Maryland (American Assets Trust, Inc.)27-3338708 (American Assets Trust, Inc.)
Maryland (American Assets Trust, L.P.)27-3338894 (American Assets Trust, L.P.)
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
Maryland (American Assets Trust, Inc.)27-3338708 (American Assets Trust, Inc.)
Maryland (American Assets Trust, L.P.)27-3338894 (American Assets Trust, L.P.)
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
145511455 El Camino Real, Suite 2009213092130
San DiegoCalifornia
(Address of Principal Executive Offices)(Zip Code)
(858) (858) 350-2600
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

American Assets Trust, Inc.    ☒  Yes   ☐  No
American Assets Trust, L.P.   ☒  Yes   ☐  No
(American Assets Trust, L.P. became subject to filing requirements under Section 13 of the Securities Exchange Act of 1934, as amended, upon effectiveness of its Registration Statement on Form S-3 on February 6, 2015 and has filed all required reports subsequent to that date.)
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    
        
American Assets Trust, Inc.    ☒  Yes   ☐   No
American Assets Trust, L.P.   ☒  Yes   ☐   No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
American Assets Trust, Inc.
Large Accelerated Filer☒Accelerated Filer☐
Non-Accelerated Filer☐(Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☐

American Assets Trust, L.P.
Large Accelerated Filer☐Accelerated Filer☐
Non-Accelerated Filer☒(Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      
        
American Assets Trust, Inc.    ☐  Yes    ☒  No
American Assets Trust, L.P.   ☐  Yes    ☒  No

Securities registered pursuant to Section 12(b) of the Act:
Name of RegistrantTitle of each classTrading SymbolName of each exchange on which registered
American Assets Trust, Inc.Common Stock, par value $0.01 per shareAATNew York Stock Exchange
American Assets Trust, L.P.NoneNoneNone

American Assets Trust, Inc. had 59,722,15860,067,910 shares of common stock, par value $0.01 per share, outstanding as of August 2, 2019.May 1, 2020.



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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2019March 31, 2020 of American Assets Trust, Inc., a Maryland corporation, and American Assets Trust, L.P., a Maryland limited partnership, of which American Assets Trust, Inc. is the parent company and sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our” or “the company” refer to American Assets Trust, Inc. together with its consolidated subsidiaries, including American Assets Trust, L.P. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “our Operating Partnership” or “the Operating Partnership” refer to American Assets Trust, L.P. together with its consolidated subsidiaries.

American Assets Trust, Inc. operates as a real estate investment trust, or REIT, and is the sole general partner of the Operating Partnership. As of June 30, 2019,March 31, 2020, American Assets Trust, Inc. owned an approximate 78.4%78.5% partnership interest in the Operating Partnership. The remaining 21.6%21.5% partnership interests are owned by non-affiliated investors and certain of our directors and executive officers. As the sole general partner of the Operating Partnership, American Assets Trust, Inc. has full, exclusive and complete authority and control over the Operating Partnership’s day-to-day management and business, can cause it to enter into certain major transactions, including acquisitions, dispositions and refinancings, and can cause changes in its line of business, capital structure and distribution policies.

The company believes that combining the quarterly reports on Form 10-Q of American Assets Trust, Inc. and the Operating Partnership into a single report will result in the following benefits:

•better reflects how management and the analyst community view the business as a single operating unit;
•enhance investors' understanding of American Assets Trust, Inc. and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
•greater efficiency for American Assets Trust, Inc. and the Operating Partnership and resulting savings in time, effort and expense; and
•greater efficiency for investors by reducing duplicative disclosure by providing a single document for their review.

Management operates American Assets Trust, Inc. and the Operating Partnership as one enterprise. The management of American Assets Trust, Inc. and the Operating Partnership are the same.

There are a few differences between American Assets Trust, Inc. and the Operating Partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between American Assets Trust, Inc. and the Operating Partnership in the context of how American Assets Trust, Inc. and the Operating Partnership operate as an interrelated consolidated company. American Assets Trust, Inc. is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, American Assets Trust, Inc. does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. American Assets Trust, Inc. itself does not hold any indebtedness. The Operating Partnership holds substantially all the assets of the company, directly or indirectly holds the ownership interests in the company’s real estate ventures, conducts the operations of the business and is structured as a partnership with no publicly-traded equity. Except for net proceeds from public equity issuances by American Assets Trust, Inc., which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of operating partnership units.

Noncontrolling interests and stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of American Assets Trust, Inc. and those of American Assets Trust, L.P. The partnership interests in the Operating Partnership that are not owned by American Assets Trust, Inc. are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in American Assets Trust, Inc.’s financial statements. To help investors understand the significant differences between the company and the Operating Partnership, this report presents the following separate sections for each of American Assets Trust, Inc. and the Operating Partnership:

•consolidated financial statements;
•the following notes to the consolidated financial statements:
◦Debt;
◦Equity/Partners' Capital; and
◦Earnings Per Share/Unit; and
◦Debt;
◦Equity/Partners' Capital; and
◦Earnings Per Share/Unit; and
•Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations.


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This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of American Assets Trust, Inc. and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of American Assets Trust, Inc. have made the requisite certifications and American Assets Trust, Inc. and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.




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AMERICAN ASSETS TRUST, INC. AND AMERICAN ASSETS TRUST, L.P.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2019MARCH 31, 2020
 
PART 1. FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Financial Statements of American Assets Trust, Inc.:
1
2
3
4
Consolidated Financial Statements of American Assets Trust, L.P.:
5
26
3
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and 2018
5
Consolidated Financial Statements of American Assets Trust, L.P.:
Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018
6
Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2019 and 2018
7
Consolidated Statement of Partners' Capital (unaudited) for the three and six months ended June 30, 2019March 31, 2020 and 20182019
87
108
119
Item 2.
3428
Item 3.
5343
Item 4.
5443
PART II. OTHER INFORMATION
Item 1.
5544
Item 1A.
5544
Item 2.
5545
Item 3.
5546
Item 4.
5546
Item 5.
5546
Item 6.
5647
5748



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PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



American Assets Trust, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Data)
 
June 30, December 31,March 31,December 31,
2019 201820202019
(unaudited)   (unaudited)
ASSETS   ASSETS
Real estate, at cost   Real estate, at cost
Operating real estate$3,056,767
 $2,549,571
Operating real estate$3,118,356  $3,096,886  
Construction in progress83,461
 71,228
Construction in progress90,598  91,264  
Held for development547
 9,392
Held for development547  547  
3,140,775
 2,630,191
3,209,501  3,188,697  
Accumulated depreciation(621,852) (590,338)Accumulated depreciation(687,932) (665,222) 
Net real estate2,518,923
 2,039,853
Net real estate2,521,569  2,523,475  
Cash and cash equivalents44,778
 47,956
Cash and cash equivalents52,371  99,303  
Restricted cash9,702
 9,316
Restricted cash4,457  10,148  
Accounts receivable, net10,104
 9,289
Accounts receivable, net8,621  12,016  
Deferred rent receivables, net42,098
 39,815
Deferred rent receivables, net56,869  52,171  
Other assets, net93,153
 52,021
Other assets, net112,298  93,220  
TOTAL ASSETS$2,718,758
 $2,198,250
TOTAL ASSETS$2,756,185  $2,790,333  
LIABILITIES AND EQUITY   LIABILITIES AND EQUITY
LIABILITIES:   LIABILITIES:
Secured notes payable, net$162,426
 $182,572
Secured notes payable, net$110,892  $161,879  
Unsecured notes payable, net1,045,949
 1,045,863
Unsecured notes payable, net1,196,036  1,195,780  
Unsecured line of credit, net93,540
 62,337
Accounts payable and accrued expenses54,652
 46,616
Accounts payable and accrued expenses67,348  62,576  
Security deposits payable7,907
 8,844
Security deposits payable8,346  8,316  
Other liabilities and deferred credits, net62,362
 49,547
Other liabilities and deferred credits, net92,542  68,110  
Total liabilities1,426,836
 1,395,779
Total liabilities1,475,164  1,496,661  
Commitments and contingencies (Note 12)

 


Commitments and contingencies (Note 11)Commitments and contingencies (Note 11)
EQUITY:   EQUITY:
American Assets Trust, Inc. stockholders’ equity   American Assets Trust, Inc. stockholders’ equity
Common stock, $0.01 par value, 490,000,000 shares authorized, 59,722,748 and 47,335,409 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively597
 474
Common stock, $0.01 par value, 490,000,000 shares authorized, 60,068,228 shares issued and outstanding at both March 31, 2020 and December 31, 2019Common stock, $0.01 par value, 490,000,000 shares authorized, 60,068,228 shares issued and outstanding at both March 31, 2020 and December 31, 2019601  601  
Additional paid-in capital1,438,768
 920,661
Additional paid-in capital1,453,264  1,452,014  
Accumulated dividends in excess of net income(135,497) (128,778)Accumulated dividends in excess of net income(150,226) (144,378) 
Accumulated other comprehensive income5,876
 10,620
Accumulated other comprehensive income603  5,680  
Total American Assets Trust, Inc. stockholders’ equity1,309,744
 802,977
Total American Assets Trust, Inc. stockholders’ equity1,304,242  1,313,917  
Noncontrolling interests(17,822) (506)Noncontrolling interests(23,221) (20,245) 
Total equity1,291,922
 802,471
Total equity1,281,021  1,293,672  
TOTAL LIABILITIES AND EQUITY$2,718,758
 $2,198,250
TOTAL LIABILITIES AND EQUITY$2,756,185  $2,790,333  
The accompanying notes are an integral part of these consolidated financial statements.

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American Assets Trust, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands, Except Shares and Per Share Data)
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended March 31,
2019 2018 2019 2018 20202019
REVENUE:       REVENUE:
Rental income$79,656
 $76,892
 $156,487
 $153,093
Rental income$92,070  $76,831  
Other property income4,457
 8,131
 12,945
 12,662
Other property income4,673  8,488  
Total revenue84,113
 85,023
 169,432
 165,755
Total revenue96,743  85,319  
EXPENSES:       EXPENSES:
Rental expenses21,826
 20,882
 42,622
 41,302
Rental expenses22,568  20,796  
Real estate taxes9,275
 8,628
 18,321
 17,174
Real estate taxes11,045  9,046  
General and administrative5,943
 5,396
 12,016
 10,963
General and administrative6,820  6,073  
Depreciation and amortization22,582
 32,868
 43,165
 66,147
Depreciation and amortization27,462  20,583  
Total operating expenses59,626
 67,774
 116,124
 135,586
Total operating expenses67,895  56,498  
OPERATING INCOME24,487
 17,249
 53,308
 30,169
OPERATING INCOME28,848  28,821  
Interest expense(13,129) (12,688) (26,478) (26,508)Interest expense(13,472) (13,349) 
Gain on sale of real estate633
 —
 633
 —
Other (expense) income, net(50) (148) (279) 61
Other income (expense), netOther income (expense), net108  (229) 
NET INCOME11,941
 4,413
 27,184
 3,722
NET INCOME15,484  15,243  
Net income attributable to restricted shares(92) (216) (185) (144)Net income attributable to restricted shares(104) (93) 
Net income attributable to unitholders in the Operating Partnership(2,933) (1,125) (6,988) (959)Net income attributable to unitholders in the Operating Partnership(3,312) (4,055) 
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS$8,916
 $3,072
 $20,011
 $2,619
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS$12,068  $11,095  
       
EARNINGS PER COMMON SHARE       EARNINGS PER COMMON SHARE
Earnings per common share, basic$0.18
 $0.07
 $0.41
 $0.06
Earnings per common share, basic$0.20  $0.24  
Weighted average shares of common stock outstanding - basic50,135,978
 46,939,449
 48,578,872
 46,937,645
Weighted average shares of common stock outstanding - basic59,723,072  47,004,465  
       
Earnings per common share, diluted$0.18
 $0.07
 $0.41
 $0.06
Earnings per common share, diluted$0.20  $0.24  
Weighted average shares of common stock outstanding - diluted66,889,784
 64,132,520
 65,543,409
 64,131,665
Weighted average shares of common stock outstanding - diluted76,113,620  64,182,073  
       
DIVIDENDS DECLARED PER COMMON SHARE$0.28
 $0.27
 $0.56
 $0.54
DIVIDENDS DECLARED PER COMMON SHARE$0.30  $0.28  
       
COMPREHENSIVE INCOME       COMPREHENSIVE INCOME
Net income$11,941
 $4,413
 $27,184
 $3,722
Net income$15,484  $15,243  
Other comprehensive (loss) income - unrealized (loss) income on swap derivative during the period(3,891) 875
 (6,023) 3,736
Other comprehensive (loss) income - unrealized (loss) income on swap derivatives during the periodOther comprehensive (loss) income - unrealized (loss) income on swap derivatives during the period(6,115) (2,132) 
Reclassification of amortization of forward-starting swap included in interest expense(319) (319) (639) (639)Reclassification of amortization of forward-starting swap included in interest expense(333) (320) 
Comprehensive income7,731
 4,969
 20,522
 6,819
Comprehensive income9,036  12,791  
Comprehensive income attributable to non-controlling interest(1,820) (1,271) (5,218) (1,773)
Comprehensive income attributable to non-controlling interestsComprehensive income attributable to non-controlling interests(1,941) (3,398) 
Comprehensive income attributable to American Assets Trust, Inc.$5,911
 $3,698
 $15,304
 $5,046
Comprehensive income attributable to American Assets Trust, Inc.$7,095  $9,393  

The accompanying notes are an integral part of these consolidated financial statements.

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American Assets Trust, Inc.
Consolidated Statement of Equity
(Unaudited)
(In Thousands, Except Share Data)

 Common SharesAdditional
Paid-in
Capital		Accumulated
Dividends in
Excess of Net
Income		Accumulated Other Comprehensive Income (Loss)Noncontrolling Interests - Unitholders in the Operating PartnershipTotal
 SharesAmount
Balance at December 31, 201960,068,228  $601  $1,452,014  $(144,378) $5,680  $(20,245) $1,293,672  
Net income—  —  —  12,172  —  3,312  15,484  
Dividends declared and paid—  —  —  (18,020) —  (4,917) (22,937) 
Stock-based compensation—  —  1,250  —  —  —  1,250  
Other comprehensive loss - change in value of interest rate swaps—  —  —  —  (4,816) (1,299) (6,115) 
Reclassification of amortization of forward-starting swap included in interest expense—  —  —  —  (261) (72) (333) 
Balance at March 31, 202060,068,228  $601  $1,453,264  $(150,226) $603  $(23,221) $1,281,021  
 American Assets Trust, Inc. Stockholders’ Equity Noncontrolling Interests - Unitholders in the Operating Partnership Total
 Common Shares 
Additional
Paid-in
Capital
 
Accumulated
Dividends in
Excess of Net
Income
 Accumulated Other Comprehensive Income (Loss) 
 Shares Amount  
Balance at December 31, 201847,335,409
 $474
 $920,661
 $(128,778) $10,620
 $(506) $802,471
Net income—
 —
 —
 11,188
 —
 4,055
 15,243
Common shares issued162,531
 1
 7,033
 —
 —
 —
 7,034
Forfeiture of restricted stock(11,046) —
 —
 —
 —
 —
 —
Dividends declared and paid—
 —
 —
 (13,251) —
 (4,810) (18,061)
Stock-based compensation—
 —
 1,098
 —
 —
 —
 1,098
Other comprehensive income - change in value of interest rate swaps—
 —
 —
 —
 (1,561) (571) (2,132)
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (234) (86) (320)
Balance at March 31, 201947,486,894
 $475
 $928,792
 $(130,841) $8,825
 $(1,918) $805,333
Net income—
 —
 —
 9,008
 —
 2,933
 11,941
Common shares issued11,444,382
 114
 495,866
 —
 —
 —
 495,980
Issuance of restricted stock4,412
 —
 —
 —
 —
 —
 —
Conversion of operating partnership units787,060
 8
 12,979
 —
 148
 (13,135) —
Dividends declared and paid—
 —
 —
 (13,664) —
 (4,589) (18,253)
Stock-based compensation—
 —
 1,131
 —
 —
 —
 1,131
Other comprehensive income - change in value of interest rate swaps—
 —
 —
 —
 (2,857) (1,034) (3,891)
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (240) (79) (319)
Balance at June 30, 201959,722,748
 $597
 $1,438,768
 $(135,497) $5,876
 $(17,822) $1,291,922


 Common SharesAdditional
Paid-in
Capital		Accumulated
Dividends in
Excess of Net
Income		Accumulated Other Comprehensive Income (Loss)Noncontrolling Interests - Unitholders in the Operating PartnershipTotal
 SharesAmount
Balance at December 31, 201847,335,409  $474  $920,661  $(128,778) $10,620  $(506) $802,471  
Net income—  —  —  11,188  —  4,055  15,243  
Common shares issued162,531  1  7,033  —  —  —  7,034  
Forfeiture of restricted stock(11,046) —  —  —  —  —  —  
Dividends declared and paid—  —  —  (13,251) —  (4,810) (18,061) 
Stock-based compensation—  —  1,098  —  —  —  1,098  
Other comprehensive loss - change in value of interest rate swaps—  —  —  —  (1,561) (571) (2,132) 
Reclassification of amortization of forward-starting swap included in interest expense—  —  —  —  (234) (86) (320) 
Balance at March 31, 201947,486,894  $475  $928,792  $(130,841) $8,825  $(1,918) $805,333  

 American Assets Trust, Inc. Stockholders’ Equity Noncontrolling Interests - Unitholders in the Operating Partnership Total
 Common Shares 
Additional
Paid-in
Capital
 
Accumulated
Dividends in
Excess of Net
Income
 Accumulated Other Comprehensive Income (Loss) 
 Shares Amount  
Balance at December 31, 201747,204,588
 $473
 $919,066
 $(97,280) $11,451
 $10,434
 $844,144
Net loss—
 —
 —
 (525) —
 (166) (691)
Forfeiture of restricted stock(1,104) —
 —
 —
 —
 —
 —
Dividends declared and paid—
 —
 —
 (12,745) —
 (4,643) (17,388)
Stock-based compensation—
 —
 727
 —
 —
 —
 727
Other comprehensive income - change in value of interest rate swaps—
 —
 —
 —
 2,107
 754
 2,861
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (234) (86) (320)
Balance at March 31, 201847,203,484
 $473
 $919,793
 $(110,550) $13,324
 $6,293
 $829,333
Net income—
 —
 —
 3,288
 $—
 1,125
 4,413
Issuance of restricted stock5,320
 —
 —
 —
 —
 —
 —
Forfeiture of restricted stock(2,208) —
 —
 —
 —
 —
 —
Conversion of operating partnership units17,372
 —
 (916) —
 —
 916
 —
Dividends declared and paid—
 —
 —
 (12,746) —
 (4,642) (17,388)
Stock-based compensation—
 —
 727
 —
 —
 —
 727
Shares withheld for employee taxes(159) —
 (6) —
 —
 —
 (6)
Other comprehensive income - change in value of interest rate swaps—
 —
 —
 —
 643
 232
 875
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (233) (86) (319)
Balance at June 30, 201847,223,809
 $473
 $919,598
 $(120,008) $13,734
 $3,838
 $817,635



The accompanying notes are an integral part of these consolidated financial statements.

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American Assets Trust, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
 Six Months Ended June 30,
 2019 2018
OPERATING ACTIVITIES   
Net income$27,184
 $3,722
Adjustments to reconcile net income to net cash provided by operating activities:   
Deferred rent revenue and amortization of lease intangibles2,562
 2,096
Depreciation and amortization43,165
 66,147
Amortization of debt issuance costs and debt fair value adjustments724
 806
Gain on sale of real estate(633) —
Stock-based compensation expense2,229
 1,454
Lease termination income(4,518) —
Other noncash interest expense(639) (639)
Other, net(380) 1,495
Changes in operating assets and liabilities   
Change in accounts receivable(177) 2,220
Change in other assets1,305
 755
Change in accounts payable and accrued expenses3,453
 1,749
Change in security deposits payable(1,380) 2,142
Change in other liabilities and deferred credits(2,726) 370
Net cash provided by operating activities70,169
 82,317
INVESTING ACTIVITIES   
Acquisition of real estate(507,780) —
Capital expenditures(47,838) (20,353)
Proceeds from sale of real estate, net of selling costs8,191
 —
Leasing commissions(2,623) (3,057)
Net cash used in investing activities(550,050) (23,410)
FINANCING ACTIVITIES   
Repayment of secured notes payable(20,187) (74,476)
Proceeds from unsecured line of credit59,000

35,000
Repayment of unsecured line of credit(28,000) (13,000)
Debt issuance costs(424) (2,656)
Proceeds from issuance of common stock, net503,014
 (236)
Dividends paid to common stock and unitholders(36,314) (34,776)
Shares withheld for employee taxes—
 (6)
Net cash provided by (used in) financing activities477,089
 (90,150)
Net increase (decrease) in cash and cash equivalents(2,792) (31,243)
Cash, cash equivalents and restricted cash, beginning of period57,272
 91,954
Cash, cash equivalents and restricted cash, end of period$54,480
 $60,711

 Three Months Ended March 31,
 20202019
OPERATING ACTIVITIES
Net income$15,484  $15,243  
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred rent revenue and amortization of lease intangibles(3,762) (1,111) 
Depreciation and amortization27,462  20,583  
Amortization of debt issuance costs and debt fair value adjustments374  368  
Stock-based compensation expense1,250  1,098  
Lease termination income—  (4,518) 
Other noncash interest expense(333) (320) 
Other, net(3,570) 678  
Changes in operating assets and liabilities
Change in accounts receivable3,632  466  
Change in other assets616  45  
Change in accounts payable and accrued expenses4,435  7,150  
Change in security deposits payable30  (1,265) 
Change in other liabilities and deferred credits(257) (1,586) 
Net cash provided by operating activities45,361  36,831  
INVESTING ACTIVITIES
Capital expenditures(20,531) (20,932) 
Leasing commissions(3,394) (1,505) 
Net cash used in investing activities(23,925) (22,437) 
FINANCING ACTIVITIES
Repayment of secured notes payable(51,003) (19,909) 
Proceeds from unsecured line of credit—  24,000  
Debt issuance costs—  (415) 
Proceeds from issuance of common stock, net(119) 7,034  
Dividends paid to common stock and unitholders(22,937) (18,061) 
Net cash used in financing activities(74,059) (7,351) 
Net (decrease) increase in cash and cash equivalents(52,623) 7,043  
Cash, cash equivalents and restricted cash, beginning of period109,451  57,272  
Cash, cash equivalents and restricted cash, end of period$56,828  $64,315  

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:
Six Months Ended June 30,Three Months Ended March 31,
2019 201820202019
Cash and cash equivalents$44,778
 $51,326
Cash and cash equivalents52,371  54,538  
Restricted cash9,702
 9,385
Restricted cash4,457  9,777  
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows$54,480
 $60,711
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows$56,828  $64,315  
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
American Assets Trust, L.P.
Consolidated Balance Sheets
(In Thousands, Except Unit Data)
 
March 31,December 31,
20202019
 (unaudited)
ASSETS
Real estate, at cost
Operating real estate$3,118,356  $3,096,886  
Construction in progress90,598  91,264  
Held for development547  547  
3,209,501  3,188,697  
Accumulated depreciation(687,932) (665,222) 
Net real estate2,521,569  2,523,475  
Cash and cash equivalents52,371  99,303  
Restricted cash4,457  10,148  
Accounts receivable, net8,621  12,016  
Deferred rent receivables, net56,869  52,171  
Other assets, net112,298  93,220  
TOTAL ASSETS$2,756,185  $2,790,333  
LIABILITIES AND CAPITAL
LIABILITIES:
Secured notes payable, net$110,892  $161,879  
Unsecured notes payable, net1,196,036  1,195,780  
Accounts payable and accrued expenses67,348  62,576  
Security deposits payable8,346  8,316  
Other liabilities and deferred credits92,542  68,110  
Total liabilities1,475,164  1,496,661  
Commitments and contingencies (Note 11)
CAPITAL:
Limited partners' capital, 16,390,548 units issued and outstanding as of both March 31, 2020 and December 31, 2019(23,886) (22,281) 
General partner's capital, 60,068,228 units issued and outstanding as of both March 31, 2020 and December 31, 20191,303,639  1,308,237  
Accumulated other comprehensive income1,268  7,716  
Total capital1,281,021  1,293,672  
TOTAL LIABILITIES AND CAPITAL$2,756,185  $2,790,333  
 June 30, December 31,
 2019 2018
 (unaudited)  
ASSETS   
Real estate, at cost   
Operating real estate$3,056,767
 $2,549,571
Construction in progress83,461
 71,228
Held for development547
 9,392
 3,140,775
 2,630,191
Accumulated depreciation(621,852) (590,338)
Net real estate2,518,923
 2,039,853
Cash and cash equivalents44,778
 47,956
Restricted cash9,702
 9,316
Accounts receivable, net10,104
 9,289
Deferred rent receivables, net42,098
 39,815
Other assets, net93,153
 52,021
TOTAL ASSETS$2,718,758
 $2,198,250
LIABILITIES AND CAPITAL   
LIABILITIES:   
Secured notes payable, net$162,426
 $182,572
Unsecured notes payable, net1,045,949
 1,045,863
Unsecured line of credit, net93,540
 62,337
Accounts payable and accrued expenses54,652
 46,616
Security deposits payable7,907
 8,844
Other liabilities and deferred credits62,362
 49,547
Total liabilities1,426,836
 1,395,779
Commitments and contingencies (Note 12)

 


CAPITAL:   
Limited partners' capital, 16,390,548 and 17,177,608 units issued and outstanding as of June 30, 2019 and December 31, 2018, respectively(19,875) (4,477)
General partner's capital, 59,722,748 and 47,335,409 units issued and outstanding as of June 30, 2019 and December 31, 2018, respectively1,303,868
 792,357
Accumulated other comprehensive income7,929
 14,591
Total capital1,291,922
 802,471
TOTAL LIABILITIES AND CAPITAL$2,718,758
 $2,198,250

The accompanying notes are an integral part of these consolidated financial statements.


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Table of Contents
American Assets Trust, L.P.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands, Except Shares and Per Unit Data)
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended March 31,
2019 2018 2019 2018 20202019
REVENUE:       REVENUE:
Rental income$79,656
 $76,892
 $156,487
 $153,093
Rental income$92,070  $76,831  
Other property income4,457
 8,131
 12,945
 12,662
Other property income4,673  8,488  
Total revenue84,113
 85,023
 169,432
 165,755
Total revenue96,743  85,319  
EXPENSES:       EXPENSES:
Rental expenses21,826
 20,882
 42,622
 41,302
Rental expenses22,568  20,796  
Real estate taxes9,275
 8,628
 18,321
 17,174
Real estate taxes11,045  9,046  
General and administrative5,943
 5,396
 12,016
 10,963
General and administrative6,820  6,073  
Depreciation and amortization22,582
 32,868
 43,165
 66,147
Depreciation and amortization27,462  20,583  
Total operating expenses59,626
 67,774
 116,124
 135,586
Total operating expenses67,895  56,498  
OPERATING INCOME24,487
 17,249
 53,308
 30,169
OPERATING INCOME28,848  28,821  
Interest expense(13,129) (12,688) (26,478) (26,508)Interest expense(13,472) (13,349) 
Gain on sale of real estate633
 —
 633
 —
Other (expense) income, net(50) (148) (279) 61
Other income (expense), netOther income (expense), net108  (229) 
NET INCOME11,941
 4,413
 27,184
 3,722
NET INCOME15,484  15,243  
Net income attributable to restricted shares(92) (216) (185) (144)Net income attributable to restricted shares(104) (93) 
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P.$11,849
 $4,197
 $26,999
 $3,578
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P.$15,380  $15,150  
       
EARNINGS PER UNIT - BASIC       EARNINGS PER UNIT - BASIC
Earnings per unit, basic$0.18
 $0.07
 $0.41
 $0.06
Earnings per unit, basic$0.20  $0.24  
Weighted average units outstanding - basic66,889,784
 64,132,520
 65,543,409
 64,131,665
Weighted average units outstanding - basic76,113,620  64,182,073  
       
EARNINGS PER UNIT - DILUTED       EARNINGS PER UNIT - DILUTED
Earnings per unit, diluted$0.18
 $0.07
 $0.41
 $0.06
Earnings per unit, diluted$0.20  $0.24  
Weighted average units outstanding - diluted66,889,784
 64,132,520
 65,543,409
 64,131,665
Weighted average units outstanding - diluted76,113,620  64,182,073  
       
DISTRIBUTIONS PER UNIT$0.28
 $0.27
 $0.56
 $0.54
DISTRIBUTIONS PER UNIT$0.30  $0.28  
       
COMPREHENSIVE INCOME       COMPREHENSIVE INCOME
Net income$11,941
 $4,413
 $27,184
 $3,722
Net income$15,484  $15,243  
Other comprehensive income (loss) - unrealized income (loss) on swap derivative during the period(3,891) 875
 (6,023) 3,736
Other comprehensive income (loss) - unrealized income (loss) on swap derivative during the period(6,115) (2,132) 
Reclassification of amortization of forward-starting swap included in interest expense(319) (319) (639) (639)Reclassification of amortization of forward-starting swap included in interest expense(333) (320) 
Comprehensive income7,731
 4,969
 20,522
 6,819
Comprehensive income9,036  12,791  
Comprehensive income attributable to Limited Partners(1,820) (1,271) (5,218) (1,773)Comprehensive income attributable to Limited Partners(1,941) (3,398) 
Comprehensive income attributable to General Partner$5,911
 $3,698
 $15,304
 $5,046
Comprehensive income attributable to General Partner$7,095  $9,393  

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
American Assets Trust, L.P.
Consolidated Statement of Partners' Capital
(Unaudited)
(In Thousands, Except Unit Data)


 
Limited Partners' Capital (1)
 
General Partner's Capital (2)
 Accumulated Other Comprehensive Income (Loss) Total Capital
 Units Amount Units Amount 
Balance at December 31, 201817,177,608
 $(4,477) 47,335,409
 $792,357
 $14,591
 $802,471
Net income—
 4,055
 —
 11,188
 —
 15,243
Contributions from American Assets Trust, Inc.—
 —
 162,531
 7,034
 —
 7,034
Forfeiture of restricted units—
 —
 (11,046) —
 —
 —
Distributions—
 (4,810) —
 (13,251) —
 (18,061)
Stock-based compensation—
 —
 —
 1,098
 —
 1,098
Other comprehensive income - change in value of interest rate swap—
 —
 —
 —
 (2,132) (2,132)
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (320) (320)
Balance at March 31, 201917,177,608
 $(5,232) 47,486,894
 $798,426
 $12,139
 $805,333
Net income—
 2,933
 —
 9,008
 —
 11,941
Contributions from American Assets Trust, Inc.—
 —
 11,444,382
 495,980
 —
 495,980
Issuance of restricted units—
 —
 4,412
 —
 —
 —
Conversion of operating partnership units(787,060) (12,987) 787,060
 12,987
 —
 —
Distributions—
 (4,589) —
 (13,664) —
 (18,253)
Stock-based compensation—
 —
 —
 1,131
 —
 1,131
Other comprehensive income - change in value of interest rate swap—
 —
 —
 —
 (3,891) (3,891)
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (319) (319)
Balance at June 30, 201916,390,548
 $(19,875) 59,722,748
 $1,303,868
 $7,929
 $1,291,922
Limited Partners' Capital (1)
General Partner's Capital (2)
Accumulated Other Comprehensive Income (Loss)Total Capital
UnitsAmountUnitsAmount
Balance at December 31, 201916,390,548  $(22,281) 60,068,228  $1,308,237  $7,716  $1,293,672  
Net income—  3,312  —  12,172  —  15,484  
Distributions—  (4,917) —  (18,020) —  (22,937) 
Stock-based compensation—  —  —  1,250  —  1,250  
Other comprehensive loss - change in value of interest rate swap—  —  —  —  (6,115) (6,115) 
Reclassification of amortization of forward-starting swap included in interest expense—  —  —  —  (333) (333) 
Balance at March 31, 202016,390,548  $(23,886) 60,068,228  $1,303,639  $1,268  $1,281,021  


 
Limited Partners' Capital (1)
General Partner's Capital (2)
Accumulated Other Comprehensive Income (Loss)Total Capital
 UnitsAmountUnitsAmount
Balance at December 31, 201817,177,608  $(4,477) 47,335,409  $792,357  $14,591  $802,471  
Net income—  4,055  —  11,188  —  15,243  
Contributions from American Assets Trust, Inc.—  —  162,531  7,034  —  7,034  
Forfeiture of restricted units—  —  (11,046) —  —  —  
Distributions—  (4,810) —  (13,251) —  (18,061) 
Stock-based compensation—  —  —  1,098  —  1,098  
Other comprehensive loss - change in value of interest rate swap—  —  —  —  (2,132) (2,132) 
Reclassification of amortization of forward-starting swap included in interest expense—  —  —  —  (320) (320) 
Balance at March 31, 201917,177,608  $(5,232) 47,486,894  $798,426  $12,139  $805,333  

 
Limited Partners' Capital (1)
 
General Partner's Capital (2)
 Accumulated Other Comprehensive Income (Loss) Total Capital
 Units Amount Units Amount 
Balance at December 31, 201717,194,980
 $6,135
 47,204,588
 $822,259
 $15,750
 $844,144
Net loss—
 (166) —
 (525) —
 (691)
Forfeiture of restricted units—
 —
 (1,104) —
 —
 —
Distributions—
 (4,643) —
 (12,745) —
 (17,388)
Stock-based compensation—
 —
 —
 727
 —
 727
Other comprehensive income - change in value of interest rate swap—
 —
 —
 —
 2,861
 2,861
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (320) (320)
Balance at March 31, 201817,194,980
 $1,326
 47,203,484
 $809,716
 $18,291
 $829,333
Net income—
 1,125
 —
 3,288
 —
 4,413
Issuance of restricted units—
 —
 5,320
 —
 —
 —
Forfeiture of restricted units—
 —
 (2,208) —
 —
 —
Conversion of operating partnership units(17,372) 916
 17,372
 (916) —
 —
Distributions—
 (4,642) —
 (12,746) —
 (17,388)
Stock-based compensation—
 —
 —
 727
 —
 727
Units withheld for employee taxes—
 —
 (159) (6) —
 (6)
Other comprehensive income - change in value of interest rate swap—
 —
 —
 —
 875
 875
Reclassification of amortization of forward-starting swap included in interest expense—
 —
 —
 —
 (319) (319)
Balance at June 30, 201817,177,608
 $(1,275) 47,223,809
 $800,063
 $18,847
 $817,635


(1) Consists of limited partnership interests held by third parties.
(2) Consists of general partnership interests held by American Assets Trust, Inc.
The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Contents
American Assets Trust, L.P.
Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
 Six Months Ended June 30,
 2019 2018
OPERATING ACTIVITIES   
Net income$27,184
 $3,722
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Deferred rent revenue and amortization of lease intangibles2,562
 2,096
Depreciation and amortization43,165
 66,147
Amortization of debt issuance costs and debt fair value adjustments724
 806
Gain on sale of real estate(633) —
Stock-based compensation expense2,229
 1,454
Lease termination income(4,518) —
Other noncash interest expense(639) (639)
Other, net(380) 1,495
Changes in operating assets and liabilities   
Change in accounts receivable(177) 2,220
Change in other assets1,305
 755
Change in accounts payable and accrued expenses3,453
 1,749
Change in security deposits payable(1,380) 2,142
Change in other liabilities and deferred credits(2,726) 370
Net cash provided by operating activities70,169
 82,317
INVESTING ACTIVITIES   
Acquisition of real estate(507,780) —
Capital expenditures(47,838) (20,353)
Proceeds from sale of real estate, net of selling costs8,191
 —
Leasing commissions(2,623) (3,057)
Net cash used in investing activities(550,050) (23,410)
FINANCING ACTIVITIES   
Repayment of secured notes payable(20,187) (74,476)
Proceeds from unsecured line of credit59,000
 35,000
Repayment of unsecured line of credit(28,000) (13,000)
Debt issuance costs(424) (2,656)
Contributions from American Assets Trust, Inc.503,014
 (236)
Distributions(36,314) (34,776)
Shares withheld for employee taxes—
 (6)
Net cash provided by (used in) financing activities477,089
 (90,150)
Net increase (decrease) in cash and cash equivalents(2,792) (31,243)
Cash, cash equivalents and restricted cash, beginning of period57,272
 91,954
Cash, cash equivalents and restricted cash, end of period$54,480
 $60,711

 Three Months Ended March 31,
 20202019
OPERATING ACTIVITIES
Net income$15,484  $15,243  
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred rent revenue and amortization of lease intangibles(3,762) (1,111) 
Depreciation and amortization27,462  20,583  
Amortization of debt issuance costs and debt fair value adjustments374  368  
Stock-based compensation expense1,250  1,098  
Lease termination income—  (4,518) 
Other noncash interest expense(333) (320) 
Other, net(3,570) 678  
Changes in operating assets and liabilities
Change in accounts receivable3,632  466  
Change in other assets616  45  
Change in accounts payable and accrued expenses4,435  7,150  
Change in security deposits payable30  (1,265) 
Change in other liabilities and deferred credits(257) (1,586) 
Net cash provided by operating activities45,361  36,831  
INVESTING ACTIVITIES
Capital expenditures(20,531) (20,932) 
Leasing commissions(3,394) (1,505) 
Net cash used in investing activities(23,925) (22,437) 
FINANCING ACTIVITIES
Repayment of secured notes payable(51,003) (19,909) 
Proceeds from unsecured line of credit—  24,000  
Debt issuance costs—  (415) 
Contributions from American Assets Trust, Inc.(119) 7,034  
Distributions(22,937) (18,061) 
Net cash used in financing activities(74,059) (7,351) 
Net (decrease) increase in cash and cash equivalents(52,623) 7,043  
Cash, cash equivalents and restricted cash, beginning of period109,451  57,272  
Cash, cash equivalents and restricted cash, end of period$56,828  $64,315  

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:
Six Months Ended June 30,Three Months Ended March 31,
2019 201820202019
Cash and cash equivalents$44,778
 $51,326
Cash and cash equivalents$52,371  $54,538  
Restricted cash9,702
 9,385
Restricted cash4,457  9,777  
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows$54,480
 $60,711
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows$56,828  $64,315  
The accompanying notes are an integral part of these consolidated financial statements.


10
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Table of Contents
American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements
June 30, 2019March 31, 2020
(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Organization
American Assets Trust, Inc. (which may be referred to in these financial statements as the “Company,” “we,” “us,” or “our”) is a Maryland corporation formed on July 16, 2010 that did not have any operating activity until the consummation of our initial public offering on January 19, 2011. The Company is the sole general partner of American Assets Trust, L.P., a Maryland limited partnership formed on July 16, 2010 (the “Operating Partnership”). The Company’s operations are carried on through our Operating Partnership and its subsidiaries, including our taxable real estate investment trust ("REIT") subsidiary ("TRS"). Since the formation of our Operating Partnership, the Company has controlled our Operating Partnership as its general partner and has consolidated its assets, liabilities and results of operations.
We are a full service, vertically integrated, and self-administered REIT with approximately 197205 employees providing substantial in-house expertise in asset management, property management, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing.
As of June 30, 2019,March 31, 2020, we owned or had a controlling interest in 28 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of June 30, 2019,March 31, 2020, we owned land at three3 of our properties that we classify as held for development and/or construction in progress. A summary of the properties owned by us is as follows:
Retail
Carmel Country PlazaGateway MarketplaceAlamo Quarry Market
Carmel Mountain PlazaDel Monte CenterHassalo on Eighth - Retail
South Bay MarketplaceGeary Marketplace
Lomas Santa Fe PlazaThe Shops at Kalakaua
Solana Beach Towne CentreWaikele Center
RetailOffice
Carmel Country PlazaGateway MarketplaceAlamo Quarry Market
Carmel Mountain PlazaDel Monte CenterHassalo on Eighth - Retail
South Bay MarketplaceGeary Marketplace
Lomas Santa Fe PlazaThe Shops at Kalakaua
Solana Beach Towne CentreWaikele Center
Office
La Jolla CommonsOne Beach Street
Torrey Reserve CampusFirst & Main
Torrey PointLloyd District Portfolio
Solana Crossing (formerly Solana Beach Corporate Centre)City Center Bellevue
The Landmark at One Market
Multifamily
Loma PalisadesHassalo on Eighth - Residential
Imperial Beach Gardens
Mariner's Point
Santa Fe Park RV Resort
Pacific Ridge Apartments
Mixed-Use
Waikiki Beach Walk Retail and Embassy Suites™ Hotel
Held for Development and/or Construction in Progress
La Jolla Commons – Land
Solana Crossing – Land
Lloyd District Portfolio – Construction in Progress


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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


Basis of Presentation
Our consolidated financial statements include the accounts of the Company, our Operating Partnership and our subsidiaries. The equity interests of other investors in our Operating Partnership are reflected as noncontrolling interests.
All significant intercompany transactions and balances are eliminated in consolidation.
The accompanying consolidated financial statements of the Company and the Operating Partnership have been prepared in accordance with the rules applicable to Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (“GAAP”) for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and notes therein included in the Company's and Operating Partnership's annual report on Form 10-K for the year ended December 31, 2018.2019.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using our best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Any reference to the number of properties, number of units, square footage, employee numbers or percentages of beneficial ownership of our shares are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.
Consolidated Statements of Cash Flows—Supplemental Disclosures
The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows (in thousands): 
 Three Months Ended March 31,
 20202019
Supplemental cash flow information  
Total interest costs incurred  $13,736  $13,534  
Interest capitalized  $264  $185  
Interest expense  $13,472  $13,349  
Cash paid for interest, net of amounts capitalized  $15,043  $13,301  
Cash paid for income taxes  $51  $157  
Supplemental schedule of noncash investing and financing activities        
Accounts payable and accrued liabilities for construction in progress  $16,541  $12,838  
Accrued leasing commissions  $2,083  $663  
 Six Months Ended June 30,
 2019 2018
Supplemental cash flow information   
Total interest costs incurred$26,808
 $27,419
Interest capitalized$330
 $911
Interest expense$26,478
 $26,508
Cash paid for interest, net of amounts capitalized$26,574
 $26,926
Cash paid for income taxes$601
 $337
Supplemental schedule of noncash investing and financing activities 
  
Accounts payable and accrued liabilities for construction in progress$12,245
 $8,156
Accrued leasing commissions$7,963
 $2,735
Reduction to capital for prepaid offering costs$—
 $236


 Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018.2019. Except for the adoption of the accounting standards during the first quarter of 20192020 as discussed below, there have been no changes to our significant accounting policies during the sixthree months ended June 30, 2019.March 31, 2020.
Segment Information
Segment information is prepared on the same basis that our chief operating decision maker reviews information for operational decision-making purposes. We operate in four4 business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


space rental. The products for our office segment primarily include rental of office space and other tenant services, including
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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)

tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room369-room all-suite hotel.
Recent Accounting Pronouncements
 
In FebruaryJune 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), which provides the principles for the recognition, measurement, presentation and disclosure of leases. This ASU significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront.

We adopted the provisions of ASU No. 2016-02 effective January 1, 2019 using the modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows lessors to elect a practical expedient by class of underlying assets to not separate non-lease components from the lease component if certain conditions are met. The lessor’s practical expedient election would be limited to circumstances in which the non-lease components otherwise would be accounted for under the new revenue guidance and both (i) the timing and pattern of transfer are the same for the non-lease component and the related lease component and (ii) the lease component would be classified as an operating lease. The Company elected the practical expedient, which allows the Company the ability to combine the lease and non-lease components if the underlying asset meets the criteria above. Due to our election of the practical expedient approach, for the three and six months ended June 30, 2019 approximately $8.6 million and $16.4 million of non-lease components are combined with lease rental income. ASU 2018-11 also includes an optional transition method in addition to the existing requirements for transition to the new standard by recognizing a cumulative effect adjustment to the opening balance sheet of retained earnings in the period of adoption. Consequently, a company’s reporting for the comparative periods presented in the financial statements would continue to be in accordance with previous GAAP (Topic 840). The Company elected this practical expedient as well. Further, bad debt expense, which has previously been recorded in rental expenses, has now been classified as a contra-revenue account in rental income in the Company’s consolidated statements of comprehensive income.

We evaluated all leases within this scope under existing accounting standards and under the new ASU lease standard recognized approximately $7.7 million of right-of-use assets and lease liabilities. Approximately $0.8 million of deferred rent expense was reclassified to lease liability within the other liabilities and deferred credits, net.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards. The pronouncement is effective for reporting periods beginning after December 15, 2017. We adopted the provisions of the ASU effective January 1, 2018 using the modified retrospective approach. As discussed above, leases are specifically excluded from this and are governed by the applicable lease codification.

We evaluated the revenue recognition for all contracts within this scope under existing accounting standards and under the new revenue recognition ASU and confirmed that there were no differences in the amounts recognized or the pattern of recognition. This evaluation included revenues from the hotel portion of our mixed-use property, parking income and excise taxes charged to customers. Therefore, the adoption of this ASU did not result in an adjustment to our retained earnings on January 1, 2018.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Topics. The pronouncement requires companies to adopt a new approach to estimating credit losses on certain types of financial instruments, such as trade and other receivables and loans. The standard requires entities to estimate a lifetime expected credit loss for most financial instruments, including trade receivables. The pronouncement isIn November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of the pronouncement. We adopted the provisions of ASU No. 2016-13 effective for fiscal yearsJanuary 1, 2020 and for interim periods within those fiscal years, beginning after December 15, 2019, with earlythe adoption permitted. We continue to evaluate thedid not have a material impact this pronouncement will have on our consolidated financial statements.financials statements as the majority of our receivables are derived from operating leases and are excluded from this standard.



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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


NOTE 2. REAL ESTATE
Dispositions
On May 22, 2019, we sold Solana Beach – Highway 101. The property is located in Solana Beach, California and was previously included in our retail segment. The sales price of this property was approximately $9.4 million, less costs to sell, resulted in net proceeds to us of approximately $9.4 million. Accordingly, we recorded a gain on sale of approximately $0.6 million for the three and six months ended June 30, 2019.
Property Asset Acquisitions
On June 20, 2019, we acquired La Jolla Commons, consisting of two office towers totaling approximately 724,000 square feet, an entitled development parcel and two parking structures, located in San Diego, California. The purchase price was approximately $525 million, less seller credits of (i) approximately $11.5 million for speculative lease-up, (ii) approximately $4.2 million for assumed contractual liabilities (iii) and approximately $1.7 million for closing prorations, excluding closing costs of approximately $0.2 million. The property was acquired with proceeds from an underwritten public offering and borrowings under the Company's Second Amended and Restated Credit Facility (defined herein).
The financial information set forth below summarizes the Company’s purchase price allocation for La Jolla Commons during the six months ended June 30, 2019 (in thousands):
 La Jolla Commons
Land$82,759
Building361,471
Land improvements1,359
Furniture, fixtures, and equipment30,822
Total real estate476,411
Lease intangibles40,082
Prepaid expenses and other assets13
Assets acquired$516,506
Accounts payable and accrued expenses$3,578
Security deposits payable443
Other liabilities and deferred credits3,817
Liabilities assumed$7,838


The value allocated to lease intangibles is amortized over the related lease term as depreciation and amortization expense in the statement of income. The remaining weighted average amortization period as of June 30, 2019, is 8.7 years.
Pro Forma Financial Information

The pro forma financial information set forth below is based upon the Company’s historical consolidated statements of
operations for the six months ended June 30, 2019 and 2018, adjusted to give effect to the acquisition of La Jolla Commons, described above, as if such transaction had been completed on January 1, 2018. The pro forma financial information set forth below is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2018, nor does it purport to represent the results of future operations (in thousands):

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


 Six Months Ended June 30, 2019 Six Months Ended June 30, 2018
 As Reported ProForma As Reported ProForma
Total revenue$169,432
 $185,876
 $165,755
 $184,359
Total operating expenses$116,124
 $128,236
 $135,586
 $150,861
Operating income$53,308
 $57,640
 $30,169
 $33,498
Net income$27,184
 $30,888
 $3,722
 $6,524


The following table summarizes the operating results for La Jolla Commons included in the Company’s historical consolidated statement of operations and in the Office segment for the period of acquisition through June 30, 2019 (in thousands):
 June 20, 2019 through June 30, 2019
Revenues$1,168
Operating expenses$1,996
Operating income$(828)
Net income attributable to American Assets Trust, Inc.$(828)

NOTE 3. ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASES
The following summarizes our acquired lease intangibles and leasing costs, which are included in other assets and other liabilities and deferred credits, as of June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands): 
March 31, 2020December 31, 2019
In-place leases$63,657  $63,896  
Accumulated amortization(33,876) (32,672) 
Above market leases7,534  7,534  
Accumulated amortization(7,373) (7,351) 
Acquired lease intangible assets, net$29,942  $31,407  
Below market leases$62,126  $62,126  
Accumulated accretion(37,643) (36,674) 
Acquired lease intangible liabilities, net$24,483  $25,452  
 June 30, 2019 December 31, 2018
In-place leases$69,232
 $40,884
Accumulated amortization(34,575) (34,603)
Above market leases9,680
 11,963
Accumulated amortization(9,431) (11,445)
Acquired lease intangible assets, net$34,906
 $6,799
Below market leases$65,198
 $63,172
Accumulated accretion(37,614) (37,220)
Acquired lease intangible liabilities, net$27,584
 $25,952

NOTE 4.3. FAIR VALUE OF FINANCIAL INSTRUMENTS
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy for inputs used in measuring fair value is as follows:

1.Level 1 Inputs—quoted prices in active markets for identical assets or liabilities
2.Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities
3.Level 3 Inputs—unobservable inputs
1.Level 1 Inputs—quoted prices in active markets for identical assets or liabilities
2.Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets and liabilities
3.Level 3 Inputs—unobservable inputs
Except as disclosed below, the carrying amounts of our financial instruments approximate their fair value. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


We measure the fair value of our deferred compensation liability, which is included in other liabilities and deferred credits on the consolidated balance sheet, on a recurring basis using Level 2 inputs. We measure the fair value of this liability based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques.

The fair value of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contract at the reporting date and are determined using interest rate pricing models and interest rate related
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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)

observable inputs. The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2019March 31, 2020 we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative. As a result, we have determined that our derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows (in thousands):
 June 30, 2019 December 31, 2018
 Level 1Level 2Level 3Total Level 1Level 2Level 3Total
Deferred compensation liability$—
$1,494
$—
$1,494
 $—
$1,424
$—
$1,424
Interest rate swap asset$—
$961
$—
$961
 $—
$6,002
$—
$6,002
Interest rate swap liability$—
$1,783
$—
$1,783
 $—
$801
$—
$801

 March 31, 2020December 31, 2019
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Deferred compensation liability$—  $1,726  $—  $1,726  $—  $1,669  $—  $1,669  
Interest rate swap asset$—  $—  $—  $—  $—  $434  $—  $434  
Interest rate swap liability$—  $6,997  $—  $6,997  $—  $1,317  $—  $1,317  
 The fair value of our secured notes payable and unsecured senior guaranteed notes are sensitive to fluctuations in interest rates. Discounted cash flow analysis using observable market interest rates (Level 2) is generally used to estimate the fair value of our secured notes payable, using rates ranging from 3.3%2.3% to 4.2%4.0%.
Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The carrying values of our revolving line of credit and term loan set forth below are deemed to be at fair value since the outstanding debt is directly tied to monthly LIBOR contracts. A summary of the carrying amount and fair value of our secured financial instruments, all of which are based on Level 2 inputs, is as follows (in thousands):  
 March 31, 2020December 31, 2019
 Carrying ValueFair ValueCarrying ValueFair Value
Secured notes payable, net$110,892  $111,750  $161,879  $166,885  
Unsecured term loans, net$248,988  $250,000  $248,864  $250,000  
Unsecured senior guaranteed notes, net$947,048  $1,036,521  $946,916  $975,291  
Unsecured line of credit$—  $—  $—  $—  
 June 30, 2019 December 31, 2018
 Carrying Value Fair Value Carrying Value Fair Value
Secured notes payable, net$162,426
 $167,201
 $182,572
 $183,253
Unsecured term loans, net$248,617
 $250,000
 $248,765
 $250,000
Unsecured senior guaranteed notes, net$797,331
 $818,958
 $797,098
 $790,267
Unsecured line of credit, net$93,540
 $95,000
 $62,337
 $64,000


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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


NOTE 5.4. DERIVATIVE AND HEDGING ACTIVITIES

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.  To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 

On June 20, 2019, we entered into a treasury lock contract (the "June 2019 Treasury Lock") with Wells Fargo Bank, N.A., to reduce the interest rate variability exposure of the projected interest cash flows of our then prospective eleven-year private placement. The treasury lock contract has a notional amount of $100 million, termination date of July 31, 2019,, a fixed pay rate of 1.9925%, and a receive rate equal to the ten years treasury rate on the settlement date.
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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)


On July 17, 2019, we settled the June 2019 Treasury Lock, resulting in a gain of approximately $0.5 million, this gain will bewhich is included in accumulated other comprehensive income and will be amortized to interest expense over ten years. The treasury lock contract has been deemed to be a highly effective cash flow hedge and we elected to designate the treasury lock contract as an accounting hedge.
The following is a summary of the terms of our outstanding interest rate swaps as of June 30, 2019March 31, 2020 (dollars in thousands):
Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value
Bank of America, N.A. $100,000
 1/9/2019 1/9/2021 $(1,783)
U.S. Bank N.A. $100,000
 3/1/2016 3/1/2023 $606
Wells Fargo Bank, N.A. $50,000
 5/2/2016 3/1/2023 $325
Wells Fargo Bank, N.A. $100,000
 6/20/2019 7/31/2019 $30

Swap Counterparty Notional Amount Effective Date Maturity Date Fair Value
Bank of America, N.A. $100,000   1/9/2019 1/9/2021 $(1,964) 
U.S. Bank N.A.$100,000  3/1/20163/1/2023$(3,366) 
Wells Fargo Bank, N.A.$50,000  5/2/20163/1/2023$(1,667) 
The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded in accumulated other comprehensive income and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings for as long as hedged cash flows remain probable. During the next twelve months, we estimate that $1.3 million will be reclassified as a decrease to interest expense.
The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative.  This analysis reflects the contractual terms of the derivative, including the period to maturity, counter party credit risk and uses observable market-based inputs, including interest rate curves, and implied volatilities.  The fair value of the interest rate swap is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. 
NOTE 5. OTHER ASSETS

Other assets consist of the following (in thousands):
March 31, 2020December 31, 2019
Leasing commissions, net of accumulated amortization of $32,180 and $30,775, respectively$42,782  $42,539  
Interest rate swap asset—  434  
Acquired above market leases, net161  183  
Acquired in-place leases, net29,781  31,224  
Lease incentives, net of accumulated amortization of $623 and $565, respectively1,760  2,603  
Other intangible assets, net of accumulated amortization of $1,113 and $1,031, respectively2,809  2,893  
Debt issuance costs, net of accumulated amortization of $916 and $814, respectively1,154  1,256  
Right-of-use lease asset, net26,338  4,863  
Prepaid expenses and other7,513  7,225  
Total other assets$112,298  $93,220  

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


NOTE 6. OTHER ASSETS

Other assets consist of the following (in thousands):
 June 30, 2019 December 31, 2018
Leasing commissions, net of accumulated amortization of $29,584 and $28,597, respectively$42,008
 $28,796
Interest rate swap asset961
 6,002
Acquired above market leases, net249
 518
Acquired in-place leases, net34,657
 6,281
Lease incentives, net of accumulated amortization of $431 and $299, respectively598
 747
Other intangible assets, net of accumulated amortization of $1,061 and $981, respectively3,014
 2,994
Right-of-use lease asset6,278
 —
Prepaid expenses and other5,388
 6,683
Total other assets$93,153
 $52,021

NOTE 7.6. OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits consist of the following (in thousands):
 June 30, 2019 December 31, 2018
Acquired below market leases, net$27,584
 $25,952
Prepaid rent and deferred revenue10,650
 11,634
Interest rate swap liability1,783
 801
Deferred rent expense and lease intangible37
 2,210
Deferred compensation1,494
 1,424
Deferred tax liability95
 93
Straight-line rent liability13,725
 7,393
Lease liability6,942
 —
Other liabilities52
 40
Total other liabilities and deferred credits, net$62,362
 $49,547

March 31, 2020December 31, 2019
Acquired below market leases, net$24,483  $25,452  
Prepaid rent and deferred revenue13,311  16,969  
Interest rate swap liability6,997  1,317  
Deferred rent expense and lease intangible25  28  
Deferred compensation1,726  1,669  
Deferred tax liability332  332  
Straight-line rent liability18,848  16,903  
Lease liability26,781  5,380  
Other liabilities39  60  
Total other liabilities and deferred credits, net$92,542  $68,110  
Straight-line rent liability relates to leases which have rental payments that decrease over time or one-time upfront payments for which the rental revenue is deferred and recognized on a straight-line basis.
NOTE 8.7. DEBT
Debt of American Assets Trust, Inc.
American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's obligations under the (i) amended and restated credit facility, (ii) term loans, and (iii) senior guaranteed notes. Additionally, American Assets Trust, Inc. has provided carve-out guarantees on certain property-level mortgage debt.
Debt of American Assets Trust, L.P.
Secured notes payable
The following is a summary of our total secured notes payable outstanding as of March 31, 2020 and December 31, 2019 (in thousands):
 Principal Balance as ofStated Interest RateStated Maturity Date
Description of DebtMarch 31, 2020December 31, 2019as of March 31, 2020
Torrey Reserve—VCI, VCII, VCIII (1)(2)
—  6,498  6.36 %June 1, 2020
Solana Crossing I-II (1)(2)
—  10,270  5.91 %June 1, 2020
Solana Beach Towne Centre (1)(2)
—  34,235  5.91 %June 1, 2020
City Center Bellevue (3)
111,000  111,000  3.98 %November 1, 2022
111,000  162,003  
Debt issuance costs, net of accumulated amortization of $313 and $449, respectively(108) (124) 
Total Secured Notes Payable Outstanding$110,892  $161,879  

(1)Loan repaid in full, without premium or penalty, on March 2, 2020.
(2)Principal payments based on a 30-year amortization schedule.
(3)Interest only.
Certain loans require us to comply with various financial covenants. As of March 31, 2020, the Operating Partnership was in compliance with these financial covenants.
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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


Debt of American Assets Trust, L.P.
SecuredUnsecured notes payable
The following is a summary of ourthe Operating Partnership's total securedunsecured notes payable outstanding as of March 31, 2020 and December 31, 2019 (in thousands):
Description of DebtPrincipal Balance as ofStated Interest RateStated Maturity Date
March 31, 2020December 31, 2019as of March 31, 2020
Term Loan A$100,000  $100,000  Variable
(1)
January 9, 2021
Senior Guaranteed Notes, Series A150,000  150,000  4.04 %
(2)
October 31, 2021
Term Loan B100,000  100,000  Variable  
(3)
March 1, 2023
Term Loan C50,000  50,000  Variable
(4)
March 1, 2023
Senior Guaranteed Notes, Series F100,000  100,000  3.78 %
(5)
July 19, 2024
Senior Guaranteed Notes, Series B100,000  100,000  4.45 %February 2, 2025
Senior Guaranteed Notes, Series C100,000  100,000  4.50 %April 1, 2025
Senior Guaranteed Notes, Series D250,000  250,000  4.29 %
(6)
March 1, 2027
Senior Guaranteed Notes, Series E100,000  100,000  4.24 %
(7)
May 23, 2029
Senior Guaranteed Notes, Series G150,000  150,000  3.91 %
(8)
July 30, 2030
1,200,000  1,200,000  
Debt issuance costs, net of accumulated amortization of $8,090 and $7,835, respectively(3,964) (4,220) 
Total Unsecured Notes Payable$1,196,036  $1,195,780  
(1)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan A at approximately 4.13% through its stated maturity date, subject to adjustments based on our consolidated leverage ratio.
(2)The Operating Partnership entered into a one-month forward-starting seven years swap contract on August 19, 2014, which was settled on September 19, 2014 at a gain of approximately $1.6 million. The forward-starting seven-year swap contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88% per annum.
(3)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan B at approximately 3.15% through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan B is approximately 2.65%, subject to adjustments based on our consolidated leverage ratio.
(4)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan C at approximately 3.14% through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan C is approximately 2.64%, subject to adjustments based on our consolidated leverage ratio.
(5)The Operating Partnership entered into a treasury lock contract on May 31, 2017, which was settled on June 23, 2017 at a loss of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.85% per annum.
(6)The Operating Partnership entered into forward-starting interest rate swap contracts on March 29, 2016 and April 7, 2016, which were settled on January 18, 2017 at a gain of approximately $10.4 million. The forward-starting interest swap rate contracts were deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.87% per annum.
(7)The Operating Partnership entered into a treasury lock contract on April 25, 2017, which was settled on May 11, 2017 at a gain of approximately $0.7 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 4.18% per annum.
(8)The Operating Partnership entered into a treasury lock contract on June 20, 2019, which was settled on July 17, 2019 at a gain of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88% per annum.

On July 30, 2019, and December 31, 2018 (in thousands):
 Principal Balance as of Stated Interest Rate Stated Maturity Date
Description of DebtJune 30, 2019 December 31, 2018 as of June 30, 2019
Torrey Reserve—North Court (1)(2)
—
 19,620
 7.22% 
June 1, 2019
Torrey Reserve—VCI, VCII, VCIII (2)
6,567
 6,635
 6.36% 
June 1, 2020
Solana Crossing I-II (2)
10,387
 10,502
 5.91% 
June 1, 2020
Solana Beach Towne Centre (2)
34,625
 35,008
 5.91% 
June 1, 2020
City Center Bellevue (3)
111,000
 111,000
 3.98% 
November 1, 2022
 162,579
 182,765
    
Debt issuance costs, net of accumulated amortization of $420 and $671, respectively(153) (193)    
Total Secured Notes Payable Outstanding$162,426
 $182,572
    

(1)Loan repaid in full, without premium or penalty, on March 1, 2019.
(2)
Principal payments based on a 30-year amortization schedule.
(3)Interest only.
Certain loans require us to comply with various financial covenants. As of June 30, 2019, the Operating Partnership wasentered into a Note Purchase Agreement for the private placement of $150 million of 3.91% Senior Guaranteed Notes, Series G, due July 30, 2030 (the "Series G Notes"). The Series G Notes were issued on July 30, 2019 and will pay interest semi-annually on the 30th of July and January until their maturity.

The Operating Partnership may prepay at any time all, or from time to time any part of, the Series G Notes, in compliance with these financial covenants.an amount not less than 5% of the aggregate principal amount of any series of the Series G Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid plus a Make-Whole Amount (as defined in the Note Purchase Agreement for the Series G Notes).


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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


Unsecured notes payable
The following isNote Purchase Agreement for the Series G Notes contains a summarynumber of customary financial covenants, including, without limitation, secured and unsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Note Purchase Agreement for the Series G Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, Make-Whole Amount or interest under the Series G Notes, and (ii) a default in the payment of certain other indebtedness of the Operating Partnership's total unsecured notesPartnership, the Company or their subsidiaries, the principal and accrued and unpaid interest and the Make-Whole Amount on the outstanding Series G Notes will become due and payable outstanding asat the option of June 30, 2019the Purchasers (as defined in the Note Purchase Agreement for the Series G Notes).

The Operating Partnership’s obligations under the Series G Notes are fully and December 31, 2018 (in thousands):unconditionally guaranteed by the Company.
Description of DebtPrincipal Balance as of Stated Interest Rate Stated Maturity Date
June 30, 2019 December 31, 2018 as of June 30, 2019 
Term Loan A$100,000
 $100,000
 Variable
(1) 
 
January 9, 2021
 
Senior Guaranteed Notes, Series A150,000
 150,000
 4.04%
(2) 
 
October 31, 2021
 
Term Loan B100,000
 100,000
 Variable
(3) 
 
March 1, 2023
 
Term Loan C50,000
 50,000
 Variable
(4) 
 
March 1, 2023
 
Senior Guaranteed Notes, Series F100,000
 100,000
 3.78%
(5) 
 
July 19, 2024
 
Senior Guaranteed Notes, Series B100,000
 100,000
 4.45%  
February 2, 2025
 
Senior Guaranteed Notes, Series C100,000
 100,000
 4.50%  
April 1, 2025
 
Senior Guaranteed Notes, Series D250,000
 250,000
 4.29%
(6) 
 
March 1, 2027
 
Senior Guaranteed Notes, Series E100,000
 100,000
 4.24%
(7) 
 
May 23, 2029
 
 1,050,000
 1,050,000
      
Debt issuance costs, net of accumulated amortization of $7,324 and $6,844, respectively(4,051) (4,137)      
Total Unsecured Notes Payable$1,045,949
 $1,045,863
      
(1)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan A at approximately 4.13% through its stated maturity date, subject to adjustments based on our consolidated leverage ratio.
(2)The Operating Partnership entered into a one-month forward-starting seven years swap contract on August 19, 2014, which was settled on September 19, 2014 at a gain of approximately $1.6 million. The forward-starting seven-year swap contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88% per annum.
(3)The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan B at approximately 3.15% through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan B is approximately 2.75%, subject to adjustments based on our consolidated leverage ratio.
(4)
The Operating Partnership has entered into an interest rate swap agreement that is intended to fix the interest rate associated with Term Loan C at approximately 3.14% through its maturity date, subject to adjustments based on our consolidated leverage ratio. Effective March 1, 2018, the effective interest rate associated with Term Loan C is approximately 2.74%, subject to adjustments based on our consolidated leverage ratio.
(5)The Operating Partnership entered into a treasury lock contract on May 31, 2017, which was settled on June 23, 2017 at a loss of approximately $0.5 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.85% per annum.
(6)
The Operating Partnership entered into forward-starting interest rate swap contracts on March 29, 2016 and April 7, 2016, which were settled on January 18, 2017 at a gain of approximately $10.4 million. The forward-starting interest swap rate contracts were deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.87% per annum.
(7)
The Operating Partnership entered into a treasury lock contract on April 25, 2017, which was settled on May 11, 2017 at a gain of approximately $0.7 million. The treasury lock contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 4.18% per annum.
Certain loans require us to comply with various financial covenants. As of June 30, 2019,March 31, 2020, the Operating Partnership was in compliance with these financial covenants.

Amended Term Loan Agreement

On January 9, 2018, we entered into the Third Amendment to the Term Loan Agreement (as so amended, the "Term Loan Agreement"), which maintains the seven years $150 million unsecured term loan (referred to herein as Term Loan B and Term Loan C) to the Operating Partnership that matures on March 1, 2023 (the “$150mm Term Loan”). Effective as of March 1, 2018, borrowings under the Term Loan Agreement with respect to the $150mm Term Loan bear interest at floating rates equal to, at the Operating Partnership’s option, either (1) LIBOR, plus a spread which ranges from 1.20% to 1.70% based on the Operating Partnership’s consolidated leverage ratio, or (2) a base rate equal to the highest of (a) 0%, (b) the prime rate, (c) the federal funds rate plus 50 bps or (d) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.70% to 1.35% based on the Operating Partnership’s consolidated leverage ratio. Additionally, the Operating Partnership may elect for

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


borrowings to bear interest based on a ratings-based pricing grid as per the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Term Loan Agreement.

Second Amended and Restated Credit Facility
On January 9, 2018, we entered into a second amended and restated credit agreement (the "Second Amended and Restated Credit Facility"). The Second Amended and Restated Credit Facility provides for aggregate, unsecured borrowing of $450 million, consisting of a revolving line of credit of $350 million (the "Revolver Loan") and a term loan of $100 million (the "Term Loan A"). The Second Amended and Restated Credit Facility has an accordion feature that may allow us to increase the availability thereunder up to an additional $350$250 million, subject to meeting specified requirements and obtaining additional commitments from lenders. At June 30, 2019,March 31, 2020, there was $95 millionwere 0 amounts outstanding under the Revolver Loan withand we had incurred approximately $1.5$1.2 million of debt issuance costs, net.net, which are recorded in other assets, net on the consolidated balance sheets.
Borrowings under the Second Amended and Restated Credit Agreement initially bear interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from (a) 1.05% to 1.50% (with respect to the Revolver Loan) and (b) 1.30% to 1.90% (with respect to Term Loan A), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) LIBOR plus 100 bps, plus a spread which ranges from (i) 0.10% to 0.50% (with respect to the Revolver Loan) and (ii) 0.30% to 0.90% (with respect to Term Loan A), in each case based on our consolidated leverage ratio. For the six months ended June 30, 2019, the weighted average interest rate on the Revolver Loan was 3.59%.
The Revolver Loan initially matures on January 9, 2022, subject to our option to extend the Revolver Loan up to two2 times, with each such extension for a six months period. The extension options are exercisable by us subject to the satisfaction of certain conditions.
On January 9, 2019, we entered into the first amendment (“First Amendment”) to the Second Amended and Restated Credit Facility, which extended the maturity date of Term Loan A to January 9, 2021, subject to three,3, one year extension options.   Additionally, in connection with the First Amendment, borrowings under the Second Amended and Restated Credit Facility with respect to Term Loan A bear interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from 1.20% to 1.70% based on our consolidated total leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) the Eurodollar rate plus 100 bps, in each case plus a spread which ranges from 0.20% to 0.70% based on our consolidated total leverage ratio. The foregoing rates are intended to be more
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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)

favorable than previously contained in the Second Amended and Restated Credit Facility (prior to entry into the First Amendment) with respect to Term Loan A.
Additionally, the Second Amended and Restated Credit Facility includes a number of customary financial covenants, including:
•A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60%,
•A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 40%,
•A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x,
•A minimum unsecured interest coverage ratio of 1.75x,
•A maximum unsecured leverage ratio of 60%, and
•Recourse indebtedness at any time cannot exceed 15% of total asset value.
The Second Amended and Restated Credit Facility provides that our annual distributions may not exceed the greater of (1) 95% of our funds from operation ("FFO") or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.
As of June 30, 2019,March 31, 2020, the Operating Partnership was in compliance with the financial covenants in the Second Amended and Restated Credit Facility.

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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


NOTE 9.8. PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P.
Noncontrolling interests in our Operating Partnership are interests in the Operating Partnership that are not owned by us. Noncontrolling interests consisted of 16,390,548 common units (the “noncontrolling common units”), and represented approximately 21.6%21.5% of the ownership interests in our Operating Partnership at June 30, 2019.March 31, 2020. Common units and shares of our common stock have essentially the same economic characteristics in that common units and shares of our common stock share equally in the total net income or loss distributions of our Operating Partnership. Investors who own common units have the right to cause our Operating Partnership to redeem any or all of their common units for cash equal to the then-current market value of one share of our common stock, or, at our election, shares of our common stock on a one-for-one1-for-one basis.
During the three and six months ended June 30, 2019, 787,060March 31, 2020, 0 common units were converted into shares of our common stock.
Earnings (Loss) Per Unit of the Operating Partnership
Basic earnings (loss) per unit (“EPU”) of the Operating Partnership is computed by dividing income applicable to unitholders by the weighted average Operating Partnership units outstanding, as adjusted for the effect of participating securities. Operating Partnership units granted in equity-based payment transactions that have non-forfeitable dividend equivalent rights are considered participating securities prior to vesting. The impact of unvested Operating Partnership unit awards on EPU has been calculated using the two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested Operating Partnership units’ participation rights in undistributed earnings.
The calculation of diluted EPU for the three months ended June 30,March 31, 2020 and 2019 and 2018 does not include the weighted average of 330,847345,153 and 266,260333,275 unvested Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders. The calculation
17
Table of diluted EPU for the six months ended June 30, 2019Contents
American Assets Trust, Inc. and 2018 does not include the weighted average of 332,054 and 267,367 unvested Operating Partnership units, respectively.American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)

NOTE 10.9. EQUITY OF AMERICAN ASSETS TRUST, INC.
Stockholders' Equity
On May 27, 2015, we entered into an at-the-market ("ATM") equity program with five5 sales agents in which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $250.0 million. On March 2, 2018, we amended certain of these equity programs, terminated one such program and entered into a new equity program with one1 new sales agent. The sales of shares of our common stock made through the ATM equity program, as amended, are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. During the three and six months ended June 30, 2019, the followingMarch 31, 2020, no shares of common stock were sold through the ATM equity programs (in thousands, except per share data and share amounts):
 Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Number of shares of common stock issued through ATM programs519,382 681,913
Weighted average price per share$45.57 $45.56
    
Proceeds, gross$23,671
 $31,071
Sales agent compensation(237) (311)
Offering costs(79) (372)
Proceeds, net$23,355
 $30,388


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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


program.

We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As of June 30, 2019,March 31, 2020, we had the capacity to issue up to an additional $145.1$132.6 million in shares of our common stock under our ATM equity program. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under the ATM equity program.

In June 2019, we issued and sold 10,925,000 shares of common stock in an underwritten public offering. The shares of common stock that we issued and sold included the full exercise of the underwriters' option to purchase 1,425,000 additional shares. We received net proceeds of approximately $472.6 million, after deducting underwriting discounts, commissions and offering expenses.

Dividends
The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the sixthree months ended June 30, 2019:March 31, 2020: 
Period 
Amount per
Share/Unit
 Period Covered Dividend Paid Date
First Quarter 2019 $0.28
 January 1, 2019 to March 31, 2019 
March 28, 2019
Second Quarter 2019 $0.28
 April 1, 2019 to June 30, 2019 
June 27, 2019

PeriodAmount per
Share/Unit		Period CoveredDividend Paid Date
First Quarter 2020$0.30 January 1, 2020 to March 31, 2020March 26, 2020
Taxability of Dividends
Earnings and profits, which determine the taxability of distributions to stockholders and holders of common units, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of revenue recognition and compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation.
Stock-Based Compensation

We follow the FASB guidance related to stock compensation which establishes financial accounting and reporting standards for stock-based employee compensation plans, including all arrangements by which employees receive shares of stock or other equity instruments of the employer.  The guidance also defines a fair value-based method of accounting for an employee stock option or similar equity instrument.
The following table summarizes the activity of restricted stock awards during the sixthree months ended June 30, 2019:March 31, 2020:
 Units Weighted Average Grant Date Fair Value
Nonvested at January 1, 2019342,093
 $28.33
Granted4,412
 45.35
Vested(5,320) 37.58
Forfeited(11,046) $28.41
Nonvested at June 30, 2019330,139
 $28.40

UnitsWeighted Average Grant Date Fair Value
Nonvested at January 1, 2020345,153  $28.75
Granted—  —  
Vested—  —  
Forfeited—  —  
Nonvested at March 31, 2020345,153  $28.75
We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $1.1$1.3 million and $0.7$1.1 million in noncash compensation expense for the three-month periods ended June 30,March 31, 2020 and 2019, and 2018, respectively, which is included in general and administrative expense on the consolidated statements of comprehensive income. We recognized $2.2 million and $1.5 million in noncash compensation expense for the six months ended June 30, 2019 and 2018, respectively. Unrecognized compensation expense was $4.4$5.9 million at March 31, 2020.

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)
.
Earnings Per Share
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings. The weighted average unvested shares outstanding, which

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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


are considered participating securities, were 330,847345,153 and 266,260333,275 for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively and 332,054 and 267,367 for the six months ended June 30, 2019 and 2018, respectively. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares as these unvested shares have nonforfeitable dividend equivalent rights.
Diluted EPS is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method. For the three months ended June 30,March 31, 2020 and 2019, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable. For the three months ended June 30, 2018, shares associated with convertible securities were not included because the inclusion would be anti-dilutive. Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive for all periods presented, and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.
The computation of basic and diluted EPS is presented below (dollars in thousands, except share and per share amounts): 
Three Months Ended March 31,
20202019
NUMERATOR
Net income$15,484  $15,243  
Less: Net income attributable to restricted shares(104) (93) 
Less: Income from operations attributable to unitholders in the Operating Partnership(3,312) (4,055) 
Net income attributable to common stockholders—basic$12,068  $11,095  
Income from operations attributable to American Assets Trust, Inc. common stockholders—basic$12,068  $11,095  
Plus: Income from operations attributable to unitholders in the Operating Partnership3,312  4,055  
Net income attributable to common stockholders—diluted$15,380  $15,150  
DENOMINATOR
Weighted average common shares outstanding—basic59,723,072  47,004,465  
Effect of dilutive securities—conversion of Operating Partnership units16,390,548  17,177,608  
Weighted average common shares outstanding—diluted76,113,620  64,182,073  
Earnings per common share, basic$0.20  $0.24  
Earnings per common share, diluted$0.20  $0.24  
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
NUMERATOR       
Net income$11,941
 $4,413
 $27,184
 $3,722
Less: Net income attributable to restricted shares(92) (216) (185) (144)
Less: Income from operations attributable to unitholders in the Operating Partnership(2,933) (1,125) (6,988) (959)
Net income attributable to common stockholders—basic$8,916
 $3,072
 $20,011
 $2,619
Income from operations attributable to American Assets Trust, Inc. common stockholders—basic$8,916
 $3,072
 $20,011
 $2,619
Plus: Income from operations attributable to unitholders in the Operating Partnership2,933
 1,125
 6,988
 959
Net income attributable to common stockholders—diluted$11,849
 $4,197
 $26,999
 $3,578
DENOMINATOR       
Weighted average common shares outstanding—basic50,135,978
 46,939,449
 48,578,872
 46,937,645
Effect of dilutive securities—conversion of Operating Partnership units16,753,806
 17,193,071
 16,964,537
 17,194,020
Weighted average common shares outstanding—diluted66,889,784
 64,132,520
 65,543,409
 64,131,665
        
Earnings per common share, basic$0.18
 $0.07
 $0.41
 $0.06
Earnings per common share, diluted$0.18
 $0.07
 $0.41
 $0.06

NOTE 11.10. INCOME TAXES
We elected to be taxed as a REIT and operate in a manner that allows us to qualify as a REIT for federal income tax purposes commencing with our initial taxable year. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. Taxable income from non-REIT activities managed through our TRS is subject to federal and state income taxes.
We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes. We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases. Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic 740, Income Taxes.

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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


A deferred tax liability is included in our consolidated balance sheets of $0.1$0.3 million as of June 30, 2019both March 31, 2020 and December 31, 2018, respectively,2019 in relation to real estate asset basis differences of property subject to state taxes based on income and certain prepaid expenses of our TRS.
Income tax expense is recorded in other (expense) income, net on our consolidated statements of comprehensive income. For the three and six months ended June 30,March 31, 2020 and 2019, we recorded income tax expense of $0.2 million and $0.4 million, respectively. For the three and six months ended June 30, 2018, we recorded income tax expense of $0.2 million and $0.1 million, respectively.million.
NOTE 12.11. COMMITMENTS AND CONTINGENCIES
Legal
We are sometimes involved in various disputes, lawsuits, warranty claims, environmental, and other matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.
We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also, under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us as owner of the properties due to certain matters relating to the operation of the properties by the tenant.
Commitments
See Footnote 1312 for description of our leases, as a lessee.
We have management agreements with Outrigger Hotels & Resorts or an affiliate thereof (“Outrigger”) pursuant to which Outrigger manages each of the retail and hotel portions of the Waikiki Beach Walk property. Under the management agreement with Outrigger relating to the retail portion of Waikiki Beach Walk (the “retail management agreement”), we pay Outrigger a monthly management fee of 3.0% of net revenues from the retail portion of Waikiki Beach Walk. Pursuant to the terms of the retail management agreement, if the agreement is terminated in certain instances, including our election not to repair damage or destruction at the property, a condemnation or our failure to make required working capital infusions, we would be obligated to pay Outrigger a termination fee equal to the sum of the management fees paid for the two months immediately preceding the termination date. The retail management agreement may not be terminated by us or by Outrigger without cause. Under our management agreement with Outrigger relating to the hotel portion of Waikiki Beach Walk (the “hotel management agreement”), we pay Outrigger a monthly management fee of 6.0% of the hotel's gross operating profit, as well as 3.0% of the hotel's gross revenues; provided that the aggregate management fee payable to Outrigger for any year shall not exceed 3.5% of the hotel's gross revenues for such fiscal year. Pursuant to the terms of the hotel management agreement, if the agreement is terminated in certain instances, including upon a transfer by us of the hotel or upon a default by us under the hotel management agreement, we would be required to pay a cancellation fee calculated by multiplying (1) the management fees for the previous 12 months by (2) (a) eight,8, if the agreement is terminated in the first 11 years of its term, or (b) four, three, two4, 3, 2 or one,1, if the agreement is terminated in the twelfth, thirteenth, fourteenth or fifteenth year, respectively, of its term. The hotel management agreement may not be terminated by us or by Outrigger without cause.

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


A wholly owned subsidiary of our Operating Partnership, WBW Hotel Lessee LLC, entered into a franchise license agreement with Embassy Suites Franchise LLC, the franchisor of the brand “Embassy Suites™,” to obtain the non-exclusive right to operate the hotel under the Embassy SuitesTM brand for 20 years. The franchise license agreement provides that WBW Hotel Lessee LLC must comply with certain management, operational, record keeping, accounting, reporting and marketing standards and procedures. In connection with this agreement, we are also subject to the terms of a product improvement plan pursuant to which we expect to undertake certain actions to ensure that our hotel's infrastructure is maintained in compliance with the franchisor's brand standards. In addition, we must pay to Embassy Suites Franchise LLC a monthly franchise royalty fee equal to 4.0% of the hotel's gross room revenue through December 2021 and 5.0% of the hotel's gross room revenue thereafter, as well as a monthly program fee equal to 4.0% of the hotel's gross room revenue. If the franchise license is terminated due to our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment, which could be as high as $7.6$7.5 million based on operating performance through June 30, 2019.March 31, 2020.
Our Del Monte Center property has ongoing environmental remediation related to ground water contamination. The environmental issue existed at purchase and remains in remediation. The final stages of the remediation will include routine, long term ground monitoring by the appropriate regulatory agency over the next five years to seven years. The work performed is financed through an escrow account funded by the seller upon purchase of the Del Monte Center. We believe the funds in the escrow account are sufficient for the remaining work to be performed. However, if further work is required costing more than the remaining escrow funds, we could be required to pay such overage, although we may have a contractual claim for such costs against the prior owner or our environmental remediation consultant.
Concentrations of Credit Risk
Our properties are located in Southern California, Northern California, Hawaii, Oregon, Texas, and Washington. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate. FourteenNaN of our consolidated properties are located in Southern California, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio. Tenants in the retail industry accounted for 32.6%26.7% of total revenues for the sixthree months ended June 30, 2019.March 31, 2020. This makes us susceptible to demand for retail rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the retail industry. Furthermore, tenants in the office industry accounted for 34.2%46.0% of total revenues for the sixthree months ended June 30, 2019.March 31, 2020. This makes us susceptible to demand for office rental space and subject to the risks associated with an investment in real estate with a concentration of tenants in the office industry. For the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, no tenant accounted for more than 10% of our total rental revenue.
NOTE 13.12. LEASES
Lessor Operating Leases

We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases.

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


Our leases with office, retail, mixed-use and residential tenants are classified as operating leases. Leases at our office and retail properties and the retail portion of our mixed-use property generally range from three years to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents, usually provide for cost recoveries for the tenant’s share of certain operating costs. Our leases may also include variable lease payments in the form of percentage rents based on the tenant’s level of sales achieved in excess of a breakpoint threshold. Leases on apartments generally range from 7 to 15 months,, with a majority having 12-month lease terms. Rooms at the hotel portion of our mixed-use property are rented on a nightly basis.
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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
March 31, 2020
(Unaudited)

Leases at our office and retail properties and the retail portion of our mixed-use property may contain lease extension options, at our lessee's discretion. The extension options are generally for 3 to 10 years and contain primarily rent at fixed rates or the prevailing market rent. The extension options are generally exercisable 6 to 12 months prior to the expiration of the lease and require the lessee to not be in default of the lease terms.

We attempt to maximize the amount we expect to derive from the underlying real estate property following the end of a lease, to the extent it is not extended.  We maintain a proactive leasing and capital improvement program that, combined with the quality and locations of our properties, has made our properties attractive to tenants. However, the residual value of a real estate property is still subject to various market-specific, asset-specific, and tenant-specific risks and characteristics. 

As of June 30, 2019,March 31, 2020, minimum future rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our office and retail properties and the retail portion of our mixed-use property are as follows (in thousands):
 
Year Ending December 31, 
2019 (six months ending December 31, 2019)$110,091
2020209,142
2021198,553
2022180,346
2023159,058
Thereafter611,674
Total$1,468,864

Year Ending December 31,
2020 (nine months ending December 31, 2020)$162,470  
2021221,027  
2022206,536  
2023186,300  
2024156,339  
Thereafter559,024  
Total$1,491,696  
 
The above future minimum rentals exclude residential leases, which typically have a term of 12 months or less, and exclude the hotel, as rooms are rented on a nightly basis.

Lessee Operating Leases

We determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. We lease real estate under operating leases.
At the Landmark at One Market, we lease, as lessee, a building adjacent to the Landmark at One Market under an operating lease effective through June 30, 2021,2026, which we have the option to extend until 2031 by way of twothe remaining five years extension optionsoption (the "Annex Lease"). The lease payments under the extension optionsoption provided for under the Annex Lease will be equal to the fair rental value at the time the extension option is exercised. The extension options are notoption is included in the calculation of the right-of-use asset orand lease liability dueas we are reasonably certain of exercising the extension option. In March 2020, we exercised a five years extension option to electingextend the practical expedient to not reassess the lease term of existing leases.Annex Lease through June 30, 2026.
At Waikiki Beach Walk, we lease a portion of the building of which Quiksilver is currently in possession, under an operating lease effective through December 31, 2021.
Our lease agreements do not contain any residual value guarantees or material restrictive covenants. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments.

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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


Current annual payments under the operating leases are as follows, as of June 30, 2019March 31, 2020 (in thousands): 
Year Ending December 31,
2020 (nine months ending December 31, 2020)$2,576  
20213,502  
20222,697  
20232,697  
20242,697  
Thereafter17,533  
Total lease payments$31,702  
Imputed interest$(4,921) 
Present value of lease liability$26,781  
Year Ending December 31, 
2019 (six months ending December 31, 2019)$1,692
20203,422
20212,153
2022—
2023—
Thereafter—
Total lease payments$7,267
Imputed interest$(325)
Present value of lease liability$6,942


Lease costs under the operating leases are as follows (in thousands): 
Three Months Ended March 31,
20202019
Operating lease cost$844  $833  
Variable lease cost—  —  
Sublease income(868) (625) 
Total lease (income) cost$(24) $208  
Weighted-average remaining lease term - operating leases (in years)10.8
Weighted-average discount rate - operating leases3.24 %
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2019
Operating lease cost$833
 $1,667
Variable lease cost—
 —
Sublease income(633) (1,258)
Total lease cost$200
 $409
    
Weighted-average remaining lease term - operating leases (in years)  2.1
Weighted-average discount rate - operating leases  4.13%

Supplemental cash flow information and non-cash activity related to our operating leases are as follow (in thousands):
Three Months Ended March 31,
20202019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities$846  $827  
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations$22,188  $7,661  
 Six Months Ended June 30,
 2019
Operating cash flow information: 
Cash paid for amounts included in the measurement of lease liabilities$1,655
Non-cash activity: 
Right-of-use assets obtained in exchange for operating lease obligations$7,661



Subleases
At the Landmark at One Market, we (as sublandlord) sublease the Annex Lease building under operating leases effective through December 31, 2029. The subleases contain extension options, subject to our ability to extend the Annex Lease, that can extend the subleases through December 31, 2039 at the fair rental value at the time the extension option is exercised.
At Waikiki Beach Walk, we (as sublandlord) sublease a portion of the building to Quiksilver under an operating lease effective through December 31, 2021.

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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


NOTE 14.13. COMPONENTS OF RENTAL INCOME AND EXPENSE
The principal components of rental income are as follows (in thousands): 
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Lease rental income       
Retail$25,021
 $19,548
 $49,470
 $39,202
Office28,564
 24,140
 54,712
 47,446
Multifamily11,975
 11,721
 23,971
 23,207
Mixed-use3,886
 2,740
 7,763
 5,565
Cost reimbursement—
 8,491
 —
 16,833
Percentage rent289
 355
 555
 791
Hotel revenue9,466
 9,530
 19,108
 19,313
Other455
 367
 908
 736
Total rental income$79,656
 $76,892
 $156,487
 $153,093

 Three Months Ended March 31,
 20202019
Lease rental income
Office$42,213  $26,148  
Retail24,955  24,449  
Multifamily11,967  11,996  
Mixed-use3,932  3,877  
Percentage rent301  266  
Hotel revenue8,125  9,642  
Other577  453  
Total rental income$92,070  $76,831  
Lease rental income include $(4.5)$2.8 million and $(2.8)$0.2 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively, and $(4.3) million and $(3.5) million for the six months ended June 30, 2019 and 2018, respectively, to recognize lease rental income on a straight-line basis. In addition, net amortization of above and below market leases included in lease rental income were $0.8$0.9 million and $0.7$0.9 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively, and $1.7 million and $1.4 million for the six months ended June 30, 2019 and 2018, respectively.
The principal components of rental expenses are as follows (in thousands): 
 Three Months Ended March 31,
 20202019
Rental operating$9,882  $8,551  
Hotel operating5,747  5,973  
Repairs and maintenance4,297  3,459  
Marketing507  546  
Rent853  841  
Hawaii excise tax865  944  
Management fees417  482  
Total rental expenses$22,568  $20,796  
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Rental operating$9,008
 $8,742
 $17,559
 $17,402
Hotel operating6,036
 5,995
 12,009
 12,027
Repairs and maintenance3,971
 3,389
 7,430
 6,390
Marketing568
 503
 1,114
 915
Rent849
 806
 1,690
 1,600
Hawaii excise tax914
 969
 1,858
 2,002
Management fees480
 478
 962
 966
Total rental expenses$21,826
 $20,882
 $42,622
 $41,302

NOTE 15.14. OTHER INCOME (EXPENSE) INCOME,, NET
The principal components of other income,expense, net, are as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended March 31,
2019 2018 2019 2018 20202019
Interest and investment income$156
 $23
 $163
 $163
Interest and investment income$312  $7  
Income tax expense(206) (171) (442) (106)Income tax expense(206) (236) 
Other non-operating income—
 —
 —
 4
Other non-operating income2  —  
Total other (expense) income, net$(50) $(148) $(279) $61
Total other income (expense), netTotal other income (expense), net$108  $(229) 


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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


NOTE 16.15. RELATED PARTY TRANSACTIONS

Through July 1, 2018, we maintained a workers' compensation insurance policy with InsuranceOn occasion, the Company of the West, a California corporationutilizes aircraft services provided by AAI Aviation, Inc. ("ICW"AAIA"), which is an insurance company majorityentity owned and controlled by Ernest Rady, our Chief Executive Officer, President and Chairman of the Board. The workers' compensation policy was renewed with ICW duringFor the second quarter of 2017 and the premium was approximately $0.2 million for the period from July 1, 2017 through July 1, 2018. We did not renew this policy with ICW during the second quarter of 2018 and commencing July 1, 2018, we entered into a workers' compensation policy with an unaffiliated third-party insurer.
During the first quarter of 2019, we terminated the lease agreement with American Assets, Inc., an entity owned and controlled by Mr. Rady, and entered into a new lease agreement for office space at Torrey Reserve Campus. Rents commenced on March 1, 2019 for an initial lease term of three years at an average annual rental rate of $0.2 million. Rental revenue recognized on the leases of $0.1 million for the six months ended June 30,March 31, 2020 and 2019, is included in rental income on the statements of comprehensive income.
On occasion, the company utilizes aircraft services provided by AAI Aviation, Inc. ("AAIA"), an entity owned and controlled by Mr. Rady. For the six months ended June 30, 2019 and 2018, we incurred approximately $0.0 million and $0.2 million, and $0.0 millionrespectively, of expenses related to aircraft services of AAIA or reimbursement to Mr. Rady (or the Ernest Rady Trust U/D/T March 13, 1983) for use of the aircraft owned by AAIA. These expenses are recorded as general and administrative expenses in our consolidated statements of comprehensive income.
The Waikiki Beach Walk entities have a 47.7% investment in WBW CHP LLC, an entity that was formed to, among other things, construct a chilled water plant to provide air conditioning to the property and other adjacent facilities. The operating expenses of WBW CHP LLC are recovered through reimbursements from its members, and reimbursements to WBW CHP LLC of $0.5$0.3 million and $0.5$0.2 million for the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, respectively, are included in rental expenses on the consolidated statements of comprehensive income.
NOTE 17.16. SEGMENT REPORTING
Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in four4 business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room369-room all-suite hotel.
We evaluate the performance of our segments based on segment profit, which is defined as property revenue less property expenses. We do not use asset information as a measure to assess performance and make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, interest expense, depreciation and amortization expense and other income and expense are not included in segment profit as our internal reporting addresses these items on a corporate level.
Segment profit is not a measure of operating income or cash flows from operating activities as measured by GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate segment profit in the same manner. We consider segment profit to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our properties.
 

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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


The following table represents operating activity within our reportable segments (in thousands): 
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Total Retail       
Property revenue$25,871
 $26,415
 $55,308
 $52,572
Property expense(7,731) (7,138) (14,885) (13,949)
Segment profit18,140
 19,277
 40,423
 38,623
Total Office       
Property revenue30,200
 31,052
 58,006
 57,822
Property expense(9,269) (8,342) (17,758) (16,355)
Segment profit20,931
 22,710
 40,248
 41,467
Total Multifamily       
Property revenue12,897
 12,622
 25,796
 25,046
Property expense(4,883) (5,020) (9,956) (10,017)
Segment profit8,014
 7,602
 15,840
 15,029
Total Mixed-Use       
Property revenue15,145
 14,934
 30,322
 30,315
Property expense(9,218) (9,010) (18,344) (18,155)
Segment profit5,927
 5,924
 11,978
 12,160
Total segments’ profit$53,012
 $55,513
 $108,489
 $107,279

 Three Months Ended March 31,
 20202019
Total Office
Property revenue$44,509  $27,806  
Property expense(11,793) (8,489) 
Segment profit32,716  19,317  
Total Retail
Property revenue25,826  29,437  
Property expense(7,331) (7,154) 
Segment profit18,495  22,283  
Total Multifamily
Property revenue12,825  12,899  
Property expense(5,510) (5,073) 
Segment profit7,315  7,826  
Total Mixed-Use
Property revenue13,583  15,177  
Property expense(8,979) (9,126) 
Segment profit4,604  6,051  
Total segments’ profit$63,130  $55,477  
The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands):
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Total segments’ profit$53,012
 $55,513
 $108,489
 $107,279
General and administrative(5,943) (5,396) (12,016) (10,963)
Depreciation and amortization(22,582) (32,868) (43,165) (66,147)
Interest expense(13,129) (12,688) (26,478) (26,508)
Gain on sale of real estate633
 —
 633
 —
Other (expense) income, net(50) (148) (279) 61
Net income11,941
 4,413
 27,184
 3,722
Net income attributable to restricted shares(92) (216) (185) (144)
Net income attributable to unitholders in the Operating Partnership(2,933) (1,125) (6,988) (959)
Net income attributable to American Assets Trust, Inc. stockholders$8,916
 $3,072
 $20,011
 $2,619


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American Assets Trust, Inc. and American Assets Trust, L.P.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2019
(Unaudited)


 Three Months Ended March 31,
 20202019
Total segments’ profit$63,130  $55,477  
General and administrative(6,820) (6,073) 
Depreciation and amortization(27,462) (20,583) 
Interest expense(13,472) (13,349) 
Other income (expense), net108  (229) 
Net income15,484  15,243  
Net income attributable to restricted shares(104) (93) 
Net income attributable to unitholders in the Operating Partnership(3,312) (4,055) 
Net income attributable to American Assets Trust, Inc. stockholders$12,068  $11,095  
The following table shows net real estate and secured note payable balances for each of the segments (in thousands):
March 31, 2020December 31, 2019
Net Real Estate
Office$1,323,207  $1,317,854  
Retail620,598  624,912  
Multifamily398,459  401,152  
Mixed-Use179,305  179,557  
$2,521,569  $2,523,475  
Secured Notes Payable (1)
Office$111,000  $127,768  
Retail—  34,235  
$111,000  $162,003  
 June 30, 2019 December 31, 2018
Net Real Estate   
Retail$627,988
 $628,734
Office1,307,106
 822,574
Multifamily406,378
 412,042
Mixed-Use177,451
 176,503
 $2,518,923
 $2,039,853
Secured Notes Payable (1)
   
Retail$34,625
 $35,008
Office127,954
 147,757
Multifamily—
 —
Mixed-Use—
 —
 $162,579
 $182,765
(1)
Excludes debt issuance costs of $0.2(1)Excludes debt issuance costs of $0.1 million and $0.1 million and $0.2 million for each of the periods ending June 30, 2019 and December 31, 2018, respectively.

Capital expenditures for each segment forof the threeperiods ended March 31, 2020 and six months ended June 30,December 31, 2019, and 2018 were as follows (in thousands):respectively.
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 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Capital Expenditures (1)
       
Retail$6,650
 $3,228
 $11,441
 $5,457
Office17,418
 7,513
 33,901
 14,886
Multifamily685
 875
 1,456
 2,484
Mixed-Use3,271
 429
 3,663
 583
 $28,024
 $12,045
 $50,461
 $23,410
(1)Capital expenditures represent cash paid for capital expenditures during the period and include leasing commissions paid.


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Notes to Consolidated Financial Statements—(Continued)
June 30, 2019March 31, 2020
(Unaudited)


Capital expenditures for each segment for the three months ended March 31, 2020 and 2019 were as follows (in thousands):
Three Months Ended March 31,
20202019
Capital Expenditures (1)
Office$18,200  $16,483  
Retail3,558  4,791  
Multifamily1,284  771  
Mixed-Use883  392  
$23,925  $22,437  
(1)Capital expenditures represent cash paid for capital expenditures during the period and include leasing commissions paid.

NOTE 18.17. SUBSEQUENT EVENT
On July 30, 2019,April 7, 2020, we drew down $100.0 million under the Operating Partnership entered intoRevolver Loan. As a Note Purchase Agreementresult of this borrowing, we have $250.0 million of remaining availability under the Revolver Loan. Although we do not have any presently anticipated need for this additional liquidity, we decided to draw this amount, and may draw additional amounts in the future, to ensure future liquidity given the recent significant impact on global financial markets and the economy as a result of the novel coronavirus (“COVID-19”) outbreak. Due to the speed with which the COVID-19 situation is developing, we are not able at this time to estimate the impact of COVID-19 on our consolidated financial statements and related disclosures, but the impact could be material for the private placementremainder of $150 millionfiscal year 2020 in all business segments and could be material during any future period affected either directly or indirectly by this pandemic. In April 2020, we received a significant amount of 3.91% Senior Guaranteed Notes, Series G, due July 30, 2030 (the "Series G Notes"). The Series G Notes were issuedrent deferment requests from various tenants and reduced rent collections, primarily within the retail segment, as a result of COVID-19. We are evaluating each tenant rent deferment request on July 30, 2019 andan individual basis, considering a number of factors. Not all rent deferment requests will pay interest semi-annually on the 30thultimately result in lease modification agreements.

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Table of January and July until their respective maturities.Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. We make statements in this report that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act). In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” 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. Currently, one of the most significant risk factors, is the potential adverse effect of the current COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the company, its tenants and guests, the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts the Company, its tenants and guests will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•the impacts from the COVID-19 outbreak and the actions taken by government authorities and others related thereto, including the ability of our company, our properties and our tenants to operate;
•adverse economic or real estate developments in our markets;
•our failure to generate sufficient cash flows to service our outstanding indebtedness;
•defaults on, early terminations of or non-renewal of leases by tenants, including significant tenants;
•difficulties in identifying properties to acquire and completing acquisitions;
•difficulties in completing dispositions;
•our failure to successfully operate acquired properties and operations;
•our inability to develop or redevelop our properties due to market conditions;
•fluctuations in interest rates and increased operating costs;
•risks related to joint venture arrangements;
•our failure to obtain necessary outside financing;
•on-going litigation;
•general economic conditions;
•financial market fluctuations;
•risks that affect the general retail, office, multifamily and mixed-use environment;
•the competitive environment in which we operate;
•decreased rental rates or increased vacancy rates;
•conflicts of interests with our officers or directors;
•lack or insufficient amounts of insurance;
•environmental uncertainties and risks related to adverse weather conditions and natural disasters;
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•other factors affecting the real estate industry generally;
•limitations imposed on our business and our ability to satisfy complex rules in order for us to continue to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes; and
•changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors,

new information, data or methods, future events or other changes. For a further discussion of these and other factors, see the section entitled “Item 1A. Risk Factors” contained herein and in our annual report on Form 10-K for the year ended December 31, 2018.2019.
Overview
References to “we,” “our,” “us” and “our company” refer to American Assets Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including American Assets Trust, L.P., a Maryland limited partnership, of which we are the sole general partner and which we refer to in this report as our Operating Partnership.
We are a full service, vertically integrated and self-administered REIT that owns, operates, acquires and develops high quality retail, office, multifamily and mixed-use properties in attractive, high-barrier-to-entry markets in Southern California, Northern California, Oregon, Washington, Texas and Hawaii. As of June 30, 2019,March 31, 2020, our portfolio was comprised of twelve retail shopping centers; nine office properties; a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center; and six multifamily properties. Additionally, as of June 30, 2019,March 31, 2020, we owned land at three of our properties that we classified as held for development and/or construction in progress. Our core markets include San Diego; the San Francisco Bay Area; Portland, Oregon; Bellevue, Washington; and Oahu, Hawaii. We are a Maryland corporation formed on July 16, 2010 to acquire the entities owning various controlling and noncontrolling interests in real estate assets owned and/or managed by Ernest S. Rady or his affiliates, including the Ernest Rady Trust U/D/T March 13, 1983, or the Rady Trust, and did not have any operating activity until the consummation of our initial public offering on January 19, 2011. Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.4%78.5% of our Operating Partnership as of June 30, 2019.March 31, 2020. Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership.
Acquisitions
On June 20, 2019, we acquired La Jolla Commons, consisting of two office towers totaling approximately 724,000 square feet, an entitled development parcel and two parking structures, located in San Diego, California. The purchase price was approximately $525 million, less seller credits of (i) approximately $11.5 million for speculative lease-up, (ii) approximately $4.2 million for assumed contractual liabilities (iii) and approximately $1.7 million for closing prorations, excluding closing costs of approximately $0.2 million.
The property was acquired with proceeds from an underwritten public offering and borrowings under the Company's Second Amended and Restated Credit Facility.
Dispositions
On May 22, 2019, we sold Solana Beach - Highway 101. The property is located in San Diego, California and was previously included in our retail segment. The sales price of this property of approximately $9.4 million, less costs to sell, resulted in net proceeds to the Company of approximately $9.4 million. Accordingly, we recorded a gain on sale of approximately $0.6 million for the three and six months ended June 30, 2019.
Critical Accounting Policies
We identified certain critical accounting policies that affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2018.2019. We have not made any material changes to these policies during the periods covered by this report, other than those described in Footnote 1.



Same-store

We have provided certain information on a total portfolio, same-store and redevelopment same-store basis. Information provided on a same-store basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared, properties under development, properties classified as held for development and properties classified as discontinued operations. Information provided on a redevelopment same-store basis includes the results of properties undergoing significant redevelopment for the entirety or portion of both periods being compared. Same-store and redevelopment same-store is considered by management to be important measures because they assist in eliminating disparities due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the Company's stabilized and redevelopment properties, as applicable. Additionally, redevelopment same-store is considered by management to be an important measure because it assists in evaluating the timing of the start and stabilization of our redevelopment opportunities and the impact that these redevelopments have in enhancing our operating performance.
While there is judgment surrounding changes in designations, we typically reclassify significant development, redevelopment or expansion properties into same-store properties once they are stabilized. Properties are deemed stabilized typically at the earlier of (i) reaching 90% occupancy or (ii) four quarters following a property's inclusion in operating real estate. We typically remove properties from same-store properties when the development, redevelopment or expansion has or is expected to have a significant impact on the property's annualized base rent, occupancy and operating income within the
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calendar year. Our evaluation of significant impact related to development, redevelopment or expansion activity is based on quantitative and qualitative measures including, but not limited to the following: the total budgeted cost of planned construction activity compared to the property’s annualized base rent, occupancy and property operating income within the calendar year; percentage of development, redevelopment or expansion square footage to total property square footage; and the ability to maintain historic occupancy and rental rates. In consideration of these measures, we generally remove properties from same-store properties when we see a decline in a property's annualized base rent, occupancy and operating income within the calendar year as a direct result of ongoing redevelopment, development or expansion activity. Acquired properties are classified into same-store properties once we have owned such properties for the entirety of comparable period(s) and the properties are not under significant development or expansion.

Below is a summary of our same-store composition for the three and six months ended June 30, 2019March 31, 2020 and 2018.2019.  For the three months ended June 30, 2019, Pacific Ridge Apartments and Gateway Marketplace wereMarch 31, 2020, Torrey Point was reclassified to same-store properties when compared to the designations for the three months ended March 31, 20182019 as the entities were acquired on April 28, 2017entity was placed into operations and July 6, 2017, respectively, and are comparablebecame available for occupancy in August 2018. For the three months ended March 31, 2019. For the three months ended June 30, 2019, Waikiki2020, One Beach Walk Retail and Embassy Suites™ HotelStreet was reclassified to non-same-store properties when compared to the designationdesignations for the three months ended March 31, 20182019 due to redevelopment activity to renovate the property. Waikiki Beach Walk Retail and Embassy Suites™ Hotel is classified as a non-same-store property due to spalling repair activity disrupting the hotel portion of the properties operations. Waikele Center is classified as a non-same-store property due to significant redevelopment activity. Torrey Point was placed into operations and became available for occupancy in August 2018 and will be classified as a non-same-store property until it becomes stabilized and comparable. La Jolla Commons is classified as a non-same-store property, as it was acquired on June 20, 2019.

For the six months ended June 30, 2019, Pacific Ridge Apartments and Gateway Marketplace were reclassified to same-store properties when compared to the designations for the six months ended June 30, 2018 as the entities were acquired on April 28, 2017 and July 6, 2017, respectively, and are comparable for the six months ended June 30, 2019. For the six months ended June 30, 2019, Waikiki Beach Walk Retail and Embassy Suites™ Hotel was reclassified to non-same-store properties when compared to the designation for the six months ended June 30, 2018 due to spalling repair activity disrupting the hotel portion of the properties operations. Waikele Center is classified as a non-same-store property due to significant redevelopment activity. Torrey Point was placed into operations and became available for occupancy in August 2018 and will be classified as a non-same-store property until it becomes stabilized and comparable. La Jolla Commons is classified as a non-same-store property, as it was acquired on June 20, 2019.

In our determination of same-store and redevelopment same-store properties for the sixthree months ended June 30, 2019,March 31, 2020, Waikele Center hasand One Beach Street have been identified as a same-store redevelopment propertyproperties due to significant constructionredevelopment activity. Retail same-store net operating income increaseddecreased approximately 13.3%21.3% for the sixthree months ended June 30, 2019March 31, 2020 compared to the same period in 2018.2019. Retail redevelopment same-store net operating income increaseddecreased approximately 3.9%17.1% for the sixthree months ended June 30, 2019March 31, 2020 compared to the same period in 2018.2019. Office same-store net operating income increased 33.2% for the three months ended March 31, 2020 compared to the same period in 2019. Office redevelopment same-store net operating income increased 28.7% for the three months ended March 31, 2020 compared to the same period in 2019.


Three Months Ended March 31,
20202019
Same-Store24  24  
Non-Same-Store4  3  
Total Properties28  27  
Redevelopment Same-Store26  25  
Total Development Properties3  3  


 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Same-Store24
 23
 24
 23
Non-Same Store4
 3
 4
 3
Total Properties28
 26
 28
 26
        
Redevelopment Same-Store25
 24
 25
 24
        
Total Development Properties3
 4
 3
 4

Outlook

We seek growth in earnings, funds from operations and cash flows primarily through a combination of the following: growth in our same-store portfolio, growth in our portfolio from property development and redevelopments and expansion of our portfolio through property acquisitions. Our properties are located in some of the nation's most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington and Hawaii, which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration and/or retenanting. We evaluate our properties on an ongoing basis to identify these types of opportunities.

We intend to opportunistically pursue the development of future phases of Lloyd District Portfolio and La Jolla Commons and the redevelopment of One Beach Street based on, among other things, market conditions and our evaluation of whether such opportunities would generate appropriate risk-adjusted financial returns. Our redevelopment and development opportunities are subject to various factors, including market conditions and may not ultimately come to fruition.

We continue to review acquisition opportunities in our primary markets that would complement our portfolio and provide long-term growth opportunities. Some of our acquisitions do not initially contribute significantly to earnings growth; however,
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we believe they provide long-term re-leasing growth, redevelopment opportunities and other strategic opportunities. Any growth from acquisitions is contingent upon our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance a property acquisition. Generally, our acquisitions are initially financed by available cash, mortgage loans and/or borrowings under our revolving line of credit, which may be repaid later with funds raised through the issuance of new equity or new long-term debt.

COVID-19

We are closely monitoring the impact of COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our tenants and business partners. We are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Certain states and cities, including where we own properties, have development sites and where our principal place of business is located, have also reacted by instituting quarantines, restrictions on travel, "stay-at-home" orders or “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. The Company cannot predict when restrictions currently in place will expire. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which the Company and our tenants operate. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown.

In addition, we cannot predict the impact that COVID-19 will have on our tenants and other business partners; however, any material effect on these parties could adversely impact us. As of April 27, 2020, we have collected approximately 94% of office rents, 47% of retail rents (including retail component of Waikiki Beach Walk) and 94% of multifamily rents that were due in April 2020. In April 2020, we received a significant amount of rent deferment requests from various tenants, primarily within the retail segment, as a result of COVID-19. We are evaluating each tenant rent deferment request on an individual basis, considering a number of factors. Not all rent deferment requests will ultimately result in lease modification agreements.

We believe the company's financial condition and liquidity are currently strong. Although there is uncertainty related to the anticipated impact of the COVID-19 outbreak on the Company's future results, we believe our efficient business model and ongoing steps we have taken to strengthen our balance sheet has positioned to manage our business through this crisis as it continues to unfold. We continue to manage all aspect of our business including, but not limited to, monitoring the financial health of our tenants, vendors, and other third-party relationships, and developing new opportunities for growth. Due to COVID-19, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity. See Part II, Item 1A - “Risk Factors” - “The novel coronavirus (COVID-19) and other possible pandemics and similar outbreaks, could result in material adverse effects on our business, financial position, results of operations and cash flows."

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law to provide widespread emergency relief for the economy and to provide aid to corporations. The CARES Act includes several significant provisions related to taxes, refundable payroll tax credits and deferment of social security payments. We continue to evaluate the relief options available under the CARES Act. We will continue to assess these options, and any subsequent legislation or other relief packages, including the accompanying restrictions on our business, as the pandemic continues to evolve.
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Leasing

Our same-store growth is primarily driven by increases in rental rates on new leases and lease renewals and changes in portfolio occupancy. Over the long-term, we believe that the infill nature and strong demographics of our properties provide us with a strategic advantage, allowing us to maintain relatively high occupancy and increase rental rates. We have continued to see signs of improvement for many of our tenants, as well as increased interest from prospective tenants for our spaces. While there can be no assurance that these positive signs will continue due to the direct or indirect affects of the COVID-19 pandemic, we remain cautiously optimistic regarding the improvedlong-term trends we have seen over the past few years.years after the pandemic subsides. We believe the locations of our properties and diverse tenant base mitigate the potentially negative impact of the current economic environment. However, any reduction in our tenants' abilities to pay base rent, including as a result of the COVID-19 pandemic, percentage rent or other charges will adversely affect our financial condition and results of operations.

During the three months ended June 30, 2019,March 31, 2020, we signed 1317 retail leases for a total of 46,60966,426 square feet of retail space including 37,84361,916 square feet of comparable space leases (leases for which there was a prior tenant), at an average rental rate decrease on a cash basis of 1.8% and increase on a cash and GAAP basis of 3.1% and 12.5%7.0%, respectively. New retail leases for comparable spaces were signed for 16,9008,794 square feet at an average rental rate decrease on a cash basis of 6.0% and increase on a GAAP basis of 6.2% and 2.9%2.5%, respectively. Renewals for comparable retail spaces were signed for 20,94353,122 square feet at an average rental rate decrease on a cash basis of 1.1% and increase on a cash and GAAP basis of 5.8% and 17.3%7.8%, respectively. Tenant improvements and incentives were $13.18$22.71 per square foot of retail space for comparable new leases for the three months ended June 30, 2019,March 31, 2020, mainly due to tenants at South Bay Marketplace.Waikele Center.


During the three months ended June 30, 2019,March 31, 2020, we signed 2317 office leases for a total of 197,661208,041 square feet of office space including 86,779181,104 square feet of comparable space leases, at an average rental rate increase on a cash and GAAP basis of 17.5%8.4% and 26.7%6.6%, respectively. New office leases for comparable spaces were signed for 45,5707,995 square feet at an average rental rate increase on a cash and GAAP basis of 22.8%6.9% and 30.9%10.4%, respectively. Renewals for comparable office spaces were signed for

41,209 173,109 square feet at an average rental rate increase on a cash and GAAP basis of 11.6%8.5% and 21.7%6.4%, respectively. Tenant improvements and incentives were $74.15$32.01 per square foot of office space for comparable new leases for the three months ended June 30, 2019,March 31, 2020, mainly attributed to tenants at La Jolla Commons.Torrey Reserve Campus.

The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent and percentage rent paid on the expiring lease and minimum rent and, in some instances, projections of first lease year percentage rent, to be paid on the new lease. In some instances, management exercises judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, capital investment made in the space and the specific lease structure. Tenant improvements and incentives include the total dollars committed for the improvement of a space as it relates to a specific lease, but may also include base-building costs (i.e. expansion, escalators or new entrances) which are required to make the space leasable. Incentives include amounts paid to tenants as an inducement to sign a lease that do not represent building improvements.

The leases signed in 20192020 generally become effective over the following year, though some may not become effective until 20202021 and beyond. Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters. However, we believe that these increases do provide information about the tenant/landlord relationship and the potential fluctuations we may achieve in rental income over time.

Through the remainder of 2019,2020, we believe our leasing volume will be in-line with our historical averages and result in overall positive increases in rental income. However, changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on new leases will continue to increase at the above disclosed levels, if at all.
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Capitalized Costs

Certain external and internal costs directly related to the development and redevelopment of real estate, including pre-construction costs, real estate taxes, insurance, interest, construction costs and salaries and related costs of personnel directly involved, are capitalized. We capitalize costs under development until construction is substantially complete and the property is held available for occupancy. The determination of when a development project is substantially complete and when capitalization must cease involves a degree of judgment. We consider a construction project as substantially complete and held available for occupancy upon the completion of landlord-owned tenant improvements or when the lessee takes possession of the unimproved space for construction of its own improvements, but not later than one year from cessation of major construction activity. We cease capitalization on the portion substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with any remaining portion under construction.

We capitalized external and internal costs related to both development and redevelopment activities combined of $0.9$1.3 million and $1.7 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively. We capitalized external and internal costs related to both development and redevelopment activities combined of $2.6 million and $2.4 million for the six months ended June 30, 2019 and 2018, respectively.
        
We capitalized external and internal costs related to other property improvements combined of $23.8$20.8 million and $8.0$24.3 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively. We capitalized external and internal costs related to other property improvements combined of $48.1 million and $16.8 million for the six months ended June 30, 2019 and 2018, respectively.
Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use as noted above. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income. If the time period for capitalizing interest is extended, however, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period. We capitalized interest costs related to development activities of $0.1$0.3 million and $0.5$0.2 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively. We capitalized interest costs related to development activities of $0.3 million and $0.9 million for the six months ended June 30, 2019 and 2018, respectively.

Results of Operations
For our discussion of results of operations, we have provided information on a total portfolio and same-store basis.
Comparison of the three months ended June 30, 2019March 31, 2020 to the three months ended June 30, 2018March 31, 2019
The following summarizes our consolidated results of operations for the three months ended June 30, 2019March 31, 2020 compared to our consolidated results of operations for the three months ended June 30, 2018.March 31, 2019. As of June 30, 2019,March 31, 2020, our operating portfolio was comprised of 28 retail, office, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel. Additionally, as of June 30, 2019, we owned land at three of our properties that we classified as held for development and/or construction in progress. As of June 30, 2018, our operating portfolio was comprised of 26 retail, office, multifamily and mixed-use properties with an aggregate of approximately 5.9 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel. Additionally, as of June 30, 2018,March 31, 2020, we owned land at fourthree of our properties that we classified as held for development and/or construction in progress. As of March 31, 2019, our operating portfolio was comprised of 27 retail, office, multifamily and mixed-use properties with an aggregate of approximately 5.8 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, 2,112 residential units (including 122 RV spaces) and a 369-room hotel. Additionally, as of March 31, 2019, we owned land at three of our properties that we classified as held for development and/or construction in progress.
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The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended June 30,March 31, 2020 and 2019 and 2018 (dollars in thousands):
 
Three Months Ended June 30, Change % Three Months Ended March 31,Change%
2019 2018  20202019
Revenues       Revenues
Rental income$79,656
 $76,892
 $2,764
 4 %Rental income$92,070  $76,831  $15,239  20 %
Other property income4,457
 8,131
 (3,674) (45)Other property income4,673  8,488  (3,815) (45) 
Total property revenues84,113
 85,023
 (910) (1)Total property revenues96,743  85,319  11,424  13  
Expenses       Expenses
Rental expenses21,826
 20,882
 944
 5
Rental expenses22,568  20,796  1,772  9  
Real estate taxes9,275
 8,628
 647
 7
Real estate taxes11,045  9,046  1,999  22  
Total property expenses31,101
 29,510
 1,591
 5
Total property expenses33,613  29,842  3,771  13  
Total property income53,012
 55,513
 (2,501) (5)Total property income63,130  55,477  7,653  14  
General and administrative(5,943) (5,396) (547) 10
General and administrative(6,820) (6,073) (747) 12  
Depreciation and amortization(22,582) (32,868) 10,286
 (31)Depreciation and amortization(27,462) (20,583) (6,879) 33  
Interest expense(13,129) (12,688) (441) 3
Interest expense(13,472) (13,349) (123) 1  
Gain on sale of real estate633
 —
 633
 100
Other (expense) income, net(50) (148) 98
 (66)
Other income (expense), netOther income (expense), net108  (229) 337  (147) 
Net income11,941
 4,413
 7,528
 171
Net income15,484  15,243  241  2  
Net income attributable to restricted shares(92) (216) 124
 (57)Net income attributable to restricted shares(104) (93) (11) 12  
Net income attributable to unitholders in the Operating Partnership(2,933) (1,125) (1,808) 161
Net income attributable to unitholders in the Operating Partnership(3,312) (4,055) 743  (18) 
Net income attributable to American Assets Trust, Inc. stockholders$8,916
 $3,072
 $5,844
 190 %Net income attributable to American Assets Trust, Inc. stockholders$12,068  $11,095  $973  9 %
Revenue
Total property revenues. Total property revenue consists of rental revenue and other property income. Total property revenue decreased $0.9increased $11.4 million, or 1%13%, to $84.1$96.7 million for the three months ended June 30, 2019March 31, 2020 compared to $85.0$85.3 million for the three months ended June 30, 2018.March 31, 2019. The percentage leased was as follows for each segment as of March 31, 2020 and 2019:
 
Percentage Leased  (1)
March 31,
 20202019
Office94.3 %92.3 %
Retail95.2 %97.1 %
Multifamily93.0 %93.9 %
Mixed-Use (2)
98.5 %98.2 %

(1)June 30,The percentage leased includes the square footage under lease, including leases which may not have commenced as of March 31, 2020 or 2019, as applicable.
(2) and Includes the retail portion of the mixed-use property only.
2018:
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Percentage Leased  (1)
 June 30,
 20192018
Retail97.5% 96.7%
Office93.7% 93.8%
Multifamily92.6% 93.9%
Mixed-Use (2)
98.2% 95.9%

(1)
The percentage leased includes the square footage under lease, including leases which may not have commenced as of June 30, 2019 or June 30, 2018, as applicable.Table of Contents
(2)Includes the retail portion of the mixed-use property only.

The decreaseincrease in total property revenue was attributable primarily to the decrease in lease termination fees and factors discussed below.
Rental revenues. Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents. Rental revenue increased $2.8$15.2 million,, or 4%20%, to $79.7$92.1 million for the three months ended June 30, 2019March 31, 2020 compared to $76.9$76.8 million for the three months ended June 30, 2018.March 31, 2019. Rental revenue by segment was as follows (dollars in thousands):
Total Portfolio
Same-Store Portfolio(1)
Total Portfolio 
Same-Store Portfolio(1)
 Three Months Ended March 31,Change%Three Months Ended March 31,Change%
Three Months Ended June 30, Change % Three Months Ended June 30, Change % 2020201920202019
2019 2018 2019 2018 
OfficeOffice$42,513  $26,343  $16,170  61  $31,835  $25,222  $6,613  26  
Retail$25,346
 $25,830
 $(484) (2)% $21,708
 $21,257
 $451
 2%Retail25,291  24,734  557  2  21,242  21,220  22  —  
Office28,757
 25,890
 2,867
 11
 27,251
 25,885
 1,366
 5
Multifamily12,024
 11,767
 257
 2
 12,024
 11,767
 257
 2
Multifamily12,014  12,044  (30) —  12,014  12,044  (30) —  
Mixed-Use13,529
 13,405
 124
 1
 —
 —
 —
 —
Mixed-Use12,252  13,710  (1,458) (11) —  —  —  —  
$79,656
 $76,892
 $2,764
 4 % $60,983
 $58,909
 $2,074
 4%$92,070  $76,831  $15,239  20 %$65,091  $58,486  $6,605  11 %
 
(1)
(1)For this table and tables following, the same-store portfolio includes the 830 building at Lloyd District Portfolio which was placed into operations on August 1, 2019 after renovating the building. The same-store portfolio excludes: (i) Waikele Center due to significant redevelopment activity; (ii) Torrey Point, which was placed into operations and became available for occupancy in August 2018; (iii) La Jolla Commons as it was acquired on June 20, 2019; (iii) Torrey Point due to the renovation of the building; (iv) Waikiki Beach Walk Retail and Embassy SuitesTM Hotel due to significant spalling repair activity; and (v) land held for development.
Total retailoffice rental revenue decreased $0.5increased $16.2 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018 primarily due to the expiration of the Kmart lease at Waikele Center on June 30, 2018. Same-store retail rental revenue increased $0.5 million for the three months ended June 30,March 31, 2019 compared to the three months ended June 30, 2018 primarily due to higher straight-line rent revenue at Carmel Mountain Plaza and additional cost reimbursements at Gateway Marketplace and Del Monte Center.
Total office rental revenue increased $2.9 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had rental revenue of approximately $1.1$10.3 million during the period. The increase in total office rental revenue is also attributed to Torrey Point, which was placed into operations duringpartially offset by the third quarter of 2018, and haddecrease in rental revenue at One Beach Street due to expiration of approximately $0.4 million duringleases to allow for the period.modernization of the property. Same-store office rental revenue increased $1.4$6.6 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to higher annualized base rents at The Landmark at One Market, Lloyd District Portfolio, Torrey Point, and City Center Bellevue, Torrey Reserve Campus, and Solana Crossing.Bellevue.
Total multifamilyretail rental revenue increased $0.3$0.6 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to an increase in averagehigher annualized base rent per unitat Waikele Center related to $2,092 for the three months ended June 30, 2019 comparedSafeway lease and Carmel Mountain Plaza related to $2,037 for the three months ended June 30, 2018.At Home Stores lease.
Total mixed-use rental revenue increased $0.1decreased $1.5 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to higher annualized base rentsthe COVID-19 pandemic reducing tourism and hotel occupancy through hotel reservation cancellations and travel restrictions in March 2020 which led to a decrease in average occupancy and revenue per available room of 75.4% and $242 for retail tenantsthe three months ended March 31, 2020, respectively, compared to 91.8% and $290 for three months ended March 31, 2019, respectively. The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental revenue at ourthe hotel portion of the mixed-use property.

property through at least the second quarter of 2020.
Other property income. Other property income decreased $3.7$3.8 million,, or 45%, to $4.5$4.7 million for the three months ended June 30, 2019March 31, 2020 compared to $8.1$8.5 million for the three months ended June 30, 2018.March 31, 2019. Other property income by segment was as follows (dollars in thousands):
 Total PortfolioSame-Store Portfolio
 Three Months Ended March 31,Change%Three Months Ended March 31,Change%
 2020201920202019
Office$1,996  $1,463  $533  36  $1,761  $1,462  $299  20  
Retail535  4,703  (4,168) (89) 359  4,498  (4,139) (92) 
Multifamily811  855  (44) (5) 811  855  (44) (5) 
Mixed-Use1,331  1,467  (136) (9) —  —  —  —  
$4,673  $8,488  $(3,815) (45)%$2,931  $6,815  $(3,884) (57)%
 Total Portfolio Same-Store Portfolio
 Three Months Ended June 30, Change % Three Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$525
 $585
 $(60) (10)% $96
 $362
 $(266) (73)%
Office1,443
 5,162
 (3,719) (72) 1,386
 3,779
 (2,393) (63)
Multifamily873
 855
 18
 2
 873
 855
 18
 2
Mixed-Use1,616
 1,529
 87
 6
 —
 —
 —
 —
 $4,457
 $8,131
 $(3,674) (45)% $2,355
 $4,996
 $(2,641) (53)%
Same-store retailOffice other property income decreased $0.3increased $0.5 million for the three months ended June 30, 2019March 31, 2020 primarily due to lease termination fees in the prior period for tenants at Solana Beach Towne Center and Del Monte Center receivedacquisition of La Jolla Commons on June 20, 2019, which had parking income of $0.2 million during the three months ended June 30, 2018.period and Lloyd District Portfolio tenant improvement construction fee income.
OfficeRetail other property income decreased $3.7$4.2 million for the three months ended June 30, 2019March 31, 2020 primarily due to non-cash lease termination fees recognized in connection with the termination of a ground lease, and ground lessee's surrender of,
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the former Sears building at Carmel Mountain Plaza during the three months three months ended March 31, 2019. The decrease in retail other property income was partially offset by the increase in lease termination fees received at Alamo Quarry Market during the period.
Mixed-use other property income decreased $0.1 million for the three months ended March 31, 2020 primarily due to the lease termination feesCOVID-19 pandemic reducing tourism and hotel occupancy in March 2020 which lead to a decrease in excise tax and food & beverage revenue at the prior period for tenantshotel portion of our mixed-use property and a decrease in parking income at Lloyd District Portfoliothe retail portion of our mixed-use property. The decrease in tourism and Torrey Point received duringhotel occupancy in Oahu due to COVID-19 is expected to substantially reduce mixed-use other property income through at least the three months ended June 30, 2018.second quarter of 2020.
Property Expenses
Total Property Expenses. Total property expenses consist of rental expenses and real estate taxes. Total property expenses increased $1.6$3.8 million, or 5%13%, to $31.1$33.6 million, for the three months ended June 30, 2019March 31, 2020 compared to $29.5$29.8 million for the three months ended June 30, 2018.March 31, 2019.
Rental Expenses. Rental expenses increased $0.9$1.8 million, or 5%9%, to $21.8 million for the three months ended June 30, 2019 compared to $20.9$22.6 million for the three months ended June 30, 2018.March 31, 2020 compared to $20.8 million for the three months ended March 31, 2019. Rental expense by segment was as follows (dollars in thousands): 
 Total PortfolioSame-Store Portfolio
 Three Months Ended March 31,Change%Three Months Ended March 31,Change%
 2020201920202019
Office$7,162  $5,469  $1,693  31  $5,752  $5,224  $528  10  
Retail3,569  3,519  50  1  2,846  2,805  41  1  
Multifamily3,843  3,492  351  10  3,843  3,492  351  10  
Mixed-Use7,994  8,316  (322) (4) —  —  —  —  
$22,568  $20,796  $1,772  9 %$12,441  $11,521  $920  8 %
 Total Portfolio Same-Store Portfolio
 Three Months Ended June 30, Change % Three Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$3,948
 $3,598
 $350
 10 % $3,026
 $3,006
 $20
 1 %
Office6,167
 5,443
 724
 13
 5,654
 5,342
 312
 6
Multifamily3,302
 3,553
 (251) (7) 3,302
 3,553
 (251) (7)
Mixed-Use8,409
 8,288
 121
 1
 —
 —
 —
 —
 $21,826
 $20,882
 $944
 5 % $11,982
 $11,901
 $81
 1 %
RetailOffice rental expenses increased $0.4$1.7 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to the absenceacquisition of contra-bad debt expense at Waikele Center and parking lot repairs expenseLa Jolla Commons on June 20, 2019, which had rental expenses of $1.2 million during the period.
Office Same-store office rental expenses increased $0.7$0.5 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to an increase in commercial rent tax at The Landmark at One Market and One Beach Street. The increase in office rental expense was also attributed to higher janitorial services and repairsrepair and maintenance at City Center Bellevue, Solana Crossing, and Torrey Point which was placed into operations in August 2018 and the acquisition of La Jolla Commons on June 20, 2019, which had rental expenses of $0.1 million during the period.
Multifamily rental expenses increased $0.4 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 primarily due to an increase in personnel compensation expenses and repairs and maintenance during the period.
Mixed-use rental expense decreased $0.3 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018 primarily due to a decrease in utilities expense and personnel compensation expenses during the period.
Mixed-use rental expense increased $0.1 million for the three months ended June 30,March 31, 2019 compared to the three months ended June 30, 2018 primarily due to an increasedecrease in hotel room expenses, marketing expenses, and repairs and maintenancegeneral excise tax expenses at the hotel portion of our mixed-use property during the period.

The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce rental expenses at the hotel portion of our mixed-use property through at least the second quarter of 2020.
Real Estate Taxes. Real estate taxes increased $0.6$2.0 million, or 7%22%, to $9.3$11.0 million for the three months ended June 30, 2019March 31, 2020 compared to $8.6$9.0 million for the three months ended June 30, 2018.March 31, 2019. Real estate tax expense by segment was as follows (dollars in thousands):
 Total PortfolioSame-Store Portfolio
 Three Months Ended March 31,Change%Three Months Ended March 31,Change%
 2020201920202019
Office$4,631  $3,020  $1,611  53  $3,021  $2,826  $195  7  
Retail3,762  3,635  127  3  3,035  2,933  102  3  
Multifamily1,667  1,581  86  5  1,667  1,581  86  5  
Mixed-Use985  810  175  22  —  —  —  —  
$11,045  $9,046  $1,999  22 %$7,723  $7,340  $383  5 %
 Total Portfolio Same-Store Portfolio
 Three Months Ended June 30, Change % Three Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$3,783
 $3,540
 $243
 7% $3,034
 $2,811
 $223
 8 %
Office3,102
 2,899
 203
 7
 2,822
 2,840
 (18) (1)
Multifamily1,581
 1,467
 114
 8
 1,581
 1,467
 114
 8
Mixed-Use809
 722
 87
 12
 —
 —
 —
 —
 $9,275
 $8,628
 $647
 7% $7,437
 $7,118
 $319
 4 %
RetailOffice real estate taxes increased $0.2$1.6 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to an increase in tax assessments at Alamo Quarry Market and Carmel Mountain Plaza.
Office real estate taxes increased $0.2 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 primarily due to an increase in tax assessments for Torrey Point, which was placed into operations in August 2018 and the acquisition of La Jolla Commons on June 20, 2019, which had real estate taxes of $0.1
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$1.4 million. Same-store office real estate taxes increased $0.2 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 primarily due to an increase in tax assessments at City Center Bellevue, The Landmark at One Market and Torrey Reserve Campus during the period.
MultifamilyRetail real estate taxes increased $0.1 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to an increase in tax assessments at Pacific Ridge Apartments.Alamo Quarry Market, Waikele Center, and Carmel Mountain Plaza.
Property Operating Income
Property operating income decreased $2.5 million, or 5%, to $53.0Mixed-use real estate taxes increased $0.2 million for the three months ended June 30,March 31, 2020 compared to the three months ended March 31, 2019 primarily due to an increase in tax assessments at the hotel portion of our mixed-use property.
Property Operating Income
Property operating income increased $7.7 million, or 14%, to $63.1 million for the three months ended March 31, 2020, compared to $55.5 million for the three months ended June 30, 2018.March 31, 2019. Property operating income by segment was as follows (dollars in thousands):
Total PortfolioSame-Store Portfolio
Total Portfolio Same-Store Portfolio Three Months Ended March 31,Change%Three Months Ended March 31,Change%
Three Months Ended June 30, Change % Three Months Ended June 30, Change % 2020201920202019
2019 2018 2019 2018 
OfficeOffice$32,716  $19,317  $13,399  69  $24,823  $18,634  $6,189  33  
Retail$18,140
 $19,277
 $(1,137) (6)% $15,744
 $15,802
 $(58) — %Retail18,495  22,283  (3,788) (17) 15,720  19,980  (4,260) (21) 
Office20,931
 22,710
 (1,779) (8) 20,161
 21,482
 (1,321) (6)
Multifamily8,014
 7,602
 412
 5
 8,014
 7,602
 412
 5
Multifamily7,315  7,826  (511) (7) 7,315  7,826  (511) (7) 
Mixed-Use5,927
 5,924
 3
 —
 —
 —
 —
 —
Mixed-Use4,604  6,051  (1,447) (24) —  —  —  —  
$53,012
 $55,513
 $(2,501) (5)% $43,919
 $44,886
 $(967) (2)%$63,130  $55,477  $7,653  14 %$47,858  $46,440  $1,418  3 %
Total retailoffice property operating income decreased $1.1increased $13.4 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to the expiration of the Kmart lease at Waikele Center offset by higher rental revenue at Carmel Mountain Plaza.
Total office property operating income decreased $1.8 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 primarily due to the lease termination fees in the prior period for tenants at Lloyd District Portfolio and Torrey Point received during the three months ended June 30, 2018. The decrease in total office property operating income was offset by the acquisition of La Jolla Commons on June 20, 2019, which had property operating income of $1.0$7.8 million during the period and higher annualized base rents at City Center Bellevue, Torrey Reserve Campus, and Solana Crossing.period. Same-store office property operating income decreased $1.3 million due to the lease termination fees in the prior period for tenants at Lloyd District Portfolio offset by the higher annualized base rents at City Center Bellevue, Torrey Reserve Campus, and Solana Crossing.
Total multifamily property operating income increased $0.4$6.2 million for the three months ended June 30, 2019March 31, 2020 compared to the three months ended June 30, 2018March 31, 2019 primarily due to an increase in averagehigher annualized base rent per unit to $2,092 forrents at The Landmark at One Market, Lloyd District Portfolio, Torrey Point, and City Center Bellevue during the three months ended June 30, 2019 compared to $2,037 for the three months ended June 30, 2018.period.

Other
General and Administrative. General and administrative expenses increased $0.5 million, or 10%, to $5.9Total retail property operating income decreased $3.8 million for the three months ended June 30, 2019,March 31, 2020 compared to $5.4 million for the three months ended June 30, 2018. This increase was primarily due to an increase in employee-related costs and travel expenses.
Depreciation and Amortization. Depreciation and amortization expense decreased $10.3 million, or 31%, to $22.6 million for the three months ended June 30,March 31, 2019 compared to $32.9 million for the three months ended June 30, 2018. This decrease was primarily due to higher depreciation and amortization in the prior period at Waikele Center attributable to the redevelopment of the Kmart space.
Interest Expense. Interest expense increased $0.4 million, or 3%, to $13.1 million for the three months ended June 30, 2019, compared to $12.7 million for the three months ended June 30, 2018. This increase was primarily due to the higher average outstanding balance on the line of credit in 2019, offset by the repayment of the mortgage loans at One Beach Street on November 30, 2018 and Torrey Reserve - North Court on March 1, 2019.
Gain on sale of real estate. Gain on sale of real estate of $0.6 million during the period relates to our sale of Solana Beach - Highway 101 on May 22, 2019.
Other (Expense) Income, Net. Other (Expense) income, net decreased $0.1 million, or 66%, to $0.1 million for the three months ended June 30, 2019, compared to $0.1 million for the three months ended June 30, 2018, primarily due to an increase in interest and investment income attributed to interest on the net proceeds from our public offering prior to the acquisition of La Jolla Commons and an increase in income tax expense related to higher taxable income for our taxable REIT subsidiary during the period.
Comparison of the Six Months Ended June 30, 2019 to the Six Months Ended June 30, 2018
The following summarizes our consolidated results of operations for the six months ended June 30, 2019 compared to our consolidated results of operations for the six months ended June 30, 2018.
The following table sets forth selected data from our unaudited consolidated statements of income for the six months ended June 30, 2019 and 2018 (dollars in thousands):

 Six Months Ended June 30, Change %
 2019 2018 
Revenues       
Rental income$156,487
 $153,093
 $3,394
 2 %
Other property income12,945
 12,662
 283
 2
Total property revenues169,432
 165,755
 3,677
 2
Expenses       
Rental expenses42,622
 41,302
 1,320
 3
Real estate taxes18,321
 17,174
 1,147
 7
Total property expenses60,943
 58,476
 2,467
 4
Total property income108,489
 107,279
 1,210
 1
General and administrative(12,016) (10,963) (1,053) 10
Depreciation and amortization(43,165) (66,147) 22,982
 (35)
Interest expense(26,478) (26,508) 30
 —
Gain on sale of real estate633
 —
 633
 100
Other income (expense), net(279) 61
 (340) 557
Net income27,184
 3,722
 23,462
 630
Net income attributable to restricted shares(185) (144) (41) 28
Net income attributable to unitholders in the Operating Partnership(6,988) (959) (6,029) 629
Net income attributable to American Assets Trust, Inc. stockholders$20,011
 $2,619
 $17,392
 664 %

Revenue
Total property revenues. Total property revenue consists of rental revenue and other property income. Total property revenue increased $3.7 million, or 2%, to $169.4 million for the six months ended June 30, 2019 compared to $165.8 million for the six months ended June 30, 2018. The percentage leased was as follows for each segment as of June 30, 2019 and 2018:
 
Percentage Leased  (1)
 June 30,
 2019 2018
Retail97.5% 96.7%
Office93.7% 93.8%
Multifamily92.6% 93.9%
Mixed-Use (2)
98.2% 95.9%
(1)
The percentage leased includes the square footage under lease, including leases which may not have commenced as of June 30, 2019 or June 30, 2018, as applicable.
(2)Includes the retail portion of the mixed-use property only.

The increase in total property revenue was attributable primarily to the factors discussed below.
Rental revenues. Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents. Rental revenue increased $3.4 million, or 2%, to $156.5 million for the six months ended June 30, 2019 compared to $153.1 million for the six months ended June 30, 2018. Rental revenue by segment was as follows (dollars in thousands):
 Total Portfolio 
Same-Store Portfolio(1)
 Six Months Ended June 30, Change % Six Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$50,080
 $51,638
 (1,558) (3)% $42,928
 $42,454
 $474
 1%
Office55,100
 50,869
 4,231
 8
 53,256
 50,858
 2,398
 5
Multifamily24,068
 23,302
 766
 3
 24,068
 23,302
 766
 3
Mixed-Use27,239
 27,284
 (45) —
 —
 —
 —
 —
 $156,487
 $153,093
 $3,394
 2 % $120,252
 $116,614
 $3,638
 3%
(1)
For this table and tables following, the same-store portfolio excludes: (i) Waikele Center due to significant redevelopment activity; (ii) Torrey Point, which was placed into operations and became available for occupancy in August 2018; (iii) La Jolla Commons as it was acquired on June 20, 2019; (iv) Waikiki Beach Walk Retail and Embassy SuitesTM Hotel due to significant spalling repair activity; and (v) land held for development.
Total retail rental revenue decreased $1.6 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to the expiration of the Kmart lease at Waikele Center on June 30, 2018. Same-store retail rental revenue increased $0.5 million due to higher straight-line rent revenue at Carmel Mountain Plaza and additional cost reimbursements at Alamo Quarry Market.
Total office rental revenue increased $4.2 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 due to the acquisition of La Jolla Commons on June 20, 2019, which had rental revenue of approximately $1.1 million during the period. The increase in total office rental revenue is also attributed to Torrey Point, which was placed into operations during the third quarter of 2018, and had rental revenue of approximately $0.7 million during the period. Same-store office rental revenue increased $2.4 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to higher annualized base rents at City Center Bellevue, Torrey Reserve Campus, and Solana Crossing.
Multifamily rental revenue increased $0.8 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increase in occupancy and higher average base rent per unit of $2,074 for the six months ended June 30, 2019 compared to $2,013 for the six months ended June 30, 2018.

Other property income. Other property income increased $0.3 million, or 2%, to $12.9 million for the six months ended June 30, 2019 compared to $12.7 million for the six months ended June 30, 2018. Other property income by segment was as follows (dollars in thousands):
 Total Portfolio Same-Store Portfolio
 Six Months Ended June 30, Change % Six Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$5,228
 $934
 $4,294
 460 % $4,595
 $440
 $4,155
 944 %
Office2,906
 6,953
 (4,047) (58) 2,811
 5,532
 (2,721) (49)
Multifamily1,728
 1,744
 (16) (1) 1,728
 1,744
 (16) (1)
Mixed-Use3,083
 3,031
 52
 2
 —
 —
 —
 —
 $12,945
 $12,662
 $283
 2 % $9,134
 $7,716
 $1,418
 18 %
Total retail other property income increased $4.3 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increasedecrease in lease termination fees recognized in the prior period in connection with the termination of a ground lease, and ground lessee's surrender of, the former Sears building at Carmel Mountain Plaza duringPlaza. The decrease in retail property operating income was partially offset by the six months ended June 30, 2019.
Total office other property income decreased $4.0 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to lease termination fees in the prior for tenants at Lloyd District Portfolio and Torrey Point received during the six months ended June 30, 2018.

Property Expenses
Total Property Expenses. Total property expenses consist of rental expenses and real estate taxes. Total property expenses increased by $2.5 million, or 4%, to $60.9 million for the six months ended June 30, 2019, compared to $58.5 million for the six months ended June 30, 2018. This increase in total property expenses was attributable primarily to the factors discussed below.
Rental Expenses. Rental expenses increased $1.3 million, or 3%, to $42.6 million for the six months ended June 30, 2019, compared to $41.3 million for the six months ended June 30, 2018. Rental expense by segment was as follows (dollars in thousands):
 Total Portfolio Same-Store Portfolio
 Six Months Ended June 30, Change % Six Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$7,467
 $7,048
 $419
 6 % $5,831
 $5,906
 $(75) (1)%
Office11,636
 10,540
 1,096
 10
 10,854
 10,307
 547
 5
Multifamily6,794
 7,005
 (211) (3) 6,795
 7,005
 (210) (3)
Mixed-Use16,725
 16,709
 16
 —
 —
 —
 —
 —
 $42,622
 $41,302
 $1,320
 3 % $23,480
 $23,218
 $262
 1 %
Total retail rental expenses increased $0.4 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to the absence of contra-bad debt expenseannualized base rents at Waikele Center.
Total office rental expenses increased $1.1 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increase in commercial rent tax at The Landmark at One Market and One Beach Street. The increase in office rental expense was also attributed to higher janitorial services and repairs at City Center Bellevue, Torrey Point, which was placed into operations in August 2018 and the acquisition of La Jolla Commons on June 20, 2019, which has rental expenses of $0.1 million during the period.
Total multifamily rental expenses decreased $0.2 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to a decrease in utilities expense and personnel compensation expense during the period.

Real Estate Taxes. Real estate tax expense increased $1.1 million, or 7%, to $18.3 million for the six months ended June 30, 2019 compared to $17.2 million for the six months ended June 30, 2018. Real estate tax expense by segment was as follows (dollars in thousands):
 Total Portfolio Same-Store Portfolio
 Six Months Ended June 30, Change % Six Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$7,418
 $6,901
 $517
 7% $5,967
 $5,444
 $523
 10 %
Office6,122
 5,815
 307
 5
 5,684
 5,699
 (15) —
Multifamily3,162
 3,012
 150
 5
 3,161
 3,012
 149
 5
Mixed-Use1,619
 1,446
 173
 12
 —
 —
 —
 —
 $18,321
 $17,174
 $1,147
 7% $14,812
 $14,155
 $657
 5 %
Retail real estate taxes increased $0.5 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increase in tax assessments at Alamo Quarry Market and Carmel Mountain Plaza.
Total office real estate taxes increased $0.3multifamily property operating income decreased $0.5 million for the sixthree months ended June 30, 2019March 31, 2020 compared to the sixthree months ended June 30, 2018March 31, 2019 primarily due to a an increase in tax assessmentspersonnel compensation expenses and repairs and maintenance during the period.
Total mixed-use property operating income decreased $1.4 million for Torrey Point,the three months ended March 31, 2020 compared to the three months ended March 31, 2019 primarily due to the impact of the COVID-19 pandemic reducing tourism and hotel occupancy in March 2020 which lead to a decrease in hotel occupancy and revenue per available room of 75.4% and $242 for the three months ended March 31, 2020 compared to 91.8% and $290 for the three months ended March 31, 2019. The decrease in tourism and hotel occupancy in Oahu due to COVID-19 is expected to substantially reduce property other property income through at least the second quarter of 2020.
Other
General and Administrative. General and administrative expenses increased $0.7 million, or 12%, to $6.8 million for the three months ended March 31, 2020, compared to $6.1 million for the three months ended March 31, 2019. This increase was placed into operationsprimarily due to increases in August 2018employee-related costs and furlough expense for our hotel staff.
Depreciation and Amortization. Depreciation and amortization expense increased $6.9 million, or 33%, to $27.5 million for the three months ended March 31, 2020, compared to $20.6 million for the three months ended March 31, 2019. This increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had real estate taxesdepreciation and amortization of $0.1 million during the period.
Multifamily real estate taxes increased $0.2 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increase in tax assessments for Pacific Ridge Apartments and Hassalo on Eighth - Residential.
Mixed-use real estate taxes increased $0.2 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increase in tax assessments for the hotel portion of our mixed-use property.
Property Operating Income
Property operating income increased $1.2 million, or 1%, to $108.5 million for the six months ended June 30, 2019, compared to $107.3 million for the six months ended June 30, 2018. Property operating income by segment was as follows (dollars in thousands):
 Total Portfolio Same-Store Portfolio
 Six Months Ended June 30, Change % Six Months Ended June 30, Change %
 2019 2018 2019 2018 
Retail$40,423
 $38,623
 $1,800
 5 % $35,725
 $31,544
 $4,181
 13 %
Office40,248
 41,467
 (1,219) (3) 39,529
 40,384
 (855) (2)
Multifamily15,840
 15,029
 811
 5
 15,840
 15,029
 811
 5
Mixed-Use11,978
 12,160
 (182) (1) —
 —
 —
 —
 $108,489
 $107,279
 $1,210
 1 % $91,094
 $86,957
 $4,137
 5 %
Total retail property operating income increased $1.8 million during the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to an increase in lease termination fees recognized in connection with the termination of a ground lease, and ground lessee's surrender of, the former Sears building at Carmel Mountain Plaza offset by the expiration of the Kmart lease at Waikele Center.
Total office property operating income decreased $1.2 million during the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to the lease termination fees in the prior period at Lloyd District Portfolio and Torrey Point received during the six months ended June 30, 2018. The decrease in total office property operating income was offset by the acquisition of La Jolla Commons on June 20, 2019, which had property operating income of $1.0$5.0 million during the period and higher annualized base rentsdepreciation and amortization at CityLloyd District Portfolio and Waikele Center Bellevue, Torrey Reserve Campus,due to tenant improvements that were put into service in 2019 and Solana Crossing.2020.
Multifamily property operating income
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Interest Expense. Interest expense increased $0.8$0.1 million, or 1%, to $13.5 million for the sixthree months ended June 30, 2019March 31, 2020, compared to the six months ended June 30, 2018 primarily due to an increase in higher average base rent per unit of $2,074 for the six months ended June 30, 2019 compared to $2,013 for the six months ended June 30, 2018.
Mixed-use property operating income decreased $0.2 million during the six months ended June 30, 2019 compared to the six months ended June 30, 2018. The decrease was primarily due to a decrease in hotel room revenue and an increase in real

estate taxes at the hotel portion of our mixed-use property offset by an increase in annualized base rents at the retail portion of our mixed-use property.
Other
General and Administrative. General and administrative expenses increased $1.1 million, or 10%, to $12.0$13.3 million for the sixthree months ended June 30, 2019, compared to $11.0 million for the six months ended June 30, 2018.March 31, 2019. This increase was primarily due to an increase in employee-related costs and travel expenses.
Depreciation and Amortization. Depreciation and amortization expense decreased $23.0 million, or 35%, to $43.2 million for the six months ended Juneclosing of our offering of Series G Notes on July 30, 2019, compared to $66.1 million foroffset by the six months ended June 30, 2018. This decrease was primarily due to an higher depreciation and amortization expense in the prior period at Waikele Center attributed to the redevelopmentrepayment of the Kmart space and Lloyd District Portfolio attributed to acceleration of depreciation related to lease terminations.
Interest Expense. Interest expense decreased $0.0 million, or 0%, to $26.5 million for the six months ended June 30, 2019 compared to $26.5 million for the six months ended June 30, 2018. This decrease was primarily due to the payoff of property mortgages for Loma Palisades during the first quarter of 2018, One Beach Street during the fourth quarter of 2018 andmortgage loans at Torrey Reserve - North Court during the first quarter of 2019, substantially offset by the higher average outstanding balance on the line of credit in 2019.
Gain on sale of real estate. Gain on sale of real estate of $0.6 million during the period relates to our sale ofVCI, VCII, VCIII, Solana Crossing I-II, and Solana Beach - Highway 101Towne Centre on May 22, 2019.March 2, 2020.
Other Income (Expense), Net. Other (Expense) income (expense), net decreasedincreased $0.3 million, or 147%, or 557%, to other expense, net of $0.3 million for the six months ended June 30, 2019, compared to other income, net of $0.1 million for the sixthree months ended June 30, 2018,March 31, 2020, compared to other expense, net of $0.2 million for the three months ended March 31, 2019 primarily due to an increase in interest and investment income attributed to higher average cash balance during the period and by a decrease in income tax expense related to higherlower taxable income for our taxable REIT subsidiary during the period.subsidiary.

Liquidity and Capital Resources of American Assets Trust, Inc.

In this “Liquidity and Capital Resources of American Assets Trust, Inc.” section, the term the “company” refers only to American Assets Trust, Inc. on an unconsolidated basis, and excludes the Operating Partnership and all other subsidiaries.

The company’s business is operated primarily through the Operating Partnership, of which the company is the parent company and sole general partner, and which it consolidates for financial reporting purposes.  Because the company operates on a consolidated basis with the Operating Partnership, the section entitled “Liquidity and Capital Resources of American Assets Trust, L.P.” should be read in conjunction with this section to understand the liquidity and capital resources of the company on a consolidated basis and how the company is operated as a whole.

The company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the Operating Partnership. The company itself does not have any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. Therefore, the consolidated assets and liabilities and the consolidated revenues and expenses of the company and the Operating Partnership are the same on their respective financial statements.  However, all debt is held directly or indirectly by the Operating Partnership. The company’s principal funding requirement is the payment of dividends on its common stock. The company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership.

As of June 30, 2019,March 31, 2020, the company owned an approximate 78.4%78.5% partnership interest in the Operating Partnership. The remaining 21.6%21.5% are owned by non-affiliated investors and certain of the company's directors and executive officers. As the sole general partner of the Operating Partnership, American Assets Trust, Inc. has the full, exclusive and complete authority and control over the Operating Partnership’s day-to-day management and business, can cause it to enter into certain major transactions, including acquisitions, dispositions and refinancings, and can cause changes in its line of business, capital structure and distribution policies. The company causes the Operating Partnership to distribute such portion of its available cash as the company may in its discretion determine, in the manner provided in the Operating Partnership’s partnership agreement.


The liquidity of the company is dependent on the Operating Partnership’s ability to make sufficient distributions to the company. The primary cash requirement of the company is its payment of dividends to its stockholders. The company also guarantees some of the Operating Partnership’s debt, as discussed further in Note 7 of the Notes to Consolidated Financial Statements included elsewhere herein. If the Operating Partnership fails to fulfill certain of its debt requirements, which trigger the company’s guarantee obligations, then the company will be required to fulfill its cash payment commitments under such guarantees. However, the company’s only significant asset is its investment in the Operating Partnership.

We believe the Operating Partnership’s sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured line of credit, are adequate for it to make its distribution payments to the company and, in turn, for the company to make its dividend payments to its stockholders. As of June 30, 2019,March 31, 2020, the company has determined that it has adequate working capital to meet its dividend funding obligations for the next 12 months. However, we cannot assure you that the Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the company. The unavailability of capital could adversely affect the Operating Partnership’s ability to pay its distributions to the company, which would in turn, adversely affect the company’s ability to pay cash dividends to its stockholders. The COVID-19 pandemic is expected to temporarily impact some of our tenants ability or willingness to remit rent payments due to the tenants operations being affected by state and local stay-at-home orders. In March and April 2020, we received rent deferment requests from some tenants and have begun negotiating and executing lease modifications for the deferment of rent. These rent deferments may adversely affect the Operating Partnership's cash flow from operations.


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Our short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to the company’s stockholders, operating expenses and other expenditures directly associated with our properties, interest expense and scheduled principal payments on outstanding indebtedness, general and administrative expenses, funding construction projects, capital expenditures, tenant improvements and leasing commissions.

The company may from time to time seek to repurchase or redeem the Operating Partnership’s outstanding debt, the company’s shares of common stock or other securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or redemptions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

For the company to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains. While historically the company has satisfied this distribution requirement by making cash distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the company’s own stock. As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. The company may need to continue to raise capital in the equity markets to fund the operating partnership’s working capital needs, acquisitions and developments. Although there is no intent at this time, if market conditions deteriorate, the company may also delay the timing of future development and redevelopment projects as well as limit future acquisitions, reduce the Operating Partnership’s operating expenditures, or re-evaluate its dividend policy.

The company is a well-known seasoned issuer. As circumstances warrant, the company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. When the company receives proceeds from preferred or common equity issuances, it is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership. The Operating Partnership may use the proceeds to repay debt, to develop new or existing properties, to acquire properties or for general corporate purposes.

In February 2018, the company filed a universal shelf registration statement on Form S-3ASR with the SEC, which became effective upon filing and which replaced the prior Form S-3ASR that was filed with the SEC in February 2015. The universal shelf registration statement may permitpermits the company from time to time to offer and sell equity securities of the company.  However, there can be no assurance that the company will be able to complete any such offerings of securities.  Factors influencing the availability of additional financing include investor perception of our prospects and the general condition of the financial markets, among others.
In May 2015, we entered into an ATM equity program with five sales agents in which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $250.0 million. On March 2, 2018, we amended certain of these equity programs, terminated one such program and entered into a new equity program with one new sales agent. The sales of shares of the company's common stock made through the ATM equity program, as amended, are made in “at-the-market” offerings as defined in Rule 415 of the Securities Act. As of June 30, 2019,March 31, 2020, we had the capacity to issue up to an additional $145.1$132.6 million in shares of common stock under the ATM equity program. We intend to use the net proceeds to fund development or redevelopment activities, repay amounts outstanding from time to time under our amended and restated credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes.

Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of the company's common stock and the company's capital needs. We have no obligation to sell the remaining shares available for sale under the ATM equity program.
On June 14, 2019, we issued and sold 10,925,000 shares of common stock in an underwritten public offering at a price to the public of $44.75 per share. We received net proceeds of approximately $472.6 million, after deducting underwriting discounts, commissions and offering expenses.
Liquidity and Capital Resources of American Assets Trust, L.P.

In this “Liquidity and Capital Resources of American Assets Trust, L.P.” section, the terms “we,” “our” and “us” refer to the Operating Partnership together with its consolidated subsidiaries, or the Operating Partnership and American Assets Trust, Inc. together with their consolidated subsidiaries, as the context requires. American Assets Trust, Inc. is our sole general partner and consolidates our results of operations for financial reporting purposes. Because we operate on a consolidated basis with American Assets Trust, Inc., the section entitled “Liquidity and Capital Resources of American Assets Trust, Inc.” should be read in conjunction with this section to understand our liquidity and capital resources on a consolidated basis.
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Due to the nature of our business, we typically generate significant amounts of cash from operations. The cash generated from operations is used for the payment of operating expenses, capital expenditures, debt service and dividends to American Assets Trust, Inc.'s stockholders and our unitholders. As a REIT, American Assets Trust, Inc. must generally make annual distributions to its stockholders of at least 90% of its net taxable income. As of June 30, 2019,March 31, 2020, we held $44.8$52.4 million in cash and cash equivalents.
Our short-term liquidity requirements consist primarily of operating expenses and other expenditures associated with our properties, regular debt service requirements, dividend payments to American Assets Trust, Inc.'s stockholders required to maintain its REIT status, distributions to our unitholders, capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash and, if necessary, borrowings available under our credit facility.
Our long-term liquidity needs consist primarily of funds necessary to pay for the repayment of debt at maturity, property acquisitions, tenant improvements and capital improvements. We expect to meet our long-term liquidity requirements to pay scheduled debt maturities and to fund property acquisitions and capital improvements with net cash from operations, long-term secured and unsecured indebtedness and, if necessary, the issuance of equity and debt securities. We also may fund property acquisitions and capital improvements using our amended and restated credit facility pending permanent financing. We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However, we cannot be assured that this will be the case. Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about our company.
Our overall capital requirements for the remainder of 20192020 and first quarter 20202021 will depend upon acquisition opportunities and the level of improvements and redevelopments on existing properties. Our capital investments will be funded on a short-term basis with, among other sources of capital, cash on hand, cash flow from operations and/or our revolving line of credit. On a long-term basis, our capital investments may be funded with additional long-term debt.debt, including, without limitation, mortgage debt and unsecured notes. Our ability to incur additional debt will be dependent on a number of factors, including, without limitation, our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our capital investments may also be funded by issuing additional equity including, without limitation, shares issued by American Assets Trust, Inc. under its ATM equity program.program or through an underwritten public offering. Although there is no intent at this time, if market conditions deteriorate or fail to improve, including as a result of the COVID-19 pandemic, we may also delay the timing of future development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy. The COVID-19 pandemic is expected to impact the timing of future development and redevelopment projects due to, among other things, capital requirements and permitting delays caused by local government shutdowns or reduced operations.
In February 2018, the Operating Partnership filed a universal shelf registration on Form S-3 ASR with the SEC which provided for the registration of an unspecified amount of debt securities by the Operating Partnership. However, there can be no assurance that the Operating Partnership will be able to complete any such offerings of debt securities. Factors influencing the availability of additional financing include investor perception of our prospects and the general condition of the financial markets, among others.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.
Cash Flows
Comparison of the sixthree months ended June 30, 2019March 31, 2020 to the sixthree months ended June 30, 2018March 31, 2019
Cash, cash equivalents, and restricted cash were $54.5$56.8 million and $60.7$64.3 million at June 30,March 31, 2020 and 2019, and 2018, respectively.
Net cash provided by operating activities decreased $12.1increased $8.5 million to $70.2$45.4 million for the sixthree months ended June 30, 2019March 31, 2020 compared to $82.3$36.8 million for the sixthree months ended June 30, 2018.March 31, 2019. The decreaseincrease in cash from operations was primarily due to the expirationincrease in annualized base rents at The Landmark at One Market, Lloyd District Portfolio, Torrey Point
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and City Center Bellevue, the Kmart leaseacquisition of La Jolla Common, which was acquired on June 30, 2018, a decrease in lease termination fees,20, 2019 and changes in operating assets and liabilities.
Net cash used in investing activities increased $526.6$1.5 million to $550.1$23.9 million for the sixthree months ended June 30, 2019March 31, 2020 compared to $23.4$22.4 million for the sixthree months ended June 30, 2018.March 31, 2019. The increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019.capital expenditures for tenant improvements at City Center Bellevue, Lloyd District Portfolio, and Torrey Reserve Campus.
Net cash provided byused in financing activities increased $567.2$66.7 million to cash provided of $477.1$74.1 million for the sixthree months ended June 30, 2019March 31, 2020 compared to cash used of $90.2$7.4 million for the sixthree months ended June 30, 2018.March 31, 2019. The increase in cash provided byused in financing activities was primarily due to payoff of the mortgages at Solana Beach Towne Centre, Solana Beach Corporate Center I-II, and Torrey Reserve VCI, VCII, VCIII during the first quarter of 2020 and an increase in dividends primarily due the increase in shares outstanding as a result of our underwritten public offering that settled on June 14, 2019.
Net Operating Income
Net Operating Income, or NOI, is a non-GAAP financial measure of performance. We define NOI as operating revenues (rental income, tenant reimbursements, lease termination fees, ground lease rental income and other property income) less property and related expenses (property expenses, ground lease expense, property marketing costs, real estate taxes and insurance). NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expense, other nonproperty income and losses, gains and losses from property dispositions, extraordinary items, tenant improvements, and leasing commissions. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to the NOIs of other REITs.
NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds of the property owner, (2) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (3) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our retail, office, multifamily or mixed-use properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is intended to be captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale, which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.
However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.
NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in “Management's Discussion and Analysis of Financial Condition and Results of Operations” regarding the components of net income that are eliminated in the

calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.  
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The following is a reconciliation of our NOI to net income for the three and six months ended June 30,March 31, 2020 and 2019 and 2018 computed in accordance with GAAP (in thousands):
Three Months Ended March 31,
20202019
Net operating income$63,130  $55,477  
General and administrative(6,820) (6,073) 
Depreciation and amortization(27,462) (20,583) 
Interest expense(13,472) (13,349) 
Other income (expense), net108  (229) 
Net income$15,484  $15,243  

 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Net operating income$53,012
 $55,513
 $108,489
 $107,279
General and administrative(5,943) (5,396) (12,016) (10,963)
Depreciation and amortization(22,582) (32,868) (43,165) (66,147)
Interest expense(13,129) (12,688) (26,478) (26,508)
Gain on sale of real estate633
 —
 633
 —
Other (expense) income, net(50) (148) (279) 61
Net income$11,941
 $4,413
 $27,184
 $3,722
Funds from Operations
We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (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 our 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. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our 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 our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our 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.
The following table sets forth a reconciliation of our FFO for the three and six months ended June 30, 2019March 31, 2020 to net income, the nearest GAAP equivalent (in thousands, except per share and share data): 

Three Months Ended March 31,
20202019
Funds from Operations (FFO)
Net income$15,484  $15,243  
Plus: Real estate depreciation and amortization27,462  20,583  
Funds from operations42,946  35,826  
Less: Nonforfeitable dividends on incentive restricted stock awards(102) (91) 
FFO attributable to common stock and units$42,844  $35,735  
FFO per diluted share/unit$0.56  $0.56  
Weighted average number of common shares and units, diluted (1)
76,117,072  64,185,323  
(1)The weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that are subject to time vesting, which were excluded from the computation of diluted EPS, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted share but is anti-dilutive for the computation of diluted EPS for the period. Diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.

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 Three Months Ended June 30, Six Months Ended June 30,
 2019 2019
Funds from Operations (FFO)   
Net income$11,941
 $27,184
Plus: Real estate depreciation and amortization22,582
 43,165
Gain on sale of real estate(633) (633)
Funds from operations33,890
 69,716
Less: Nonforfeitable dividends on incentive restricted stock awards(94) (185)
FFO attributable to common stock and units$33,796
 $69,531
FFO per diluted share/unit$0.51
 $1.06
Weighted average number of common shares and units, diluted (1)
66,890,084
 65,543,584
(1)The weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that are subject to time vesting, which were excluded from the computation of diluted EPS, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted share but is anti-dilutive for the computation of diluted EPS for the period. Diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We manage our market risk by attempting to match anticipated inflow of cash from our operating, investing and financing activities with anticipated outflow of cash to fund debt payments, dividends to our stockholders and Operating Partnership unitholders, investments, capital expenditures and other cash requirements.
Interest Rate Risk
Outstanding Debt
The following discusses the effect of hypothetical changes in market rates of interest on the fair value of our total outstanding debt. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt. Discounted cash flow analysis is generally used to estimate the fair value of our mortgages payable. Considerable judgment is necessary to estimate the fair value of financial instruments. This analysis does not purport to take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure.
Fixed Interest Rate Debt
Our outstanding notes payable obligations (maturing at various times through May 2029)July 2030) have fixed interest rates which limit the risk of fluctuating interest rates. However, interest rate fluctuations may affect the fair value of our fixed rate debt instruments. At June 30, 2019,March 31, 2020, we had $962.6 million$1.061 billion of fixed rate debt outstanding with an estimated fair value of $986.2 million.$1.148 billion. The carrying values of our revolving line of credit and term loan are deemed to be at fair value since the outstanding debt is directly tied to monthly LIBOR contracts. Additionally, we consider our $250.0 million term loan outstanding as of June 30, 2019March 31, 2020 to be fixed rate debt as the rate is effectively fixed by an interest rate swap agreement. If interest rates at June 30, 2019March 31, 2020 had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately $19.0$55.0 million. If interest rates at June 30, 2019March 31, 2020 had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately $31.1$59.3 million.
Variable Interest Rate Debt
At June 30, 2019,March 31, 2020, we had $345.0$250.0 million of variable rate debt outstanding. We have historically entered into forward starting interest rate swaps in order to economically hedge against the risk of rising interest rates that would affect our interest expense related to our future anticipated debt issuances as part of its overall borrowing program. See the discussion under Note 4 to the accompanying consolidated financial statements for certain quantitative details related to the interest rate swaps and for a discussion on how we value derivative financial instruments.  Based upon this amount of variable rate debt and the specific terms, if market interest rates increased 1.0%, our annual interest expense would increase by approximately $1.0$0.0 million with a corresponding decrease in our net income and cash flows for the year. Conversely, if market rates decreased 1.0%, our annual interest expense would decrease by approximately $1.0$0.0 million with a corresponding increase in our net income and cash flows for the year.


ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures (American Assets Trust, Inc.)
American Assets Trust, Inc. maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in American Assets Trust, Inc.'s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that such information is accumulated and communicated to management, including American Assets Trust, Inc.'s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
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American Assets Trust, Inc. has carried out an evaluation, under the supervision and with the participation of management, including American Assets Trust, Inc.'s Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of its disclosure controls and procedures as of June 30, 2019,March 31, 2020, the end of the period covered by this report. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer have concluded, as of June 30, 2019,March 31, 2020, that American Assets Trust, Inc.'s disclosure controls and procedures were effective in ensuring that information required to be disclosed by it in reports filed or submitted under the Exchange Act (1) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to its management, including American Assets Trust, Inc.'s Chief Executive Officer and its Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
No changes to American Assets Trust, Inc.'s internal control over financial reporting were identified in connection with the evaluation referenced above that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, American Assets Trust, Inc.'s internal control over financial reporting.
Controls and Procedures (American Assets Trust, L.P.)
The Operating Partnership maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that such information is accumulated and communicated to management, including the Operating Partnership's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Operating Partnership has carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of its disclosure controls and procedures as of June 30, 2019,March 31, 2020, the end of the period covered by this report. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer have concluded, as of June 30, 2019,March 31, 2020, that the Operating Partnership's disclosure controls and procedures were effective in ensuring that information required to be disclosed by it in reports filed or submitted under the Exchange Act (1) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
No changes to the Operating Partnership's internal control over financial reporting were identified in connection with the evaluation referenced above that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting.


PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation if determined adversely to us. We may be subject to on-going litigation, relating to our portfolio and the properties comprising our portfolio, and we expect to otherwise be party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business.
ITEM 1A. RISK FACTORS
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “PART I – Item 1A. – Risk Factors” of our 2019 Form 10-K, as filed with the U.S. Securities and Exchange Commission on February 14, 2020, and available at www.sec.gov or on the "Investors" page of www.americanassetstrust.com, we included a detailed discussion of our risk factors. Other than as noted below, our risk factors have been nonot changed significantly from those disclosed in our 2019 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in our 2019 Form 10-K as well as any of the risks described below could materially affect our business, consolidated financial condition or future results and the actual outcome of matters as to which forward-
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looking statements are made. The risk factors described in our 2019 Form 10-K and the risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, consolidated financial condition and/or future results.

The novel coronavirus (COVID-19) and other possible pandemics and similar outbreaks, could result in material changesadverse effects on our business, financial position, results of operations and cash flows.

The outbreak of COVID-19, which has rapidly spread to a growing number of countries, including the United States and the specific regions in which our properties are located, has created considerable instability and disruption in the U.S. and world economies. Considerable uncertainty still surrounds COVID-19 and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. However, measures taken to limit the impact of COVID-19, including “social distancing” and other restrictions on travel, congregation and business operations have already resulted in significant negative economic impacts. The long-term impact of COVID-19 on the U.S. and world economies remains uncertain, but is likely to result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted. The extent to which our financial condition, operating results will continue to be affected by the COVID-19 pandemic will largely depend on future developments, which are highly uncertain and cannot be accurately predicted.

Our operating results depend, in large part, on revenues derived from leasing space in our retail, office, mixed-use and multifamily properties and the ability of tenants to generate sufficient income to pay their rents in a timely manner. The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, have, and may continue to, adversely affect our returns and profitability and, as a result, our ability to make distributions to American Assets Trust, Inc.’s stockholders or American Assets Trust, L.P.’s unitholders or to realize appreciation in the value of our properties. The spread of COVID-19 could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent on a timely basis, or at all. In some cases, we may have to restructure tenants’ rent obligations, and may not be able to do so on terms as favorable to us as those currently in place. Numerous state, local, federal and industry-initiated efforts may also affect our ability to collect rent or enforce remedies for the failure to pay rent, including, among others, limitations, prohibitions and moratoriums on evicting tenants unwilling or unable to pay rent. In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our properties, and have limited ability to renew existing leases or sign new leases at projected rents.

Our properties may also incur significant costs or losses related to shelter-in-place orders, quarantines, infection or other related factors, which may result in a negative impact on our occupancy levels. We typically conduct aspects of our leasing activity on-site at our multifamily apartment communities. Reductions in the ability and willingness of prospective residents to visit our communities due to the risk factors included in Item 1A. “Risk Factors”COVID-19 pandemic could reduce rental revenue and ancillary operating revenue produced by our properties. Additionally, if there is an outbreak that directly impacts one or more of our properties, we may experience negative publicity and/or an unwillingness of prospective tenants, customers of tenants or residents to visit or ultimately choose to lease our space in our annual reportproperties or live in our communities, which could directly affect our rental revenue. In addition, property managers may be limited in their ability to properly maintain our multifamily apartment communities and other properties.

Additionally, market fluctuations as a result of the COVID-19 pandemic may affect our ability to obtain necessary funds for our operations from current lenders or new borrowings. We may be unable to obtain financing for the acquisition of investments on satisfactory terms, or at all. The occurrence of any of the foregoing events or any other related matters could have a material adverse effect on our business, financial condition, results of operations or cash flows.

The global impact of the COVID-19 pandemic continues to evolve rapidly, and the extent of its effect on our operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others. As a result, the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial condition and results of operations. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. In addition, if in the future there is an outbreak of another highly infectious or contagious disease or other health concern, our company and our properties may be subject to similar risks as posed by COVID-19.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.

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ITEM 6. EXHIBITS
Exhibit No.Description
Exhibit No.31.1*Description
10.2*
10.4(1)
Note Purchase Agreement, dated as of July 30, 2019, by and among the Company, the Operating Partnership. and the purchasers named therein.
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, Inc.
31.2*
31.3*
31.4*
32.1*
32.2*
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 
* Filed herewith.

(1) Incorporated here by reference to American Assets Trust, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2019.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto authorized.

American Assets Trust, Inc.American Assets Trust, L.P.
By: American Assets Trust, Inc.
Its: General Partner
American Assets Trust, Inc.American Assets Trust, L.P.
By: American Assets Trust, Inc.
Its: General Partner
/s/ ERNEST RADY/s/ ERNEST RADY
Ernest RadyErnest Rady
Chairman, President and Chief Executive OfficerChairman, President and Chief Executive Officer
(Principal Executive Officer)(Principal Executive Officer)
/s/ ROBERT F. BARTON/s/ ROBERT F. BARTON
Robert F. BartonRobert F. Barton
Executive Vice President, Chief Financial
Officer		Executive Vice President, Chief Financial
Officer
(Principal Financial and Accounting
Officer)		(Principal Financial and Accounting
Officer)
Date:August 2, 2019May 1, 2020Date:August 2, 2019May 1, 2020


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