American Assets Trust Narrows 2026 FFO Outlook as Q3 Property NOI Rises

American Assets Trust Inc. revised its 2026 funds-from-operations guidance to a narrower range after reporting higher third-quarter revenue, FFO and same-store cash net operating income. The real estate investment trust now expects FFO attributable to common stock and units of $2.04 to $2.10 per diluted share, compared with its previous range of $1.96 to $2.10.

For the three months ended September 30, 2026, FFO attributable to common stock and common units rose to $42.8 million, or $0.56 per diluted share and unit, from $37.8 million, or $0.49, a year earlier. FFO, a non-GAAP measure commonly used by REITs, excludes real estate depreciation and amortization and gains or losses on property sales.

Total revenue increased 4.3% to $114.3 million from $109.6 million. Rental income rose to $107.8 million from $102.2 million, while other property income declined to $6.4 million from $7.4 million.

GAAP net income increased to $10.0 million from $5.9 million, and net income attributable to American Assets Trust stockholders rose to $7.7 million, or $0.13 per share, from $4.5 million, or $0.07 per share. Operating income advanced to $29.4 million from $24.8 million as revenue growth and lower real estate taxes and general and administrative expenses offset higher rental costs and depreciation.

For the first nine months of 2026, revenue rose to $334.4 million from $326.1 million, while FFO attributable to common stock and units increased to $121.0 million, or $1.57 per diluted share and unit, from $117.4 million, or $1.53. Nine-month GAAP net income fell to $23.5 million from $67.1 million because the prior-year period included a $44.5 million gain on the sale of real estate.

Property Operations Strengthen Across Segments

Same-store cash NOI increased 8.3% to $69.8 million in the third quarter, with gains across each of the company’s property categories. Office same-store cash NOI rose 7.9% to $36.9 million, retail increased 9.6% to $17.9 million, multifamily advanced 10.2% to $9.0 million, and mixed-use improved 3.9% to $5.9 million.

For the first nine months, same-store cash NOI increased 2.3% to $202.3 million. Multifamily posted the strongest percentage gain at 4.2%, followed by retail at 2.8%, office at 1.9% and mixed-use at 0.7%.

The office portfolio, which accounted for 53% of third-quarter cash NOI, was 85.8% leased at September 30, up from 81.9% a year earlier. Retail properties were 98.3% leased, compared with 97.9%, while traditional multifamily properties were 94.2% leased, up from 91.5%. The retail portion of the mixed-use portfolio was 93.7% leased, down from 95.0%, while mixed-use hotel occupancy for the first nine months was 90.3%, compared with 82.9% a year earlier.

Office leasing activity covered 123,517 square feet during the quarter. Comparable office leases produced a 2.1% cash-basis rent increase and an 8.2% increase on a straight-line basis. Retail leasing totaled 108,344 square feet, with comparable rents rising 7.4% on a cash basis and 16.8% on a straight-line basis.

The company had 225,614 square feet of signed but not yet commenced office and retail leases at quarter-end, representing $12.8 million of annualized base rent. Most of those leases are expected to begin between the fourth quarter of 2026 and the end of 2027.

At Waikiki Beach Walk’s Embassy Suites, third-quarter average occupancy was 88.5%, with an average daily rate of $381 and revenue per available room of $337. The retail portion of the mixed-use property was 93.7% leased.

Distribution Measure Reflects Higher Property Spending

Funds available for distribution declined to $25.4 million from $26.0 million despite the increase in FFO. Tenant improvements, leasing commissions and recurring capital expenditures rose to $18.7 million from $14.7 million, accounting for much of the difference. The company declared and paid $26.4 million in dividends during the quarter, or $0.34 per share and unit.

Total capital expenditures, including redevelopment, expansion, repositioning and new development, were $36.0 million for the quarter and $85.7 million for the first nine months. Office properties accounted for $73.3 million of the nine-month total.

American Assets Trust identified several potential development and redevelopment projects, including a proposed 120,000-square-foot retail building at Waikele Center and possible multifamily projects at several California properties. It also listed a 385,000-square-foot second phase at Oregon Square within Portland’s Lloyd Portfolio. The company cautioned that many projects remain preliminary and depend on approvals, financing, tenant or lender consents, demand and market conditions.

Guidance and Balance Sheet

The revised full-year forecast calls for FFO attributable to common stock and units of $156.9 million to $161.5 million. Management’s estimates incorporate assumptions for leasing activity, rental rates, occupancy, interest rates, credit spreads and the timing of acquisition and development activity. Unless otherwise discussed by management, the forecast excludes future acquisitions, dispositions, equity transactions and debt financings or repayments.

At September 30, American Assets Trust had $1.70 billion of debt and $89.6 million of cash. Net debt to annualized adjusted EBITDA was 6.4 times, while the interest-coverage and fixed-charge-coverage ratios were both 3.3 times. The company had no borrowings outstanding under its $500 million unsecured revolving credit facility.

Debt maturities include $325 million in 2027, consisting of $250 million of unsecured Series D notes due in March and a $75 million secured loan on City Center Bellevue due in October. The portfolio also remains weighted toward office assets, which represented 64% of combined office and retail square footage and 53% of quarterly cash NOI. The company identified tenant defaults or nonrenewals, higher vacancies, weaker rental rates, interest-rate changes, increased operating costs, financing constraints and adverse real estate conditions among the factors that could cause actual results to differ from its expectations.