2Q13 10Q-DOC
Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number: 001-35030
 
 
AMERICAN ASSETS TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Maryland
(State of Organization)
27-3338708
(IRS Employer Identification No.)
 
 
 
 
 
11455 El Camino Real, Suite 200,
San Diego, California
(Address of Principal Executive Offices)
92130
(Zip Code)
 
(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.    x  Yes   o   No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    x  Yes      o  No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large Accelerated Filer
x
 
Accelerated Filer
o
Non-Accelerated Filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      o  Yes    x  No
The number of Registrant’s common shares outstanding on August 2, 2013 was 40,445,578.

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Table of Contents


AMERICAN ASSETS TRUST, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2013
 
PART 1. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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Table of Contents



American Assets Trust, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Data)
 
 
June 30,
 
December 31,
 
2013
 
2012
 
(unaudited)
 
 
ASSETS
 
 
 
Real estate, at cost
 
 
 
Operating real estate
$
1,899,074

 
$
1,891,549

Construction in progress
49,378

 
32,183

Held for development
8,964

 
14,944

 
1,957,416

 
1,938,676

Accumulated depreciation
(295,461
)
 
(270,494
)
Net real estate
1,661,955

 
1,668,182

Cash and cash equivalents
63,340

 
42,479

Restricted cash
9,206

 
7,421

Accounts receivable, net
7,338

 
6,440

Deferred rent receivables, net
30,918

 
29,395

Other assets, net
64,002

 
73,670

TOTAL ASSETS
$
1,836,759

 
$
1,827,587

LIABILITIES AND EQUITY
 
 
 
LIABILITIES:
 
 
 
Secured notes payable
$
1,044,299

 
$
1,044,682

Accounts payable and accrued expenses
31,285

 
29,509

Security deposits payable
5,093

 
4,856

Other liabilities and deferred credits
59,558

 
62,811

Total liabilities
1,140,235

 
1,141,858

Commitments and contingencies (Note 11)

 


EQUITY:
 
 
 
American Assets Trust, Inc. stockholders’ equity
 
 
 
Common stock $0.01 par value, 490,000,000 shares authorized, 40,445,578 and 39,664,212 shares outstanding at June 30, 2013 (unaudited) and December 31, 2012, respectively
405

 
397

Additional paid-in capital
690,507

 
663,589

Accumulated dividends in excess of net income
(35,868
)
 
(25,625
)
Total American Assets Trust, Inc. stockholders’ equity
655,044

 
638,361

Noncontrolling interests
41,480

 
47,368

Total equity
696,524

 
685,729

TOTAL LIABILITIES AND EQUITY
$
1,836,759

 
$
1,827,587

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

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American Assets Trust, Inc.
Consolidated Statements of Income
(Unaudited)
(In Thousands, Except Shares and Per Share Data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
REVENUE:
 
 
 
 
 
 
 
Rental income
$
59,705

 
$
53,740

 
$
118,927

 
$
106,748

Other property income
3,209

 
2,391

 
6,167

 
4,832

Total revenue
62,914

 
56,131

 
125,094

 
111,580

EXPENSES:
 
 
 
 
 
 
 
Rental expenses
16,686

 
15,506

 
32,972

 
30,324

Real estate taxes
5,476

 
5,743

 
10,276

 
10,984

General and administrative
4,426

 
3,911

 
8,627

 
7,636

Depreciation and amortization
16,953

 
14,329

 
33,966

 
29,183

Total operating expenses
43,541

 
39,489

 
85,841

 
78,127

OPERATING INCOME
19,373

 
16,642

 
39,253

 
33,453

Interest expense
(14,744
)
 
(14,028
)
 
(29,480
)
 
(27,929
)
Other income (expense), net
(65
)
 
(217
)
 
(344
)
 
(363
)
INCOME FROM CONTINUING OPERATIONS
4,564

 
2,397

 
9,429

 
5,161

DISCONTINUED OPERATIONS
 
 
 
 
 
 
 
Results from discontinued operations
—

 
227

 
—

 
334

NET INCOME
4,564

 
2,624

 
9,429

 
5,495

Net income attributable to restricted shares
(133
)
 
(131
)
 
(265
)
 
(263
)
Net income attributable to unitholders in the Operating Partnership
(1,354
)
 
(804
)
 
(2,849
)
 
(1,687
)
NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC. STOCKHOLDERS
$
3,077

 
$
1,689

 
$
6,315

 
$
3,545

EARNINGS PER COMMON SHARE, BASIC
 
 
 
 
 
 
 
Continuing operations
$
0.08

 
$
0.04

 
$
0.16

 
$
0.08

Discontinued operations
—

 
—

 
—

 
0.01

Basic net income attributable to common stockholders per share
$
0.08

 
$
0.04

 
$
0.16

 
$
0.09

Weighted average shares of common stock outstanding - basic
39,460,086

 
38,659,155

 
39,247,729

 
38,658,162

EARNINGS PER COMMON SHARE, DILUTED
 
 
 
 
 
 
 
Continuing operations
$
0.08

 
$
0.04

 
$
0.16

 
$
0.08

Discontinued operations
—

 
—

 
—

 
0.01

Diluted net income attributable to common stockholders per share
$
0.08

 
$
0.04

 
$
0.16

 
$
0.09

Weighted average shares of common stock outstanding - diluted
57,429,837

 
57,055,244

 
57,244,174

 
57,054,509

Dividends declared per common share
$
0.21

 
$
0.21

 
$
0.42

 
$
0.42


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)
 
 
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
 
 
Shares
 
Amount
 
Balance at December 31, 2012
39,664,212

 
$
397

 
$
663,589

 
$
(25,625
)
 
$
47,368

 
$
685,729

Net income
—

 
—

 
—

 
6,580

 
2,849

 
9,429

Common shares issued
718,714

 
7

 
24,346

 
—

 
—

 
24,353

Conversion of operating partnership units
61,511

 
1

 
1,179

 
—

 
(1,180
)
 
—

Issuance of restricted stock
5,004

 
—

 
—

 
—

 
—

 
—

Forfeiture of restricted stock
(3,863
)
 
—

 
—

 
—

 
—

 
—

Dividends declared
—

 
—

 
—

 
(16,823
)
 
(7,557
)
 
(24,380
)
Stock-based compensation
—

 
—

 
1,393

 
—

 
—

 
1,393

Balance at June 30, 2013
40,445,578

 
$
405

 
$
690,507

 
$
(35,868
)
 
$
41,480

 
$
696,524

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,
 
2013
 
2012
OPERATING ACTIVITIES
 
 
 
Net income
$
9,429

 
$
5,495

Results from discontinued operations
—

 
(334
)
Income from continuing operations
9,429

 
5,161

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 
 
 
Deferred rent revenue and amortization of lease intangibles
(1,874
)
 
(3,071
)
Depreciation and amortization
33,966

 
29,183

Amortization of debt issuance costs and debt fair value adjustments
1,966

 
1,958

Stock-based compensation expense
1,393

 
1,406

Loss from real estate joint ventures
54

 
—

Other, net
(535
)
 
745

Changes in operating assets and liabilities
 
 
 
Change in restricted cash
(818
)
 
(1,244
)
Change in accounts receivable
(1,073
)
 
1,628

Change in other assets
(38
)
 
315

Change in accounts payable and accrued expenses
2,662

 
(1,010
)
Change in security deposits payable
238

 
(204
)
Change in other liabilities and deferred credits
303

 
223

Net cash provided by operating activities of continuing operations
45,673

 
35,090

Net cash provided by operating activities of discontinued operations
—

 
252

Net cash provided by operating activities
45,673

 
35,342

INVESTING ACTIVITIES
 
 
 
Acquisition of real estate, net of cash acquired
—

 
(32,918
)
Capital expenditures
(21,204
)
 
(11,951
)
Change in restricted cash
433

 
(495
)
Leasing commissions
(1,344
)
 
(1,312
)
Maturity of marketable securities
—

 
3,324

Net cash used in investing activities of continuing operations
(22,115
)
 
(43,352
)
Net cash used in investing activities of discontinued operations
—

 
(203
)
Net cash used in investing activities
(22,115
)
 
(43,555
)
FINANCING ACTIVITIES
 
 
 
Change in restricted cash
(1,400
)
 
—

Issuance of secured notes payable
—

 
21,900

Repayment of secured notes payable
(1,839
)
 
(2,315
)
Debt issuance costs
—

 
(924
)
Proceeds from issuance of common stock, net
24,922

 
—

Dividends paid to common stock and unitholders
(24,380
)
 
(24,226
)
Deferred offering costs
—

 
(361
)
Net cash used in financing activities
(2,697
)
 
(5,926
)
Net increase (decrease) in cash and cash equivalents
20,861

 
(14,139
)
Cash and cash equivalents, beginning of period
42,479

 
112,723

Cash and cash equivalents, end of period
$
63,340

 
$
98,584

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

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American Assets Trust, Inc.
Notes to Consolidated Financial Statements
June 30, 2013
(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 vertically integrated and self-administered REIT with approximately 113 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, 2013, we owned or had a controlling interest in 23 office, retail, multifamily and mixed-use operating properties, the operations of which we consolidate. Additionally, as of June 30, 2013, we owned land at five 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 Plaza
Del Monte Center
 
Carmel Mountain Plaza
Geary Marketplace
 
South Bay Marketplace
The Shops at Kalakaua
 
Rancho Carmel Plaza
Waikele Center
 
Lomas Santa Fe Plaza
Alamo Quarry Market
 
Solana Beach Towne Centre
 
 
Office
Torrey Reserve Campus
Lloyd District Portfolio
 
Solana Beach Corporate Centre
City Center Bellevue
 
The Landmark at One Market
 
 
One Beach Street
 
 
First & Main
 
 
Multifamily
Loma Palisades
 
 
Imperial Beach Gardens
 
 
Mariner's Point
 
 
Santa Fe Park RV Resort
 
 
Mixed-Use
Waikiki Beach Walk Retail and Embassy Suites™ Hotel
 
Held for Development and Construction in Progress
Solana Beach Corporate Centre – Land
 
 
Solana Beach – Highway 101 – Land
 
 
Sorrento Pointe – Land
 
 
Torrey Reserve – Land
 
 
Lloyd District Portfolio – Land
 
 

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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(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.
In December 2012, we sold 160 King Street. We have reclassified our financial statements for all periods prior to the sale to reflect 160 King Street as discontinued operations. Unless noted otherwise, discussions in these notes pertain to our continuing operations.
The accompanying consolidated financial statements of the Company 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 annual report on Form 10-K for the year ended December 31, 2012.
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 and square footage 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): 
 
Six Months Ended June 30,
 
2013
 
2012
Supplemental cash flow information
 
 
 
Total interest costs incurred
$
30,326

 
$
28,136

Interest capitalized
$
846

 
$
207

Interest expense
$
29,480

 
$
27,929

Cash paid for interest, net of amounts capitalized (including discontinued operations)
$
27,021

 
$
27,113

Cash paid for income taxes
$
585

 
$
954

Supplemental schedule of noncash investing and financing activities
 

 
 

Accounts payable and accrued liabilities for construction in progress
$
(1,407
)
 
$
3,203

Acquisition of working capital deficit, net of cash
$
—

 
$
(190
)
Reduction to capital for prepaid offering costs
$
437

 
$
—

Accrued leasing commissions
$
389

 
$
—


 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, 2012. There have been no changes to our significant accounting policies during the six months ended June 30, 2013.

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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


Segment Information
Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in four 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-room all-suite hotel.
Reclassifications
Certain items in the consolidated financial statements for prior periods have been reclassified to conform to current classifications.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board issued ASU 2013-2, Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-2 requires entities to disclose certain information relating to amounts reclassified out of accumulated other comprehensive income. This pronouncement became effective for us in the first quarter of 2013 and did not have a significant impact on our consolidated financial statements.
NOTE 2. 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, 2013 and December 31, 2012 (in thousands): 
 
June 30, 2013
 
December 31, 2012
In-place leases
$
70,336

 
$
72,598

Accumulated amortization
(41,445
)
 
(38,290
)
Above market leases
29,974

 
32,846

Accumulated amortization
(20,799
)
 
(21,363
)
Acquired lease intangible assets, net
$
38,066

 
$
45,791

Below market leases
$
79,706

 
$
80,071

Accumulated accretion
(28,360
)
 
(25,721
)
Acquired lease intangible liabilities, net
$
51,346

 
$
54,350

NOTE 3. MARKETABLE SECURITIES
Our portfolio of marketable securities was comprised of debt securities that were classified as trading securities. Our marketable securities consisted of investments in mortgage-backed securities issued by the Government National Mortgage Association (“GNMA securities”). We reported our trading securities at fair value, using prices provided by independent market participants that were based on observable inputs using market-based valuation techniques (Level 2 of the fair value hierarchy-see Note 4). On August 20, 2012, we sold all of our outstanding GNMA securities with a realized loss of $0.7 million for the year ended December 31, 2012. For the six months ended June 30, 2012, gains and losses resulting from the mark-to-market of these securities were recognized as unrealized gains in income.  Unrealized loss in our statement of income for the six months ended June 30, 2012 was $0.6 million and is included in other income (expense), net on the accompanying consolidated statement of income.

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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


NOTE 4. 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
Except as disclosed below, the carrying amounts of our financial instruments approximate their fair value. The financial liability whose fair value we measure on a recurring basis using Level 2 inputs is our deferred compensation liability included in other liabilities and deferred credits on the consolidated balance sheet. 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.
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.
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, 2013
 
December 31, 2012
 
Level 1
Level 2
Level 3
Total
 
Level 1
Level 2
Level 3
Total
Deferred compensation liability
$
—

$
689

$
—

$
689

 
$
—

$
637

$
—

$
637

 The fair value of our secured notes payable is 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 3.9% to 5.0%.
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. 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):  
 
June 30, 2013
 
December 31, 2012
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Secured notes payable
$
1,044,299

 
$
1,095,170

 
$
1,044,682

 
$
1,116,162


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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


NOTE 5. OTHER ASSETS
Other assets consist of the following (in thousands): 
 
June 30, 2013
 
December 31, 2012
Leasing commissions, net of accumulated amortization of $18,767 and $16,829, respectively
$
17,710

 
$
18,329

Acquired above market leases, net
9,175

 
11,483

Acquired in-place leases, net
28,891

 
34,308

Lease incentives, net of accumulated amortization of $2,405 and $2,220, respectively
1,295

 
1,480

Other intangible assets, net of accumulated amortization of $1,846 and $4,239, respectively
785

 
960

Debt issuance costs, net of accumulated amortization of $2,884 and $2,374, respectively
3,142

 
3,651

Prepaid expenses and other
3,004

 
3,459

Total other assets
$
64,002

 
$
73,670

NOTE 6. OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits consist of the following (in thousands):
 
June 30, 2013
 
December 31, 2012
Acquired below market leases, net
$
51,346

 
$
54,350

Prepaid rent and deferred revenue
5,972

 
6,383

Deferred rent expense and lease intangible
930

 
1,008

Deferred compensation
689

 
637

Deferred tax liability
320

 
320

Straight-line rent liability
249

 
63

Other liabilities
52

 
50

Total other liabilities and deferred credits
$
59,558

 
$
62,811

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.

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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


NOTE 7. DEBT
The following is a summary of our total secured notes payable outstanding as of June 30, 2013 and December 31, 2012 (in thousands):
 
Principal Balance as of
 
Stated Interest
Rate as of
June 30, 2013
 
Stated Maturity Date
Description of Debt
June 30, 2013
 
December 31, 2012
 
Alamo Quarry Market (1)(2)
$
92,838

 
$
93,942

 
5.67
%
 
January 8, 2014
Waikele Center (3)
140,700

 
140,700

 
5.15
%
 
November 1, 2014
The Shops at Kalakaua (3)
19,000

 
19,000

 
5.45
%
 
May 1, 2015
The Landmark at One Market (2)(3)
133,000

 
133,000

 
5.61
%
 
July 5, 2015
Del Monte Center (3)
82,300

 
82,300

 
4.93
%
 
July 8, 2015
First & Main (3)
84,500

 
84,500

 
3.97
%
 
July 1, 2016
Imperial Beach Gardens (3)
20,000

 
20,000

 
6.16
%
 
September 1, 2016
Mariner’s Point (3)
7,700

 
7,700

 
6.09
%
 
September 1, 2016
South Bay Marketplace (3)
23,000

 
23,000

 
5.48
%
 
February 10, 2017
Waikiki Beach Walk—Retail (3)
130,310

 
130,310

 
5.39
%
 
July 1, 2017
Solana Beach Corporate Centre III-IV (4)
37,004

 
37,204

 
6.39
%
 
August 1, 2017
Loma Palisades (3)
73,744

 
73,744

 
6.09
%
 
July 1, 2018
One Beach Street (3)
21,900

 
21,900

 
3.94
%
 
April 1, 2019
Torrey Reserve—North Court (1)
21,521

 
21,659

 
7.22
%
 
June 1, 2019
Torrey Reserve—VCI, VCII, VCIII (1)
7,247

 
7,294

 
6.36
%
 
June 1, 2020
Solana Beach Corporate Centre I-II (1)
11,556

 
11,637

 
5.91
%
 
June 1, 2020
Solana Beach Towne Centre (1)
38,520

 
38,790

 
5.91
%
 
June 1, 2020
City Center Bellevue (3)
111,000

 
111,000

 
3.98
%
 
November 1, 2022
 
1,055,840

 
1,057,680

 
 
 
 
Unamortized fair value adjustment
(11,541
)
 
(12,998
)
 
 
 
 
Total Secured Notes Payable Outstanding
$
1,044,299

 
$
1,044,682

 
 
 
 
(1)
Principal payments based on a 30-year amortization schedule.
(2)
Maturity Date is the earlier of the loan maturity date under the loan agreement, or the “Anticipated Repayment Date” as specifically defined in the loan agreement, which is the date after which substantial economic penalties apply if the loan has not been paid off.
(3)
Interest only.
(4)
Loan was interest only through August 2012. Beginning in September 2012, principal payments are based on a 30-year amortization schedule.
Certain loans require us to comply with various financial covenants. As of June 30, 2013, we were in compliance with these financial covenants.
Credit Facility
On January 19, 2011, we entered into a credit facility pursuant to which a group of lenders provided commitments for a revolving credit facility allowing borrowings of up to $250.0 million. At June 30, 2013, our maximum allowable borrowing amount was $227.8 million. The credit facility has an accordion feature that may allow us to increase the availability thereunder up to a maximum of $400.0 million, subject to meeting specified requirements and obtaining additional commitments from lenders. The credit facility bears interest at the rate of either the applicable LIBOR or a base rate, in each case plus a margin that will vary depending on our leverage ratio. The amount available for us to borrow under the credit facility is subject to the net operating income of our properties that form the borrowing base of the facility and a minimum implied debt yield of such properties. At June 30, 2013, no amounts were outstanding on the credit facility.

12
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


On March 7, 2011, the credit facility was amended to allow us or our Operating Partnership to purchase GNMA securities with maturities of up to 30 years. On January 10, 2012, the credit facility was amended a second time to (1) extend the maturity date to January 10, 2016 (with a one-year extension option), (2) decrease the applicable interest rates and (3) modify certain financial covenants contained therein. On September 7, 2012, the credit facility was amended a third time to allow our consolidated total secured indebtedness to be up to 55% of our secured total asset value for the period commencing upon the date that a material acquisition (generally, greater than $100 million) is consummated through and including the last day of the third fiscal quarter that follows such date.
The credit facility includes a number of customary financial covenants, including:
•
a maximum leverage ratio (defined as total indebtedness net of certain unrestricted cash and cash equivalents to total asset value) of 60%,
•
a minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x,
•
a maximum secured leverage ratio (defined as total secured indebtedness to secured total asset value) of up to 55% in certain circumstances,
•
a minimum tangible net worth equal to at least 75% of our tangible net worth at January 19, 2011, plus 85% of the net proceeds of any additional equity issuances (other than additional equity issuances in connection with any dividend reinvestment program), and
•
a $35.0 million limit on the maximum principal amount of recourse indebtedness we may have outstanding at any time, other than under the credit facility.
The credit facility provides that our annual distributions may not exceed the greater of (1) 95.0% of our funds from operations 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.
We and certain of our subsidiaries guarantee the obligations under the credit facility, and certain of our subsidiaries pledged specified equity interests in our subsidiaries as collateral for our obligations under the credit facility.
As of June 30, 2013, we were in compliance with the credit facility financial covenants.
NOTE 8. EQUITY
Stockholders' Equity
On May 6, 2013, we entered into an at-the-market (“ATM”) equity program with four 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 $150.0 million. The sales of shares of our common stock made through the ATM equity program are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. For the three months ended June 30, 2013, we issued 718,714 shares of common stock through the ATM equity program at a weighted average price per share of $35.09 for gross proceeds of $25.2 million and paid $0.3 million in sales agent compensation and $0.6 million in additional offering expenses related to the sales of these shares of common stock. We intend to use the net proceeds to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As of June 30, 2013, we had the capacity to issue up to an additional $124.8 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.
Noncontrolling Interests
Noncontrolling interests in our Operating Partnership are interests in the Operating Partnership that are not owned by us. Noncontrolling interests consisted of 17,961,924 common units (the “noncontrolling common units”), and represented approximately 31% of the ownership interests in our Operating Partnership at June 30, 2013. 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

13
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


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-one basis.
During the six months ended June 30, 2013, approximately 61,511 common units were converted into shares of our common stock.
Dividends
The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the six months ended June 30, 2013: 
Period
 
Amount  per
Share/Unit
 
Period Covered
 
Dividend Paid Date
First Quarter 2013
 
$
0.21

 
January 1, 2013 to March 31, 2013
 
March 29, 2013
Second Quarter 2013
 
$
0.21

 
April 1, 2013 to June 30, 2013
 
June 28, 2013
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 loss on extinguishment of debt, revenue recognition and compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation.
Stock-Based Compensation
Pursuant to our 2011 Equity Incentive Award Plan (the “2011 Plan”), we have made grants of restricted shares of our common stock to certain executive officers pursuant to the terms of their employment agreements, which are subject to either timing-based vesting or performance-based vesting. Those awards subject to time-based vesting will vest, subject to the recipient’s continued employment, in two substantially equal installments on each of the third and fourth anniversaries of the date of grant. The vesting of those restricted stock awards subject to performance-based vesting is based on the achievement of absolute and relative total shareholder return hurdles over a three-year performance period, commencing on January 19, 2011. Following the completion of the three-year performance period, our compensation committee will determine the number of shares to which the executive officer is entitled based on our performance relative to the performance hurdles set forth in the restricted stock award agreement he entered into in connection with his initial award grant. These shares will then vest in two substantially equal installments, with the first installment vesting on the third anniversary of the date of grant and the second installment vesting on the fourth anniversary of the date of grant, subject to the executive officer’s continued employment on those dates.
We granted each of our non-employee directors restricted shares of our common stock pursuant to the 2011 Plan, either concurrently with the closing of our initial public offering or at the time the director was formally appointed to our board of directors (the "Board"). In addition, on the date of each annual meeting of our stockholders, each non-employee director who continues to serve on the Board following such annual meeting will be granted restricted shares of our common stock pursuant to the 2011 Plan. These awards of restricted stock will vest ratably as to one-third of the shares granted on each of the first three anniversaries of the date of grant, subject to the director’s continued service on our Board pursuant to our independent director compensation policy.
We have also granted restricted shares of our common stock to certain other employees pursuant to the 2011 Plan. These shares are subject to performance-based vesting, with substantially the same terms described above.
For the performance-based stock awards, the fair value of the awards was estimated using a Monte Carlo Simulation model. Our stock price, along with the stock prices of a group of peer REITs, is assumed to follow the Multivariate Geometric Brownian Motion Process. Multivariate Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on the stock price of the Company and the group of REITs were estimated based on a three year look-back period. The expected growth rate of the stock prices over the “derived service period” of the employee is determined with consideration of the risk free rate as of the grant date. For the restricted stock grants that are time-vesting, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

14
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


The following table summarizes the activity of restricted stock awards during the six months ended June 30, 2013:
 
Units
 
Weighted Average Grant Date Fair Value
Nonvested at January 1, 2013
633,222

 
$
15.64

Granted
5,004

 
31.97

Vested
(2,601
)
 
20.50

Forfeited
(3,863
)
 
20.39

Nonvested at June 30, 2013
631,762

 
$
15.61

We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $1.4 million in noncash compensation expense for both the six months ended June 30, 2013 and 2012, which is included in general and administrative expense on the consolidated statements of income. Unrecognized compensation expense was $3.0 million at June 30, 2013.
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. For the three and six months ended June 30, 2013 and 2012, we had a weighted average of approximately 630,374, 630,784, 626,274 and 626,771 unvested shares outstanding, respectively, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares.
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 and six months ended June 30, 2013 and 2012, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable. 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.


15
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


The computation of basic and diluted EPS is presented below (dollars in thousands, except share and per share amounts): 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
NUMERATOR
 
 
 
 
 
 
 
Income from continuing operations
$
4,564

 
$
2,397

 
$
9,429

 
$
5,161

Less: Net income attributable to restricted shares
(133
)
 
(131
)
 
(265
)
 
(263
)
Less: Income from continuing operations attributable to unitholders in the Operating Partnership
(1,354
)
 
(804
)
 
(2,849
)
 
(1,687
)
Income from continuing operations attributable to American Assets Trust, Inc. common stockholders—basic
3,077

 
1,462

 
6,315

 
3,211

Plus: Results from discontinued operations attributable to American Assets Trust, Inc. common stockholders
—

 
154

 
—

 
226

Net income attributable to common stockholders—basic
$
3,077

 
$
1,616

 
$
6,315

 
$
3,437

Income from continuing operations attributable to American Assets Trust, Inc. common stockholders—basic
$
3,077

 
$
1,462

 
$
6,315

 
$
3,211

Plus: Income from continuing operations attributable to unitholders in the Operating Partnership
1,354

 
804

 
2,849

 
1,687

Income from continuing operations attributable to common stockholders—diluted
4,431

 
2,266

 
9,164

 
4,898

Plus: Results from discontinued operations attributable to American Assets Trust, Inc. common stockholders
—

 
154

 
—

 
226

Plus: Results from discontinued operations attributable to unitholders in the Operating Partnership
—

 
73

 
—

 
108

Net income attributable to common stockholders—diluted
$
4,431

 
$
2,493

 
$
9,164

 
$
5,232

DENOMINATOR
 
 
 
 
 
 
 
Weighted average common shares outstanding—basic
39,460,086

 
38,659,155

 
39,247,729

 
38,658,162

Effect of dilutive securities—conversion of Operating Partnership units
17,969,751

 
18,396,089

 
17,996,445

 
18,396,347

Weighted average common shares outstanding—diluted
57,429,837

 
57,055,244

 
57,244,174

 
57,054,509

EARNINGS PER COMMON SHARE-BASIC
 
 
 
 
 
 
 
Continuing operations
$
0.08

 
$
0.04

 
$
0.16

 
$
0.08

Discontinued operations
—

 
—

 
—

 
0.01

 
$
0.08

 
$
0.04

 
$
0.16

 
$
0.09

EARNINGS PER COMMON SHARE-DILUTED
 
 
 
 
 
 
 
Continuing operations
$
0.08

 
$
0.04

 
$
0.16

 
$
0.08

Discontinued operations
—

 
—

 
—

 
0.01

 
$
0.08

 
$
0.04

 
$
0.16

 
$
0.09

NOTE 9. DISCONTINUED OPERATIONS
On December 4, 2012, we sold 160 King Street for a sales price of approximately $93.8 million. The property is located in San Francisco, California and was previously included in our office segment. The decision to sell 160 King Street was a result of our desire to focus resources on our core, high-barrier-to-entry markets. The sale was completed as a reverse tax deferred exchange in conjunction with the acquisition of City Center Bellevue pursuant to the provisions of Section 1031 of the Internal Revenue Code of 1986, as amended, and applicable state revenue and taxation code sections. As a result of the sale, 160 King Street no longer serves as a borrowing base property under our revolving credit facility.

16
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


Net revenue and net income from the property’s discontinued operations were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Net revenue from discontinued operations
—

 
$
1,678

 
$
—

 
$
3,267

Net property expenses from discontinued operations
—

 
647

 
—

 
1,275

Depreciation and amortization
—

 
342

 
—

 
741

Results from discontinued operations
 
 
 
 
 
 
 
Income from discontinued operations
—

 
227

 
—

 
334

Total income from discontinued operations
$
—

 
$
227

 
$
—

 
$
334

NOTE 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. We record the Portland Business Tax and Texas Margin Tax as income taxes in our financial statements.
A deferred tax liability of $0.3 million as of June 30, 2013 and December 31, 2012 is included in our consolidated balance sheets in relation to real estate asset basis differences for Alamo Quarry Market and certain elections made in our 2011 return for our TRS.
NOTE 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
At The Landmark at One Market, we lease, as lessee, a building adjacent to The Landmark under an operating lease effective through June 30, 2016, which we have the option to extend until 2026 by way of two five-year extension options.
At Waikiki Beach Walk, we sublease a portion of the building of which Quiksilver is currently in possession, under an operating lease effective through December 31, 2021, which we have the option to extend at fair rental value in the event the sublessor extends its lease for the space with the master landlord. The lease payments under the lease will increase by approximately 3.4% annually through 2017 and, thereafter, will be equal to fair rental value, as defined in the lease, through lease expiration.

17
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


Current minimum annual payments under the leases are as follows, as of June 30, 2013 (in thousands): 
Year Ending December 31,
 
 
2013 (six months ending December 31, 2013)
$
1,264

 
2014
2,569

 
2015
2,636

 
2016
1,709

 
2017
736

(1) 
Thereafter
2,961

 
Total
$
11,875

 
(1)
Lease payments on the Waikiki Beach Walk lease will be equal to fair rental value from March 2017 through the end of the lease term. In the table, we have shown the lease payments for this period based on the stated rate for the month of February 2017 of $61,690.
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 calendar 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, if the agreement is terminated in the first 11 years of its term, or (b) four, three, two or one, 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.
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 $6.0 million based on operating performance through June 30, 2013.
We had a property management agreement with Langley Investment Properties, Inc. (“Langley”) pursuant to which Langley managed and operated Lloyd District Portfolio, and we paid Langley a monthly management fee of 3.5% of “gross receipts,” as defined in the property management agreement, as well as leasing commissions and construction oversight fees in certain situations. The property management agreement was terminated on February 1, 2013 by mutual consent of both parties. Langley continued to provide development consulting services to us until June 30, 2013 and will continue to provide leasing services to us through December 31, 2013 pursuant to a development, consulting, leasing and transition services and management termination agreement.
Our Del Monte Center property has ongoing environmental remediation related to ground water contamination. The environmental issue existed at purchase and remediation is expected to conclude within the next two years. The work performed is financed through an escrow account funded by the seller upon purchase of the property. We believe the funds in

18
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


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.
In connection with our initial public offering, we entered into tax protection agreements with certain limited partners of our Operating Partnership. These agreements provide that if we dispose of any interest with respect to Carmel Country Plaza, Carmel Mountain Plaza, Del Monte Center, Loma Palisades, Lomas Santa Fe Plaza, Waikele Center or the ICW Plaza portion of Torrey Reserve Campus, in a taxable transaction during the period from the closing of our initial public offering through January 19, 2018, we will indemnify such limited partners for their tax liabilities attributable to their share of the built-in gain that existed with respect to such property interest as of the time of our initial public offering and tax liabilities incurred as a result of the reimbursement payment. Subject to certain exceptions and limitations, the indemnification rights will terminate for any such protected partner that sells, exchanges or otherwise disposes of more than 50% of his or her common units. We have no present intention to sell or otherwise dispose of the properties or interest therein in taxable transactions during the restriction period. If we were to trigger the tax protection provisions under these agreements, we would be required to pay damages in the amount of the taxes owed by these limited partners (plus additional damages in the amount of the taxes incurred as a result of such payment).

As of June 30, 2013, the Company has accrued approximately $6.6 million for transfer taxes that the Company expected to incur on its California properties in connection with its initial public offering.   The Company believes that it has filed all necessary forms with the requisite taxing authorities, but can offer no assurances that the taxing authorities will agree with the Company's estimate above.
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. Twelve 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. Further, tenants in the retail industry accounted for 36.5% of total revenues for the six months ended June 30, 2013. 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. For the six months ended June 30, 2013 and 2012, no tenant accounted for more than 10% of our total rental revenue.
NOTE 12. OPERATING LEASES
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 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 and also may include percentage rents based on the tenant’s level of sales achieved. 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.
As of June 30, 2013, 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,
 
2013 (six months ending December 31, 2013)
$
76,398

2014
143,328

2015
132,080

2016
112,365

2017
96,662

Thereafter
173,231

Total
$
734,064


19
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


 
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.
NOTE 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,
 
2013
 
2012
 
2013
 
2012
Minimum rents
 
 
 
 
 
 
 
Retail
$
17,236

 
$
16,772

 
$
34,587

 
$
32,847

Office
20,298

 
16,508

 
40,798

 
32,755

Multifamily
3,687

 
3,252

 
7,270

 
6,527

Mixed-use
2,257

 
2,252

 
4,677

 
4,535

Cost reimbursement
7,242

 
6,688

 
12,913

 
13,421

Percentage rent
402

 
434

 
820

 
726

Hotel revenue
8,178

 
7,461

 
17,026

 
15,125

Other
405

 
373

 
836

 
812

Total rental income
$
59,705

 
$
53,740

 
$
118,927

 
$
106,748

Minimum rents include $0.5 million and $1.7 million for the three months ended June 30, 2013 and 2012, respectively, and $1.2 million and $3.6 million for the six months ended June 30, 2013 and 2012, respectively, to recognize minimum rents on a straight-line basis. In addition, net amortization of above and below market leases included in minimum rents were $0.2 million and $(0.2) million for the three months ended June 30, 2013 and 2012, respectively, and $0.7 million and $(0.5) million for the six months ended June 30, 2013 and 2012, respectively.
The principal components of rental expenses are as follows (in thousands): 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Rental operating
$
6,430

 
$
5,799

 
$
12,744

 
$
11,382

Hotel operating
5,438

 
5,156

 
10,920

 
10,112

Repairs and maintenance
2,489

 
2,281

 
4,603

 
4,285

Marketing
344

 
264

 
696

 
570

Rent
611

 
625

 
1,224

 
1,236

Hawaii excise tax
952

 
895

 
1,891

 
1,757

Management fees
422

 
486

 
894

 
982

Total rental expenses
$
16,686

 
$
15,506

 
$
32,972

 
$
30,324


20
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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


NOTE 14. OTHER INCOME (EXPENSE), NET
The principal components of other income (expense), net, are as follows (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Interest and investment income
$
26

 
$
65

 
$
34

 
$
152

Income tax expense
(91
)
 
(282
)
 
(388
)
 
(500
)
Acquisition related expenses
—

 
—

 
—

 
(15
)
Other non-operating income
—

 
—

 
10

 
—

Total other income (expense), net
$
(65
)
 
$
(217
)
 
$
(344
)
 
$
(363
)
NOTE 15. RELATED PARTY TRANSACTIONS
At ICW Plaza, we lease space to Insurance Company of the West, which is under the indirect control of Ernest Rady, our Executive Chairman of the Board. Rental revenue recognized on the leases of $1.1 million and $1.1 million for the six months ended June 30, 2013 and 2012, respectively, is included in rental 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 million were made for the six months ended June 30, 2013 and 2012, respectively, and are included in rental expenses on the statement of income.
NOTE 16. SEGMENT REPORTING
Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in four 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-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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American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


The following table represents operating activity within our reportable segments (in thousands): 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Total Retail
 
 
 
 
 
 
 
Property revenue
$
23,497

 
$
22,452

 
$
45,651

 
$
44,143

Property expense
(6,060
)
 
(6,094
)
 
(11,031
)
 
(11,820
)
Segment profit
17,437

 
16,358

 
34,620

 
32,323

Total Office
 
 
 
 
 
 
 
Property revenue
22,512

 
18,027

 
44,934

 
35,914

Property expense
(6,584
)
 
(5,858
)
 
(13,020
)
 
(11,376
)
Segment profit
15,928

 
12,169

 
31,914

 
24,538

Total Multifamily
 
 
 
 
 
 
 
Property revenue
3,974

 
3,509

 
7,849

 
7,051

Property expense
(1,416
)
 
(1,565
)
 
(2,858
)
 
(2,879
)
Segment profit
2,558

 
1,944

 
4,991

 
4,172

Total Mixed-Use
 
 
 
 
 
 
 
Property revenue
12,931

 
12,143

 
26,660

 
24,472

Property expense
(8,102
)
 
(7,732
)
 
(16,339
)
 
(15,233
)
Segment profit
4,829

 
4,411

 
10,321

 
9,239

Total segments’ profit
$
40,752

 
$
34,882

 
$
81,846

 
$
70,272

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,
 
2013
 
2012
 
2013
 
2012
Total segments’ profit
$
40,752

 
$
34,882

 
$
81,846

 
$
70,272

General and administrative
(4,426
)
 
(3,911
)
 
(8,627
)
 
(7,636
)
Depreciation and amortization
(16,953
)
 
(14,329
)
 
(33,966
)
 
(29,183
)
Interest expense
(14,744
)
 
(14,028
)
 
(29,480
)
 
(27,929
)
Other income (expense), net
(65
)
 
(217
)
 
(344
)
 
(363
)
Income from continuing operations
4,564

 
2,397

 
9,429

 
5,161

Discontinued operations
 
 
 
 
 
 
 
Results from discontinued operations
—

 
227

 
—

 
334

Net income
4,564

 
2,624

 
9,429

 
5,495

Net income attributable to restricted shares
(133
)
 
(131
)
 
(265
)
 
(263
)
Net income attributable to unitholders in the Operating Partnership
(1,354
)
 
(804
)
 
(2,849
)
 
(1,687
)
Net income attributable to American Assets Trust, Inc. stockholders
$
3,077

 
$
1,689

 
$
6,315

 
$
3,545


22
Table of Contents
American Assets Trust, Inc.
Notes to Consolidated Financial Statements—(Continued)
June 30, 2013
(Unaudited)


The following table shows net real estate and secured note payable balances for each of the segments (in thousands):
 
June 30, 2013
 
December 31, 2012
Net Real Estate
 
 
 
Retail
$
659,496

 
$
669,177

Office
765,552

 
759,203

Multifamily
35,937

 
36,391

Mixed-Use
200,970

 
203,411

 
$
1,661,955

 
$
1,668,182

Secured Notes Payable (1)
 
 
 
Retail
$
396,358

 
$
397,732

Office
427,728

 
428,194

Multifamily
101,444

 
101,444

Mixed-Use
130,310

 
130,310

 
$
1,055,840

 
$
1,057,680

(1)
Excludes unamortized fair market value adjustments of $11.5 million and $13.0 million as of June 30, 2013 and December 31, 2012, respectively.

Capital expenditures for each segment for the three and six months ended June 30, 2013 and 2012 were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Capital Expenditures (1)
 
 
 
 
 
 
 
Retail
$
580

 
$
4,012

 
$
2,527

 
$
7,442

Office
11,439

 
2,441

 
19,301

 
5,153

Multifamily
206

 
285

 
349

 
523

Mixed-Use
83

 
68

 
371

 
145

 
$
12,308

 
$
6,806

 
$
22,548

 
$
13,263

(1)
Capital expenditures represent cash paid for capital expenditures during the period and include leasing commissions paid.

23
Table of 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. 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:
•
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;
•
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 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,

24
Table of Contents


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, 2012.
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 real estate investment trust, or 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, Texas, Oregon, Washington and Hawaii. As of June 30, 2013, our portfolio is comprised of eleven retail shopping centers; seven office properties; a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center; and four multifamily properties. Additionally, as of June 30, 2013, we owned land at five 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 68.9% of our Operating Partnership as of June 30, 2013. Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership.
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, 2012. We have not made any material changes to these policies during the periods covered by this report.
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, 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 $6.1 million and $2.6 million for the three months ended June 30, 2013 and 2012, respectively. We capitalized external and internal costs related to both development and redevelopment activities combined of $13.6 million and $5.2 million for the six months ended June 30, 2013 and 2012, respectively
    
We capitalized external and internal costs related to other property improvements combined of $4.3 million and $7.0 million, for the three months ended June 30, 2013 and 2012, respectively. We capitalized external and internal costs related to other property improvements combined of $6.2 million and $10.1 million, for the six months ended June 30, 2013 and 2012, respectively.

We capitalized internal costs for salaries and related benefits for development and redevelopment activities and other property improvements of $0.03 million and $0.02 million for the three months ended June 30, 2013 and 2012, respectively. We capitalized internal costs for salaries and related benefits for development and redevelopment activities and other property improvements of $0.06 million and $0.02 million for the six months ended June 30, 2013 and 2012, 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

25
Table of Contents


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, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period. We capitalized interest costs related to both development and redevelopment activities combined of $0.5 million and $0.2 million for the three months ended June 30, 2013 and 2012, respectively. We capitalized interest costs related to both development and redevelopment activities combined of $0.8 million and $0.2 million for the six months ended June 30, 2013 and 2012, respectively.
Results of Operations
For our discussion of results of operations, we have provided information on a total portfolio and 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 held for development and properties classified as discontinued operations, which are excluded for both periods.
Comparison of the three months ended June 30, 2013 to the three months ended June 30, 2012
The following summarizes our consolidated results of operations for the three months ended June 30, 2013 compared to our consolidated results of operations for the three months ended June 30, 2012. As of June 30, 2013, our operating portfolio was comprised of 23 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, 922 residential units (including 122 RV spaces) and a 369-room hotel. Additionally, as of June 30, 2013, we owned land at five of our properties that we classified as held for development and/or construction in progress. As of June 30, 2012, our operating portfolio was comprised of 21 properties with an aggregate of approximately 5.3 million rentable square feet of retail and office space, including the retail portion of our mixed-use property, and 922 residential units (including 122 RV spaces) and a 369-room hotel; we also owned land at five of our properties that we classified as held for development.
The following table sets forth selected data from our unaudited consolidated statements of income for the three months ended June 30, 2013 and 2012 (dollars in thousands):
 
 
Three Months Ended
June 30,
 
Change
 
%
 
2013
 
2012
 
Revenues
 
 
 
 
 
 
 
Rental income
$
59,705

 
$
53,740

 
$
5,965

 
11
 %
Other property income
3,209

 
2,391

 
818

 
34

Total property revenues
62,914

 
56,131

 
6,783

 
12

Expenses
 
 
 
 
 
 
 
Rental expenses
16,686

 
15,506

 
1,180

 
8

Real estate taxes
5,476

 
5,743

 
(267
)
 
(5
)
Total property expenses
22,162

 
21,249

 
913

 
4

Total property income
40,752

 
34,882

 
5,870

 
17

General and administrative
(4,426
)
 
(3,911
)
 
(515
)
 
13

Depreciation and amortization
(16,953
)
 
(14,329
)
 
(2,624
)
 
18

Interest expense
(14,744
)
 
(14,028
)
 
(716
)
 
5

Other income (expense), net
(65
)
 
(217
)
 
152

 
(70
)
Total other, net
(36,188
)
 
(32,485
)
 
(3,703
)
 
11

Income from continuing operations
4,564

 
2,397

 
2,167

 
90

Discontinued operations
 
 
 
 
 
 
 
Results from discontinued operations
—

 
227

 
(227
)
 
(100
)
Net income
4,564

 
2,624

 
1,940

 
74

Net income attributable to restricted shares
(133
)
 
(131
)
 
(2
)
 
2

Net income attributable to unitholders in the Operating Partnership
(1,354
)
 
(804
)
 
(550
)
 
68

Net income attributable to American Assets Trust, Inc. stockholders
$
3,077

 
$
1,689

 
$
1,388

 
82
 %

26
Table of Contents


Revenue
Total property revenues. Total property revenue consists of rental revenue and other property income. Total property revenue increased $6.8 million, or 12%, to $62.9 million for the three months ended June 30, 2013 compared to $56.1 million for the three months ended June 30, 2012. The percentage leased was as follows for each segment as of June 30, 2013 and 2012:
 
Percentage Leased  (1)
June 30,
 
2013
2012
Retail
96.6
%
 
96.2
%
 
Office
92.9
%
 
94.7
%
(2) 
Multifamily
97.7
%
 
97.7
%
 
Mixed-Use (3)
93.8
%
 
93.9
%
 
 
(1)
The percentage leased includes the square footage under lease, including leases which may not have commenced as of June 30, 2013 or June 30, 2012, as applicable.
(2)
Excludes 160 King Street, which was sold on December 4, 2012.
(3)
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 $6.0 million, or 11%, to $59.7 million for the three months ended June 30, 2013 compared to $53.7 million for the three months ended June 30, 2012. Rental revenue by segment was as follows (dollars in thousands):
 
Total Portfolio
 
Same-Store Portfolio(1)
 
Three Months Ended June 30,
 
Change
 
%
 
Three Months Ended June 30,
 
Change
 
%
 
2013
 
2012
 
2013
 
2012
 
Retail
$
23,073

 
$
22,135

 
$
938

 
4
%
 
$
22,593

 
$
22,121

 
$
472

 
2
 %
Office
21,442

 
17,516

 
3,926

 
22

 
17,066

 
17,459

 
(393
)
 
(2
)
Multifamily
3,688

 
3,254

 
434

 
13

 
3,688

 
3,254

 
434

 
13

Mixed-Use
11,502

 
10,835

 
667

 
6

 
11,502

 
10,835

 
667

 
6

 
$
59,705

 
$
53,740

 
$
5,965

 
11
%
 
$
54,849

 
$
53,669

 
$
1,180

 
2
 %
 
(1)
For this table and tables following, the same-store portfolio excludes: City Center Bellevue acquired on August 21, 2012; Geary Marketplace acquired on December 19, 2012 and land held for development.
Retail rental revenue increased $0.9 million for the three months ended June 30, 2013 compared to the three months ended June 30, 2012. This increase was due to the acquisition of Geary Marketplace on December 19, 2012, which had rental revenue of $0.5 million for the three months ended June 30, 2013. Same-store retail rental revenue increased $0.5 million for the three months ended June 30, 2013 primarily related to the increase in percentage leased and additional cost reimbursements. These increases were partially offset by a decrease in occupancy at Lomas Santa Fe Plaza, mainly due to the expiration of the Ross Dress for Less lease on January 31, 2013.
Office rental revenue increased $3.9 million for the three months ended June 30, 2013 compared to the three months ended June 30, 2012. This increase was due to the acquisition of City Center Bellevue on August 21, 2012, which contributed additional rental revenue of $4.3 million for the three months ended June 30, 2013. Same-store office rental revenue decreased $0.4 million for the three months ended June 30, 2013 primarily due to a decrease in the percentage leased during the period, mainly at Torrey Reserve Campus and One Beach Street.
The increase in multifamily rental revenue was primarily due to an increase in average occupancy of 95.4% during the three months ended June 30, 2013 compared to 92.2% during the three months ended June 30, 2012. Additionally, there was an increase in average monthly base rent of $1,398 per leased unit during the three months ended June 30, 2013 compared to $1,328 per leased unit during the three months ended June 30, 2012.
The increase in mixed-use rental revenue was due to higher revenue per available room of $244 for the three months ended June 30, 2013 compared to $222 for the three months ended June 30, 2012.

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Table of Contents


Other property income. Other property income increased $0.8 million, or 34%, to $3.2 million for the three months ended June 30, 2013, compared to $2.4 million for the three months ended June 30, 2012. Other property income by segment was as follows (dollars in thousands):
 
Total Portfolio
 
Same-Store Portfolio