American Assets Trust
Annual Report 2019

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2019or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to AMERICAN ASSETS TRUST, INC.(Exact Name of Registrant as Specified in its Charter)Commission file number: 001-35030AMERICAN ASSETS TRUST, L.P.(Exact Name of Registrant as Specified in its Charter)Commission file number: 33-202342-01Maryland (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.)11455 El Camino Real, Suite 200San Diego, California 92130(Address of Principal Executive Offices and Zip Code)(858) 350-2600(Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act:RegistrantTitle of Each ClassTrading SymbolName Of Each Exchange On Which RegisteredAmerican Assets Trust, Inc.Common Stock, $.01 par value per shareAATNew York Stock ExchangeAmerican Assets Trust, L.P.NoneNoneNoneSecurities registered pursuant to Section 12(g) of the Act:American Assets Trust, Inc.NoneAmerican Assets Trust, L.P.None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. American Assets Trust, Inc.Yes NoAmerican Assets Trust, L.P.Yes NoIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.American Assets Trust, Inc.Yes NoAmerican Assets Trust, L.P.Yes NoIndicate 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 1934during 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 filingrequirements for the past 90 days. American Assets Trust, Inc.Yes NoAmerican Assets Trust, L.P.Yes NoIndicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required tobe 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 tosubmit and post such files). American Assets Trust, Inc.Yes NoAmerican Assets Trust, L.P.Yes NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. ☒Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.(Check one):American Assets Trust, Inc.Large Accelerated Filer Accelerated Filer Non-Accelerated Filer 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 newor revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oAmerican Assets Trust, L.P.Large Accelerated Filer Accelerated Filer Non-Accelerated Filer 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 orrevised 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 NoAmerican Assets Trust, L.P.Yes NoThe aggregate market value of American Assets Trust, Inc.'s common shares held by non-affiliates of the Registrant, based upon the closing sales price of theRegistrant's common shares on June 30, 2019 was $2.491 billion.The number of American Assets Trust, Inc.’s common shares outstanding on February 14, 2020 was 60,068,228. DOCUMENTS INCORPORATED BY REFERENCEPortions of American Assets Trust, Inc.'s Proxy Statement with respect to its 2020 Annual Meeting of Stockholders to be filed not later than 120 days after the endof its fiscal year are incorporated by reference into Part III hereof.EXPLANATORY NOTEThis report combines the annual reports on Form 10-K for the year ended December 31, 2019 of American Assets Trust, Inc., a Maryland corporation, andAmerican Assets Trust, L.P., a Maryland limited partnership, of which American Assets Trust, Inc. is the parent company and sole general partner. Unlessotherwise 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, allreferences in this report to “our Operating Partnership” or “the Operating Partnership” refer to American Assets Trust, L.P. together with its consolidatedsubsidiaries.American Assets Trust, Inc. operates as a real estate investment trust, or REIT, and is the sole general partner of the Operating Partnership. Asof December 31, 2019, American Assets Trust, Inc. owned an approximate 78.5% partnership interest in the Operating Partnership. The remaining 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 OperatingPartnership, American Assets Trust, Inc. has full, exclusive and complete authority and control over the Operating Partnership’s day-to-day management andbusiness, 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 annual reports on Form 10-K of American Assets Trust, Inc. and the Operating Partnership into a single report willresult in the following benefits:•better reflects how management and the analyst community view the business as a single operatingunit;•enhance investors' understanding of American Assets Trust, Inc. and the Operating Partnership by enabling them to view the business as a whole and inthe 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 theirreview.Management operates American Assets Trust, Inc. and the Operating Partnership as one enterprise. The management of American Assets Trust, Inc. and theOperating 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. Webelieve it is important to understand the differences between American Assets Trust, Inc. and the Operating Partnership in the context of how American AssetsTrust, Inc. and the Operating Partnership operate as an interrelated consolidated company. American Assets Trust, Inc. is a REIT, whose only material asset is itsownership of partnership interests of the Operating Partnership. As a result, American Assets Trust, Inc. does not conduct business itself, other than acting as thesole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. AmericanAssets Trust, Inc. itself does not hold any indebtedness. The Operating Partnership holds substantially all the assets of the company, directly or indirectly holds theownership 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 forpartnership units, the Operating Partnership generates the capital required by the company’s business through the Operating Partnership’s operations, by theOperating 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 ofAmerican Assets Trust, Inc. and those of American Assets Trust, L.P. The partnership interests in the Operating Partnership that are not owned by American AssetsTrust, Inc. are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in American Assets Trust, Inc.’sfinancial statements. To help investors understand the significant differences between the company and the Operating Partnership, this report presents thefollowing separate sections for each of American Assets Trust, Inc. and the Operating Partnership:•consolidated financialstatements;•the following notes to the consolidated financialstatements:◦Debt;◦Equity/Partners' Capital; and◦Earnings PerShare/Unit;•Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities;and•Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results ofOperations.This report also includes separate Item 9A. 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 madethe requisite certifications and American Assets Trust, Inc. and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the SecuritiesExchange Act of 1934 and 18 U.S.C. §1350.AMERICAN ASSETS TRUST, INC. AND AMERICAN ASSETS TRUST, L.P.ANNUAL REPORT ON FORM 10-KFISCAL YEAR ENDED DECEMBER 31, 2019TABLE OF CONTENTS PART I 2ITEM 1. BUSINESS 2ITEM 1A. RISK FACTORS 5ITEM 1B. UNRESOLVED STAFF COMMENTS 28ITEM 2. PROPERTIES 29ITEM 3. LEGAL PROCEEDINGS 34ITEM 4. MINE SAFETY DISCLOSURES 34PART II 35ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES 35ITEM 6. SELECTED FINANCIAL DATA 37ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 39ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 58ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 59ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 59ITEM 9A. CONTROLS AND PROCEDURES 59ITEM 9B. OTHER INFORMATION 62PART III 62ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 62ITEM 11. EXECUTIVE COMPENSATION 62ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS 62ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 62ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 62PART IV 63ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 63SIGNATURES 66Forward Looking Statements.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 inSection 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 ExchangeAct). In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise,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,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phraseswhich are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statementsby 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 statementsdepend 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 transactionsand events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future eventsto differ materially from those set forth or contemplated in the forward-looking statements:•adverse economic or real estate developments in ourmarkets;•our failure to generate sufficient cash flows to service our outstandingindebtedness;•defaults on, early terminations of or non-renewal of leases by tenants, including significanttenants;•difficulties in identifying properties to acquire and completingacquisitions;•difficulties in completingdispositions;•our failure to successfully operate acquired properties andoperations;•our inability to develop or redevelop our properties due to marketconditions;•fluctuations in interest rates and increased operatingcosts;•risks related to joint venturearrangements;•our failure to obtain necessary outsidefinancing;•on-going litigation;•general economicconditions;•financial market fluctuations;•risks that affect the general retail, office, multifamily and mixed-useenvironment;•the competitive environment in which weoperate;•decreased rental rates or increased vacancyrates;•conflicts of interests with our officers ordirectors;•lack or insufficient amounts of insurance;•environmental uncertainties and risks related to adverse weather conditions and naturaldisasters;•other factors affecting the real estate industrygenerally;•limitations imposed on our business and our ability to satisfy complex rules in order for American Assets Trust, Inc. to continue to qualify as areal 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 andtaxation 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 orrevise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes.For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled “Item 1A. RiskFactors.”1PART I ITEM 1.BUSINESSGeneralReferences to “we,” “our,” “us” and “our company” refer to American Assets Trust, Inc., a Maryland corporation, together with our consolidatedsubsidiaries, 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 asour 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 qualityretail, 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 December 31, 2019, our portfolio is comprised of twelve retail shopping centers; nine office properties; a mixed-use property consistingof a 369-room all-suite hotel and a retail shopping center; and six multifamily properties. Additionally, as of December 31, 2019, we owned land at three of ourproperties that we classified as held for development and 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 that was formed on July 16, 2010 to acquire the entities owning various controlling and noncontrolling interests in real estateassets 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 anyoperating activity until the consummation of our initial public offering and the related acquisition of such interest on January 19, 2011. After the completion of ourinitial public offering and the related acquisitions, our operations have been carried on through our Operating Partnership. Our company, as the sole general partnerof our Operating Partnership, has control of our Operating Partnership and owned 78.5% of our Operating Partnership as of December 31, 2019. Accordingly, weconsolidate the assets, liabilities and results of operations of our Operating Partnership.Our Competitive StrengthsWe believe the following competitive strengths distinguish us from other owners and operators of commercial real estate and will enable us to takeadvantage of new acquisition and development opportunities, as well as growth opportunities within our portfolio:•Irreplaceable Portfolio of High Quality Retail, Office and Multifamily Properties. We have acquired and developed a high quality portfolio ofretail, office and multifamily properties located in affluent neighborhoods and sought-after business centers in Southern California, NorthernCalifornia, Portland, Oregon, Bellevue, Washington, San Antonio, Texas and Oahu, Hawaii. Many of our properties are located in in-filllocations where developable land is scarce or where we believe current zoning, environmental and entitlement regulations significantly restrictnew development. We believe that the location of many of our properties will provide us an advantage in terms of generating higher internalrevenue growth on a relative basis.•Experienced and Committed Senior Management Team with Strong Sponsorship. The members of our senior management team havesignificant experience in all aspects of the commercial real estate industry.•Properties Located in High-Barrier-to-Entry Markets with Strong Real Estate Fundamentals. Our core markets currently include SouthernCalifornia, Northern California, Oregon, Washington and Hawaii, which we believe have attractive long-term real estate fundamentals driven byfavorable supply and demand characteristics.•Extensive Market Knowledge and Long-Standing Relationships Facilitate Access to a Pipeline of Acquisition and Leasing Opportunities. Webelieve that our in-depth market knowledge and extensive network of long-standing relationships in the real estate industry provide us access toan ongoing pipeline of attractive acquisition and investment opportunities in and near our core markets, while also facilitating our leasing effortsand providing us with opportunities to increase occupancy rates at our properties.•Internal Growth Prospects through Development, Redevelopment and Repositioning. The development and redevelopment potential at severalof our properties presents compelling growth prospects and our expertise enhances our ability to capitalize on these opportunities.•Broad Real Estate Expertise with Retail, Office and Multifamily Focus. Our senior management team has strong experience and capabilitiesacross the real estate sector with significant expertise in the retail, office and multifamily asset classes, which provides for flexibility in pursuingattractive acquisition, development and repositioning opportunities. Ernest Rady, our Chairman, President and Chief Executive Officer, andRobert Barton, our Chief Financial Officer, each have over 30 years of commercial real estate experience,2and the other members of senior management, including Adam Wyll, our Chief Operating Officer, each have over 20 years of commercial realestate experience.Business and Growth StrategiesOur primary business objectives are to increase operating cash flows, generate long-term growth and maximize stockholder value. Specifically, we pursuethe following strategies to achieve these objectives:•Capitalizing on Acquisition Opportunities in High-Barrier-to-Entry Markets. We intend to pursue growth through the strategic acquisition ofattractively priced, high quality properties that are well located in their submarkets, focusing on markets that generally are characterized bystrong supply and demand characteristics, including high barriers to entry and diverse industry bases, that appeal to institutional investors.•Repositioning/Redevelopment and Development of Office, Retail and Multifamily Properties. Our strategy is to selectively reposition andredevelop several of our existing or newly-acquired properties, and we will also selectively pursue ground-up development of undeveloped landwhere we believe we can generate attractive risk-adjusted returns.•Disciplined Capital Recycling Strategy. Our strategy is to pursue an efficient asset allocation strategy that maximizes the value of ourinvestments by selectively disposing of properties whose returns appear to have been maximized and redeploying capital into acquisition,repositioning, redevelopment and development opportunities with higher return prospects, in each case in a manner that is consistent with ourqualification as a REIT.•Proactive Asset and Property Management. We actively manage our properties, employ targeted leasing strategies, leverage our existing tenantrelationships and focus on reducing operating expenses to increase occupancy rates at our properties, attract high quality tenants and increaseproperty cash flows, thereby enhancing the value of our properties.EmployeesAt December 31, 2019, we had 206 employees. None of our employees are represented by a collective bargaining unit. We believe that our relationship withour employees is good.Tax StatusWe have elected to be taxed as a REIT and believe we are organized and operate in a manner that has allowed us to qualify and will allow us to remainqualified as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2011. To maintain REIT status, we must meet anumber of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our net taxable income to ourstockholders (excluding any net capital gains).InsuranceWe carry comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in our portfolio undera blanket insurance policy, in addition to other coverages, such as trademark and pollution coverage, that may be appropriate for certain of our properties. Webelieve the policy specifications and insured limits are appropriate and adequate for our properties given the relative risk of loss, the cost of the coverage andindustry practice; however, our insurance coverage may not be sufficient to fully cover our losses. We do not carry insurance for certain losses, including, but notlimited to, losses caused by riots or war. Some of our policies, like those covering losses due to terrorism and earthquakes, are insured subject to limitationsinvolving large deductibles or co-payments and policy limits that may not be sufficient to cover losses, for such events. In addition, all but one of our propertiesare subject to an increased risk of earthquakes. While we carry earthquake insurance on all of our properties, the amount of our earthquake insurance coverage maynot be sufficient to fully cover losses from earthquakes. We may reduce or discontinue earthquake, terrorism or other insurance on some or all of our properties inthe future if the cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss. Also, if destroyed, wemay not be able to rebuild certain of our properties due to current zoning and land use regulations. As a result, we may be required to incur significant costs in theevent of adverse weather conditions and natural disasters. In addition, our title insurance policies may not insure for the current aggregate market value of ourportfolio, and we do not intend to increase our title insurance coverage if the market value of our portfolio increases. If we or one or more of our tenantsexperiences a loss that is uninsured or that exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cashflows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness,3even if these properties were irreparably damaged. Furthermore, we may not be able to obtain adequate insurance coverage at reasonable costs in the future as thecosts associated with property and casualty renewals may be higher than anticipated.RegulationOur properties are subject to various covenants, laws, ordinances and regulations, including laws such as the Americans with Disabilities Act of 1990, orADA, and the Fair Housing Amendment Act of 1988, or FHAA, that impose further restrictions on our properties and operations. Under the ADA and the FHAA,all public accommodations must meet federal requirements related to access and use by disabled persons. Some of our properties may currently be in non-compliance with the ADA or the FHAA. If one or more of the properties in our portfolio is not in compliance with the ADA, the FHAA or any other regulatoryrequirements, we may be required to incur additional costs to bring the property into compliance and we might incur governmental fines or the award of damagesto private litigants. In addition, we do not know whether existing requirements will change or whether future requirements will require us to make significantunanticipated expenditures.Under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may beliable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migratingfrom such property, including costs to investigate, clean up such contamination and liability for harm to natural resource. Such laws often impose liability withoutregard to whether the owner or operator knew of, or was responsible for, the presence of such contamination, and the liability may be joint and several. Theseliabilities could be substantial and the cost of any required remediation, removal, fines or other costs could exceed the value of the property and/or our aggregateassets. In addition, the presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability for costs ofremediation and/or personal or property damage or materially adversely affect our ability to sell, lease or develop our properties or to borrow using the propertiesas collateral. In addition, environmental laws may create liens on contaminated sites in favor of the government for damages and costs it incurs to address suchcontamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may beused or businesses may be operated, and these restrictions may require substantial expenditures.Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property, or adjacent properties, forcommercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store suchmaterials. For example, Del Monte Center is currently undergoing remediation of dry cleaning solvent contamination from a former onsite dry cleaner. Theenvironmental issue is currently in the final stages of remediation which entails the long term ground monitoring by the appropriate regulatory agency over the nextfive to seven years. The prior owner of Del Monte Center entered into a fixed fee environmental services agreement in 1997 pursuant to which the remediation willbe completed for approximately $3.5 million, with the remediation costs paid for through an escrow funded by the prior owner. We expect that the funds in thisescrow account will cover all remaining costs and expenses of the environmental remediation. However, if the Regional Water Quality Control Board - CentralCoast Region were to require further work costing more than the remaining escrowed funds, we could be required to pay such overage although we may have aclaim for such costs against the prior owner or our environmental remediation consultant. In addition to the foregoing, we possess Phase I Environmental SiteAssessments for certain of the properties in our portfolio. However, the assessments are limited in scope (e.g., they do not generally include soil sampling,subsurface investigations or hazardous materials survey) and may have failed to identify all environmental conditions or concerns. Furthermore, we do not havePhase I Environmental Site Assessment reports for all of the properties in our portfolio and, as such, may not be aware of all potential or existing environmentalcontamination liabilities at the properties in our portfolio. As a result, we could potentially incur material liability for these issues, which could adversely impactour financial condition, results of operations, cash flow and the per share trading price of our common stock.As the owner of the buildings on our properties, we could face liability for the presence of hazardous materials (e.g., asbestos or lead) or other adverseconditions (e.g., poor indoor air quality) in our buildings. Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings,and if we do not comply with such laws, we could face fines for such noncompliance. Also, we could be liable to third parties (e.g., occupants of the buildings) fordamages related to exposure to hazardous materials or adverse conditions in our buildings, and we could incur material expenses with respect to abatement orremediation of hazardous materials or other adverse conditions in our buildings. In addition, some of our tenants routinely handle and use hazardous or regulatedsubstances and wastes as part of their operations at our properties, which are subject to regulation. Such environmental and health and safety laws and regulationscould subject us or our tenants to liability resulting from these activities.Competition4We compete with a number of developers, owners and operators of retail, office, multifamily and mixed-use real estate, many of which own propertiessimilar to ours in the same markets in which our properties are located and some of which have greater financial resources than we do. In operating and managingour portfolio, we compete for tenants based on a number of factors, including location, rental rates, security, flexibility and expertise to design space to meetprospective tenants' needs and the manner in which the property is operated, maintained and marketed. As leases at our properties expire, we may encountersignificant competition to renew or re-let space in light of the large number of competing properties within the markets in which we operate. As a result, we may berequired to provide rent concessions or abatements, incur charges for tenant improvements and other inducements, including early termination rights or belowmarket renewal options, or we may not be able to timely lease vacant space. In that case, our financial condition, results of operations, cash flow, per share tradingprice of our common stock and ability to satisfy our debt service obligations and to pay dividends may be adversely affected.We also face competition when pursuing acquisition and disposition opportunities. Our competitors may be able to pay higher property acquisition prices,may have private access to opportunities not available to us and otherwise be in a better position to acquire a property. Competition may also have the effect ofreducing the number of suitable acquisition opportunities available to us, increasing the price required to consummate an acquisition opportunity and generallyreducing the demand for retail, office, mixed-use and multifamily space in our markets. Likewise, competition with sellers of similar properties to locate suitablepurchasers may result in us receiving lower proceeds from a sale or in us not being able to dispose of a property at a time of our choosing due to the lack of anacceptable return.SegmentsWe operate in four business segments: retail, office, multifamily and mixed-use. Information related to our business segments for 2019, 2018 and 2017 is setforth in Note 17 to our consolidated financial statements in Item 8 of this Report.Tenants Accounting for over 10% of RevenuesNone of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2019, 2018 or 2017. Google LLC at TheLandmark at One Market accounted for approximately 10.4%, 0% and 0% of total office segment revenues for the years ended December 31, 2019, 2018 and2017, respectively. LPL Holdings, Inc at La Jolla Commons accounted for approximately 9.2%, 0% and 0% of total office segment revenues for the years endedDecember 31, 2019, 2018 and 2017, respectively. salesforce.com, inc. at The Landmark at One Market accounted for approximately 4.3%, 15.4% and 15.5% oftotal office segment revenues for the years ended December 31, 2019, 2018 and 2017, respectively.Foreign OperationsWe do not engage in any foreign operations or derive any revenue from foreign sources.Available InformationWe file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports with theSecurities and Exchange Commission, or the SEC. You may obtain copies of these documents by accessing the SEC’s website at www.sec.gov. In addition, assoon as reasonably practicable after such materials are furnished to the SEC, we make copies of these documents available to the public free of charge through ourwebsite at www.americanassetstrust.com, or by contacting our Secretary at our principal office, which is located at 11455 El Camino Real, Suite 200, San Diego,California 92130. Our telephone number is (858) 350-2600. The information contained on our website is not a part of this report and is not incorporated herein byreference.Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Policies and Procedures for Complaints Regarding Accounting, InternalAccounting Controls, Fraud or Auditing Matters and the charters of our audit committee, compensation committee and nominating and corporate governancecommittee are all available in the Governance section of the Investors page of our website.ITEM 1A.RISK FACTORSThe following section includes the most significant factors that may adversely affect our business and operations. The risk factors describe risks that mayaffect these statements but are not all-inclusive, particularly with respect to possible future events. Moreover, we operate in a very competitive and rapidlychanging environment. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of allsuch risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained inany forward-looking statements. This discussion of risk factors includes many forward-looking statements. For5cautions about relying on forward-looking statements, please refer to the section entitled “Forward Looking Statements” at the beginning of this Reportimmediately prior to Item 1.Risks Related to Our Business and OperationsOur portfolio of properties is dependent upon regional and local economic conditions and is geographically concentrated in California, Oregon, Washington,Texas and Hawaii, which may cause us to be more susceptible to adverse developments in those markets than if we owned a more geographically diverseportfolio.Our properties are located in California, Oregon, Washington, Texas and Hawaii, and substantially all of our properties are concentrated in California,Oregon, Washington and Hawaii, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio. As a result, we areparticularly susceptible to adverse economic or other conditions in these markets (such as periods of economic slowdown or recession, business layoffs ordownsizing, industry slowdowns, changes in the local or global tourism industry, relocations of businesses, increases in real estate and other taxes and the cost ofcomplying with governmental regulations or increased regulation), as well as to natural disasters that occur in these markets (such as earthquakes, wildfires andother events). If there is a downturn in the economy in these markets, our operations and our revenue and cash available for distribution, including cash available topay distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders, could be materially adversely affected. We cannotassure you that these markets will grow or that underlying real estate fundamentals will be favorable to owners and operators of retail, office, mixed-use ormultifamily properties. Our operations may also be affected if competing properties are built in any of these markets. Moreover, submarkets within any of our coremarkets may be dependent upon a limited number of industries. In addition, the State of California is regarded as more litigious, highly regulated and taxed thanmany other states, all of which may reduce demand for retail, office, mixed-use or multifamily space in California. Any adverse economic or real estatedevelopments in the California, Oregon, Washington or Hawaii markets, or any decrease in demand for retail, office, multifamily or mixed-use space resultingfrom the regulatory environment, business climate or energy or fiscal problems, could adversely impact our financial condition, results of operations, cash flow,our ability to satisfy our debt service obligations and our ability to pay distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'sunitholders.We have a substantial amount of indebtedness, which may expose us to the risk of default under our debt obligations.At December 31, 2019, we had total debt outstanding of $1.36 billion, excluding debt issuance costs, a substantial portion of which contains non-recoursecarve-out guarantees and environmental indemnities from us and our Operating Partnership, and we may incur significant additional debt to finance futureacquisition and development activities. At December 31, 2019, we also had a second amended and restated credit facility with a capacity of $450 million,consisting of a revolving line of credit of $350 million and an unsecured term loan of $100 million. Payments of principal and interest on borrowings may leave uswith insufficient cash resources to operate our properties or to pay the dividends currently contemplated or necessary to maintain our REIT qualification. Our levelof debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:•our cash flow may be insufficient to meet our required principal and interestpayments;•we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability tomeet operational needs;•we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our originalindebtedness;•we may be forced to dispose of one or more of our properties, possibly on unfavorable terms or in violation of certain covenants to which wemay be subject;•we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations;and•our default under any loan with cross default provisions could result in a default on otherindebtedness.If any one of these events were to occur, our financial condition, results of operations, cash flow and per share trading price of our common stock could beadversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REITdistribution requirements imposed by the Internal Revenue Code of 1986, or the Code.Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may materially adversely affect us.6On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.Furthermore, in the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference RatesCommittee of the Federal Reserve Board and the Federal Reserve Bank of New York. At this time, it is not possible to predict whether any such changes willoccur, whether LIBOR will be phased out or any such alternative reference rates or other reforms to LIBOR will be enacted in the United Kingdom, the UnitedStates or elsewhere or the effect that any such changes, phase out, alternative reference rates or other reforms, if they occur, would have on the amount of interestpaid on, or the market value of, our LIBOR-based securities, including our floating rate notes. Uncertainty as to the nature of such potential changes, phase out,alternative reference rates or other reforms may materially adversely affect the trading market for LIBOR-based securities. Reform of, or the replacement orphasing out of, LIBOR and proposed regulation of LIBOR and other “benchmarks” may materially adversely affect the market value of and the amount of interestpaid on our LIBOR-based securities and could have a material adverse effect on our business, financial condition and results of operations.We depend on significant tenants in our office properties, and a bankruptcy, insolvency or inability to pay rent of any of these tenants may adversely affect theincome produced by our office properties and could have an adverse effect on our financial condition, results of operations, cash flow and the per sharetrading price of our common stock.As of December 31, 2019, the three largest tenants in our office portfolio - LPL Holdings, Inc., Google LLC and Autodesk, Inc. - represented approximately31.8% of the total annualized base rent in our office portfolio. LPL Holdings, Inc. is a subsidiary of LPL Financial Holdings, Inc. and provides an integratedplatform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States.Google LLC is a subsidiary of Alphabet, Inc. and provides online advertising services. Autodesk, Inc. is an American multinational corporation that focuses on 3-D design software for use in the architecture, engineering, construction, manufacturing, media and entertainment industries. The inability of a significant tenant topay rent or the bankruptcy or insolvency of a significant tenant may adversely affect the income produced by our office properties. If a tenant becomes bankrupt orinsolvent, federal law may prohibit us from evicting such tenant based solely upon such bankruptcy or insolvency. In addition, a bankrupt or insolvent tenant maybe authorized to reject and terminate its lease with us. Any claim against such tenant for unpaid, future rent would be subject to a statutory cap that might besubstantially less than the remaining rent owed under the lease. If any of these tenants were to experience a downturn in its business or a weakening of its financialcondition resulting in its failure to make timely rental payments or causing it to default under its lease, we may experience delays in enforcing our rights aslandlord and may incur substantial costs in protecting our investment. Any such event could have an adverse effect on our financial condition, results ofoperations, cash flow and the per share trading price of our common stock.Our retail shopping center properties depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a storeclosure by, one or more of these tenants.Our retail shopping center properties typically are anchored by large, nationally recognized tenants. At any time, our tenants may experience a downturn intheir business that may significantly weaken their financial condition. As a result, our tenants, including our anchor and other major tenants, may fail to complywith their contractual obligations to us, seek concessions in order to continue operations or declare bankruptcy, any of which could result in the termination of suchtenants' leases and the loss of rental income attributable to the terminated leases. In addition, certain of our tenants may cease operations while continuing to payrent, which could decrease customer traffic, thereby decreasing sales for our other tenants at the applicable retail property. In addition to these potential effects of abusiness downturn, mergers or consolidations among large retail establishments could result in the closure of existing stores or duplicate or geographicallyoverlapping store locations, which could include stores at our retail properties.Loss of, or a store closure by, an anchor or major tenant could significantly reduce our occupancy level or the rent we receive from our retail properties, andwe may not have the right to re-lease vacated space or we may be unable to re-lease vacated space at attractive rents or at all. Moreover, in the event of default bya major tenant or anchor store, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of ouragreements with those parties. The occurrence of any of the situations described above, particularly if it involves an anchor tenant with leases in multiple locations,could seriously harm our performance and could adversely affect the value of the applicable retail property.As of December 31, 2019, our largest anchor tenants were Lowe's, Nordstrom Rack and Sprouts Farmers Market, which together represented approximately10.1% of our total annualized base rent of our retail portfolio in the aggregate, and 4.8%, 2.8% and 2.5%, respectively, of the annualized base rent generated by ourretail properties.7Many of the leases at our retail properties contain “co-tenancy” or “go-dark” provisions, which, if triggered, may allow tenants to pay reduced rent, ceaseoperations or terminate their leases, any of which could adversely affect our performance or the value of the applicable retail property.Many of the leases at our retail properties contain “co-tenancy” provisions that condition a tenant's obligation to remain open, the amount of rent payable bythe tenant or the tenant's obligation to continue occupancy on certain conditions, including: (1) the presence of a certain anchor tenant or tenants; (2) the continuedoperation of an anchor tenant's store; and (3) minimum occupancy levels at the applicable retail property. If a co-tenancy provision is triggered by a failure of anyof these or other applicable conditions, a tenant could have the right to cease operations, to terminate its lease early or to a reduction of its rent. In periods ofprolonged economic decline, there is a higher than normal risk that co-tenancy provisions will be triggered as there is a higher risk of tenants closing stores orterminating leases during these periods. In addition to these co-tenancy provisions, certain of the leases at our retail properties contain “go-dark” provisions thatallow the tenant to cease operations while continuing to pay rent. This could result in decreased customer traffic at the applicable retail property, therebydecreasing sales for our other tenants at that property, which may result in our other tenants being unable to pay their minimum rents or expense recovery charges.These provisions also may result in lower rental revenue generated under the applicable leases. To the extent co-tenancy or go-dark provisions in our retail leasesresult in lower revenue or tenant sales or tenants' rights to terminate their leases early or to a reduction of their rent, our performance or the value of the applicableretail property could be adversely affected.We may be unable to renew leases, lease vacant space or re-let space as leases expire, thereby increasing or prolonging vacancies, which could adverselyaffect our financial condition, results of operations, cash flow and per share trading price of our common stock.As of December 31, 2019, leases representing 8.7% of the square footage and 8.2% of the annualized base rent of the properties in our office, retail and retailportion of our mixed-use portfolios will expire in 2020, and an additional 3.7% of the square footage of the properties in our office, retail and retail portion of ourmixed-use portfolios was available. We cannot assure you that leases will be renewed or that our properties will be re-let at rental rates equal to or above thecurrent average rental rates or that substantial rent abatements, tenant improvements, early termination rights or below market renewal options will not be offeredto attract new tenants or retain existing tenants. In addition, our ability to lease our multifamily properties at favorable rates, or at all, is dependent upon the overalllevel of spending in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, personal debt levels, thedownturn in the housing market, stock market volatility and uncertainty about the future. If the rental rates for our properties decrease, our existing tenants do notrenew their leases or we do not re-let a significant portion of our available space and space for which leases will expire, our financial condition, results ofoperations, cash flow and per share trading price of our common stock could be adversely affected.We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth.Our business strategy involves the acquisition of retail, office, multifamily and mixed-use properties. These activities require us to identify suitableacquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategies. We continue to evaluate the market ofavailable properties and may attempt to acquire properties when strategic opportunities exist. However, we may be unable to acquire properties identified aspotential acquisition opportunities. Our ability to acquire properties on favorable terms, or at all, may be exposed to the following significant risks:•we may incur significant costs and divert management attention in connection with evaluating and negotiating potential acquisitions, includingones that we are subsequently unable to complete;•even if we enter into agreements for the acquisition of properties, these agreements are subject to conditions to closing, which we may be unableto satisfy; and•we may be unable to finance the acquisition on favorable terms or atall.If we are unable to finance property acquisitions or acquire properties on favorable terms, or at all, our financial condition, results of operations, cash flowand per share trading price of our common stock could be adversely affected. In addition, failure to identify or complete acquisitions of suitable properties couldslow our growth.8We face significant competition for acquisitions of real properties, which may reduce the number of acquisition opportunities available to us and increase thecosts of these acquisitions.The current market for acquisitions continues to be extremely competitive. This competition may increase the demand for the types of properties in which wetypically invest and, therefore, reduce the number of suitable acquisition opportunities available to us and increase the prices paid for such acquisition properties.We also face significant competition for attractive acquisition opportunities from an indeterminate number of investors, including publicly traded and privatelyheld REITs, private equity investors and institutional investment funds, some of which have greater financial resources than we do, a greater ability to borrowfunds to acquire properties and the ability to accept more risk than we can prudently manage, including risks with respect to the geographic proximity ofinvestments and the payment of higher acquisition prices. This competition will increase if investments in real estate become more attractive relative to other formsof investment. Competition for investments may reduce the number of suitable investment opportunities available to us and may have the effect of increasingprices paid for such acquisition properties and/or reducing the rents we can charge and, as a result, adversely affecting our operating results.Our future acquisitions may not yield the returns we expect, and we may otherwise be unable to operate these properties to meet our financial expectations,which could adversely affect our financial condition, results of operations, cash flow and per share trading price of our common stock.Our future acquisitions and our ability to successfully operate the properties we acquire in such acquisitions may be exposed to the following significantrisks:•even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchaseprice;•we may acquire properties that are not accretive to our results upon acquisition, and we may not successfully manage and lease those propertiesto meet our expectations;•our cash flow may be insufficient to meet our required principal and interestpayments;•we may spend more than budgeted amounts to make necessary improvements or renovations to acquiredproperties;•we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existingoperations, and as a result our results of operations and financial condition could be adversely affected;•market conditions may result in higher than expected vacancy rates and lower than expected rental rates;and•we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities, suchas liabilities for clean-up of undisclosed environmental contamination, claims by tenants, vendors or other persons dealing with the formerowners of the properties, liabilities incurred in the ordinary course of business and claims for indemnification by general partners, directors,officers and others indemnified by the former owners of the properties.If we cannot operate acquired properties to meet our financial expectations, our financial condition, results of operations, cash flow and per share tradingprice of our common stock could be adversely affected.We may not be able to control our operating costs or our expenses may remain constant or increase, even if our revenues do not increase, causing our resultsof operations to be adversely affected.Factors that may adversely affect our ability to control operating costs include the need to pay for insurance and other operating costs, including real estatetaxes, which could increase over time, the need periodically to repair, renovate and re-lease space, the cost of compliance with governmental regulation, includingzoning and tax laws, the potential for liability under applicable laws, interest rate levels and the availability of financing. If our operating costs increase as a resultof any of the foregoing factors, our results of operations may be adversely affected.The expense of owning and operating a property is not necessarily reduced when circumstances such as market factors and competition cause a reduction inincome from the property. As a result, if revenues decline, we may not be able to reduce our expenses accordingly. Costs associated with real estate investments,such as real estate taxes, insurance, loan payments and maintenance, generally will not be reduced even if a property is not fully occupied or other circumstancescause our revenues to decrease. If we are unable to decrease operating costs when demand for our properties decreases and our revenues decline, our financialcondition, results of operations and our ability to make distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders maybe adversely affected.9Our ability to grow will be limited if we cannot obtain additional capital.If economic conditions and conditions in the capital markets are not favorable at the time we need to raise capital, we may need to obtain capital on lessfavorable terms than our current debt financings. Equity capital could include our common shares or preferred shares. We cannot guarantee that additionalfinancing, refinancing or other capital will be available in the amounts we desire or on favorable terms. Our access to debt or equity capital depends on a number offactors, including the market's perception of our growth potential, our ability to pay dividends, and our current and potential future earnings. Depending on theoutcome of these factors as well as the impact of the economic environment, we could experience delay or difficulty in implementing our growth strategy,including the development and redevelopment of our assets, on satisfactory terms, or be unable to implement this strategy.High mortgage rates and/or unavailability of mortgage debt may make it difficult for us to finance or refinance properties, which could reduce the number ofproperties we can acquire, our net income and the amount of cash distributions we can make.If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, wemay be unable to refinance the properties when the loans become due, or to refinance on favorable terms. If interest rates are higher when we refinance ourproperties, our income could be reduced. If any of these events occur, our cash flow could be reduced. This, in turn, could reduce cash available for distribution toour stockholders and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of propertiessubject to mortgage debt.Incurring mortgage and other secured debt obligations increases our risk of property losses because defaults on indebtedness secured by properties may resultin foreclosure actions initiated by lenders and ultimately our loss of the property securing any loans for which we are in default. Any foreclosure on a mortgagedproperty or group of properties could adversely affect the overall value of our portfolio of properties. Moreover, repayment of mortgage and other secured debtobligations could limit the funds that are available to repay our unsecured debt obligations. For tax purposes, a foreclosure on any of our properties that is subjectto a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but wouldnot receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code.Some of our financing arrangements involve balloon payment obligations, which may adversely affect our ability to make distributions.Some of our financing arrangements require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity isuncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or maynot be able to refinance the existing financing on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. Theeffect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets. In addition, payments of principaland interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as aREIT.Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow and per share tradingprice of our common stock.The REIT rules impose certain restrictions on our ability to utilize hedges, swaps and other types of derivatives to hedge our liabilities. Subject to theserestrictions, we may enter into hedging transactions to protect us from the effects of interest rate fluctuations on floating rate debt. Our hedging transactions mayinclude entering into interest rate cap agreements or interest rate swap agreements. As described under Note 8. "Derivative and Hedging Activities," to theaccompanying consolidated financial statements, we have entered into several interest rate swap agreements that are intended to reduce the interest rate variabilityexposure with respect to certain of our indebtedness. These agreements involve risks, such as the risk that such arrangements would not be effective in reducingour exposure to interest rate changes or that a court could rule that such an agreement is not legally enforceable. In addition, interest rate hedging can be expensive,particularly during periods of rising and volatile interest rates. Hedging could reduce the overall returns on our investments. Failure to hedge effectively againstinterest rate changes could materially adversely affect our financial condition, results of operations, cash flow and per share trading price of our common stock. Inaddition, while such agreements would be intended to lessen the impact of rising interest rates on us, they could also expose us to the risk that the other parties tothe agreements would not perform, we could incur significant costs associated with the settlement of the agreements or that the underlying transactions could fail toqualify as10highly-effective cash flow hedges under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 815, Derivatives andHedging.Our second amended and restated credit facility, note purchase agreements and amended term loan agreement restrict our ability to engage in some businessactivities, including our ability to incur additional indebtedness, make capital expenditures and make certain investments, which could adversely affect ourfinancial condition, results of operations, cash flow and per share trading price of our common stock.Our second amended and restated credit facility, note purchase agreements and amended term loan agreement contain customary negative covenants andother financial and operating covenants that, among other things:•restrict our ability to incur additionalindebtedness;•restrict our ability to incur additionalliens;•restrict our ability to make certain investments (including certain capitalexpenditures);•restrict our ability to merge with anothercompany;•restrict our ability to sell or dispose ofassets;•restrict our ability to make distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders;and•require us to satisfy minimum financial coverage ratios, minimum tangible net worth requirements and/or maximum leverageratios.These limitations restrict our ability to engage in some business activities, which could adversely affect our financial condition, results of operations, cashflow and per share trading price of our common stock. In addition, our credit facility contains specific cross-default provisions with respect to specified otherindebtedness, giving the lenders and/or note purchasers the right to declare a default if we are in default under other loans in some circumstances.The effective subordination of our unsecured indebtedness may reduce amounts available for payment on our unsecured indebtedness.Our second amended and restated credit facility, the notes issued under our note purchase agreements and our amended term loan agreement representunsecured indebtedness. The holders of our secured debt may foreclose on the assets securing such debt, reducing the cash flow from the foreclosed propertyavailable for payment of unsecured debt. The holders of any of our secured debt also would have priority over unsecured creditors in the event of a bankruptcy,liquidation or similar proceeding.If we invest in mortgage receivables, including originating mortgages, such investment would be subject to several risks, any of which could decrease thevalue of such investments and result in a significant loss to us.From time to time, we may invest in mortgage receivables, including originating mortgages. In general, investments in mortgages are subject to several risks,including:•borrowers may fail to make debt service payments or pay the principal when due, which may make it necessary for us to foreclose our mortgagesor engage in costly negotiations;•the value of the mortgaged property may be less than the principal amount of the mortgage note securing theproperty;•interest rates payable on the mortgages may be lower than our cost for the funds to acquire these mortgages;and•the mortgages may be or become subordinated to mechanics' or materialmen's liens or property tax liens, in which case we would need to makepayments to maintain the current status of a prior lien or discharge it in its entirety to protect such mortgage investment.If any of these risks were to be realized, the total amount we would recover from our mortgage receivables may be less than our total investment, resultingin a loss and our mortgage receivables may be materially and adversely affected.Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results ofoperations, cash flow and per share trading price of our common stock.Our business may be affected by market and economic challenges experienced by the U.S. economy or real estate industry as a whole, including dislocationsin the credit markets. These conditions, or similar conditions existing in the future, may adversely affect our financial condition, results of operations, cash flowand per share trading price of our common stock as a result of the following potential consequences, among others:11•decreased demand for retail, office, multifamily and mixed-use space, which would cause market rental rates and property values to benegatively impacted;•reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by ourproperties and may reduce the availability of unsecured loans;•our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursueacquisition and development opportunities and refinance existing debt, reduce our returns from our acquisition and development activities andincrease our future interest expense; and•one or more lenders under our second amended and restated credit facility could refuse to fund their financing commitment to us or could failand we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.We are subject to risks that affect the general retail environment, such as weakness in the economy, the level of consumer spending, the adverse financialcondition of large retailing companies and competition from discount and internet retailers, any of which could adversely affect market rents for retail spaceand the willingness or ability of retailers to lease space in our shopping centers.A portion of our properties are in the retail real estate market. This means that we are subject to factors that affect the retail sector generally, as well as themarket for retail space. The retail environment and the market for retail space have previously been, and could again be, adversely affected by weakness in thenational, regional and local economies, the level of consumer spending and consumer confidence, the adverse financial condition of some large retailingcompanies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets and increasing competition from discountretailers, outlet malls, internet retailers (including Amazon.com) and other online businesses. Increases in consumer spending via the internet may significantlyaffect our retail tenants' ability to generate sales in their stores and could affect the way future tenants lease space. In addition, some of our retail tenants facecompetition from the expanding market for digital content and hardware. New and enhanced technologies, including new digital technologies and new webservices technologies, may increase competition for certain of our retail tenants. While we devote considerable effort and resources to analyze and respond totenant trends, preferences and consumer spending patterns, we cannot predict with certainty what future tenants will want, what future retail spaces will look likeand how much revenue will be generated at traditional “brick and mortar” locations. If we are unable to anticipate and respond promptly to trends in the market,our occupancy levels and rental amounts may decline.Any of the foregoing factors could adversely affect the financial condition of our retail tenants and the willingness of retailers to lease space in our shoppingcenters. In turn, these conditions could negatively affect market rents for retail space and could materially and adversely affect our financial condition, results ofoperations, cash flow, the trading price of our common shares and our ability to satisfy our debt service obligations and to pay distributions to American AssetsTrust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders.We face significant competition in the leasing market, which may decrease or prevent increases of the occupancy and rental rates of our properties.We compete with numerous developers, owners and operators of real estate, many of which own properties similar to ours in the same submarkets in whichour properties are located. If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, wemay lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge or to offer more substantial rentabatements, tenant improvements, early termination rights or below market renewal options in order to retain tenants when our tenants' leases expire. As a result,our financial condition, results of operations, cash flow and per share trading price of our common stock could be adversely affected.We may be required to make rent or other concessions and/or significant capital expenditures to improve our properties in order to retain and attract tenants,causing our financial condition, results of operations, cash flow and per share trading price of our common stock to be adversely affected.We may be required, upon expiration of leases at our properties, to make rent or other concessions to tenants, accommodate requests for renovations, build-to-suit remodeling and other improvements or provide additional services to our tenants. As a result, we may have to make significant capital or other expendituresin order to retain tenants whose leases expire and to attract new tenants in sufficient numbers. Additionally, we may need to raise capital to make suchexpenditures. If we are unable to do so or capital is otherwise unavailable, we may be unable to make the required expenditures. This could result in non-renewalsby tenants upon expiration of their leases, which could cause an adverse effect to our financial condition, results of operations, cash flow and per share tradingprice of our common stock.12The actual rents we receive for the properties in our portfolio may be less than our asking rents, and we may experience lease roll down from time to time,which could negatively impact our ability to generate cash flow growth.As a result of various factors, including competitive pricing pressure in our submarkets, adverse conditions in the California, Oregon, Washington, Texas andHawaii real estate markets and the desirability of our properties compared to other properties in our submarkets, we may be unable to realize the asking rentsacross the properties in our portfolio. In addition, the degree of discrepancy between our asking rents and the actual rents we are able to obtain may vary both fromproperty to property and among different leased spaces within a single property. If we are unable to obtain rental rates that are on average comparable to our askingrents across our portfolio, then our ability to generate cash flow growth will be negatively impacted. In addition, depending on asking rental rates at any given timeas compared to expiring leases in our portfolio, from time to time rental rates for expiring leases may be higher than starting rental rates for new leases.We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit ourability to sell or refinance such assets.In the future we may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in ourOperating Partnership, which may result in stockholder dilution through the issuance of Operating Partnership units that may be exchanged for shares of ourcommon stock. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over the tax life ofthe acquired properties, and may require that we agree to protect the contributors' ability to defer recognition of taxable gain through restrictions on our ability todispose of, or refinance the debt on, the acquired properties. Similarly, we may be required to incur or maintain debt we would otherwise not incur so we canallocate the debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell an asset at a time, or on terms, that would befavorable absent such restrictions.We are subject to the business, financial and operating risks inherent to the hospitality and tourism industries, including competition for guests with otherhospitality properties and general and local economic conditions that may affect demand for travel in general, any of which could adversely affect therevenues generated by our hospitality or other properties.Because we own the Waikiki Beach Walk-Embassy Suites™ in Hawaii and the Santa Fe Park RV Resort in California, we are susceptible to risks associatedwith the hospitality industry, including:•competition for guests with other hospitality properties, some of which may have greater marketing and financial resources than the managers ofour hospitality properties;•increases in operating costs from inflation, labor costs (including the impact of unionization), workers' compensation and healthcare relatedcosts, utility costs, insurance and other factors that the managers of our hospitality properties may not be able to offset through higher rates;•the fluctuating and seasonal demands of business travelers and tourism, which seasonality may cause quarterly fluctuations in ourrevenues;•general and local economic conditions that may affect demand for travel ingeneral;•periodic oversupply resulting from excessive newdevelopment;•unforeseen events beyond our control, such as terrorist attacks, travel-related health concerns, including pandemics and epidemics, imposition oftaxes or surcharges by regulatory authorities, travel-related accidents, climate change and unusual weather patterns, including natural disasterssuch as earthquakes or wildfires; and•decreased reimbursement revenue from the licensor for traveler rewardprograms.If our hospitality properties do not generate sufficient revenues, our financial position, results of operations, cash flow, per share trading price of ourcommon stock and ability to satisfy our debt service obligations and to pay distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust,L.P.'s unitholders may be adversely affected.In addition, because tourism is a major component of both the local economies in Hawaii and California, our properties in California and Hawaii may beimpacted by the local and global tourism industry. These properties are susceptible to any factors that affect travel and tourism related to Hawaii and California,including cost and availability of air services and the impact of any events that disrupt air or other travel to and from these regions. Moreover, these properties maybe affected by risks such as acts of terrorism and natural disasters, including major fires, floods and earthquakes, as well as severe or inclement weather, whichcould also decrease tourism activity in Hawaii or California.13We must rely on third-party management companies to operate the Waikiki Beach Walk-Embassy Suites™ in order to maintain our qualification as a REITunder the Code, and, as a result, we will have less control than if we were operating the hotel directly.In order to assist us in maintaining our qualification as a REIT, we have leased the Waikiki Beach Walk-Embassy Suites™ to WBW Hotel Lessee, LLC, ourtaxable REIT subsidiary, or TRS, lessee, and engaged a third-party management company to operate our hotel. While we have some input into operating decisionsfor the hotel leased by our TRS lessee and operated under a management agreement, we have less control than if we managed the hotel ourselves. Even if webelieve that our hotel is not being operated efficiently, we may not have sufficient rights under the management agreement to enable us to force the managementcompany to change its method of operation. We cannot assure you that the management company will successfully manage our hotel. A failure by themanagement company to successfully manage the hotel could lead to an increase in our operating expenses or a decrease in our revenue, or both, which couldadversely impact our financial condition, results of operations, cash flow, our ability to satisfy our debt service obligations and our ability to pay distributions toAmerican Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders.If our relationship with the franchisor of the Waikiki Beach Walk-Embassy Suites™ was to deteriorate or terminate, it could have a material adverse effect onour business, financial condition, results of operations and our ability to make distributions to American Assets Trust, Inc.'s stockholders or American AssetsTrust, L.P.'s unitholders.We cannot assure you that disputes between us and the franchisor of the Waikiki Beach Walk- Embassy Suites™ will not arise. If our relationship with thefranchisor were to deteriorate as a result of disputes regarding the franchise agreement under which our hotel operates or for other reasons, the franchisor could,under certain circumstances, terminate our current license with them or decline to provide licenses for hotels that we may acquire in the future. If any of theforegoing were to occur, it could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions toAmerican Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders.Our franchisor, Embassy Suites™, could cause us to expend additional funds on upgraded operating standards, which may adversely affect our results ofoperations and reduce cash available for distribution to stockholders.Under the terms of our franchise license agreement, our hotel operator must comply with operating standards and terms and conditions imposed by thefranchisor of the hotel brand, Embassy Suites™. Failure by us, our TRS lessees or any hotel management company that we engage to maintain these standards orother terms and conditions could result in the franchise license being canceled or the franchisor requiring us to undertake a costly property improvement program.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 fora termination payment, which we expect could be as high as approximately $7.6 million based on operating performance through December 31, 2019. In addition,our franchisor may impose upgraded or new brand standards, such as substantially upgrading the bedding, enhancing the complimentary breakfast or increasingthe value of guest awards under its “frequent guest” program, which can add substantial expense for the hotel. Furthermore, under certain circumstances, thefranchisor may require us to make certain capital improvements to maintain the hotel in accordance with system standards, the cost of which can be substantial andmay adversely affect our results of operations and reduce cash available for distribution to our stockholders.Embassy Suites™, our franchisor, has a right of first offer with respect to the Waikiki Beach Walk-Embassy Suites™, which may limit our ability to obtain thehighest price possible for the hotel.Pursuant to the terms of our franchise agreement for the Waikiki Beach Walk-Embassy Suites™, the franchisor has a right of first offer to purchase the hotelif we propose to sell all or a portion of the hotel or any interest therein. In the event that we choose to dispose of the hotel, we would be required to notify thefranchisor, prior to offering the hotel to any other potential buyer, of the price and conditions on which we would be willing to sell the hotel, and the franchisorwould have the right, within 30 days of receiving such notice, to make an offer to purchase the hotel. If the franchisor makes an offer to purchase that is equal to orgreater than the price and on substantially the same terms set forth in our notice, then we will be obligated to sell the hotel to the franchisor at that price and onthose terms. If the franchisor makes an offer to purchase for less than the price stated in our notice or on less favorable terms, then we may reject the franchisor'soffer. The existence of this right of first offer could adversely impact our ability to obtain the highest possible price for the hotel as, during the term of the franchiseagreement, we would not be able to offer the hotel to potential purchasers through a competitive bid process or in a similar manner designed to maximize the valueobtained for the property without first offering to sell this property to the franchisor.14Our real estate development activities are subject to risks particular to development, such as unanticipated expenses, delays and other contingencies, any ofwhich could adversely affect our financial condition, results of operations, cash flow and the per share trading price of our common stock.We may engage in development and redevelopment activities with respect to certain of our properties. To the extent that we do so, we will be subject to thefollowing risks associated with such development and redevelopment activities:•unsuccessful development or redevelopment opportunities could result in direct expenses to us;•construction or redevelopment costs of a project may exceed original estimates, possibly making the project less profitable than originallyestimated, or unprofitable;•time required to complete the construction or redevelopment of a project or to lease up the completed project may be greater than originallyanticipated, thereby adversely affecting our cash flow and liquidity;•contractor and subcontractor disputes, strikes, labor disputes or supplydisruptions;•failure to achieve expected occupancy and/or rent levels within the projected time frame, if atall;•delays with respect to obtaining or the inability to obtain necessary zoning, occupancy, land use and other governmental permits, and changes inzoning and land use laws;•occupancy rates and rents of a completed project may not be sufficient to make the projectprofitable;•our ability to dispose of properties developed or redeveloped with the intent to sell could be impacted by the ability of prospective buyers toobtain financing given the current state of the credit markets; and•the availability and pricing of financing to fund our development activities on favorable terms or atall.These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development orredevelopment activities once undertaken, any of which could have an adverse effect on our financial condition, results of operations, cash flow and the per sharetrading price of our common stock.Our success depends on key personnel whose continued service is not guaranteed, and the loss of one or more of our key personnel could adversely affect ourability to manage our business and to implement our growth strategies, or could create a negative perception in the capital markets.Our continued success and our ability to manage anticipated future growth depend, in large part, upon the efforts of key personnel, particularly Messrs. Rady,Barton and Wyll who have extensive market knowledge and relationships and exercise substantial influence over our operational, financing, acquisition anddisposition activity. Among the reasons that these individuals are important to our success is that each has a national or regional industry reputation that attractsbusiness and investment opportunities and assists us in negotiations with lenders, existing and potential tenants and industry personnel. If we lose their services,our relationships with such personnel could diminish.Our Board has implemented an emergency succession plan in case of the sudden or unanticipated resignation, termination, death or temporary or permanentdisability of Mr. Rady, or otherwise in case Mr. Rady is unable to perform his duties as Chairman, President and Chief Executive Officer. This plan is reviewed atleast annually by our Board with input from our Nominating and Governance Committee and currently includes Dr. Robert Sullivan (Board member), Mr. Bartonand Mr. Wyll, as potential interim candidates for the roles of Chairman, President and/or Chief Executive Officer and/or as emergency interim executivecommittee members. Many of our other senior executives also have extensive experience and strong reputations in the real estate industry, which aid us in identifyingopportunities, having opportunities brought to us and negotiating with tenants and build-to-suit prospects. The loss of services of one or more members of oursenior management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investmentopportunities and weaken our relationships with lenders, business partners, existing and prospective tenants and industry participants, which could adversely affectour financial condition, results of operations, cash flow and per share trading price of our common stock.Mr. Rady is involved in outside businesses, which may interfere with his ability to devote time and attention to our business and affairs.We rely on our senior management team, including Mr. Rady, for the day-to-day operations of our business. Our employment agreement with Mr. Radyrequires him to devote a substantial portion of his business time and attention to our business. Mr. Rady continues to serve as chairman of the board of directorsand president of American Assets, Inc. and chairman of the board of directors of Insurance Company of the West. As such, Mr. Rady has certain ongoing duties toAmerican Assets, Inc., Insurance Company of the West and other business ventures that could require a portion of his time and attention. Although we expect thatMr. Rady will continue to devote a majority of his business time and attention to us, we cannot accurately predict the amount of time and attention that will berequired of Mr. Rady to perform such ongoing duties. To15the extent that Mr. Rady is required to dedicate time and attention to American Assets, Inc. and/or Insurance Company of the West, his ability to devote a majorityof his business time and attention to our business and affairs may be limited and could adversely affect our operations.We may be subject to on-going or future litigation and otherwise in the ordinary course of business, which could have a material adverse effect on ourfinancial condition, results of operations, cash flow and per share trading price of our common stock.We may be subject to on-going litigation at our properties and otherwise in the ordinary course of business. Some of these claims may result in significantdefense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to vigorously defendourselves; however, we cannot be certain of the ultimate outcomes of currently asserted claims or of those that may arise in the future. Resolution of these types ofmatters against us may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments, and settlementsexceed insured levels, could adversely impact our earnings and cash flows, thereby having an adverse effect on our financial condition, results of operations, cashflow and per share trading price of our common stock. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of ourinsurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adverselyimpact our ability to attract officers and directors.Potential losses from earthquakes in California, Oregon, Washington and Hawaii may not be fully covered by insurance.Many of the properties we currently own are located in California, Oregon, Washington and Hawaii, which are areas especially subject to earthquakes. Whilewe carry earthquake insurance on all of our properties, the amount of our earthquake insurance coverage may not be sufficient to fully cover losses fromearthquakes and will be subject to limitations involving large deductibles or co-payments. In addition, we may reduce or discontinue earthquake insurance on someor all of our properties in the future if the cost of premiums for any such policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss.As a result, in the event of an earthquake, we may be required to incur significant costs, and, to the extent that a loss exceeds policy limits, we could lose the capitalinvested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourseindebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.We may be adversely affected by laws, regulations or other issues related to climate change.We may become subject to laws or regulations related to climate change, which could cause our business, results of operations and financial condition to beimpacted adversely. The federal government has enacted, and some of the states and localities in which we operate may enact, certain climate change laws andregulations or have begun regulating carbon footprints and greenhouse gas emissions. Although these laws and regulations have not had any known materialadverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and constructioncosts, including monitoring and reporting costs, and capital expenditures for environmental control facilities and other new equipment. Furthermore, our reputationcould be negatively affected if we violate climate change laws or regulations. We cannot predict how future laws and regulations, or future interpretations ofcurrent laws and regulations, related to climate change will affect our business, results of operations and financial condition. Lastly, the potential physical impactsof climate change on our operations are highly uncertain, and would be particular to the geographic circumstances in areas in which we operate. These may includechanges global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, changing sea levels andchanging temperature averages or extremes. These impacts may adversely affect our properties, our business, financial condition and results of operations.We may not be able to rebuild our existing properties to their existing specifications if we experience a substantial or comprehensive loss of such properties.In the event that we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existingspecifications. Further, reconstruction or improvement of such a property would likely require significant upgrades to meet zoning and building coderequirements. Environmental and legal restrictions could also restrict the rebuilding of our properties. For example, if we experienced a substantial orcomprehensive loss of Torrey Reserve Campus in San Diego, California, reconstruction could be delayed or prevented by the California Coastal Commission,which regulates land use in the California coastal zone.Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers' financial condition anddisputes between us and our co-venturers.16We may co-invest in the future with other third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharingresponsibility for managing the affairs of a property, partnership, joint venture or other entity. Consequently, with respect to any such arrangement we may enterinto in the future, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity.Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, includingthe possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions. Partners or co-venturers may haveeconomic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to ourpolicies or objectives, and they may have competing interests in our markets that could create conflict of interest issues. Such investments may also have thepotential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or jointventure. In addition, a sale or transfer by us to a third party of our interests in the joint venture may be subject to consent rights or rights of first refusal, in favor ofour joint venture partners, which would in each case restrict our ability to dispose of our interest in the joint venture. Where we are a limited partner or non-managing member in any partnership or limited liability company, if such entity takes or expects to take actions that could jeopardize our status as a REIT orrequire us to pay tax, we may be forced to dispose of our interest in such entity. Disputes between us and partners or co-venturers may result in litigation orarbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions byor disputes with partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may incertain circumstances be liable for the actions of our third-party partners or co-venturers. Our joint ventures may be subject to debt and, in the current volatilecredit market, the refinancing of such debt may require equity capital calls.Increased competition and increased affordability of residential homes could limit our ability to retain our residents, lease apartment homes or increase ormaintain rents at our multifamily apartment communities.Our multifamily apartment communities compete with numerous housing alternatives in attracting residents, including other multifamily apartmentcommunities and single-family rental homes, as well as owner occupied single and multifamily homes. Competitive housing in a particular area and an increase inthe affordability of owner occupied single and multifamily homes due to, among other things, housing prices, oversupply, mortgage interest rates and taxincentives and government programs to promote home ownership, could adversely affect our ability to retain residents, lease apartment homes and increase ormaintain rents.Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all,which could limit our ability, among other things, to meet our capital and operating needs or make the cash distributions to American Assets Trust, Inc.'sstockholders or American Assets Trust, L.P.'s unitholders necessary to maintain our qualification as a REIT.In order to maintain our qualification as a REIT, we are required under the Code, among other things, to distribute annually at least 90% of our REIT taxableincome, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regularcorporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of these distributionrequirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we intend torely on third-party sources to fund our capital needs. We may not be able to obtain such financing on favorable terms or at all and any additional debt we incur willincrease our leverage and likelihood of default. Our access to third-party sources of capital depends, in part, on:•general market conditions;•the market's perception of our growthpotential;•our current debtlevels;•our current and expected future earnings;•our cash flow and cash distributions; and•the market price per share of our commonstock.If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet the capitaland operating needs of our existing properties, satisfy our debt service obligations or make the cash distributions to American Assets Trust, Inc.'s stockholders orAmerican Assets Trust, L.P.'s unitholders necessary to maintain our qualification as a REIT.We rely on information technology in our operations, and any breach, interruption or security failure of that technology could have a negative impact on ourbusiness, operations and/or financial condition.17Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities ofperpetrators of cyber-attacks. We face risks associated with security breaches, whether through cyber-attacks or cyber-intrusions over the internet, malware,computer viruses, attachments to e-mails and/or employees or third-parties with access to our systems. We face the risk of ransomware or other cyber-attacksaimed at disrupting the availability of systems, applications, networks or data important to our business operations.Our information technology, or IT, networks and related systems, are essential to the operation of our business and our ability to perform day-to-dayoperations, and, in some cases, may be critical to the operations of certain of our tenants.Additionally, we collect and hold personal information of our residents and prospective residents in connection with our leasing activities at our multifamilylocations. We also collect and hold personal information of our employees in connection with their employment. In addition, we engage third-party serviceproviders that may have access to such personal information in connection with providing business services to us, whether through our own IT networks andrelated systems, or through the third-party service providers’ IT networks and related systems.We mitigate the risk of disruptions, breaches or disclosure of this confidential personally identifiable information by implementing a variety of securitymeasures including (among others) engaging reputable, recognized firms to help us design and maintain our information technology and data security systems, andto test and verify their proper and secure operations on a periodic basis.There can be no assurance that our efforts to maintain the confidentiality, integrity, and availability and controls of our (or our third-party service providers')IT networks and related data and systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. A securitybreach or other significant disruption involving our (or our third-party service providers') IT networks and related systems could materially and adversely impactour income, cash flow, results of operations, financial condition, liquidity, the ability to service our debt obligations, the market price of our common stock, ourability to pay dividends and/or other distributions to our shareholders. A security breach could additionally cause the disclosure or misuse of confidential orproprietary information (including personal information of our residents and/or employees) and damage to our reputation.Risks Related to the Real Estate IndustryOur performance and value are subject to risks associated with real estate assets and the real estate industry, including local oversupply, reduction in demandor adverse changes in financial conditions of buyers, sellers and tenants of properties, which could decrease revenues or increase costs, which would adverselyaffect our financial condition, results of operations, cash flow and the per share trading price of our common stock.Our ability to make expected distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders depends on our abilityto generate revenues in excess of expenses, scheduled principal payments on debt and capital expenditure requirements. Events and conditions generally applicableto owners and operators of real property that are beyond our control may decrease cash available for distribution and the value of our properties. These eventsinclude many of the risks set forth above under “Risks Related to Our Business and Operations,” as well as the following:•local oversupply or reduction in demand for retail, office, multifamily or mixed-usespace;•adverse changes in financial conditions of buyers, sellers and tenants ofproperties;•vacancies or our inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenantimprovements, early termination rights or below market renewal options, and the need to periodically repair, renovate and re-let space;•increased operating costs, including insurance premiums, utilities, real estate taxes and state and localtaxes;•a favorable interest rate environment that may result in a significant number of potential residents of our multifamily apartment communitiesdeciding to purchase homes instead of renting;•rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases inoperating costs;•civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes and floods, which may result in uninsured or underinsuredlosses;•decreases in the underlying value of our realestate;•changing submarket demographics; and•changing trafficpatterns.18In addition, periods of economic downturn or recession, rising interest rates or declining demand for real estate, or the public perception that any of theseevents may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases, which would adversely affect our financialcondition, results of operations, cash flow and per share trading price of our common stock.Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm ourfinancial condition.The real estate investments made, and to be made, by us are relatively difficult to sell quickly. As a result, our ability to promptly sell one or more propertiesin our portfolio in response to changing economic, financial and investment conditions is limited. Return of capital and realization of gains, if any, from aninvestment generally will occur upon disposition or refinancing of the underlying property. We may be unable to realize our investment objectives by sale, otherdisposition or refinancing at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In particular, our ability todispose of one or more properties within a specific time period is subject to weakness in or even the lack of an established market for a property, changes in thefinancial condition or prospects of prospective purchasers, changes in national or international economic conditions, such as the recent economic downturn, andchanges in laws, regulations or fiscal policies of jurisdictions in which the property is located.In addition, the Code imposes restrictions on a REIT's ability to dispose of properties that are not applicable to other types of real estate companies. Inparticular, the tax laws applicable to REITs effectively require that we hold our properties for investment, rather than primarily for sale in the ordinary course ofbusiness, which may cause us to forgo or defer sales of properties that otherwise would be in our best interest. Therefore, we may not be able to vary our portfolioin response to economic or other conditions promptly or on favorable terms, which may adversely affect our financial condition, results of operations, cash flowand per share trading price of our common stock.Our property taxes could increase due to property tax rate changes or reassessment, which would adversely impact our cash flows.Even if we continue to qualify as a REIT for federal income tax purposes, we will be required to pay some state and local taxes on our properties. The realproperty taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. If the property taxeswe pay increase, our cash flow would be adversely impacted, and our ability to pay any expected dividends to our stockholders could be adversely affected.As an owner of real estate, we could incur significant costs and liabilities related to environmental matters.Under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may beliable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migratingfrom such property, including costs to investigate, clean up such contamination and liability for harm to natural resources. Such laws often impose liability withoutregard to whether the owner or operator knew of, or was responsible for, the presence of such contamination, and the liability may be joint and several. Theseliabilities could be substantial and the cost of any required remediation, removal, fines or other costs could exceed the value of the property and/or our aggregateassets. In addition, the presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability for costs ofremediation and/or personal or property damage or materially adversely affect our ability to sell, lease or develop our properties or to borrow using the propertiesas collateral. In addition, environmental laws may create liens on contaminated sites in favor of the government for damages and costs it incurs to address suchcontamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may beused or businesses may be operated, and these restrictions may require substantial expenditures.Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property, or adjacent properties, forcommercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store suchmaterials. For example, Del Monte Center is currently undergoing remediation of dry cleaning solvent contamination from a former onsite dry cleaner. Theenvironmental issues is currently in the final stages of remediation which entails the long term ground monitoring by the appropriate regulatory agency over thenext five to seven years. The prior owner of Del Monte Center entered into a fixed fee environmental services agreement in 1997 pursuant to which the remediationwill be completed for approximately $3.5 million, with the remediation costs paid for through an escrow funded by the prior owner. We expect that the funds inthis escrow account will cover all remaining costs and expenses of the environmental remediation. However, if the Regional Water Quality Control Board - CentralCoast Region were to require further work costing more than the remaining escrowed funds, we could be required to pay such overage although we may have aclaim for such costs against the prior owner or our environmental remediation consultant. In addition to the foregoing, we possess Phase I Environmental SiteAssessments for certain of the properties in our19portfolio. However, the assessments are limited in scope (e.g., they do not generally include soil sampling, subsurface investigations or hazardous materialssurvey) and may have failed to identify all environmental conditions or concerns. Furthermore, we do not have Phase I Environmental Site Assessment reports forall of the properties in our portfolio and, as such, may not be aware of all potential or existing environmental contamination liabilities at the properties in ourportfolio. As a result, we could potentially incur material liability for these issues, which could adversely impact our financial condition, results of operations, cashflow and the per share trading price of our common stock.As the owner of the buildings on our properties, we could face liability for the presence of hazardous materials (e.g., asbestos or lead) or other adverseconditions (e.g., poor indoor air quality) in our buildings. Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings,and if we do not comply with such laws, we could face fines for such noncompliance. Also, we could be liable to third parties (e.g., occupants of the buildings) fordamages related to exposure to hazardous materials or adverse conditions in our buildings, and we could incur material expenses with respect to abatement orremediation of hazardous materials or other adverse conditions in our buildings. In addition, some of our tenants routinely handle and use hazardous or regulatedsubstances and wastes as part of their operations at our properties, which are subject to regulation. Such environmental and health and safety laws and regulationscould subject us or our tenants to liability resulting from these activities. Environmental liabilities could affect a tenant's ability to make rental payments to us, andchanges in laws could increase the potential liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially andadversely affect our operations, or those of our tenants, which could in turn have an adverse effect on us.We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to you or that suchcosts or other remedial measures will not have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of ourcommon stock. If we do incur material environmental liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell anyaffected properties.Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs ofremediation.When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remainsundiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem frominadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoorexposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or otherreactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediationprogram to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence ofsignificant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants or others if property damage or personalinjury is alleged to have occurred.We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties.The properties in our portfolio are subject to various covenants and federal, state and local laws and regulatory requirements, including permitting andlicensing requirements. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developersmay restrict our use of our properties and may require us to obtain approval from local officials or restrict our use of our properties and may require us to obtainapproval from local officials of community standards organizations at any time with respect to our properties, including prior to acquiring a property or whenundertaking renovations of any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic or hazardous materialabatement requirements. There can be no assurance that existing laws and regulatory policies will not adversely affect us or the timing or cost of any futureacquisitions or renovations, or that additional regulations will not be adopted that increase such delays or result in additional costs. Our growth strategy may beaffected by our ability to obtain permits, licenses and zoning relief. Our failure to obtain such permits, licenses and zoning relief or to comply with applicable lawscould have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.In addition, federal and state laws and regulations, including laws such as the ADA and the FHAA, impose further restrictions on our properties andoperations. Under the ADA and the FHAA, all public accommodations must meet federal requirements related to access and use by disabled persons. Some of ourproperties may currently be in non-compliance with the ADA or the FHAA. If one or more of the properties in our portfolio is not in compliance with the ADA,the FHAA or any other regulatory requirements, we may be required to incur additional costs to bring the property into compliance and we might20incur governmental fines or the award of damages to private litigants. In addition, we do not know whether existing requirements will change or whether futurerequirements will require us to make significant unanticipated expenditures that will adversely impact our financial condition, results of operations, cash flow andper share trading price of our common stock.Risks Related to Our Organizational StructureErnest S. Rady and his affiliates, directly or indirectly, own a substantial beneficial interest in our company on a fully diluted basis and have the ability toexercise significant influence on our company and our Operating Partnership, including the approval of significant corporate transactions.As of December 31, 2019, Mr. Rady and his affiliates owned approximately 12.6% of our outstanding common stock and 19.5% of our outstanding commonunits, which together represent an approximate 32.0% beneficial interest in our company on a fully diluted basis. Consequently, Mr. Rady may be able tosignificantly influence the outcome of matters submitted for stockholder action, including the approval of significant corporate transactions, including businesscombinations, consolidations and mergers. In addition, we may not, without prior limited partner approval, directly or indirectly transfer all or any portion of ourinterest in the Operating Partnership before the later of the death of Mr. Rady and the death of his wife, in connection with a merger, consolidation or othercombination of our assets with another entity, a sale of all or substantially all of our assets, a reclassification, recapitalization or change in any outstanding sharesof our stock or other outstanding equity interests or an issuance of shares of our stock, in any case that requires approval by our common stockholders. As a result,Mr. Rady has substantial influence on us and could exercise his influence in a manner that conflicts with the interests of other stockholders.Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of units in our OperatingPartnership, which may impede business decisions that could benefit our stockholders.Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our OperatingPartnership or any partner thereof, on the other. Our directors and officers have duties to our company under Maryland law in connection with their management ofour company. At the same time, we, as the general partner of our Operating Partnership, have fiduciary duties and obligations to our Operating Partnership and itslimited partners under Maryland law and the partnership agreement of our Operating Partnership in connection with the management of our Operating Partnership.Our fiduciary duties and obligations as the general partner of our Operating Partnership may come into conflict with the duties of our directors and officers to ourcompany.Under Maryland law, a general partner of a Maryland limited partnership has fiduciary duties of loyalty and care to the partnership and its partners and mustdischarge its duties and exercise its rights as general partner under the partnership agreement or Maryland law consistently with the obligation of good faith andfair dealing. The partnership agreement provides that, in the event of a conflict between the interests of our Operating Partnership or any partner, on the one hand,and the separate interests of our company or our stockholders, on the other hand, we, in our capacity as the general partner of our Operating Partnership, are underno obligation not to give priority to the separate interests of our company or our stockholders, and that any action or failure to act on our part or on the part of ourdirectors that gives priority to the separate interests of our company or our stockholders that does not result in a violation of the contract rights of the limitedpartners of the Operating Partnership under its partnership agreement does not violate the duty of loyalty that we, in our capacity as the general partner of ourOperating Partnership, owe to the Operating Partnership and its partners.Additionally, the partnership agreement provides that we will not be liable to the Operating Partnership or any partner for monetary damages for lossessustained, liabilities incurred or benefits not derived by the Operating Partnership or any limited partner, except for liability for our intentional harm or grossnegligence. Our Operating Partnership must indemnify us, our directors and officers, officers of our Operating Partnership and our designees from and against anyand all claims that relate to the operations of our Operating Partnership, unless (1) an act or omission of the person was material to the matter giving rise to theaction and either was committed in bad faith or was the result of active and deliberate dishonesty, (2) the person actually received an improper personal benefit inviolation or breach of the partnership agreement or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act oromission was unlawful. Our Operating Partnership must also pay or reimburse the reasonable expenses of any such person upon its receipt of a written affirmationof the person's good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to repay any amounts paid oradvanced if it is ultimately determined that the person did not meet the standard of conduct for indemnification. Our Operating Partnership will not indemnify oradvance funds to any person with respect to any action initiated by the person seeking indemnification without our approval (except for any proceeding brought toenforce such person's right to indemnification under the partnership agreement) or if the person is found to be liable to our Operating Partnership on any portion ofany claim in the action. No reported decision of a Maryland appellate court has interpreted provisions similar to the provisions of the partnership agreement of ourOperating Partnership that modify and reduce our21fiduciary duties or obligations as the general partner or reduce or eliminate our liability for money damages to the Operating Partnership and its partners, and wehave not obtained an opinion of counsel as to the enforceability of the provisions set forth in the partnership agreement that purport to modify or reduce thefiduciary duties that would be in effect were it not for the partnership agreement.Our charter and bylaws, the partnership agreement of our Operating Partnership and Maryland law contain provisions that may delay, defer or prevent achange of control transaction that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.Our charter contains certain ownership limits with respect to our stock. Our charter, subject to certain exceptions, authorizes our board of directors to takesuch actions as it determines are advisable to preserve our qualification as a REIT. Our charter also prohibits the actual, beneficial or constructive ownership by anyperson of more than 7.275% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock or more than 7.275% invalue of the aggregate outstanding shares of all classes and series of our stock, excluding any shares that are not treated as outstanding for federal income taxpurposes. Our board of directors, in its sole and absolute discretion, may exempt a person, prospectively or retroactively, from these ownership limits if certainconditions are satisfied. Our board of directors has granted to each of (1) Mr. Rady (and certain of his affiliates), (2) Cohen & Steers Management, Inc. and (3)BlackRock, Inc. an exemption from the ownership limits that will allow them to own, in the aggregate, up to 19.9%, 10.0% and 10.0%, respectively, in value or innumber of shares, whichever is more restrictive, of our outstanding common stock, subject to various conditions and limitations. The restrictions on ownership andtransfer of our stock may:•discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our commonstock or that our stockholders otherwise believe to be in their best interests; or•result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, theforfeiture by the acquirer of the benefits of owning the additional shares.22We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval.Our board of directors, without stockholder approval, has the power under our charter to amend our charter to increase the aggregate number of shares ofstock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our commonstock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series of stock and setthe terms of such newly classified or reclassified shares. As a result, we may issue series or classes of common stock or preferred stock with preferences,dividends, powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common stock. Although our board ofdirectors has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay,defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be intheir best interest.Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking otherchange of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting a third party from making a proposal to acquire usor of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize apremium over the then-prevailing market price of such shares, including:•“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interestedstockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or anaffiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstandingvoting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on whichthe stockholder becomes an interested stockholder, and thereafter impose fair price and/or supermajority and stockholder voting requirements onthese combinations; and•“control share” provisions that provide that “control shares” of our company (defined as shares that, when aggregated with other sharescontrolled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired ina “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”)have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at leasttwo-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.As permitted by the MGCL, our board of directors has, by board resolution, elected to opt out of the business combination provisions of the MGCL.However, we cannot assure you that our board of directors will not opt to be subject to such business combination provisions of the MGCL in the future.Certain provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter orbylaws, to implement certain corporate governance provisions, some of which (for example, a classified board) are not currently applicable to us. These provisionsmay have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for us or of delaying, deferring or preventing a changein control of us under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over thethen current market price. Our charter contains a provision whereby we elected to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to thefilling of vacancies on our board of directors.Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent unsolicited acquisitions of us.Provisions in the partnership agreement of our Operating Partnership may delay, or make more difficult, unsolicited acquisitions of us or changes of ourcontrol. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although somestockholders might consider such proposals, if made, desirable. These provisions include, among others:•redemption rights of qualifyingparties;•a requirement that we may not be removed as the general partner of our Operating Partnership without ourconsent;•transfer restrictions on commonunits;23•our ability, as general partner, in some cases, to amend the partnership agreement and to cause the Operating Partnership to issue units with termsthat could delay, defer or prevent a merger or other change of control of us or our Operating Partnership without the consent of the limitedpartners; and•the right of the limited partners to consent to direct or indirect transfers of the general partnership interest, including as a result of a merger or asale of all or substantially all of our assets, in the event that such transfer requires approval by our common stockholders.In particular, we may not, without prior “partnership approval,” directly or indirectly transfer all or any portion of our interest in our Operating Partnership,before the later of the death of Mr. Rady and the death of his wife, in connection with a merger, consolidation or other combination of our assets with anotherentity, a sale of all or substantially all of our assets, a reclassification, recapitalization or change in any outstanding shares of our stock or other outstanding equityinterests or an issuance of shares of our stock, in any case that requires approval by our common stockholders. The “partnership approval” requirement is satisfied,with respect to such a transfer, when the sum of (1) the percentage interest of limited partners consenting to the transfer of our interest, plus (2) the product of (a)the percentage of the outstanding common units held by us multiplied by (b) the percentage of the votes that were cast in favor of the event by our commonstockholders equals or exceeds the percentage required for our common stockholders to approve the event resulting in the transfer. As of December 31, 2019, thelimited partners, including Mr. Rady and his affiliates and our other executive officers and directors, owned approximately 22.8% of our outstanding commonunits and approximately 17.0% of our outstanding common stock, which together represent an approximate 34.8% beneficial interest in our company on a fullydiluted basis.Our charter and bylaws, the partnership agreement of our Operating Partnership and Maryland law also contain other provisions that may delay, defer orprevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their bestinterest.Our board of directors may change our investment and financing policies without stockholder approval and we may become more highly leveraged, whichmay increase our risk of default under our debt obligations.Our investment and financing policies are exclusively determined by our board of directors. Accordingly, our stockholders do not control these policies.Further, our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter oreliminate our current policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged which couldresult in an increase in our debt service. Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies,including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure tointerest rate risk, real estate market fluctuations and liquidity risk. Changes to our policies with regards to the foregoing could adversely affect our financialcondition, results of operations, cash flow and per share trading price of our common stock.Our rights and the rights of our stockholders to take action against our directors and officers are limited.As permitted by Maryland law, our charter eliminates the liability of our directors and officers to us and our stockholders for money damages, except forliability resulting from:•actual receipt of an improper benefit or profit in money, property or services;or•a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of actionadjudicated.As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist. Accordingly, in the eventthat actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director orofficer will be limited.We are a holding company with no direct operations and, as such, we will rely on funds received from our Operating Partnership to pay liabilities, and theinterests of our stockholders will be structurally subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries.We are a holding company and conduct substantially all of our operations through our Operating Partnership. We do not have, apart from an interest in ourOperating Partnership, any independent operations. As a result, we rely on distributions from our Operating Partnership to pay any dividends we might declare onshares of our common stock. We also rely on distributions from our Operating Partnership to meet our obligations, including any tax liability on taxable incomeallocated to us from our Operating Partnership. In addition, because we are a holding company, claims of stockholders are structurally subordinated to all existingand future liabilities and obligations (whether or not for borrowed money) of our Operating Partnership and its subsidiaries. Therefore, in the event of ourbankruptcy, liquidation or reorganization, our assets and those of our Operating Partnership and its subsidiaries will be available to satisfy the claims of ourstockholders only after all of our and our Operating Partnership's and its subsidiaries' liabilities and obligations have been paid in full.24Our Operating Partnership may issue additional partnership units to third parties without the consent of our stockholders, which would reduce our ownershippercentage in our Operating Partnership and would have a dilutive effect on the amount of distributions made to us by our Operating Partnership and,therefore, the amount of distributions we can make to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders.We may, in connection with our acquisition of properties or otherwise, issue additional partnership units to third parties. Such issuances would reduce ourownership percentage in our Operating Partnership and affect the amount of distributions made to us by our Operating Partnership and, therefore, the amount ofdistributions we can make to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders. To the extent that our stockholders do notdirectly own partnership units, our stockholders will not have any voting rights with respect to any such issuances or other partnership level activities of ourOperating Partnership.Our operating structure subjects us to the risk of increased hotel operating expenses.Our lease with our TRS lessee requires our TRS lessee to pay us rent based in part on revenues from the Waikiki Beach Walk-Embassy Suites™. Ouroperating risks include decreases in hotel revenues and increases in hotel operating expenses, which would adversely affect our TRS lessee's ability to pay us rentdue under the lease, including but not limited to the increases in:•wage and benefit costs;•repair and maintenance expenses;•energy costs;•propertytaxes;•insurance costs; and•other operating expenses.Increases in these operating expenses can have an adverse impact on our financial condition, results of operations, the market price of our common stock andour ability to make distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders.Future sales of common stock or common units by our directors and officers, or their pledgees, as a result of margin calls or foreclosures could adverselyaffect the price of our common stock and could, in the future, result in a loss of control of our company.Our directors and officers may pledge shares of common stock or common units owned or controlled by them as collateral for loans or for marginpurposes in favor of third parties. Depending on the status of the various loan obligations for which the stock or units ultimately serve as collateral and the tradingprice of our common stock, our directors and/or officers, and their affiliates, may experience a foreclosure or margin call that could result in the sale of the pledgedstock or units, in the open market or otherwise. Unlike for our directors and officers, sales by these pledgees may not be subject to the volume limitations of Rule144 of the Securities Act. A sale of pledged stock or units by pledgees could result in a loss of control of our company, depending upon the number of shares ofstock or units sold and the ownership interests of other stockholders. In addition, sale of these shares or units, or the perception of possible future sales, could havea materially adverse effect on the trading price of our common stock or make it more difficult for us to raise additional capital through sales of equity securities.Risks Related to Our Status as a REITFailure to maintain our qualification as a REIT would have significant adverse consequences to us and the value of our common stock.We have elected to be taxed as a REIT and believe we are organized and operate in a manner that has allowed us to qualify and will allow us to remainqualified as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2011. We have not requested and do not plan torequest a ruling from the Internal Revenue Service, or IRS, that we qualify as a REIT. Therefore, we cannot assure you that we have qualified as a REIT, or thatwe will remain qualified as such in the future. If we lose our REIT status, we will face serious tax consequences that would substantially reduce the funds availablefor distribution to you for each of the years involved because:•we would not be allowed a deduction for distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholdersin computing our taxable income and would be subject to the regular U.S. federal corporate income tax rate (and we could be subject to thefederal alternative miimum tax for taxable years prior to 2018);•we also could be subject to increased state and local taxes;and25•unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years followingthe year during which we were disqualified.Any such corporate tax liability could be substantial and would reduce our cash available for, among other things, our operations and distributions toAmerican Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders. In addition, if we fail to maintain our qualification as a REIT, we will notbe required to make distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders. As a result of all these factors, ourfailure to maintain our qualification as a REIT also could impair our ability to expand our business and raise capital, and could materially and adversely affect thevalue of our common stock.Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrativeinterpretations. The complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the Code, or the TreasuryRegulations, is greater in the case of a REIT that, like us, holds its assets through a partnership. The determination of various factual matters and circumstances notentirely within our control may affect our ability to maintain our qualification as a REIT. In order to maintain our qualification as a REIT, we must satisfy anumber of requirements, including requirements regarding the ownership of our stock, requirements regarding the composition of our assets and requirementsregarding the sources of our gross income. Also, we must make distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'sunitholders aggregating annually at least 90% of our net taxable income, excluding net capital gains. In addition, legislation, new regulations, administrativeinterpretations or court decisions may materially adversely affect our investors, our ability to maintain our qualification as a REIT for federal income tax purposesor the desirability of an investment in a REIT relative to other investments.Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to some federal, state and local income, property andexcise taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer. In addition, our taxable REITsubsidiaries will be subject to tax as regular corporations in the jurisdictions they operate.If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverseconsequences.We believe that our Operating Partnership is treated as a partnership for federal income tax purposes. As a partnership, our Operating Partnership is notsubject to federal income tax on its income. Instead, each of its partners, including us, is allocated, and may be required to pay tax with respect to, its share of ourOperating Partnership's income. We cannot be assured, however, that the IRS will not challenge the status of our Operating Partnership or any other subsidiarypartnership in which we own an interest, as a partnership for federal income tax purposes, or that a court would not sustain such a challenge. If the IRS weresuccessful in treating our Operating Partnership or any such other subsidiary partnership as an entity taxable as a corporation for federal income tax purposes, wewould fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT. Also, thefailure of our Operating Partnership or any subsidiary partnerships to qualify as a partnership could cause it to become subject to federal and state corporate incometax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.Our ownership of taxable REIT subsidiaries will be limited, and we will be required to pay a 100% penalty tax on certain income or deductions if ourtransactions with our taxable REIT subsidiaries are not conducted on arm's length terms.We own an interest in one taxable REIT subsidiary, our TRS lessee, and may acquire securities in additional taxable REIT subsidiaries in the future. Ataxable REIT subsidiary is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT tobe treated as a taxable REIT subsidiary. If a taxable REIT subsidiary owns more than 35% of the total voting power or value of the outstanding securities ofanother corporation, such other corporation will also be treated as a taxable REIT subsidiary. Other than some activities relating to lodging and health carefacilities, a taxable REIT subsidiary may generally engage in any business, including the provision of customary or non-customary services to tenants of its parentREIT. A taxable REIT subsidiary is subject to federal income tax as a regular C corporation. In addition, a 100% excise tax will be imposed on certain transactionsbetween a taxable REIT subsidiary and its parent REIT that are not conducted on an arm's length basis.Not more than 20% (25% for taxable years beginning before January 1, 2018) of the value of a REIT’s total assets may be represented by the securities ofone or more taxable REIT subsidiaries. A REIT's ownership of securities of a taxable REIT subsidiary is not subject to the 5% or 10% asset tests applicable toREITs. Not more than 25% of a REIT's total assets may be represented by securities (including securities of one or more taxable REIT subsidiaries), other thanthose securities includable in the 75% asset test. We anticipate that the aggregate value of the stock and securities of our taxable REIT subsidiaries and othernonqualifying assets will be less than 25% of the value of our total assets, and we will monitor the value of these investments to ensure compliance with applicableownership limitations. In addition, we intend to structure our transactions26with our taxable REIT subsidiaries to ensure that they are entered into on arm's length terms to avoid incurring the 100% excise tax described above. There can beno assurance, however, that we will be able to comply with these ownership limitations or to avoid application of the 100% excise tax discussed above.To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions, and the unavailability of such capital on favorableterms at the desired times, or at all, may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, which could adverselyaffect our financial condition, results of operations, cash flow and per share trading price of our common stock.To maintain our REIT status, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding net capital gains,and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year, including net capitalgains. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less thanthe sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. In order to maintain ourREIT status and avoid the payment of income and excise taxes, we may need to borrow even if the then prevailing market conditions are not favorable for theseborrowings. These borrowing needs could result from, among other things, differences in timing between the actual receipt of cash and inclusion of income forfederal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. Thesesources, however, may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of factors, including themarket's perception of our growth potential, our current debt levels, the market price of our common stock, and our current and potential future earnings. Wecannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activitiesand/or to dispose of assets at inopportune times, and could adversely affect our financial condition, results of operations, cash flow and per share trading price ofour common stock.We may in the future choose to make dividends payable partly in our common stock, in which case you may be required to pay tax in excess of the cash youreceive.To maintain our REIT status, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding net capital gains. In order to preserve cash to repay debt or for other reasons, we may choose to satisfy the REIT distribution requirements by distributing taxable dividends that arepayable partly in our stock and partly in cash. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend asordinary income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, a U.S. stockholder may be requiredto pay tax with respect to such dividends in excess of the cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, thesales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale.Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portionof such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed ondividends, such sales may have an adverse effect on the per share trading price of our common stock.Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.The maximum tax rate applicable to dividends treated as “qualified dividend income” payable to U.S. stockholders that are individuals, trusts and estates is20%. Dividends payable by REITs, however, generally are not eligible for the 20% rate. Although these rules do not adversely affect the taxation of REITs ordividends payable by REITs, investors who are individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments inthe stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including the per share trading price of ourcommon stock. Non-corporate stockholders, including individuals, generally may deduct 20% of dividends from a REIT, other than capital gain dividends anddividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026. If we fail to qualify as a REIT,such stockholders may not claim this deduction with respect to dividends paid by us.The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for federalincome tax purposes.A REIT's net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions ofproperty, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we do not intend to hold any propertiesthat would be characterized as held for sale to customers in the ordinary course of our business, unless a sale or disposition qualifies under certain statutory safeharbors, such27characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we willalways be able to make use of the available safe harbors.Complying with REIT requirements may affect our profitability and may force us to liquidate or forgo otherwise attractive investments.To maintain our qualification as a REIT, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, thesources of our income and the amounts we distribute to our stockholders. We may be required to liquidate or forgo otherwise attractive investments in order tosatisfy the asset and income tests or to qualify under certain statutory relief provisions. We also may be required to make distributions to American Assets Trust,Inc.'s stockholders or American Assets Trust, L.P.'s unitholders at disadvantageous times or when we do not have funds readily available for distribution. As aresult, having to comply with the distribution requirement could cause us to: (1) sell assets in adverse market conditions; (2) borrow on unfavorable terms; or (3)distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt. Accordingly, satisfying the REITrequirements could have an adverse effect on our business results, profitability and ability to execute our business plan. Moreover, if we are compelled to liquidateour investments to meet any of these asset, income or distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of therequirements applicable to REITs or may be subject to a 100% tax on any resulting gain if such sales constitute prohibited transactions.Legislative or other actions affecting REITs could have a negative effect on our investors or us, including our ability to maintain our qualification as a REITor the federal income tax consequences of such qualification.The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.Department of the Treasury. Changes to the tax laws, with or without retroactive application, could adversely affect our investors or us. We cannot predict howchanges in the tax laws might affect our investors or us. New legislation, Treasury Regulations, administrative interpretations or court decisions could significantlyand negatively affect our ability to qualify as a REIT, the federal income tax consequences of such qualification or the federal income tax consequences of suchqualification or the federal income tax consequences of an investment in us. Also, the law relating to the tax treatment of other entities, or an investment in otherentities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.The 2017 Tax Cuts and Jobs Act, or TCJA, has significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including REITsand their stockholders. The legislation remains unclear in many respects and could be subject to potential amendments and technical corrections, as well asinterpretations and implementing regulations by the U.S. Department of the Treasury and the IRS, any of which could lessen or increase certain adverse impacts ofthe legislation. In addition, it remains unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses U.S. federal taxableincome as a starting point for computing state and local tax liabilities.While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may bebeneficial on a going forward basis. We continue to work with our tax advisors and auditors to determine the full impact that the TCJA as a whole will have on us.We urge our investors to consult with their legal and tax advisors with respect to the TCJA and the potential tax consequences of investing in our common stock.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.28ITEM 2.PROPERTIESOur PortfolioAs of December 31, 2019, our operating portfolio was comprised of 28 office, retail, multifamily and mixed-use properties with an aggregate ofapproximately 6.6 million rentable square feet of office and retail space (including mixed-use retail space), 2,112 residential units (including 122 RV spaces) and a369-room hotel. Additionally, as of December 31, 2019, we owned land at three of our properties that we classified as held for development and construction inprogress.Retail and Office PortfoliosPropertyLocation Year Built/Renovated NumberofBuildings NetRentableSquareFeet PercentageLeased AnnualizedBase Rent AnnualizedBase RentPer LeasedSquareFootOFFICE PROPERTIES La Jolla Commons (1)San Diego, CA 2008/2014 2 723,945 99.0% $36,197,608 $50.51Torrey Reserve CampusSan Diego, CA 1996-2000/2014-2016 14 521,311 93.1% 21,540,295 44.38Torrey PointSan Diego, CA 2017 2 91,990 56.7 2,217,822 42.52Solana Beach Corporate CentreSolana Beach, CA 1982/2005 4 212,614 97.3 7,882,527 38.10The Landmark at One Market (2)San Francisco, CA 1917/2000 1 422,426 100.0 29,574,142 70.01One Beach StreetSan Francisco, CA 1924/1972/1987/1992 1 97,614 45.0 2,407,267 54.80First & MainPortland, OR 2010 1 360,641 98.7 11,315,061 31.79Lloyd District PortfolioPortland, OR 1940-2015 2 515,850 96.0 13,151,480 26.56City Center BellevueBellevue, WA 1987 1 497,488 98.9 21,222,347 43.13Subtotal / Weighted Average Office Portfolio (3) 28 3,443,879 95.0% $145,508,549 $44.48 RETAIL PROPERTIES Carmel Country PlazaSan Diego, CA 1991 9 78,098 94.6% $3,939,853 $53.33Carmel Mountain Plaza (4)San Diego, CA 1994/2014 15 528,416 97.0 14,113,184 27.53South Bay Marketplace (4)San Diego, CA 1997 9 132,877 100.0 2,472,266 18.61Gateway MarketplaceSan Diego, CA 1997/2016 3 127,861 100.0 2,412,123 18.87Lomas Santa Fe PlazaSolana Beach, CA 1972/1997 9 208,030 97.7 6,046,434 29.75Solana Beach Towne CentreSolana Beach, CA 1973/2000/2004 12 247,535 97.7 6,223,473 25.73Del Monte Center (4)Monterey, CA 1967/1984/2006 16 673,572 98.0 11,795,227 17.87Geary MarketplaceWalnut Creek, CA 2012 3 35,159 100.0 1,232,864 35.07The Shops at KalakauaHonolulu, HI 1971/2006 3 11,671 100.0 1,878,736 160.97Waikele CenterWaipahu, HI 1993/2008 9 418,047 99.5 12,534,073 30.13Alamo Quarry Market (4)San Antonio, TX 1997/1999 16 588,148 97.2 14,170,932 24.79Hassalo on Eighth - Retail (5)Portland, OR 2015 3 44,236 89.5 986,185 24.91Subtotal / Weighted Average Retail Portfolio (1) 107 3,093,650 97.8% $77,805,350 $25.72Total / Weighted Average Retail and Office Portfolio (1) 135 6,537,529 96.3% $223,313,899 $35.47Mixed-Use PortfolioRetail PortionLocation Year Built/Renovated NumberofBuildings NetRentableSquareFeet PercentLeased AnnualizedBase Rent AnnualizedBase RentPer LeasedSquareFootWaikiki Beach Walk—Retail (6)Honolulu, HI 2006 3 96,707 97.9% $11,130,250 $117.56Hotel PortionLocation Year Built/Renovated NumberofBuildings Units AverageOccupancy AverageDaily Rate RevenueperAvailableRoomWaikiki Beach Walk—Embassy SuitesTMHonolulu, HI 2008/2014 2 369 91.7% $326.15 $299.1929Multifamily Portfolio PropertyLocation Year Built/Renovated NumberofBuildings Units PercentageLeased AnnualizedBase Rent Average MonthlyBase Rent per LeasedUnitLoma PalisadesSan Diego, CA 1958/2001-2008 80 548 96.0% $13,966,392 $2,212Imperial Beach GardensImperial Beach, CA 1959/2008 26 160 93.1 3,578,328 2,002Mariner’s PointImperial Beach, CA 1986 8 88 93.2 1,775,364 1,804Santa Fe Park RV Resort (7)San Diego, CA 1971/2007-2008 1 126 88.1 1,367,484 1,027Pacific Ridge ApartmentsSan Diego, CA 2013 3 533 94.4 17,277,480 2,862Hassalo on Eighth - Multifamily(5)Portland, OR 2015 3 657 89.6 11,395,716 1,613Total / Weighted Average Multifamily 121 2,112 92.8% $49,360,764 $2,099 (1)The annualized base rent for La Jolla Commons has been adjusted for this presentation to reflect that the contractual triple net leases were instead structured as modified gross leases, byadding the contractual annualized triple net base rent of $24,364,930 to our estimate of annual triple net operating expenses of $11,832,678 for an estimated annualized base rent on amodified gross lease basis of $36,197,608 for La Jolla Commons.(2)This property contains 422,426 net rentable square feet consisting of The Landmark at One Market (375,151 net rentable square feet) as well as a separate long-term leasehold interest inapproximately 44,220 net rentable square feet of space located in an adjacent six-story leasehold known as the Annex. We currently lease the Annex from an affiliate of the ParamountGroup pursuant to a long-term master lease effective through June 30, 2021, which we have the option to extend until 2031 pursuant to two five-year extension options.(3)Lease data for signed but not commenced leases as of December 31, 2019 is in the following table: Leased Square Feet Annualized Base Pro Forma Annualized Under Signed But Annualized Rent per Base Rent per Not Commenced Leases (a) Base Rent (b) Leased Square Foot (b) Leased Square Foot (c)Office Portfolio$298,169 $17,498,233 $58.69 $49.80Retail Portfolio28,249 737,855 $26.12 $25.98Total Retail and Office Portfolio$326,418 $18,236,088 $55.87 $38.35 (a)Office portfolio leases signed but not commenced of 197,415, 46,846, 48,784, and 5,124 square feet are expected to commence during the first, second and third quarters of 2020 andthe first quarter of 2021, respectively. Retail portfolio leases signed but not commenced of 5,653, 4,821 and 17,775 square feet are expected to commence during the first, second andfourth quarters of 2020, respectively.(b)Annualized base rent is calculated by multiplying base rental payments (defined as cash base rents (before abatements)) for signed but not commenced leases as of December 31,2019 by 12. In the case of triple net or modified gross leases, annualized base rent does not include tenant reimbursements for real estate taxes, insurance, common area or otheroperating expenses. The foregoing notwithstanding, the annualized base rent for signed but not commenced leases as of December 31, 2019 at La Jolla Commons has been adjustedfor this presentation to reflect that the contractual triple net leases were instead structured as modified gross leases. Annualized base rent per leased square foot is calculated bydividing annualized base rent, by square footage for signed by not commenced leases.(c)Pro forma annualized base rent is calculated by dividing annualized base rent for commenced leases and for signed but not commenced leases as of December 31, 2019, by squarefootage under lease as of December 31, 2019.(4)Net rentable square feet at certain of our retail properties includes square footage leased pursuant to ground leases, as described in the following table: PropertyNumber of GroundLeases Square FootageLeased Pursuant toGround Leases Aggregate Annualized BaseRentCarmel Mountain Plaza5 17,607 $780,964South Bay Marketplace1 2,824 $102,276Del Monte Center1 212,500 $96,000Alamo Quarry Market4 31,994 $509,880 (5)The Hassalo on Eighth property is comprised of three multifamily buildings, each with a ground floor retail component: Velomor, Aster Tower and Elwood.(6)Waikiki Beach Walk-Retail contains 96,707 net rentable square feet consisting of 94,093 net rentable square feet that we own in fee and approximately 2,614 net rentable square feet ofspace in which we have a subleasehold interest pursuant to a sublease from First Hawaiian Bank effective through December 31, 2021.(7)The Santa Fe Park RV Resort is subject to seasonal variation, with higher rates of occupancy occurring during the summer months. The number of units at the Santa Fe Park RV Resortincludes 122 RV spaces and four apartments.In the tables above:•The net rentable square feet for each of our retail properties and the retail portion of our mixed-use property is the sum of (1) the square footages ofexisting leases, plus (2) for available space, the field-verified square footage. The net rentable square feet for each of our office properties is the sumof (1) the square footages of existing30leases, plus (2) for available space, management's estimate of net rentable square feet based, in part, on past leases. The net rentable square feetincluded in such office leases is generally determined consistently with the Building Owners and Managers Association, or BOMA, 2010measurement guidelines. Net rentable square footage may be adjusted from the prior period to reflect re-measurement of leased space at theproperties.•Percentage leased for each of our retail and office properties and the retail portion of the mixed-use property is calculated as square footage underleases as of December 31, 2019, divided by net rentable square feet, expressed as a percentage. The square footage under lease includes leases whichmay not have commenced as of December 31, 2019. Percentage leased for our multifamily properties is calculated as total units rented as ofDecember 31, 2019, divided by total units available, expressed as a percentage.•Annualized base rent is calculated by multiplying base rental payments (defined as cash base rents, before abatements) for the month endedDecember 31, 2019, by 12. Annualized base rent per leased square foot is calculated by dividing annualized base rent, by square footage under leaseas of December 31, 2019. In the case of triple net or modified gross leases, annualized base rent does not include tenant reimbursements for realestate taxes, insurance, common area or other operating expenses. Total abatements for leases in effect as of December 31, 2019 for our retail andoffice portfolio equaled approximately $8.0 million for the year ended December 31, 2019. There were no abatements for the retail portion of ourmixed-use portfolio for the year ended December 31, 2019. Total abatements for leases in effect as of December 31, 2019 for our multifamilyportfolio equaled approximately $0.8 million for the year ended December 31, 2019.•Units represent the total number of units available for sale/rent at December 31,2019.•Average occupancy represents the percentage of available units that were sold during the 12-month period ended December 31, 2019, and iscalculated by dividing the number of units sold by the product of the total number of units and the total number of days in the period. Average dailyrate represents the average rate paid for the units sold and is calculated by dividing the total room revenue (i.e., excluding food and beveragerevenues or other hotel operations revenues such as telephone, parking and other guest services) for the 12-month period ended December 31, 2019,by the number of units sold. Revenue per available room, or RevPAR, represents the total unit revenue per total available units for the 12-monthperiod ended December 31, 2019 and is calculated by multiplying average occupancy by the average daily rate. RevPAR does not include food andbeverage revenues or other hotel operations revenues such as telephone, parking and other guest services.•Average monthly base rent per leased unit represents the average monthly base rent per leased units as of December 31,2019.31Tenant DiversificationAt December 31, 2019, our operating portfolio had approximately 790 leases with office and retail tenants, of which 4 expired on December 31, 2019 andthere were 25 that had not yet commenced as of such date. Our residential properties had approximately 1,849 leases with residential tenants at December 31, 2019,excluding Santa Fe Park RV Resort. The retail portion of our mixed-use property had approximately 71 leases with retailers. No one tenant or affiliated group oftenants accounted for more than 7.5% of our annualized base rent as of December 31, 2019 for our office, retail and retail portion of our mixed-use propertyportfolio. The following table sets forth information regarding the 25 tenants with the greatest annualized base rent for our combined retail, office and retailportion of our mixed-use property portfolios as of December 31, 2019.Tenant Property(ies) LeaseExpiration Total LeasedSquare Feet RentableSquareFeet as aPercentageof Total AnnualizedBase Rent (1) AnnualizedBase Rentas aPercentageof TotalLPL Holdings, Inc. La Jolla Commons 4/30/2029 421,001 6.3% $17,562,831 7.5%Google LLC (2) The Landmark at One Market 12/31/2029 253,198 3.8 16,766,202 7.2Autodesk, Inc. The Landmark at One Market 12/31/202212/31/2023 138,615 2.1 11,938,530 5.1Lowe's Waikele Center 5/31/2028 155,000 2.3 3,720,000 1.6Smartsheet, Inc. City Center Bellevue 12/31/2026 73,669 1.1 3,517,695 1.5VMware, Inc. City Center Bellevue 11/30/20225/31/20257/31/2027 91,246 1.4 3,397,298 1.4Veterans Benefits Administration First & Main 8/31/2020 93,572 1.4 3,006,453 1.3Clearesult Operating, LLC First & Main 4/30/2025 101,848 1.5 2,818,324 1.2State of Oregon: Department ofEnvironmental Quality Lloyd District Portfolio 10/31/2031 87,787 1.3 2,685,963 1.1Nordstrom Rack Carmel Mountain Plaza, Alamo Quarry Market 9/30/202210/31/2022 69,047 1.0 2,189,648 0.9Treasury Call Center (3) First & Main 8/31/2020 63,648 1.0 2,184,302 0.9Genentech, Inc. Lloyd District Portfolio 10/31/2026 66,852 1.0 2,139,264 0.9Quiksilver Waikiki Beach Walk 12/31/2021 8,365 0.1 2,137,606 0.9Sprouts Farmers Market Solana Beach Towne Centre, Carmel Mountain Plaza, Geary Marketplace 6/30/20243/31/20259/30/2032 71,431 1.1 1,967,339 0.8California Bank & Trust Torrey Reserve Campus 2/29/2024 34,731 0.5 1,861,910 0.8Industrious City Center Bellevue 11/30/2033 37,166 0.6 1,780,066 0.8Perkins Coie, LLP Torrey Reserve Campus 12/31/2028 36,980 0.6 1,752,852 0.7Troutman Sanders, LLP Torrey Reserve CampusFirst & Main 3/31/20254/30/2025 33,812 0.5 1,646,047 0.7Marshalls Solana Beach Towne Centre,Carmel Mountain Plaza 1/31/20251/31/2029 68,055 1.0 1,421,727 0.6Vons Lomas Santa Fe Plaza 12/31/2022 49,895 0.8 1,399,205 0.6Old Navy Waikele Center, South Bay Marketplace,Alamo Quarry Market 7/31/20204/30/20219/30/2022 59,780 0.9 * *At Home Stores Carmel Mountain Plaza 7/31/2029 107,870 1.6 1,384,552 0.6GE Healthcare City Center Bellevue 12/31/2021 32,304 0.5 1,356,768 0.6Cisco Systems, Inc. City Center Bellevue 2/28/2023 29,415 0.4 1,302,790 0.6Ruth's Chris Steak House Waikiki Beach Walk, Torrey Reserve Campus 2/29/20281/31/2030 14,833 0.2 1,255,570 0.5TOTAL 2,200,120 33.0% $91,192,942 38.8%*Data withheld at tenant’s request.(1)Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents before abatements) for the month ended December 31, 2019 for the applicablelease(s) by (ii) 12.(2)The annualized base rent does not include the base rent from 75,336 square feet as the rent commencement date begins January 1, 2020.(3)The tenant may terminate its lease at any time with 90 days' notice.32Geographic DiversificationOur properties are located in Southern California, Northern California, Oregon, Washington, Texas and Hawaii. The following table shows the number ofproperties, the net rentable square feet and the percentage of total portfolio net rentable square footage in each region as of December 31, 2019. Our six multifamilyproperties are excluded from the table below and are located in Southern California and Portland, Oregon. The hotel portion of our mixed-use property is alsoexcluded and is located in Hawaii. RegionNumber of Properties Net Rentable Square Feet Percentage of Net RentableSquare Feet (1)Southern California10 2,872,677 43.3%Northern California4 1,228,771 18.5Oregon3 920,727 13.9Washington1 497,488 7.5Texas1 588,148 8.9Hawaii (2)3 526,425 7.9Total22 6,634,236 100.0% (1)Percentage of Net Rentable Square Feet is calculated based on the total net rentable square feet available in our retail portfolio, office portfolio and the retail portion of our mixed-useportfolio.(2)Includes the retail portion related to the mixed-use property.Segment DiversificationThe following table sets forth information regarding the total property operating income for each of our segments for the year ended December 31, 2019(dollars in thousands). SegmentNumber of Properties Property Operating Income Percentage of Property OperatingIncomeRetail12 $76,971 32.8%Office9 102,449 43.6Mixed-Use1 30,203 12.9Multifamily6 25,138 10.7Total28 $234,761 100.0%Lease ExpirationsThe following table sets forth a summary schedule of the lease expirations for leases in place as of December 31, 2019, plus available space, for each of theten calendar years beginning January 1, 2020 at the properties in our retail portfolio, office portfolio and the retail portion of our mixed-use portfolio. The squarefootage of available space includes the space from 5 leases that terminated on December 31, 2019. In 2020, we expect a similar level of leasing activity for newand expiring leases compared to prior years with overall positive increases in rental income. However, changes in rental income associated with individual signedleases 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 abovedisclosed levels, if at all.33The lease expirations for our multifamily portfolio and the hotel portion of our mixed-use portfolio are excluded from this table because multifamily unitleases generally have lease terms ranging from seven to 15 months, with a majority having 12-month lease terms, and because rooms in the hotel are rented on anightly basis. The information set forth in the table assumes that tenants do not exercise any renewal options.Year of Lease Expiration SquareFootage ofExpiringLeases Percentageof PortfolioNetRentableSquareFeet Annualized BaseRent (1) Percentageof PortfolioAnnualizedBase Rent Annualized BaseRent Per LeasedSquare Foot (2)Available 242,321 3.7% $— —% $—Month to Month 39,354 0.6 830,909 0.4 21.112020 579,560 8.7 18,271,854 8.2 31.532021 408,868 6.2 20,969,602 9.4 51.292022 750,767 11.3 28,724,579 12.9 38.262023 665,196 10.0 26,556,705 11.9 39.922024 659,847 9.9 23,794,939 10.7 36.062025 528,752 8.0 16,880,875 7.6 31.932026 368,632 5.6 13,503,272 6.1 36.632027 265,262 4.0 9,161,918 4.1 34.542028 594,459 9.0 12,738,710 5.7 21.432029 859,163 13.0 41,179,259 18.5 47.93Thereafter 345,637 5.2 9,998,845 4.5 28.93Signed Leases Not Commenced 326,418 4.9 — — —Total: 6,634,236 100.0% $222,611,467 100.0% $33.55 (1)Annualized base rent is calculated by multiplying base rental payments (defined as cash base rents (before abatements)) for the month ended December 31, 2019 for the leases expiringduring the applicable period, by 12.(2)Annualized base rent per leased square foot is calculated by dividing annualized base rent for leases expiring during the applicable period by square footage under such expiring leases.ITEM 3.LEGAL PROCEEDINGSWe 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 toongoing litigation 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 ofour business.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.34PART IIITEM 5.MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESAmerican Assets Trust, Inc.Shares of American Assets Trust, Inc.'s common stock began trading on the NYSE under the symbol “AAT” on January 13, 2011. Prior to that time therewas no public market for the company's common stock. On February 7, 2020, the reported close sale price per share was $46.07. The following table sets forth, forthe periods indicated, the high and low close prices in dollars on the NYSE for the company's common stock and the dividends we declared per share. Per Share Price Dividend perCommon SharePeriod Low High First Quarter 2018 $31.72 $38.16 $0.2700Second Quarter 2018 $32.45 $38.79 $0.2700Third Quarter 2018 $36.75 $39.64 $0.2700Fourth Quarter 2018 $35.46 $42.81 $0.2800First Quarter 2019 $39.30 $46.28 $0.2800Second Quarter 2019 $43.69 $48.03 $0.2800Third Quarter 2019 $45.58 $48.22 $0.2800Fourth Quarter 2019 $44.36 $48.96 $0.3000On February 7, 2020, we had 75 stockholders of record of our common stock. Certain shares are held in “street” name and accordingly, the number ofbeneficial owners of such shares is not known or included in the foregoing number.American Assets Trust, L.P.There is no established trading market for American Assets Trust, L.P.'s operating partnership units. The following table sets forth the distributions wedeclared with respect to American Assets Trust, L.P.'s operating partnership units for the periods indicated:Period Distribution per UnitFirst Quarter 2018 $0.27Second Quarter 2018 $0.27Third Quarter 2018 $0.27Fourth Quarter 2018 $0.28First Quarter 2019 $0.28Second Quarter 2019 $0.28Third Quarter 2019 $0.28Fourth Quarter 2019 $0.30As of February 7, 2020, we had 21 holders of record of American Assets Trust, L.P.'s operating partnership units, including American Assets Trust, Inc.Distribution PolicyWe pay and intend to continue to pay regular quarterly dividends to holders of our common stock and unitholders of our Operating Partnership and to makedividend distributions that will enable us to meet the distribution requirements applicable to REITs and to eliminate or minimize our obligation to pay income andexcise taxes. Dividend amounts depend on our available cash flows, financial condition and capital requirements, the annual distribution requirements under theREIT provisions of the Code and such other factors as our board of directors deems relevant.35Recent Sales of Unregistered Equity SecuritiesNo unregistered equity securities were sold by us during 2019.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNo equity securities were purchased by us during 2019.Equity Compensation Plan InformationInformation about our equity compensation plans is incorporated by reference in Item 12 of Part III of this annual report on Form 10-K.Stock Performance GraphThe information below shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than asprovided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information betreated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act. The graph below compares the cumulative total return on the company’s common stock with that of the Standard & Poor's 500 Stock Index, or S&P 500Index, and an industry peer group, SNL US REIT Equity Index from December 31, 2014 through December 31, 2019. The stock price performance graphassumes that an investor invested $100 in each of AAT and the indices, and the reinvestment of any dividends. The comparisons in the graph are provided inaccordance with the SEC disclosure requirements and are not intended to forecast or be indicative of the future performance of AAT’s shares of common stock.36ITEM 6.SELECTED FINANCIAL DATAThe following tables set forth, on a historical basis, selected financial and operating data. The financial information has been derived from our consolidatedbalance sheets and statements of operations. You should read the following summary selected financial data in conjunction with “Item 7. Management'sDiscussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.” The following data is inthousands, except per share and share data. American Assets Trust, Inc. Year Ended December 31, 2019 2018 2017 2016 2015Statement of Operations Data: Revenue: Rental income$343,865 $309,537 $298,803 $279,498 $261,887Other property income22,876 21,330 16,180 15,590 13,736Total revenues366,741 330,867 314,983 295,088 275,623Expenses: Rental expenses91,967 86,482 84,006 79,553 73,187Real estate taxes40,013 34,973 32,671 28,378 24,819General and administrative24,871 22,784 21,382 17,897 20,074Depreciation and amortization96,205 107,093 83,278 71,319 63,392Total operating expenses253,056 251,332 221,337 197,147 181,472Operating income113,685 79,535 93,646 97,941 94,151Interest expense(54,008) (52,248) (53,848) (51,936) (47,260)Gain on sale of real estate633 — — — 7,121Other income (expense), net(122) (85) 334 (368) (97)Net income60,188 27,202 40,132 45,637 53,915Net income attributable to restricted shares(381) (311) (241) (189) (168)Net income attributable to unitholders in the OperatingPartnership(14,089) (7,205) (10,814) (12,863) (15,238)Net income attributable to American Assets Trust, Inc.stockholders$45,718 $19,686 $29,077 $32,585 $38,509Net income attributable to common stockholders per share Basic earnings per share$0.84 $0.42 $0.62 $0.72 $0.87Diluted earnings per share$0.84 $0.42 $0.62 $0.72 $0.86Weighted average shares of common stock outstanding - basic54,110,949 46,950,812 46,715,520 45,332,471 44,439,112Weighted average shares of common stock outstanding - diluted70,786,132 64,136,559 64,087,250 63,228,159 62,339,163Dividends declared per share$1.1400 $1.0900 $1.0500 $1.0100 $0.947537 American Assets Trust, Inc. Year Ended December 31, 2019 2018 2017 2016 2015Balance Sheet Data: Net real estate$2,523,475 $2,039,853 $2,076,707 $1,831,546 $1,834,862Total assets2,790,333 2,198,250 2,259,864 1,986,933 1,974,289Notes payable and line of credit1,357,659 1,290,772 1,325,020 1,061,530 1,055,613Total liabilities1,496,661 1,395,779 1,415,720 1,148,382 1,145,362Stockholders' equity1,313,917 802,977 833,710 809,556 799,562Noncontrolling interests(20,245) (506) 10,434 28,995 29,365Total equity1,293,672 802,471 844,144 838,551 828,927Total liabilities and equity2,790,333 2,198,250 2,259,864 1,986,933 1,974,289 Other Data: Funds from operations (FFO) (1)$155,760 $134,295 $123,410 $116,956 $110,186FFO attributable to common stock and units155,384 133,990 123,174 116,773 110,027(1)We present FFO because we consider FFO an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and otherinterested parties in the evaluation of REITs, many of which present FFO when reporting their results. We calculate FFO in accordance with the standards established by the NationalAssociation of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciableoperating property, impairment losses, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidatedpartnerships and joint ventures. FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO isbeneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses fromproperty 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 inoccupancy 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 compareour 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 thatresult 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 realeconomic 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 calculateFFO 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 asupplement 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, includingour 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 withGAAP.The following table sets forth a reconciliation of our FFO to net income, the nearest GAAP equivalent, for the periods presented (in thousands): Year Ended December 31, 2019 2018 2017 2016 2015Net income$60,188 $27,202 $40,132 $45,637 $53,915Plus: Real estate depreciation and amortization96,205 107,093 83,278 71,319 63,392Less: Gain on sale of real estate(633) — — — (7,121)Funds from operations, as defined by NAREIT155,760 134,295 123,410 116,956 110,186Less: Nonforfeitable dividends on restricted stock awards(376) (305) (236) (183) (159)FFO attributable to common stock and units$155,384 $133,990 $123,174 $116,773 $110,02738ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONSThe following discussion should be read in conjunction with the audited historical consolidated financial statements and notes thereto appearing in “Item 8.Financial Statements and Supplementary Data” of this report. As used in this section, unless the context otherwise requires, “we,” “us,” “our,” and “our company”mean American Assets Trust, Inc., a Maryland corporation and its consolidated subsidiaries, including American Assets Trust, L.P. This discussion may containforward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated inthese forward looking statements as a result of various factors, including those set forth under “Item 1A. Risk Factors” or elsewhere in this document. See “Item1A. Risk Factors” and “Forward-Looking Statements.”OverviewOur CompanyWe are a full service, vertically integrated and self-administered REIT that owns, operates, acquires and develops high quality office, retail, multifamily andmixed-use properties in attractive, high-barrier-to-entry markets in Southern California, Northern California, Oregon, Washington, Texas, and Hawaii. As ofDecember 31, 2019, our portfolio was comprised of nine office properties; twelve retail shopping centers; a mixed-use property consisting of a 369-room all-suitehotel and a retail shopping center; and six multifamily properties. Additionally, as of December 31, 2019, we owned land at three of our properties that weclassified as held for development and construction in progress. Our core markets include San Diego, the San Francisco Bay Area, Portland, Oregon, Bellevue,Washington and Oahu, Hawaii. Our company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.5%of our Operating Partnership as of December 31, 2019. Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership.Taxable REIT SubsidiaryOn November 5, 2010, we formed American Assets Services, Inc., a Delaware corporation that is wholly owned by our Operating Partnership and which werefer to as our services company. We have elected, together with our services company, to treat our services company as a taxable REIT subsidiary for federalincome tax purposes. A taxable REIT subsidiary generally may provide non-customary and other services to our tenants and engage in activities that we may notengage in directly without adversely affecting our qualification as a REIT, provided a taxable REIT subsidiary may not operate or manage a lodging facility orprovide rights to any brand name under which any lodging facility is operated. We may form additional taxable REIT subsidiaries in the future, and our OperatingPartnership may contribute some or all of its interests in certain wholly owned subsidiaries or their assets to our services company. Any income earned by ourtaxable REIT subsidiaries will not be included in our taxable income for purposes of the 75% or 95% gross income tests, except to the extent such income isdistributed to us as a dividend, in which case such dividend income will qualify under the 95%, but not the 75%, gross income test. Because a taxable REITsubsidiary is subject to federal income tax, and state and local income tax (where applicable) as a regular corporation, the income earned by our taxable REITsubsidiaries generally will be subject to an additional level of tax as compared to the income earned by our other subsidiaries.OutlookWe 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 insome of the nation's most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington and Hawaii, whichwe believe 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 projects in our development pipeline including future phases of La Jolla Commons, Lloyd District Portfolio, as well asother redevelopments at Waikele Center. The commencement of these developments is based on, among other things, market conditions and our evaluation ofwhether such opportunities would generate appropriate risk adjusted financial returns. Our redevelopment and development opportunities are subject to variousfactors, including market conditions and may not ultimately come to fruition. We continue to review acquisition opportunities in our primary markets that wouldcomplement our portfolio and provide long-term growth opportunities. Some of our acquisitions do not initially contribute significantly to earnings growth;however, we believe they provide long-term re-leasing growth, redevelopment opportunities and other strategic opportunities. Any growth from acquisitions iscontingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect oursuccess 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 economicallyfinance a property acquisition. Generally, our acquisitions are initially financed by available39cash, mortgage loans and/or borrowings under our second amended and restated credit facility, which may be repaid later with funds raised through the issuance ofnew equity or new long-term debt.Same-storeWe have provided certain information on a total portfolio, same-store and redevelopment same-store basis. Information provided on a same-store basisincludes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significantredevelopment or expansion occurred during either of the periods being compared, properties under development, properties classified as held for development andproperties classified as discontinued operations. Information provided on a redevelopment same-store basis includes the results of properties undergoing significantredevelopment for the entirety or portion of both periods being compared. Same-store and redevelopment same-store is considered by management to be animportant measure because it assists in eliminating disparities due to the development, acquisition or disposition of properties during the particular periodpresented, 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 andstabilization 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 tosame-store properties once they are stabilized. Properties are deemed stabilized typically at the earlier of (1) reaching 90% occupancy or (2) four quartersfollowing a property's inclusion in operating real estate. We typically remove properties from same-store properties when the development, redevelopment orexpansion has or is expected to have a significant impact on the property's annualized base rent, occupancy and operating income within the calendar year.Acquired properties are classified to same-store properties once we have owned such properties for the entirety of comparable period(s) and the properties are notunder significant development or expansion.In our determination of same-store and redevelopment same-store properties, Waikele Center has been identified as a same-store redevelopment property dueto significant construction activity. Retail same-store net operating income increased approximately 4.5% for the year ended December 31, 2019, respectively,compared to the same periods in 2018. Retail redevelopment same-store net operating income increased approximately 1.5% for the year ended December 31,2019, respectively, compared to the same periods in 2018.Below is a summary of our same-store composition for the years ended December 31, 2019, 2018 and 2017. For the year ended December 31, 2019, whencompared to the designations for the year ended December 31, 2018, Pacific Ridge Apartments and Gateway Marketplace were reclassified to same-store propertieswhen compared to the designations for the year ended December 31, 2018 as the entities were acquired on April 28, 2017 and July 6, 2017, respectively, and arecomparable for the year ended December 31, 2019. Waikiki Beach Walk Retail and Embassy Suites™ Hotel was reclassified to non-same-store properties whencompared to the designation for the year ended December 31, 2018 due to spalling repair activity disrupting the hotel portion of the properties operations. WaikeleCenter was classified as a non-same-store property due to significant redevelopment activity during the year ended December 31, 2018. Torrey Point was placedinto 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 year ended December 31, 2018, when compared to the designations for the year ended December 31, 2017, Torrey Reserve Campus, Hassalo onEighth - Retail and Hassalo on Eighth - Multifamily were reclassified to same-store properties when compared to the designations for the year ended December 31,2017 as the entities became stabilized after their respective construction periods. Pacific Ridge Apartments and Gateway Marketplace were classified as non-same-store properties as they were acquired on April 28, 2017 and July 6, 2017, respectively, when compared to the designations for the year ended December 31, 2018.Additionally, Waikele Center was transferred out of same-store properties due to significant redevelopment activity for the year ended December 31, 2018. TorreyPoint 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 stabilizedand comparable.40 December 31, 2019 2018 2017Same-Store25 23 21Non-Same Store3 4 5Total Properties28 27 26 Redevelopment Same-Store26 24 22 Total Development Properties3 3 4Revenue BaseRental income consists of scheduled rent charges, straight-line rent adjustments and the amortization of above market and below market rents acquired. Wealso derive revenue from tenant recoveries and other property revenues, including parking income, lease termination fees, late fees, storage rents and othermiscellaneous property revenues.Office Leases. Our office portfolio included nine properties with a total of approximately 3.4 million rentable square feet available for lease as ofDecember 31, 2019. As of December 31, 2019, these properties were 95.0% leased. For the year ended December 31, 2019, the office segment contributed 39.5%of our total revenue. Historically, we have leased office properties to tenants primarily on a full service gross or a modified gross basis and to a limited extent on atriple-net lease basis. We expect to continue to do so in the future. A full-service gross or modified gross lease has a base year expense stop, whereby the tenantpays a stated amount of certain expenses as part of the rent payment, while future increases in property operating expenses (above the base year stop) are billed tothe tenant based on such tenant's proportionate square footage of the property. The increased property operating expenses billed are reflected as operating expensesand amounts recovered from tenants are reflected as rental income in the statements of operations.During the year ended December 31, 2019, we signed 71 office leases for 504,335 square feet with an average rent of $49.70 per square foot during the initialyear of the lease term. Of the leases, 45 represent comparable leases where there was a prior tenant, with an increase of 17.2% in cash basis rent and an increase of34.1% in straight-line rent compared to the prior leases.Retail Leases. Our retail portfolio included twelve properties with a total of approximately 3.1 million rentable square feet available for lease as ofDecember 31, 2019. As of December 31, 2019, these properties were 97.8% leased. For the year ended December 31, 2019, the retail segment contributed 29.3%,of our total revenue. Historically, we have leased retail properties to tenants primarily on a triple-net lease basis, and we expect to continue to do so in the future. Ina triple-net lease, the tenant is responsible for all property taxes and operating expenses. As such, the base rent payment does not include any operating expense, butrather all such expenses, to the extent they are paid by the landlord, are billed to the tenant. The full amount of the expenses for this lease type, to the extent they arepaid by the landlord, is reflected in operating expenses, and the reimbursement is reflected as rental income in the statements of operations.During the year ended December 31, 2019, we signed 67 retail leases for 296,457 square feet with an average rent of $34.56 per square foot during the initialyear of the lease term, including leases signed for the retail portion of our mixed-use property. Of the leases, 52 represent comparable leases where there was aprior tenant, with an increase of 2.0% in cash basis rent and an increase of 11.4% in straight-line rent compared to the prior leases.Multifamily Leases. Our multifamily portfolio included six apartment properties, as well as an RV resort, with a total of 2,112 units (including 122 RVspaces) available for lease as of December 31, 2019. As of December 31, 2019, these properties were 92.8% leased. For the year ended December 31, 2019, themultifamily segment contributed 13.9% of our total revenue. Our multifamily leases, other than at our RV Resort, generally have lease terms ranging from 7 to 15months, with a majority having 12-month lease terms. Tenants normally pay a base rental amount, usually quoted in terms of a monthly rate for the respective unit.Spaces at the RV Resort can be rented at a daily, weekly, or monthly rate. The average monthly base rent per leased unit as of December 31, 2019 was $2,099,compared to $2,046 at December 31, 2018.Mixed-Use Property Revenue. Our mixed-use property consists of approximately 97,000 rentable square feet of retail space and a 369-room all-suite hotel.Revenue from the mixed-use property consists of revenue earned from retail leases, and revenue earned from the hotel, which consists of room revenue, food andbeverage services, parking and other guest services. As of December 31, 2019, the retail portion of the property was 97.9% leased, and for the year endedDecember 31, 2019, the hotel had an average occupancy of 91.7%. For the year ended December 31, 2019, the mixed-use segment contributed 17.3%,41of our total revenue. We have leased the retail portion of such property to tenants primarily on a triple-net lease basis, and we expect to continue to do so in thefuture. As such, the base rent payment under such leases does not include any operating expenses, but rather all such expenses, to the extent they are paid by thelandlord, are billed to the tenant. Rooms at the hotel portion of our mixed-use property are rented on a nightly basis.LeasingOur 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 highoccupancy and increase rental rates. We have continued to see signs of improvement for many of our tenants as well as increased interest from prospective tenantsfor our spaces. While there can be no assurance that these positive signs will continue, we remain cautiously optimistic regarding the improved trends we have seenover the past few years. We believe the locations of our properties and diverse tenant base mitigate the potentially negative impact of a poor economicenvironment. However, any reduction in our tenants' abilities to pay base rent, percentage rent or other charges, may adversely affect our financial condition andresults of operations.During the twelve months ended December 31, 2019, we signed 71 office leases for a total of 504,335 square feet of office space including 276,415 squarefeet of comparable space leases, at an average rental rate increase of 17.2% on a cash basis and an average rental increase of 34.1% on a straight-line basis. Newoffice leases for comparable spaces were signed for 155,802 square feet at an average rental rate increase of 24.4% on a cash basis and an average rental rateincrease of 45.5% on a straight-line basis. Renewals for comparable office spaces were signed for 120,613 square feet at an average rental rate increase of 7.4% ona cash basis and increase of 18.9% on a straight-line basis. Tenant improvements and incentives were $63.40 per square foot of office space for comparable newleases for the twelve months ended December 31, 2019. There were $20.45 per square foot of office space of tenant improvement or incentives for comparablerenewal leases for the twelve months ended December 31, 2019.During the twelve months ended December 31, 2019, we signed 67 retail leases for a total of 296,457 square feet of retail space including 149,107 square feetof comparable space leases (leases for which there was a prior tenant), an increase of 2.0% on a cash basis and an increase of 11.4% on a straight-line basis. Newretail leases for comparable spaces were signed for 32,309 square feet at an average rental rate decrease of 0.8% on a cash basis and an average rental rate increaseof 11.2% on a straight-line basis. Renewals for comparable retail spaces were signed for 116,798 square feet at an average rental rate increase of 2.5% on a cashbasis and an increase of 11.5% on a straight-line basis. Tenant improvements and incentives were $46.04 per square foot of retail space for comparable new leasesfor the twelve months ended December 31, 2019. There were $3.29 per square foot of retail space of tenant improvement or incentives for comparable renewalleases for the twelve months ended December 31, 2019.The rental increases associated with comparable spaces generally include all leases signed in arms-length transactions reflecting market leverage betweenlandlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent andpercentage 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. Insome instances, management exercises judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rentalincome 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 incentivesinclude 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 notrepresent building improvements.The leases signed in 2019 generally become effective over the following year, though some may not become effective until 2021. Further, there is risk thatsome 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 tooperating, financing or other matters. However, we believe that these increases do provide information about the tenant/landlord relationship and the potentialfluctuations we may achieve in rental income over time.In 2020, we believe our leasing volume will be in-line with our historical averages with overall positive increases in rental income. However, changes inrental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on newleases will continue to increase at the above disclosed levels, if at all.42Critical Accounting PoliciesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that in certain circumstancesaffect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared usingmanagement's best judgment, after considering past and current events and economic conditions. In addition, information relied upon by management in preparingsuch estimates includes internally generated financial and operating information, external market information, when available, and when necessary, informationobtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may affect theseestimates is included in the section above entitled “Item 1A. Risk Factors.” Management considers an accounting estimate to be critical if changes in the estimatecould have a material impact on our consolidated results of operations or financial condition.Our significant accounting policies are more fully described in the notes to the consolidated financial statements included elsewhere in this report; however,the most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts thatdiffer from estimates, are as follows:Revenue Recognition and Accounts ReceivableOur leases with tenants are classified as operating leases. Substantially all such leases contain fixed rent escalations which occur at specified times during theterm of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuationadjustments, based on management's assessment of credit, collection and other business risks. When we determine that we are the owner of tenant improvementsand the tenant has reimbursed us for a portion or all of the tenant improvement costs, we consider the amount paid to be additional rent, which is recognized on astraight-line basis over the term of the related lease. For first generation tenants, in instances in which we fund tenant improvements and the improvements aredeemed to be owned by us, revenue recognition will commence when the improvements are substantially completed and possession or control of the space isturned over to the tenant. When we determine that the tenant is the owner of tenant improvements, tenant allowances are recorded as lease incentives and wecommence revenue recognition and lease incentive amortization when possession or control of the space is turned over to the tenant for tenant work to begin.Percentage rents, which represent additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier ifwe have determined the required sales level is achieved and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized onan accrual basis over the periods in which the related expenditures are incurred.Other property income includes parking income, general excise tax billed to tenants, fees charged to tenants at our multifamily properties and food andbeverage sales at the hotel portion of our mixed-use property. Other property income is recognized when we satisfy performance obligations as evidenced by thetransfer of control of our services to customers. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a feeto cancel the lease agreement. Lease termination fees for which the tenant has relinquished control of the space are generally recognized on the later of thetermination date or the satisfaction of all conditions precedent to the lease termination, including, without limitation, payment of all lease termination fees. When alease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenlyover the remaining term of the modified lease agreement.Current accounts receivable from tenants primarily relate to contractual minimum rent and percentage rent as well as real estate tax and other costreimbursements. Accounts receivable from straight-line rent is typically longer term in nature and relates to the cumulative amount by which straight-line rentalincome recorded to date exceeds cash rents billed to date under the contractual lease agreement.We recognize revenue on the hotel portion of our mixed-use property from the rental of hotel rooms and guest services when we satisfy performanceobligations as evidenced by the transfer of control when the rooms are occupied and services have been provided. Food and beverage sales are recognized when thecustomer has been served or at the time the transaction occurs. Revenue from room rental is included in rental revenue on the statement of income. Revenue fromother sales and services provided is included in other property income on the statement of income.We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which requires significant judgment bymanagement. The collectability of receivables is affected by numerous different factors including current economic conditions, tenant bankruptcies, the status ofcollectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communicationsbetween our43operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenant to perform under theterms of their lease agreement. If our assessment of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize acharge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cashcollected. If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental incomein the period we make a change to our prior conclusion.Due to the nature of the accounts receivable from straight-line rents, the collection period of these amounts typically extends beyond one year. Ourexperience relative to unbilled straight-line rents is that a portion of the amounts otherwise recognizable as revenue is never billed to or collected from tenants dueto early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with ourevaluation of tenant credit risk may result in the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured.Any changes to our conclusion regarding these assessments of collectability would have a direct impact on our net income.Effective January 1, 2018, (upon the adoption of ASU 2014-09, Revenue from Contracts with Customers) sales of real estate are recognized generally uponthe transfer of control, which usually occurs when the real estate is legally sold. Prior to January 1, 2018, sales of real estate were recognized only when sufficientdown payments had been obtained, possession and other attributes of ownership had been transferred to the buyer and we had no significant continuinginvolvement. The application of these criteria can be complex and required us to make assumptions. We believe the relevant criteria were met for all real estatesold during the periods presented.Real EstateDepreciation and maintenance costs relating to our properties constitute substantial costs for us. Land, buildings and improvements are recorded at cost.Depreciation is computed using the straight-line method. Estimated useful lives range generally from 30 years to a maximum of 40 years on buildings and majorimprovements. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 3 to 15 years. Maintenance andrepairs that do not improve or extend the useful lives of the related assets are charged to operations as incurred. Tenant improvements are capitalized anddepreciated over the life of the related lease or their estimated useful life, whichever is shorter. If a tenant vacates its space prior to contractual termination of itslease, the undepreciated balance of any tenant improvements are written off if they are replaced or have no future value. Our estimates of useful lives have a directimpact on our net income. If expected useful lives of our real estate assets were shortened, we would depreciate the assets over a shorter time period, resulting inan increase to depreciation expense and a corresponding decrease to net income on an annual basis.Acquisitions of properties are accounted for in accordance with the authoritative accounting guidance on acquisitions and business combinations. Ourmethodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraisedvalues. When we acquire operating real estate properties, the purchase price is allocated to land and buildings, intangibles such as in-place leases, and to currentassets and liabilities acquired, if any. Such valuations include a consideration of the noncancelable terms of the respective leases as well as any applicable renewalperiod(s). The fair values associated with below market renewal options are determined based on a review of several qualitative and quantitative factors on a lease-by-lease basis at acquisition to determine whether it is probable that the tenant would exercise its option to renew the lease agreement. These factors include: (1)the type of tenant in relation to the property it occupies, (2) the quality of the tenant, including the tenant's long term business prospects, and (3) whether the fixedrate renewal option was sufficiently lower than the fair rental of the property at the date the option becomes exercisable such that it would appear to be reasonablyassured that the tenant would exercise the option to renew. Each of these estimates requires a great deal of judgment, and some of the estimates involve complexcalculations. These allocation assessments have a direct impact on our results of operations because if we were to allocate more value to land, there would be nodepreciation with respect to such amount. If we were to allocate more value to the buildings, as opposed to allocating to the value of tenant leases, this amountwould be recognized as an expense over a much longer period of time, since the amounts allocated to buildings are depreciated over the estimated lives of thebuildings whereas amounts allocated to tenant leases are amortized over the remaining terms of the leases.The value allocated to in-place leases is amortized over the related lease term and reflected as depreciation and amortization in the consolidated statements ofcomprehensive income. The value of above and below market leases associated with the original noncancelable lease terms are amortized to rental income over theterms of the respective noncancelable lease periods and are reflected as either an increase (for below market leases) or a decrease (for above market leases) torental income in the consolidated statement of comprehensive income. If a tenant vacates its space prior to contractual termination of its lease or the lease is notrenewed, the unamortized balance of any in-place lease value is written off to rental income and44amortization expense. The value of the leases associated with below market lease renewal options that are likely to be exercised are amortized to rental incomeover the respective renewal periods. We make assumptions and estimates related to below market lease renewal options, which impact revenue in the period inwhich the renewal options are exercised and could result in significant increases to revenue if the renewal options are not exercised at which time the related belowmarket lease liabilities would be written off as an increase to revenue.Transaction costs related to the acquisition of a business, such as broker fees, transfer taxes, legal, accounting, valuation, and other professional andconsulting fees, are expensed as incurred and included in “general and administrative expenses” in our consolidated statements of comprehensive income. For assetacquisitions not meeting the definition of a business, transaction costs are capitalized as part of the acquisition cost.Capitalized CostsCertain 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 untilconstruction is substantially complete and the property is held available for occupancy. The determination of when a development project is substantially completeand when capitalization must cease involves a degree of judgment. We consider a construction project as substantially complete and held available for occupancyupon the completion of landlord-owned tenant improvements or when the lessee takes possession of the unimproved space for construction of its ownimprovements, but not later than one year from cessation of major construction activity. We cease capitalization on the portion substantially completed andoccupied 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 $4.5 million and $14.1 million for the yearsended December 31, 2019 and 2018, respectively. We capitalized external and internal costs related to other property improvements combined of $95.6 million and $48.7 million for the years ended December31, 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 itsintended 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 netincome 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 redevelopmentactivities combined of $0.6 million and $1.5 million for the years ended December 31, 2019 and 2018, respectively.45Segment capital expenditures for the years ended December 31, 2019 and 2018 are as follows (dollars in thousands): Year Ended December 31, 2019 Segment Tenant Improvementsand LeasingCommissions Maintenance CapitalExpenditures Total TenantImprovements, LeasingCommissions andMaintenance CapitalExpenditures Redevelopment andExpansions New Development Total CapitalExpenditures Office Portfolio $46,947 $10,501 $57,448 $6,165 $936 $64,549Retail Portfolio 5,654 16,882 22,536 308 — 22,844Multifamily Portfolio — 3,711 3,711 — — 3,711Mixed-Use Portfolio 323 8,167 8,490 — — 8,490Total $52,924 $39,261 $92,185 $6,473 $936 $99,594 Year Ended December 31, 2018 Segment Tenant Improvementsand LeasingCommissions Maintenance CapitalExpenditures Total TenantImprovements, LeasingCommissions andMaintenance CapitalExpenditures Redevelopment andExpansions New Development Total CapitalExpenditures Office Portfolio $28,645 $8,439 $37,084 $6,730 $1,378 $45,192Retail Portfolio 4,137 7,498 11,635 2,584 — 14,219Multifamily Portfolio — 3,659 3,659 — — 3,659Mixed-Use Portfolio 336 941 1,277 — — 1,277Total $33,118 $20,537 $53,655 $9,314 $1,378 $64,347 The increase in maintenance capital expenditures in our retail portfolio was primarily related to the Safeway lease buildout at Waikele Center. The increasein maintenance capital expenditures in our office portfolio was primarily related to The Landmark at One Market and Torrey Reserve Campus buildingrenovations during 2019.The decrease in new development expenditures for the year ended December 31, 2019 was primarily related to the capitalization of interest for Torrey Pointin the prior period. New development expenditures for the office portfolio incurred during the year ended December 31, 2019 reflect costs incurred for thedevelopment of La Jolla Commons land parcel.Our capital expenditures during 2020 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties andthe timing and cost of development of our development, held for development and construction in progress properties. While the amount of future expenditures willdepend on numerous factors, we expect expenditures incurred in 2020 will increase from 2019 in connection with our development activities at La Jolla Commons,renovations at One Beach Street and a planned hotel refresh at our mixed-use property.Derivative InstrumentsWe may use derivative instruments to manage exposure to variable interest rate risk. We may enter into interest rate swaps to manage our exposure tovariable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt.Any interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. We assess effectiveness of our cash flow hedgesboth at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recordedin other comprehensive income which is included in accumulated other comprehensive income on our consolidated balance sheet and our consolidated statementof equity. Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not match, such as notional amounts,settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness ofthe counterparty which includes reviewing debt ratings and financial performance. However, management does not anticipate non-performance by thecounterparty. If a cash flow hedge is deemed46ineffective, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the periodaffected.Impairment of Long-Lived AssetsWe review for impairment on a property by property basis. Impairment is recognized on properties held for use when the expected undiscounted cash flowsfor a property are less than its carrying amount at which time the property is written-down to fair value. The calculation of both discounted and undiscounted cashflows requires management to make estimates of future cash flows including revenues, operating expenses, required maintenance and development expenditures,market conditions, demand for space by tenants and rental rates over long periods. Since our properties typically have a long life, the assumptions used to estimatethe future recoverability of book value requires significant management judgment. Actual results could be significantly different from the estimates. Theseestimates have a direct impact on net income because recording an impairment charge results in a negative adjustment to net income. The evaluation of anticipatedcash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materiallyfrom actual results in future periods.Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. Although our strategy is to hold ourproperties over the long-term, if our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reducethe property to fair value and such loss could be material.No impairment charges were recorded for the years ended December 31, 2019, 2018 or 2017.Income TaxesWe elected to be taxed as a REIT under the Code commencing with the taxable year ended December 31, 2011. To maintain our qualification as a REIT, weare required to distribute at least 90% of our net taxable income to our stockholders, excluding net capital gains, and meet the various other requirements imposedby the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we maintain ourqualification for taxation as a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders. If we failto maintain our qualification as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, our taxableincome generally would be subject to regular U.S. federal corporate income tax. Any such corporate tax liability could be substantial and would reduce our cashavailable for, among other things, our operations and distributions to American Assets Trust, Inc.'s stockholders or American Assets Trust, L.P.'s unitholders. We, together with one of our subsidiaries, have elected to treat such subsidiary as a taxable REIT subsidiary for federal income tax purposes. A taxableREIT subsidiary is subject to federal and state income taxes.Property Acquisitions and Dispositions2019 Acquisitions and DispositionsOn June 20, 2019, we acquired La Jolla Commons, consisting of two office towers totaling approximately 724,000 square feet, an entitled developmentparcel 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 closingprorations, excluding closing costs of approximately $0.2 million.The property was acquired with proceeds from an underwritten public offering and borrowings under our Second Amended and Restated Credit Facility.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 year ended December 31, 2019.472018 Acquisitions and DispositionsDuring 2018, there were no acquisitions or dispositions.2017 Acquisitions and DispositionsOn April 28, 2017, we acquired the Pacific Ridge Apartments, a 533-unit, multifamily community, built in 2013 and located in San Diego, California. Thepurchase price was approximately $232 million, excluding closing costs and prorations.On July 6, 2017, we acquired Gateway Marketplace, an approximately 128,000 square feet dual-grocery anchored shopping center located in Chula Vista,California. The purchase price was approximately $42 million, excluding closing costs and prorations.On September 1, 2017, we acquired the building and related improvements in which Forever 21 and Gold's Gym are currently in tenancy at Del MonteCenter for approximately $5.3 million.During 2017, there were no dispositions.Results of OperationsFor our discussion of results of operations, we have provided information on a total portfolio and same-store basis.For our discussion related to the results of operations and liquidity and capital resources for fiscal year 2018 compared to fiscal year 2017 please refer to PartII, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2018 Form 10-K, filed with the Securities andExchange Commission on February 15, 2019.Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018The following summarizes our consolidated results of operations for the year ended December 31, 2019 compared to our consolidated results of operationsfor the year ended December 31, 2018. As of December 31, 2019, our operating portfolio was comprised of 28 office, retail, multifamily and mixed-use propertieswith an aggregate of approximately 6.6 million rentable square feet of office and retail space (including mixed-use retail space), 2,112 residential units (including122 RV spaces) and a 369-room hotel. Additionally, as of December 31, 2019, we owned land at three of our properties that we classified as held for developmentand construction in progress. As of December 31, 2018, our operating portfolio was comprised of 27 office, retail, multifamily and mixed-use properties with anaggregate of approximately 5.8 million rentable square feet of office and retail space (including mixed-use retail space), 2,112 residential units (including 122 RVspaces) and a 369-room hotel. Additionally, as of December 31, 2018, we owned land at three of our properties that we classified as held for development andconstruction in progress.48The following table sets forth selected data from our consolidated statements of income for the years ended December 31, 2019 and 2018 (dollars inthousands): Year Ended December 31, 2019 2018 Change %Revenues Rental income$343,865 $309,537 $34,328 11 %Other property income22,876 21,330 1,546 7Total property revenues366,741 330,867 35,874 11Expenses Rental expenses91,967 86,482 5,485 6Real estate taxes40,013 34,973 5,040 14Total property expenses131,980 121,455 10,525 9Net operating income234,761 209,412 25,349 12General and administrative(24,871) (22,784) (2,087) 9Depreciation and amortization(96,205) (107,093) 10,888 (10)Interest expense(54,008) (52,248) (1,760) 3Gain on sale of real estate633 — 633 100Other income (expense), net(122) (85) (37) 44Net income60,188 27,202 32,986 121Net income attributable to restricted shares(381) (311) (70) 23Net income attributable to unitholders in the Operating Partnership(14,089) (7,205) (6,884) 96Net income attributable to American Assets Trust, Inc. stockholders$45,718 $19,686 $26,032 132 %RevenueTotal property revenues. Total property revenue consists of rental revenue and other property income. Total property revenue increased $35.9 million, or11%, to $366.7 million for the year ended December 31, 2019, compared to $330.9 million for the year ended December 31, 2018. The percentage leased was asfollows for each segment as of December 31, 2019 and 2018: Percentage Leased (1)Year EndedDecember 31, 2019 2018Retail97.8% 93.9%Office95.0% 90.9%Multifamily92.8% 93.6%Mixed-Use (2)97.9% 96.1% (1)The percentage leased includes the square footage under lease, including leases which may not have commenced as of December 31, 2019 or December 31, 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.49Rental revenues. Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents. Rental revenue increased $34.3 million,or 11%, to $343.9 million for the year ended December 31, 2019, compared to $309.5 million for the year ended December 31, 2018. Rental revenue by segmentwas as follows (dollars in thousands): Total Portfolio Same-Store Portfolio (1) Year Ended December 31, Year Ended December 31, 2019 2018 Change % 2019 2018 Change %Office$137,380 $102,618 $34,762 34 % $115,300 $102,192 $13,108 13 %Retail101,841 103,671 (1,830) (2)% 86,856 87,256 (400) — %Multifamily47,630 47,076 554 1 47,630 47,076 554 1Mixed-Use57,014 56,172 842 1 — — — — $343,865 $309,537 $34,328 11 % $249,786 $236,524 $13,262 6 %(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 afterrenovating the building. The same-store portfolio excludes: (i) Waikele Center due to significant redevelopment activity; (ii) Torrey Point, which was placed into operations andbecame 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 dueto significant spalling repair activity; and (v) land held for development.Total office rental revenue increased $34.8 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due tothe acquisition of La Jolla Commons on June 20, 2019, which had rental revenue of approximately $20.1 million during the period. The increase in total officerental revenue is also attributed to Torrey Point, which was placed into operations in August 2018, and had incremental rental revenue of $1.5 million during theperiod. Same-store office rental revenue increased $13.1 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarilydue to higher annualized base rents at The Landmark at One Market, City Center Bellevue, Lloyd District Portfolio and Torrey Reserve Campus.Total retail rental revenue decreased $1.8 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due to theexpiration of the Kmart lease at Waikele Center on June 30, 2018. Same-store retail rental revenue decreased $0.4 million primarily due to an increase in bad debtcontra-revenue at Hassalo on Eighth - Retail.Multifamily rental revenue increased $0.6 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due to thehigher average base rent per unit of $2,077 during the year ended December 31, 2019 compared to $2,032 during the year ended December 31, 2018.Mixed-use rental revenue increased $0.8 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due tohigher annualized base rents for retail tenants at our mixed-use property.Other property income. Other property income increased $1.5 million, or 7%, to $22.9 million for the year ended December 31, 2019, compared to $21.3million for the year ended December 31, 2018. Other property income by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Year Ended December 31, Year Ended December 31, 2019 2018 Change % 2019 2018 Change %Office$7,303 $9,744 $(2,441) (25)% $6,878 $8,350 $(1,472) (18)%Retail5,763 1,881 3,882 206 % 4,774 1,028 3,746 364 %Multifamily3,436 3,551 (115) (3) 3,436 3,551 (115) (3)Mixed-Use6,374 6,154 220 4 — — — — $22,876 $21,330 $1,546 7 % $15,088 $12,929 $2,159 17 %Office other property income decreased $2.4 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due tolease termination fees in the prior period for tenants at Lloyd District Portfolio and Torrey Point. The decrease was partially offset by an increase in leasetermination fees and parking garage income at City Center Bellevue and due to the acquisition of La Jolla Commons on June 20, 2019, which had parking garageincome of approximately $0.4 million during the period.50Retail other property income increased $3.9 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due toan increase in lease termination fees recognized in connection with the termination of a ground lease, and the ground lessee's surrender of, the former Searsbuilding at Carmel Mountain Plaza during the period. The increase was partially offset by a decrease in lease termination fees received in the prior period fortenants at Solana Beach Towne Centre, Del Monte Center and Geary Marketplace.Multifamily other property income decreased $0.1 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarilydue to a decrease in utility billings and late fees.Mixed-use other property income increased $0.2 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarilydue to an increase in parking revenue at the retail portion of our mixed-use property.Property ExpensesTotal Property Expenses. Total property expenses consist of rental expenses and real estate taxes. Total property expenses increased by $10.5 million, or 9%,to $132.0 million for the year ended December 31, 2019, compared to $121.5 million for the year ended December 31, 2018. This increase in total propertyexpenses was attributable primarily to the factors discussed below.Rental Expenses. Rental expenses increased $5.5 million, or 6%, to $92.0 million for the year ended December 31, 2019, compared to $86.5 million for theyear ended December 31, 2018. Rental expense by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Year Ended December 31, Year Ended December 31, 2019 2018 Change % 2019 2018 Change %Office$26,881 $21,934 $4,947 23 % $23,312 $21,718 $1,594 7 %Retail16,063 16,273 (210) (1)% 12,695 12,790 (95) (1)%Multifamily14,362 14,264 98 1 14,362 14,264 98 1Mixed-Use34,661 34,011 650 2 — — — — $91,967 $86,482 $5,485 6 % $50,369 $48,772 $1,597 3 %Total office rental expenses increased $4.9 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due tothe acquisition of La Jolla Commons on June 20, 2019, which had rental expenses of approximately $2.5 million during the period. The increase in total officerental expense is also attributed to Torrey Point, which was placed into operations in August 2018, and had incremental rental expenses of $0.8 million during theperiod. Same-store office rental expenses increased $1.6 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarilydue to an increase in the commercial rent tax at The Landmark at One Market and One Beach Street. The increase in same-store office rental expense was alsoattributed to higher janitorial services and utilities expenses at City Center Bellevue.Total retail rental expenses decreased $0.2 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due tothe absence of demolition costs for the former Kmart building at Waikele Center incurred in the prior period partially offset by the absence of contra-bad debtexpense at Waikele Center. Same-store retail rental expenses decreased $0.1 million for the year ended December 31, 2019 compared to the year ended December31, 2018 primarily due to the absence of contra-bad debt expense at Waikele Center, and a decrease in pest control and utilities expenses during the period.Mixed-use rental expenses increased $0.7 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due to anincrease in hotel room and marketing expenses at the hotel portion of our mixed-use property and an increase in landscaping expenses at the retail portion of ourmixed-use property during the period.51Real Estate Taxes. Real estate tax expense increased $5.0 million, or 14%, to $40.0 million for the year ended December 31, 2019, compared to $35.0 millionfor the year ended December 31, 2018. Real estate tax expense by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Year Ended December 31, Year Ended December 31, 2019 2018 Change % 2019 2018 Change %Office$15,353 $11,926 $3,427 29% $11,660 $11,516 $144 1%Retail14,570 13,805 765 6% 11,674 11,107 567 5%Multifamily6,501 6,177 324 5 6,501 6,177 324 5Mixed-Use3,589 3,065 524 17 — — — — $40,013 $34,973 $5,040 14% $29,835 $28,800 $1,035 4%Total office real estate taxes increased $3.4 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due tothe acquisition of La Jolla Commons on June 20, 2019, which had real estate taxes of approximately $3.0 million. The increase in office real estate taxes is alsoattributed to Torrey Point, which was placed into operations in August 2018, and had incremental real estate taxes of $0.2 million during the period. Same-storeoffice real estate taxes increased $0.1 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due to an increase inthe assessed values of Torrey Reserve Campus, The Landmark at One Market and Lloyd District Portfolio.Retail real estate taxes increased $0.8 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due to anincrease in the assessed values of Alamo Quarry Market, Carmel Mountain Plaza, and Waikele Center.Multifamily real estate taxes increased $0.3 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due toan increase in the assessed values of Pacific Ridge Apartments, Lomas Palisades, and Hassalo on Eighth - Multifamily.Mixed-use real estate taxes increased $0.5 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due to anincrease in real estate taxes for the hotel portion of our mixed-use property that are assessed annually based on the hotel's room rates, which have increased fromthe prior year.Property Operating Income.Property operating income increased $25.3 million, or 12%, to $234.8 million for the year ended December 31, 2019, compared to $209.4 million for the yearended December 31, 2018. Property operating income by segment was as follows (dollars in thousands): Total Portfolio Same-Store Portfolio Year Ended December 31, Year Ended December 31, 2019 2018 Change % 2019 2018 Change %Office$102,449 $78,502 $23,947 31 % $87,206 $77,308 $9,898 13%Retail76,971 75,474 1,497 2 67,261 64,387 2,874 4Multifamily30,203 30,186 17 — 30,203 30,186 17 —Mixed-Use25,138 25,250 (112) — — — — — $234,761 $209,412 $25,349 12 % $184,670 $171,881 $12,789 7%Total office property operating income increased $23.9 million for the year ended December 31, 2019 compared to the year ended December 31, 2018primarily due to the acquisition of La Jolla Commons on June 20, 2019, which had property operating income of $15.1 million during the period. The increase intotal office property operating income was partially offset by a decrease in lease termination fees in the prior period at Lloyd District Portfolio and Torrey Point.Same-store property operating income increased $9.9 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily dueto higher annualized base rents at City Center Bellevue, The Landmark at One Market and Torrey Reserve Campus.52Retail property operating income increased $1.5 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily dueto an increase in lease termination fees recognized in connection with the termination of a ground lease, and the ground lessee's surrender of, the former Searsbuilding at Carmel Mountain Plaza offset by the expiration of the Kmart lease at Waikele Center and an increase in bad debt contra-revenue at Hassalo at Eighth -Retail.Multifamily property operating income increased $0.0 million for the year ended December 31, 2019 compared to the year ended December 31, 2018primarily due to the higher average base rent per unit offset by the increase in rental expense and real estate tax expenses.Mixed-use property operating income decreased $0.1 million for the year ended December 31, 2019 compared to the year ended December 31, 2018primarily due to an increase in hotel room and marketing expense at the hotel portion of our mixed-use property and landscaping expenses at the retail portion ofour mixed-use property and an increase in real estate taxes.OtherGeneral and administrative. General and administrative expenses increased $2.1 million, or 9%, to $24.9 million for the year ended December 31, 2019,compared to $22.8 million for the year ended December 31, 2018. This increase was primarily due to an increase in employee related costs and travel expenses.Depreciation and amortization. Depreciation and amortization expense decreased $10.9 million, or 10%, to $96.2 million for the year ended December 31,2019, compared to $107.1 million for the year ended December 31, 2018. This decrease was primarily due to higher depreciation and amortization expense in theprior period at Waikele Center attributed to the redevelopment of the Kmart space and Lloyd District Portfolio attributed to acceleration of depreciation related tolease terminations. The decrease was offset by the acquisition of La Jolla Commons on June 20, 2019, which had depreciation and amortization of $11.9 millionduring the period and higher depreciation and amortization at City Center Bellevue due to tenant improvements that were put into service in 2019.Interest expense. Interest expense increased $1.8 million, or 3%, to $54.0 million for the year ended December 31, 2019 compared with $52.2 million for theyear ended December 31, 2018. This increase was primarily due to the closing of our offering of Series G Notes on July 30, 2019 and higher average outstandingbalance on our line of credit during the first six months of 2019, offset by the repayment of our line of credit during the third quarter of 2019 and repayment of theproperty mortgages for Lomas Palisades during the first quarter of 2018, One Beach Street during the fourth quarter of 2018 and Torrey Reserve - North Courtduring the first quarter of 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 Income (Expense), Net. Other (expense) income, net decreased $0.0 million, or 44%, to other expense, net of $0.1 million for the year ended December31, 2019 compared to other income, net of $0.1 million for the year ended December 31, 2018, primarily due to an increase in income tax expense related to highertaxable income for our taxable REIT subsidiary during the period offset by an increase in interest and investment income attributed to higher cash balances duringthe period.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 anunconsolidated 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, andwhich 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 resourcesof 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 incurringcertain 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 theconsolidated revenues and expenses of the company and the Operating Partnership are the same on their respective financial statements. However, all debt is helddirectly or indirectly by the Operating Partnership. The company’s principal funding requirement is the payment of dividends on its common stock. The company’sprincipal source of funding for its dividend payments is distributions it receives from the Operating Partnership.53As of December 31, 2019, the company owned an approximate 78.5% partnership interest in the Operating Partnership. The remaining 21.5% are owned bynon-affiliated investors and certain of the company's directors and executive officers. As the sole general partner of the Operating Partnership, American AssetsTrust, 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 enterinto certain major transactions, including acquisitions, dispositions and refinancings, and can cause changes in its line of business, capital structure and distributionpolicies. The company causes the Operating Partnership to distribute such portion of its available cash as the company may in its discretion determine, in themanner 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 cashrequirement of the company is its payment of dividends to its stockholders. The company also guarantees some of the Operating Partnership’s debt, as discussedfurther in Note 7 of the Notes to Consolidated Financial Statements included elsewhere herein. If the Operating Partnership fails to fulfill certain of its debtrequirements, which trigger the company’s guarantee obligations, then the company will be required to fulfill its cash payment commitments under suchguarantees. 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 unsecuredline 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 December 31, 2019, 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 itsdistributions to the company, which would in turn, adversely affect the company’s ability to pay cash dividends to its stockholders.Our short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to the company’s stockholders, operatingexpenses and other expenditures directly associated with our properties, interest expense and scheduled principal payments on outstanding indebtedness, generaland 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 orother securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or redemptions, if any, will depend on prevailing marketconditions, 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 taxableincome, excluding net capital gains. While historically the company has satisfied this distribution requirement by making cash distributions to American AssetsTrust, 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 retainedearnings 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 toraise capital in the equity markets to fund the operating partnership’s working capital needs, acquisitions and developments.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 theOperating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for preferred orcommon partnership units of the operating partnership. The operating partnership may use the proceeds to repay debt, to develop new or existing properties, toacquire 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 whichreplaced the prior Form S-3ASR that was filed with the SEC in February 2015. The universal shelf registration statement may permit the company from time totime 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 ofsecurities. Factors influencing the availability of additional financing include investor perception of our prospects and the general condition of the financialmarkets, among others.54On May 6, 2013, the company entered into an at-the-market, or ATM, equity program with four sales agents under which the company could from time totime offer and sell shares of common stock having an aggregate offering price of up to $150.0 million (the “2013 ATM Program”). The sales of shares of thecompany's common stock made through the 2013 ATM Program were made in “at-the-market” offerings as defined in Rule 415 of the Securities Act. Thecompany completed $150.0 million of issuances under the 2013 ATM Program on May 21, 2015.On May 27, 2015, the company entered into a new ATM equity program with five sales agents under which the company may, from time to time, offer andsell shares of common stock having an aggregate offering price of up to $250.0 million (the "2015 ATM Program"). As of December 31, 2019, the company hasissued 6,930,002 shares of common stock at a weighted average price per share of $38.58 for gross cash proceeds of $267.4 million under the 2013 ATM Programand 2015 ATM Program, in the aggregate.The company intends to use the net proceeds to fund development or redevelopment activities, repay amounts outstanding from time to time under ouramended and restated credit facility or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As ofDecember 31, 2019, the company had the capacity to issue up to an additional $132.6 million in shares of common stock under the 2015 ATM Program. Actualfuture 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 thecompany's capital needs. The company has no obligation to sell the remaining shares available for sale under the 2015 ATM 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. Wereceived 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 togetherwith its consolidated subsidiaries, or the Operating Partnership and American Assets Trust, Inc. together with their consolidated subsidiaries, as the contextrequires. American Assets Trust, Inc. is our sole general partner and consolidates our results of operations for financial reporting purposes. Because we operate ona consolidated basis with American Assets Trust, Inc., the section entitled “Liquidity and Capital Resources of American Assets Trust, Inc.” should be read inconjunction with this section to understand our liquidity and capital resources on a consolidated basis.Due to the nature of our business, we typically generate significant amounts of cash from operations. The cash generated from operations is used for thepayment 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.Our short-term liquidity requirements consist primarily of operating expenses and other expenditures associated with our properties, regular debt servicerequirements, dividend payments to American Assets Trust, Inc.'s stockholders required to maintain its REIT status, distributions to our other unitholders, capitalexpenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves establishedfrom existing cash and, if necessary, borrowings available under our second amended and restated credit facility.Our long-term liquidity needs consist primarily of funds necessary to pay for the repayment of debt at maturity, property acquisitions, tenant improvementsand capital improvements. We expect to meet our long-term liquidity requirements to pay scheduled debt maturities and to fund property acquisitions and capitalimprovements with net cash from operations, long-term secured and unsecured indebtedness and, if necessary, the issuance of equity and debt securities. We alsomay fund property acquisitions and capital improvements using our second amended and restated credit facility pending permanent financing. We believe that wehave access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt, noting that during the thirdquarter of 2015, the company obtained investment grade credit ratings from Moody’s Investors Service (Baa3), Standard & Poor’s Ratings Services (BBB-) andFitch Ratings, Inc. (BBB), and the issuance of additional equity. However, we cannot be assured that this will be the case. Our ability to incur additional debt willbe dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed bylenders. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs andmarket perceptions about our company. Given our past ability to access the capital markets, we expect debt or equity to be available to us. Although there is nointent at this time, if market conditions deteriorate, we may also delay the timing of future development and redevelopment projects as well as limit futureacquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.55Our overall capital requirements will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and thetiming and cost of developments. Our capital investments will be funded on a short-term basis with cash on hand, cash flow from operations and/or our secondamended and restated credit facility.We intend to operate with and maintain a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverageratios as part of our commitment to investment grade debt ratings. In the short and long term, we may seek to obtain funds through the issuance of additionalequity, unsecured and/or secured debt financings, and property dispositions that are consistent with this conservative structure.We currently believe that cash flows from operations, cash on hand, our ATM equity program, our revolving credit facility and our general ability to accessthe capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.Contractual ObligationsThe following table outlines the timing of required payments related to our commitments as of December 31, 2019 (dollars in thousands): Payments by PeriodContractual ObligationsTotal Within1 Year 2 Years 3 Years 4 Years 5 Years More than5 YearsPrincipal payments on long-termindebtedness$1,362,003 $51,003 $250,000 $111,000 $150,000 $100,000 $700,000Interest payments288,554 53,979 47,667 41,790 34,576 31,859 78,683Operating lease5,575 3,422 2,153 — — — —Tenant-related commitments47,622 44,728 1,242 1,652 — — —Construction-related commitments9,946 9,946 — — — — —Total$1,713,700 $163,078 $301,062 $154,442 $184,576 $131,859 $778,683 Off-Balance Sheet ArrangementsWe currently do not have any off-balance sheet arrangements.Cash FlowsComparison of the year ended December 31, 2019 to the year ended December 31, 2018Total cash, cash equivalents, and restricted cash were $109.5 million and $57.3 million at December 31, 2019 and 2018, respectively.Net cash provided by operating activities increased $17.3 million to $153.8 million for the year ended December 31, 2019, compared to $136.5 million forthe year ended December 31, 2018. The increase in cash from operations was primarily due to the increase in rental income from The Landmark at One Marketand City Center Bellevue, the acquisition of La Jolla Commons, which was acquired on June 20, 2019 and changes in operating assets and liabilities.Net cash used in investing activities increased $534.8 million to $599.2 million for the year ended December 31, 2019, compared to $64.3 million for the yearended December 31, 2018. The increase was primarily due to the acquisition of La Jolla Commons on June 20, 2019.Net cash provided by financing activities was $497.5 million for the year ended December 31, 2019, compared to net cash used in financing activities of$106.8 million for the year ended December 31, 2018. The increase in cash provided by financing activities was primarily due to the underwritten public offeringthat settled on June 14, 2019 and the closing of the Series G Notes issued on July 30, 2019.56Net Operating IncomeNet Operating Income, or NOI, is a non-GAAP financial measure of performance. We define NOI as operating revenues (rental income, tenantreimbursements, lease termination fees, ground lease rental income and other property income) less property and related expenses (property expenses, ground leaseexpense, property marketing costs, real estate taxes and insurance). NOI excludes general and administrative expenses, interest expense, depreciation andamortization, acquisition-related expense, other non-property income and losses, gains and losses from property dispositions, extraordinary items, tenantimprovements and leasing commissions. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable toother 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 computethe 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 wellas 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 andadministrative 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 tothe particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and othercosts 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. Depreciationand amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent theactual 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 certainaspects 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 awhole 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 oftime. 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 usuallychange from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to theoperating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income isuseful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancyrates, 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 capitalexpenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail tocapture 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 netincome as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP anddiscussions elsewhere in “Management's Discussion and Analysis of Financial Condition and Results of Operations” regarding the components of net income thatare eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOImay not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.The following is a reconciliation of our NOI to net income for the years ended December 31, 2019, 2018 and 2017 computed in accordance with GAAP (inthousands): Year Ended December 31, 2019 2018 2017Net operating income$234,761 $209,412 $198,306General and administrative(24,871) (22,784) (21,382)Depreciation and amortization(96,205) (107,093) (83,278)Interest expense(54,008) (52,248) (53,848)Gain on sale of real estate633 — —Other income (expense), net(122) (85) 334Net income$60,188 $27,202 $40,132Funds from Operations57We present FFO because we consider FFO an important supplemental measure of our operating performance and believe it is frequently used by securitiesanalysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. We calculate FFO inaccordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) (computedin accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment losses, real estate related depreciation andamortization (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 isbeneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization andgains and losses from property dispositions, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, whencompared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of theperformance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludesdepreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capitalexpenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and couldmaterially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculateFFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO shouldbe 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 offunds 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 substitutefor cash flow from operating activities computed in accordance with GAAP.The following table sets forth a reconciliation of our FFO for the years ended December 31, 2019, 2018 and 2017 to net income, the nearest GAAPequivalent (in thousands, except per share and share data): Year Ended December 31, 2019 2018 2017Net income$60,188 $27,202 $40,132Plus: Real estate depreciation and amortization96,205 107,093 83,278Less: Gain on sale of real estate(633) — —Funds from operations, as defined by NAREIT$155,760 $134,295 $123,410Less: Nonforfeitable dividends on restricted stock awards(376) (305) (236)FFO attributable to common stock and units$155,384 $133,990 $123,174FFO per diluted share/unit$2.20 $2.09 $1.92Weighted average number of common shares and units, diluted (1)70,788,597 64,139,437 64,089,921 (1)For the years ended December 31, 2019, 2018 and 2017 the weighted average common shares used to compute FFO per diluted share include unvested restricted stock awards that aresubject to time vesting, as the vesting of the restricted stock awards is dilutive in the computation of FFO per diluted shares, but is anti-dilutive for the computation of diluted EPS for theperiods. Diluted shares exclude incentive restricted stock as these awards are considered contingently issuable.InflationSubstantially all of our office and retail leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases providefor fixed base rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalationsdescribed above. In addition, our multifamily leases (other than at our RV resort where spaces can be rented at a daily, weekly or monthly rate) generally havelease terms ranging from seven to 15 months, with a majority having 12-month lease terms, and generally allow for rent adjustments at the time of renewal, whichwe believe reduces our exposure to the effects of inflation. For the hotel portion of our mixed-use property, we possess the ability to adjust room rates daily toreflect the effects of inflation. However, competitive pressures may limit our ability to raise room rates.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISKOur future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to therisk of loss from adverse changes in market prices and interest rates.58We may enter into certain types of derivative financial instruments to further reduce interest rate risk. We use interest rate swap agreements, for example, toconvert some of our variable rate debt to a fixed-rate basis or to hedge anticipated financing transactions. We use derivatives for hedging purposes rather thanspeculation and do not enter into financial instruments for trading purposes. See the discussion under Note 8, “Derivative and Hedging Activities,” to theaccompanying consolidated financial statements for certain quantitative details related to the interest rate swaps.Interest Rate RiskOutstanding DebtThe following discusses the effect of hypothetical changes in market rates of interest on the fair value of our total outstanding debt. Interest rate risk amountswere determined by considering the impact of hypothetical interest rates on our debt. Discounted cash flow analysis is generally used to estimate the fair value ofour mortgages payable. Considerable judgment is necessary to estimate the fair value of financial instruments. This analysis does not purport to take into accountall 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 theaction that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure.Fixed Interest Rate DebtExcept as described below, all of our outstanding debt obligations (maturing at various times through May 2029) have fixed interest rates which limit therisk of fluctuating interest rates. However, interest rate fluctuations may affect the fair value of our fixed rate debt instruments. At December 31, 2019, we had$1.112 billion of fixed-rate debt outstanding with an estimated fair value of $1.142 billion. If interest rates at December 31, 2019 had been 1.0% higher, the fairvalue of those debt instruments on that date would have decreased by approximately $3.4 million. If interest rates at December 31, 2019 had been 1.0% lower, thefair value of those debt instruments on that date would have increased by approximately $26.0 million.Variable Interest Rate DebtGenerally, we believe that our primary interest rate risk is due to fluctuations in interest rates on our variable rate debt. At December 31, 2019, we had $250.0million of variable rate debt outstanding. We have entered into term loans that have interest rates that contain both fixed and variable components. See thediscussion under Note 8 to the accompanying consolidated financial statements for details related to the interest rate swaps and for a discussion on how we valuederivative financial instruments. Based upon this amount of variable rate debt and the specific terms, if market interest rates increased 1.0%, our annual interestexpense would increase by approximately nil with a corresponding decrease in our net income and cash flows for the year. Conversely, if market rates decreased1.0%, our annual interest expense would decrease by approximately nil with a corresponding increase in our net income and cash flows for the year.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur consolidated financial statements and supplementary data are included as a separate section of this Annual Report on Form 10-K commencing on pageF-1 and are incorporated herein by reference.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURENone.ITEM 9A.CONTROLS ANDPROCEDURESControls and Procedures (American Assets Trust, Inc.)Evaluation of Disclosure Controls and ProceduresAmerican Assets Trust, Inc. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that aredesigned to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer andChief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls andprocedures, management recognizes that any controls and procedures, no matter how well designed and operated,59can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.As required by Rule 13a-15(b) under the Exchange Act, American Assets Trust, Inc. carried out an evaluation, under the supervision and with theparticipation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosurecontrols and procedures. Based on the foregoing, American Assets Trust, Inc.’s Chief Executive Officer and Chief Financial Officer concluded that, as of the endof the period covered by this report, American Assets Trust, Inc.’s disclosure controls and procedures were effective and were operating at a reasonable assurancelevel.Management’s Report on Internal Control over Financial ReportingInternal control over financial reporting refers to the process designed by, or under the supervision of, American Assets Trust, Inc.’s Chief Executive Officerand Chief Financial Officer, and effected by American Assets Trust, Inc.’s board of directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes thosepolicies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withGAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that couldhave a material effect on the financial statements.Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resultingfrom human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of suchlimitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However,these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though noteliminate, this risk.Management is responsible for establishing and maintaining adequate internal control over financial reporting for the company, as such term is defined inRule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including American Assets Trust, Inc.’s Chief ExecutiveOfficer and Chief Financial Officer, American Assets Trust, Inc. conducted an evaluation of the effectiveness of its internal control over financial reporting.Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework (2013)” published by the Committee of SponsoringOrganizations of the Treadway Commission to evaluate the effectiveness of the company’s internal control over financial reporting. Based on its evaluation,management has concluded that the company’s internal control over financial reporting was effective as of December 31, 2019.American Assets Trust, Inc.’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report over American AssetsTrust, Inc.’s internal control over financial reporting, which report is contained elsewhere in this annual report on Form 10-K.Changes in Internal Control over Financial ReportingThere were no changes in American Assets Trust, Inc.'s internal control over financial reporting during the quarter ended December 31, 2019 that materiallyaffected, 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.)Evaluation of Disclosure Controls and ProceduresThe Operating Partnership maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that aredesigned to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer andChief Financial Officer of its general partner, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosurecontrols and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonableassurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possiblecontrols and procedures.As required by Rule 13a-15(b) under the Exchange Act, the Operating Partnership carried out an evaluation, under the supervision and with the participationof management, including the Chief Executive Officer and Chief Financial Officer of its60general partner, of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures. Based on the foregoing, theChief Executive Officer and Chief Financial Officer of the Operating Partnership's general partner concluded that, as of the end of the period covered by thisreport, the Operating Partnership’s disclosure controls and procedures were effective and were operating at a reasonable assurance level.Management’s Report on Internal Control over Financial ReportingInternal control over financial reporting refers to the process designed by, or under the supervision of, the Chief Executive Officer and Chief FinancialOfficer of the Operating Partnership's general partner and effected by the general partner's board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP,and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Operating Partnership; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with GAAP, and that receipts and expenditures of the Operating Partnership are being made only in accordance withauthorizations of management and directors of the general partner of the Operating Partnership; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of the Operating Partnership’s assets that could have a material effect on the financial statements.Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resultingfrom human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of suchlimitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However,these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though noteliminate, this risk.Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Operating Partnership, as such term isdefined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including the Chief Executive Officer andChief Financial Officer of the Operating Partnership's general partner, the Operating Partnership conducted an evaluation of the effectiveness of its internal controlover financial reporting. Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework (2013)” published by theCommittee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the Operating Partnership’s internal control over financialreporting. Based on its evaluation, management has concluded that the Operating Partnership’s internal control over financial reporting was effective asof December 31, 2019.Changes in Internal Control over Financial ReportingThere were no changes in the Operating Partnership's internal control over financial reporting during the quarter ended December 31, 2019 that materiallyaffected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting.61ITEM 9B.OTHER INFORMATIONNone.PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information concerning our directors, executive officers and corporate governance required by Item 10 will be included in the Proxy Statement to befiled relating to American Assets Trust, Inc.'s 2020 Annual Meeting of Stockholders and is incorporated herein by reference.Pursuant to instruction G(3) to Form 10-K, information concerning audit committee financial expert disclosure set forth under the heading “InformationRegarding the Board - Committees of the Board - Audit Committee” will be included in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s2020 Annual Meeting of Stockholders and is incorporated herein by reference.Pursuant to instruction G(3) to Form 10-K, information concerning compliance with Section 16(a) of the Exchange Act concerning our directors andexecutive officers set forth under the heading entitled “General - Section 16(a) Beneficial Ownership Reporting Compliance” will be included in the ProxyStatement to be filed relating to American Assets Trust, Inc.'s 2020 Annual Meeting of Stockholders and is incorporated herein by reference.ITEM 11.EXECUTIVE COMPENSATIONThe information concerning our executive compensation required by Item 11 will be included in the Proxy Statement to be filed relating to American AssetsTrust, Inc.'s 2020 Annual Meeting of Stockholders and is incorporated herein by reference.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information concerning the security ownership of certain beneficial owners and management and related stockholder matters required by Item 12 will beincluded in the Proxy Statement to be filed relating to American Assets Trust, Inc.'s 2020 Annual Meeting of Stockholders and is incorporated herein by reference.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCEThe information concerning certain relationships and related transactions, and director independence required by Item 13 will be included in the ProxyStatement to be filed relating to American Assets Trust, Inc.'s 2020 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM 14.PRINCIPAL ACCOUNTING FEES ANDSERVICESThe information concerning our principal accountant fees and services required by Item 14 will be included in the Proxy Statement to be filed relating toAmerican Assets Trust, Inc.'s 2020 Annual Meeting of Stockholders and is incorporated herein by reference.62PART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) (1) Financial StatementsOur consolidated financial statements and notes thereto, together with Report of Independent Registered Public Accounting Firm are included asa separate section of this Annual Report on Form 10-K commencing on page F-1.(2) Financial Statement ScheduleOur financial statement schedule is included in a separate section of this Annual Report on Form 10-K commencing on page F-1.(3) ExhibitsA list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporatedherein by reference.(b) See Exhibit Index(c) Not Applicable63EXHIBIT INDEX Exhibit No.Description3.1(1)Articles of Amendment and Restatement of American Assets Trust, Inc.3.2(1)Amended and Restated Bylaws of American Assets Trust, Inc.3.3(2)Certificate of Limited Partnership of American Assets Trust, L.P.4.1(1)Form of Certificate of Common Stock of American Assets Trust, Inc.4.2*Description of Securities10.1(3)Amended and Restated Agreement of Limited Partnership of American Assets Trust, L.P., dated January 19, 201110.2(3)Registration Rights Agreement among American Assets Trust, Inc. and the persons named therein, dated January 19, 201110.3(1)American Assets Trust, Inc. and American Assets Trust, L.P. 2011 Equity Incentive Award Plan10.4(1)Form of Indemnification Agreement between American Assets Trust, Inc. and its directors and officers10.5*Form of American Assets Trust, Inc. Restricted Stock Award Agreement (Performance Vesting)10.6(3)Transition Services Agreement between American Assets, Inc. and American Assets Trust, L.P., dated January 19, 201110.7(1)Management Agreement for Waikiki Beach Walk®—Retail between ABW Holdings LLC and Retail Resort Properties LLC, dated as ofNovember 1, 200710.8(1)Outrigger Hotels Hawaii—Hotel Management Agreement—Embassy SuitesTM—Waikiki Beach WalkTM Hotel by and among EBWHotel LLC, Waikele Venture Holdings, LLC, Broadway 225 Sorrento Holdings, LLC, Broadway 225 Stonecrest Holdings, LLC andOutrigger Hotels Hawaii, dated as of January 10, 200610.9(3)Franchise License Agreement—Embassy Suites—Waikiki Beach Walk—Honolulu, Hawaii between Embassy Suites Franchise LLC andWBW Hotel Lessee, LLC, dated January 19, 201110.10(4)Deed of Trust and Security Agreement by and between AAT CC Bellevue, LLC, as Borrower, and PNC Bank, National Association, asLender, dated October 10, 2012.10.11(4)Promissory Note by AAT CC Bellevue, LLC, as maker, to PNC Bank, National Association, dated as of October 10, 2012.10.12*American Assets Trust, Inc. and American Assets Trust, L.P. Amended and Restated Incentive Bonus Plan, effective as of December 5,2019.10.13(5)Amended and Restated Employment Agreement among American Assets Trust, Inc., American Assets Trust, L.P. and Ernest S. Rady datedMarch 25, 201410.14(5)Amended and Restated Employment Agreement among American Assets Trust, Inc., American Assets Trust, L.P. and Robert F. Bartondated March 25, 201410.15(5)Amended and Restated Employment Agreement among American Assets Trust, Inc., American Assets Trust, L.P. and Adam Wyll datedMarch 25, 201410.16(6)Note Purchase Agreement, dated as of October 31, 2014 by and among American Assets Trust, Inc., American Assets Trust, L.P. and thepurchasers named therein. (Series A, B and C)10.17(7)Joinder and First Amendment to Term Loan Agreement, dated as of May 2, 2016, among American Assets Trust, Inc., the American AssetsTrust, L.P., the Lenders party thereto and U.S. Bank National Association, as Administrative Agent.10.18(8)Note Purchase Agreement, dated as of March 1, 2017 by and among American Assets Trust, Inc., American Assets Trust, L.P. and thepurchasers named therein. (Series D)10.19(9)Purchase Agreement and Escrow Instructions between CP III Pacific Ridge RF, LLC, CP III Pacific Ridge Solar, LLC, collectively asSeller, and American Assets Trust, Inc., as Purchaser, dated March 24, 201710.20(10)Note Purchase Agreement, dated as of May 23, 2017 by and among American Assets Trust, Inc., American Assets Trust, L.P. and thepurchasers named therein. (Series E)10.21(10)Second Amendment to the Amended and Restated Credit Agreement dated as of May 23, 2017, by and among American Assets Trust, Inc.,American Assets Trust, L.P., the lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing LineLender and L/C Issuer, and the other entities named therein.10.22(10)Second Amendment to the Term Loan Agreement dated as of May 23, 2017, by and among American Assets Trust, Inc., American AssetsTrust, L.P., the lenders from time to time party thereto, U.S. Bank National Association, as Administrative Agent, and the other entitiesnamed therein.64Exhibit No.Description10.23(10)First Amendment, dated as of May 23, 2017, to the Note Purchase Agreement, dated as if October 31, 2014, by and among AmericanAssets Trust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series E)10.24(10)First Amendment, dated as of May 23, 2017, to the Note Purchase Agreement, dated as of March 1, 2017, by and among American AssetsTrust, Inc., American Assets Trust, L.P. and the purchasers named therein. (Series E)10.25(11)Note Purchase Agreement, dated as of July 19, 2017, by and among American Assets Trust, Inc., American Assets Trust, L.P. and thepurchasers named therein. (Series F)10.26(12)Second Amended and Restated Credit Agreement dated January 9, 2018, by and among the company, the Operating Partnership, Bank ofAmerica, N.A., as Administrative Agent, and other entities named therein.10.27(12)Third Amendment to Term Loan Agreement dated January 9, 2018, by and among the company, the Operating Partnership, each lenderfrom time to time party thereto, and U.S. Bank National Association, as Administrative Agent.10.28(13)Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American AssetsTrust, L.P., and RBC Capital Markets, LLC10.29(13)Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American AssetsTrust, L.P., and Merrill Lynch, Pierce, Fenner & Smith Incorporated10.30(13)Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American AssetsTrust, L.P., and Morgan Stanley & Co, LLC10.31(13)Amended and Restated Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American AssetsTrust, L.P., and Wells Fargo Securities, LLC10.32(13)Equity Distribution Agreement, dated March 2, 2018, by and among American Assets Trust, Inc., American Assets Trust, L.P., and MizuhoSecurities USA LLC10.33(14)First Amendment to Second Amended and Restated Credit Agreement dated January 9, 2019, by and among the company, the OperatingPartnership, Bank of America, N.A., as Administrative Agent, and other entities named therein.10.34(15)Note Purchase Agreement, dated as of July 30, 2019, by and among the Company, the Operating Partnership, and the purchasers namedtherein.10.35(16)Contract for Purchase and Sale between HSPF La Jolla Commons I Investors LLC, HSPF La Jolla Commons II Investors LLC and HSPFLa Jolla Commons III Investors LLC, collectively as Seller, and the Company, as Purchaser, dated June 10, 201921.1*List of Subsidiaries of American Assets Trust, Inc.23.1*Consent of Independent Registered Public Accounting Firm for American Assets Trust, Inc.23.2*Consent of Independent Registered Public Accounting Firm for American Assets Trust, L.P.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*Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, L.P.31.3*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, Inc.31.4*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of American Assets Trust, L.P.32.1*Certification of Chief Executive Officer and Chief Financial Officer of American Assets Trust, Inc. pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*Certification of Chief Executive Officer and Chief Financial Officer of American Assets Trust, L.P. pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS*Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embeddedwithin the Inline XBRL Document.101.SCH*Inline XBRL Taxonomy Extension Schema Document101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).65*Filed herewith.(1)Incorporated herein by reference to American Assets Trust, Inc.'s Registration Statement on Form S-11, as amended (File No. 333-169326), filed with theSecurities and Exchange Commission on September 13, 2010.(2)Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 10-K filed with the Securities and Exchange Commission onFebruary 20, 2015.(3)Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission onJanuary 19, 2011.(4)Incorporated herein by reference to American Assets Trust, Inc’s Current Report on Form 8-K filed with the Securities and Exchange Commission onOctober 10, 2012.(5)Incorporated herein by reference to American Assets Trust, Inc’s Current Report on Form 10-Q filed with the Securities and Exchange Commission on May2, 2014.(6)Incorporated herein by reference to American Assets Trust, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission onOctober 31, 2014.(7)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 10-Q filed with the Securities and Exchange Commission on July29, 2016.(8)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on March1, 2017.(9)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on March27, 2017.(10)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on May23, 2017.(11)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on July19, 2017.(12)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission onJanuary 9, 2018.(13)Incorporated herein by reference to American Assets Trust, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March5, 2018.(14)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission onJanuary 9, 2019.(15)Incorporated herein by reference to American Assets Trust, Inc's Current Report on Form 8-K filed with the Securities and Exchange Commission on July30, 2019.(16)Incorporated herein by reference to American Assets Trust, Inc's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission onAugust 2, 2019.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrants have duly caused this Report to be signedon their behalf by the undersigned thereunto duly authorized this 14th day of February, 2020. American Assets Trust, Inc. American Assets Trust, L.P. By: American Assets Trust, Inc. Its: General Partner /s/ ERNEST RADY /s/ ERNEST RADYErnest Rady Ernest RadyChairman, President and Chief Executive Officer Chairman, President and Chief Executive Officer(Principal Executive Officer) (Principal Executive Officer) /s/ ROBERT F. BARTON /s/ ROBERT F. BARTONRobert F. BartonExecutive Vice President and Chief Financial Officer Robert F. BartonExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) (Principal Financial and Accounting Officer)66Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of theRegistrants and in the capacities and on the dates indicated. Signature Title Date/s/ ERNEST RADY Chairman of the Board, President and Chief ExecutiveOfficer February 14, 2020Ernest Rady /s/ ROBERT F. BARTON Executive Vice President, Chief Financial Officer andTreasurer February 14, 2020Robert F. Barton /s/ JOY L. SCHAEFER Director February 14, 2020Joy L. Schaefer /s/ DUANE A. NELLES Director February 14, 2020Duane A. Nelles /s/ THOMAS S. OLINGER Director February 14, 2020Thomas S. Olinger /s/ ROBERT S. SULLIVAN Director February 14, 2020Robert S. Sullivan 67Item 8 and Item 15(a) (1) and (2)Index to Consolidated Financial Statements and Schedule Reports of Independent Registered Public Accounting FirmF-2American Assets Trust, Inc. Consolidated Balance Sheets as of December 31, 2019 and 2018F-9Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017F-10Consolidated Statements of Equity for the years ended December 31, 2019, 2018, and 2017F-11Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017F-13American Assets Trust, L.P. Consolidated Balance Sheets as of December 31, 2019 and 2018F-14Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017F-15Consolidated Statements of Partners' Capital for the years ended December 31, 2019, 2018, and 2017F-16Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017F-18Notes to Consolidated Financial Statements of American Assets Trust, Inc. and American Assets Trust, L.P.F-19Schedule III—Consolidated Real Estate and Accumulated DepreciationF-53F-1Report of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of American Assets Trust, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of American Assets Trust, Inc. (the Company) as of December 31, 2019 and 2018, the relatedconsolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notesand financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results ofits operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accountingprinciples.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internalcontrol over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 14, 2020 expressed an unqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based onour audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with theU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required tobe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financialstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate.F-2 Impairment of real estate propertiesDescription of the MatterThe Company’s net real estate properties totaled $2.5 billion as of December 31, 2019. As discussed in Note 1 to the consolidatedfinancial statements, the Company reviews for impairment on a property by property basis whenever events or changes in circumstancesindicate that the carrying value of a property may not be fully recoverable. Impairment is recognized on properties held for use when theexpected undiscounted cash flows for a property are less than its carrying amount, at which time the property is written down to itsestimated fair value. Properties classified as held for sale are recorded at the lower of the carrying amount or the expected sales priceless costs to sell. There were no impairment charges during the year ended December 31, 2019.Auditing the Company's impairment assessment for real estate properties is challenging because of the subjective auditor judgmentnecessary in evaluating management’s identification of indictors of potential impairment and the related assessment of the severity ofsuch indicators in determining whether a triggering event has occurred that requires the Company to evaluate the recoverability of theasset.How We Addressed theMatter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s propertyimpairment review process. For example, we tested controls over management’s process for identifying and evaluating potentialimpairment indicators.Our testing of the Company’s impairment assessment included, among other procedures, evaluating significant judgments applied indetermining whether indicators of impairment were present at any given property by obtaining evidence to corroborate such judgmentsand searching for evidence contrary to such judgments. For example, we searched for tenants or groups of tenants with large reservedbalances or upcoming lease expirations that occupy a substantial portion of any particular property and searched for significant declinesin operating results of any particular property due to occupancy changes, tenant bankruptcies, environmental issues, adverse changes inlegal factors or natural disasters. Property asset acquisitionDescription of the MatterOn June 20, 2019, the Company acquired La Jolla Commons, consisting of two office buildings, an entitled development parcel andtwo parking structures, for a purchase price of approximately $525 million, less seller credits of (i) approximately $11.5 million forspeculative lease-up, (ii) approximately $4.2 million for assumed contractual liabilities (iii) and approximately $1.7 million for closingprorations, excluding closing costs of approximately $0.2 million. As discussed in Note 1 and Note 2 to the consolidated financialstatements, the Company accounted for the purchase of La Jolla Commons as an asset acquisition in accordance with the authoritativeaccounting guidance on acquisitions and business combinations. The Company’s methodology of allocating the cost of acquisitions toassets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraised values. For acquired operatingreal estate properties, such as La Jolla Commons, the purchase price is allocated to land and buildings, intangible assets such as in-placeleases, and tangible assets and liabilities acquired, if any.Auditing the Company’s accounting for its acquisition of La Jolla Commons was complex and highly judgmental due to the significantjudgment required in determining estimated fair values, replacement cost and appraised values of the acquired land and buildings andintangible assets such as in-place leases. The significant judgment was primarily due to (1) the judgmental nature of inputs, includingdiscount rate, capitalization rates, cost multipliers and various market assumptions such as market rental rates, (2) the complexity of themodels used to allocate the cost of the acquisition to the assets acquired and liabilities assumed, including income, sales comparison andcost approach models and (3) the sensitivity of the respective values to the underlying significant assumptions.F-3How We Addressed theMatter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accountingfor acquisitions process. For example, we tested controls over the valuation of acquired land, buildings and intangible assets, includingthe valuation models and underlying assumptions used to develop such estimates.Our testing of the Company’s accounting for its acquisition of La Jolla Commons included, among other procedures, reading thepurchase agreement and testing the values allocated to the assets acquired and liabilities assumed by evaluating the valuation methodsand significant assumptions used by management. For example, our real estate valuation specialists assisted us in evaluating themethodologies used by the Company and testing the consistency of the selected discount rate, capitalization rates, cost multipliers andvarious market assumptions such as market rental rates with external market data sources. Furthermore, we compared assumptions aboutfuture projections with historical results of the acquired property. Additionally, we evaluated the completeness and accuracy of theunderlying data supporting the determination of various inputs. Also, with the assistance of our specialists, we evaluated theincorporation of the key assumptions in the aforementioned models and tested such models for clerical accuracy./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2010.San Diego, CaliforniaFebruary 14, 2020F-4Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of American Assets Trust, Inc. Opinion on Internal Control over Financial ReportingWe have audited American Assets Trust, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion,American Assets Trust, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, basedon the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balancesheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income, equity, and cash flows for each of thethree years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report datedFebruary 14, 2020 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to expressan opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate./s/ Ernst & Young LLPSan Diego, CaliforniaFebruary 14, 2020F-5Report of Independent Registered Public Accounting FirmTo the Partners of American Assets Trust, L.P.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of American Assets Trust, L.P. (the Company) as of December 31, 2019 and 2018, the relatedconsolidated statements of comprehensive income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2019, and therelated notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion,the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the resultsof its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accountingprinciples.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statementsbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are requiredto be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor werewe engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal controlover financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required tobe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financialstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate.F-6 Impairment of real estate propertiesDescription of the MatterThe Company’s net real estate properties totaled $2.5 billion as of December 31, 2019. As discussed in Note 1 to the consolidatedfinancial statements, the Company reviews for impairment on a property by property basis whenever events or changes in circumstancesindicate that the carrying value of a property may not be fully recoverable. Impairment is recognized on properties held for use when theexpected undiscounted cash flows for a property are less than its carrying amount, at which time the property is written down to itsestimated fair value. Properties classified as held for sale are recorded at the lower of the carrying amount or the expected sales priceless costs to sell. There were no impairment charges during the year ended December 31, 2019.Auditing the Company's impairment assessment for real estate properties is challenging because of the subjective auditor judgmentnecessary in evaluating management’s identification of indictors of potential impairment and the related assessment of the severity ofsuch indicators in determining whether a triggering event has occurred that requires the Company to evaluate the recoverability of theasset.How We Addressed theMatter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s propertyimpairment review process. For example, we tested controls over management’s process for identifying and evaluating potentialimpairment indicators.Our testing of the Company’s impairment assessment included, among other procedures, evaluating significant judgments applied indetermining whether indicators of impairment were present at any given property by obtaining evidence to corroborate such judgmentsand searching for evidence contrary to such judgments. For example, we searched for tenants or groups of tenants with large reservedbalances or upcoming lease expirations that occupy a substantial portion of any particular property and searched for significant declinesin operating results of any particular property due to occupancy changes, tenant bankruptcies, environmental issues, adverse changes inlegal factors or natural disasters. Property asset acquisitionDescription of the MatterOn June 20, 2019, the Company acquired La Jolla Commons, consisting of two office buildings, an entitled development parcel andtwo parking structures, for a purchase price of approximately $525 million, less seller credits of (i) approximately $11.5 million forspeculative lease-up, (ii) approximately $4.2 million for assumed contractual liabilities (iii) and approximately $1.7 million for closingprorations, excluding closing costs of approximately $0.2 million. As discussed in Note 1 and Note 2 to the consolidated financialstatements, the Company accounted for the purchase of La Jolla Commons as an asset acquisition in accordance with the authoritativeaccounting guidance on acquisitions and business combinations. The Company’s methodology of allocating the cost of acquisitions toassets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraised values. For acquired operatingreal estate properties, such as La Jolla Commons, the purchase price is allocated to land and buildings, intangible assets such as in-placeleases, and tangible assets and liabilities acquired, if any.Auditing the Company’s accounting for its acquisition of La Jolla Commons was complex and highly judgmental due to the significantjudgment required in determining estimated fair values, replacement cost and appraised values of the acquired land and buildings andintangible assets such as in-place leases. The significant judgment was primarily due to (1) the judgmental nature of inputs, includingdiscount rate, capitalization rates, cost multipliers and various market assumptions such as market rental rates, (2) the complexity of themodels used to allocate the cost of the acquisition to the assets acquired and liabilities assumed, including income, sales comparison andcost approach models and (3) the sensitivity of the respective values to the underlying significant assumptions.F-7How We Addressed theMatter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accountingfor acquisitions process. For example, we tested controls over the valuation of acquired land, buildings and intangible assets, includingthe valuation models and underlying assumptions used to develop such estimates.Our testing of the Company’s accounting for its acquisition of La Jolla Commons included, among other procedures, reading thepurchase agreement and testing the values allocated to the assets acquired and liabilities assumed by evaluating the valuation methodsand significant assumptions used by management. For example, our real estate valuation specialists assisted us in evaluating themethodologies used by the Company and testing the consistency of the selected discount rate, capitalization rates, cost multipliers andvarious market assumptions such as market rental rates with external market data sources. Furthermore, we compared assumptions aboutfuture projections with historical results of the acquired property. Additionally, we evaluated the completeness and accuracy of theunderlying data supporting the determination of various inputs. Also, with the assistance of our specialists, we evaluated theincorporation of the key assumptions in the aforementioned models and tested such models for clerical accuracy./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2014.San Diego, CaliforniaFebruary 14, 2020F-8American Assets Trust, Inc.Consolidated Balance Sheets(In Thousands, Except Share Data) December 31, 2019 December 31, 2018ASSETS Real estate, at cost Operating real estate$3,096,886 $2,549,571Construction in progress91,264 71,228Held for development547 9,392 3,188,697 2,630,191Accumulated depreciation(665,222) (590,338)Net real estate2,523,475 2,039,853Cash and cash equivalents99,303 47,956Restricted cash10,148 9,316Accounts receivable, net12,016 9,289Deferred rent receivables, net52,171 39,815Other assets, net93,220 52,021TOTAL ASSETS$2,790,333 $2,198,250LIABILITIES AND EQUITY LIABILITIES: Secured notes payable$161,879 $182,572Unsecured notes payable1,195,780 1,045,863Unsecured line of credit— 62,337Accounts payable and accrued expenses62,576 46,616Security deposits payable8,316 8,844Other liabilities and deferred credits68,110 49,547Total liabilities1,496,661 1,395,779Commitments and contingencies (Note 12) EQUITY: American Assets Trust, Inc. stockholders' equity Common stock, $0.01 par value, 490,000,000 shares authorized, 60,068,228 and 47,335,409 sharesissued and outstanding at December 31, 2019 and December 31, 2018, respectively601 474Additional paid-in capital1,452,014 920,661Accumulated dividends in excess of net income(144,378) (128,778)Accumulated other comprehensive income5,680 10,620Total American Assets Trust, Inc. stockholders' equity1,313,917 802,977Noncontrolling interests(20,245) (506)Total equity1,293,672 802,471TOTAL LIABILITIES AND EQUITY$2,790,333 $2,198,250The accompanying notes are an integral part of these consolidated financial statements.F-9American Assets Trust, Inc.Consolidated Statements of Comprehensive Income(In Thousands, Except Shares and Per Share Data) Year Ended December 31, 2019 2018 2017REVENUE: Rental income$343,865 $309,537 $298,803Other property income22,876 21,330 16,180Total revenue366,741 330,867 314,983EXPENSES: Rental expenses91,967 86,482 84,006Real estate taxes40,013 34,973 32,671General and administrative24,871 22,784 21,382Depreciation and amortization96,205 107,093 83,278Total operating expenses253,056 251,332 221,337OPERATING INCOME113,685 79,535 93,646Interest expense(54,008) (52,248) (53,848)Gain on sale of real estate633 — —Other income (expense), net(122) (85) 334NET INCOME60,188 27,202 40,132Net income attributable to restricted shares(381) (311) (241)Net income attributable to unitholders in the Operating Partnership(14,089) (7,205) (10,814)NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, INC.STOCKHOLDERS$45,718 $19,686 $29,077EARNINGS PER COMMON SHARE, BASIC Basic income attributable to common stockholders per share$0.84 $0.42 $0.62Weighted average shares of common stock outstanding - basic54,110,949 46,950,812 46,715,520EARNINGS PER COMMON SHARE, DILUTED Diluted income attributable to common stockholders per share$0.84 $0.42 $0.62Weighted average shares of common stock outstanding - diluted70,786,132 64,136,559 64,087,250 COMPREHENSIVE INCOME Net income$60,188 $27,202 $40,132Other comprehensive (loss) gain - unrealized (loss) gain on swap derivative during the period(5,571) 120 386Reclassification of amortization of forward starting swap included in interest expense(1,304) (1,279) (1,114)Comprehensive income53,313 26,043 39,404Comprehensive income attributable to noncontrolling interest(12,301) (6,877) (10,433)Comprehensive income attributable to American Assets Trust, Inc.$41,012 $19,166 $28,971The accompanying notes are an integral part of these consolidated financial statements.F-10American Assets Trust, Inc.Consolidated Statements of Equity(In Thousands, Except Share Data) American Assets Trust, Inc. Stockholders' Equity NoncontrollingInterests -Unitholders in theOperatingPartnership Total Common Shares Additional Paid-in Capital AccumulatedDividends inExcess of NetIncome Accumulated OtherComprehensiveIncome (Loss) Shares Amount Balance at December 31, 201645,732,109 $457 $874,597 $(77,296) $11,798 $28,995 $838,551Net income— — — 29,318 — 10,814 40,132Common shares issued700,000 7 29,866 — — — 29,873Issuance of restricted stock150,098 2 (2) — — — —Forfeiture of restricted stock(48,624) — — — — — —Conversion of operatingpartnership units693,842 7 10,752 — — (10,759) —Dividends declared and paid— — — (49,302) — (18,235) (67,537)Stock-based compensation— — 4,735 — — — 4,735Shares withheld for employee taxes(22,837) — (882) — — — (882)Other comprehensive loss - changein value of interest rate swap— — — — (7,310) (2,971) (10,281)Other comprehensive income -unrealized gain on forward-starting interest rate swaps— — — — 7,775 2,892 10,667Reclassification of amortization offorward starting swap included ininterest expense— — — — (812) (302) (1,114)Balance at December 31, 201747,204,588 473 919,066 (97,280) 11,451 10,434 844,144Net income— — — 19,997 — 7,205 27,202Common shares issued— — — — — — —Issuance of restricted stock205,110 2 (2) — — — —Forfeiture of restricted stock(78,975) (1) 1 — — — —Conversion of operatingpartnership units17,372 — (916) — — 916 —Dividends declared and paid— — — (51,495) — (18,733) (70,228)Stock-based compensation— — 3,039 — — — 3,039Shares withheld for employee taxes(12,686) — (527) — — — (527)Other comprehensive income -change in value of interest rateswap— — — — 105 15 120Reclassification of amortization offorward starting swap included ininterest expense— — — — (936) (343) (1,279)Balance at December 31, 201847,335,409 474 920,661 (128,778) 10,620 (506) 802,471Net income— — — 46,099 — 14,089 60,188Common shares issued11,871,552 118 515,236 — — — 515,354Issuance of restricted stock173,008 2 (2) — — — —Forfeiture of restricted stock(70,641) (1) 1 — — — —Conversion of operatingpartnership units787,060 8 12,979 — 148 (13,135) —Dividends declared and paid— — — (61,699) — (18,906) (80,605)F-11Stock-based compensation— — 4,477 — — — 4,477Shares withheld for employee taxes(28,160) — (1,338) — — — (1,338)Other comprehensive loss - changein value of interest rate swap— — — — (4,482) (1,602) (6,084)Other comprehensive income -unrealized gain on forward-starting interest rate swaps— — — — 392 121 513Reclassification of amortization offorward-starting swap included ininterest expense— — — — (998) (306) (1,304)Balance at December 31, 201960,068,228 $601 $1,452,014 $(144,378) $5,680 $(20,245) $1,293,672The accompanying notes are an integral part of these consolidated financial statements.F-12American Assets Trust, Inc.Consolidated Statements of Cash Flows(In Thousands) Year ended December 31, 2019 2018 2017OPERATING ACTIVITIES Net income$60,188 $27,202 $40,132Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent revenue and amortization of lease intangibles(6,985) (1,157) (2,547)Depreciation and amortization96,205 107,093 83,278Amortization of debt issuance costs and debt fair value adjustments1,467 1,530 3,058Gain on sale of real estate(633) — —Stock-based compensation expense4,477 3,039 4,735Settlement of forward interest rate swap agreement513 — 10,667Lease termination income(4,518) — —Other noncash interest expense(1,304) (1,279) (1,114)Other, net6,497 383 901Changes in operating assets and liabilities Change in accounts receivable(1,071) (336) (1,116)Change in other assets(2,420) (227) (499)Change in accounts payable and accrued expenses5,956 (3,297) 7,632Change in security deposits payable(971) 2,274 456Change in other liabilities and deferred credits(3,585) 1,282 270Net cash provided by operating activities153,816 136,507 145,853INVESTING ACTIVITIES Acquisition of real estate, net(507,780) — (278,141)Capital expenditures(88,327) (54,411) (47,496)Proceeds from sale of real estate, net of selling costs8,191 — —Leasing commissions(11,267) (9,936) (4,927)Net cash used in investing activities(599,183) (64,347) (330,564)FINANCING ACTIVITIES Repayment of secured notes payable(20,762) (97,124) (167,139)Proceeds from unsecured line of credit59,000 84,000 173,000Repayment of unsecured line of credit(123,000) (20,000) (193,000)Proceeds from issuance of unsecured notes payable150,000 — 450,000Debt issuance costs(1,103) (2,727) (2,401)Proceeds from issuance of common stock, net515,354 (236) 29,873Dividends paid to common stock and unitholders(80,605) (70,228) (67,537)Shares withheld for employee taxes(1,338) (527) (882)Net cash provided by (used in) financing activities497,546 (106,842) 221,914Net increase (decrease) in cash, cash equivalents and restricted cash52,179 (34,682) 37,203Cash, cash equivalents and restricted cash, beginning of year57,272 91,954 54,751Cash, cash equivalents and restricted cash, end of year$109,451 $57,272 $91,954The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total ofthe same amounts shown in the consolidated statement of cash flows: Year ended December 31, 2019 2018 2017Cash and cash equivalents$99,303 $47,956 $82,610Restricted cash10,148 9,316 9,344Total cash, cash equivalents and restricted cash shown in Statement of Cash Flows$109,451 $57,272 $91,954The accompanying notes are an integral part of these consolidated financial statements.F-13American Assets Trust, L.P.Consolidated Balance Sheets(In Thousands, Except Unit Data) December 31, December 31, 2019 2018 ASSETS Real estate, at cost Operating real estate$3,096,886 $2,549,571Construction in progress91,264 71,228Held for development547 9,392 3,188,697 2,630,191Accumulated depreciation(665,222) (590,338)Net real estate2,523,475 2,039,853Cash and cash equivalents99,303 47,956Restricted cash10,148 9,316Accounts receivable, net12,016 9,289Deferred rent receivables, net52,171 39,815Other assets, net93,220 52,021TOTAL ASSETS$2,790,333 $2,198,250LIABILITIES AND CAPITAL LIABILITIES: Secured notes payable$161,879 $182,572Unsecured notes payable1,195,780 1,045,863Unsecured line of credit— 62,337Accounts payable and accrued expenses62,576 46,616Security deposits payable8,316 8,844Other liabilities and deferred credits68,110 49,547Total liabilities1,496,661 1,395,779Commitments and contingencies (Note 12) CAPITAL: Limited partners' capital, 16,390,548 and 17,177,608 units issued and outstanding as of December 31,2019 and December 31, 2018, respectively(22,281) (4,477)General partner's capital, 60,068,228 and 47,335,409 units issued and outstanding as of December 31,2019 and December 31, 2018, respectively1,308,237 792,357Accumulated other comprehensive income7,716 14,591Total capital1,293,672 802,471TOTAL LIABILITIES AND CAPITAL$2,790,333 $2,198,250The accompanying notes are an integral part of these consolidated financial statements.F-14American Assets Trust, L.P.Consolidated Statements of Comprehensive Income(In Thousands, Except Units and Per Unit Data) Year Ended December 31, 2019 2018 2017REVENUE: Rental income$343,865 $309,537 $298,803Other property income22,876 21,330 16,180Total revenue366,741 330,867 314,983EXPENSES: Rental expenses91,967 86,482 84,006Real estate taxes40,013 34,973 32,671General and administrative24,871 22,784 21,382Depreciation and amortization96,205 107,093 83,278Total operating expenses253,056 251,332 221,337OPERATING INCOME113,685 79,535 93,646Interest expense(54,008) (52,248) (53,848)Gain on sale of real estate633 — —Other income (expense), net(122) (85) 334NET INCOME60,188 27,202 40,132Net income attributable to restricted shares(381) (311) (241)NET INCOME ATTRIBUTABLE TO AMERICAN ASSETS TRUST, L.P.$59,807 $26,891 $39,891EARNINGS PER UNIT - BASIC Earnings per unit, basic$0.84 $0.42 $0.62Weighted average units outstanding, basic70,786,132 64,136,559 64,087,250EARNINGS PER UNIT - DILUTED Earnings per unit, diluted$0.84 $0.42 $0.62Weighted average units outstanding, diluted70,786,132 64,136,559 64,087,250 DISTRIBUTIONS PER UNIT$1.14 $1.09 $1.05 COMPREHENSIVE INCOME Net income$60,188 $27,202 $40,132Other comprehensive (loss) gain - unrealized (loss) gain on swap derivative during the period(5,571) 120 386Reclassification of amortization of forward starting swap included in interest expense(1,304) (1,279) (1,114)Comprehensive income53,313 26,043 39,404Comprehensive income attributable to Limited Partners(12,301) (6,877) (10,433)Comprehensive income attributable to General Partner$41,012 $19,166 $28,971The accompanying notes are an integral part of these consolidated financial statements.F-15American Assets Trust, L.P.Consolidated Statements of Partners' Capital(In Thousands, Except Unit Data) Limited Partners' Capital (1) General Partner's Capital (2) Accumulated OtherComprehensiveIncome (Loss) Total Capital Units Amount Units Amount Balance at December 31, 201617,888,822 $24,315 45,732,109 $797,758 $16,478 $838,551Net income— 10,814 — 29,318 — 40,132Contributions from American AssetsTrust, Inc.— — 700,000 29,873 — 29,873Conversion of operating partnership units(693,842) (10,759) 693,842 10,759 — —Issuance of restricted units— — 150,098 — — —Forfeiture of restricted units— — (48,624) — — —Distributions— (18,235) — (49,302) — (67,537)Stock-based compensation— — — 4,735 — 4,735Units withheld for employee taxes— — (22,837) (882) — (882)Other comprehensive loss - change invalue of interest rate swap— — — — (10,281) (10,281)Other comprehensive income - unrealizedgain on forward-starting interest rateswaps— — — — 10,667 10,667Reclassification of amortization of forwardstarting swap included in interest expense— — — — (1,114) (1,114)Balance at December 31, 201717,194,980 6,135 47,204,588 822,259 15,750 844,144Net income— 7,205 — 19,997 — 27,202Conversion of operating partnership units(17,372) 916 17,372 (916) — —Issuance of restricted units— — 205,110 — — —Forfeiture of restricted units— — (78,975) — — —Distributions— (18,733) — (51,495) — (70,228)Stock-based compensation— — — 3,039 — 3,039Units withheld for employee taxes— — (12,686) (527) — (527)Other comprehensive income - change invalue of interest rate swap— — — — 120 120Reclassification of amortization of forwardstarting swap included in interest expense— — — — (1,279) (1,279)Balance at December 31, 201817,177,608 (4,477) 47,335,409 792,357 14,591 802,471Net income— 14,089 — 46,099 — 60,188Contributions from American AssetsTrust, Inc.— — 11,871,552 515,354 — 515,354Conversion of operating partnership units(787,060) (12,987) 787,060 12,987 — —Issuance of restricted units— — 173,008 — — —Forfeiture of restricted units— — (70,641) — — —Distributions— (18,906) — (61,699) — (80,605)Stock-based compensation— — — 4,477 — 4,477Units withheld for employee taxes— — (28,160) (1,338) — (1,338)F-16Other comprehensive loss - change invalue of interest rate swap— — — — (6,084) (6,084)Other comprehensive income - unrealizedgain on forward-starting interest rate swaps— — — — 513 513Reclassification of amortization offorward-starting swap included in interestexpense— — — — (1,304) (1,304)Balance at December 31, 201916,390,548 $(22,281) 60,068,228 $1,308,237 $7,716 $1,293,672(1) Consists of limited partnership interests held by third parties.(2) Consists of general and limited partnership interests held by American Assets Trust, Inc.The accompanying notes are an integral part of these consolidated financial statements.F-17American Assets Trust, L.P.Consolidated Statements of Cash Flows(In Thousands) Year Ended December 31, 2019 2018 2017OPERATING ACTIVITIES Net income$60,188 $27,202 $40,132Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent revenue and amortization of lease intangibles(6,985) (1,157) (2,547)Depreciation and amortization96,205 107,093 83,278Amortization of debt issuance costs and debt fair value adjustments1,467 1,530 3,058Gain on sale of real estate(633) — —Stock-based compensation expense4,477 3,039 4,735Settlement of forward interest rate swap agreement513 — 10,667Lease termination income(4,518) — —Other noncash interest expense(1,304) (1,279) (1,114)Other, net6,497 383 901Changes in operating assets and liabilities Change in accounts receivable(1,071) (336) (1,116)Change in other assets(2,420) (227) (499)Change in accounts payable and accrued expenses5,956 (3,297) 7,632Change in security deposits payable(971) 2,274 456Change in other liabilities and deferred credits(3,585) 1,282 270Net cash provided by operating activities153,816 136,507 145,853INVESTING ACTIVITIES Acquisition of real estate, net(507,780) — (278,141)Capital expenditures(88,327) (54,411) (47,496)Proceeds from sale of real estate, net of selling costs8,191 — —Leasing commissions(11,267) (9,936) (4,927)Net cash used in investing activities(599,183) (64,347) (330,564)FINANCING ACTIVITIES Repayment of secured notes payable(20,762) (97,124) (167,139)Proceeds from unsecured line of credit59,000 84,000 173,000Repayment of unsecured line of credit(123,000) (20,000) (193,000)Proceeds from issuance of unsecured notes payable150,000 — 450,000Debt issuance costs(1,103) (2,727) (2,401)Contributions from American Assets Trust, Inc.515,354 (236) 29,873Distributions(80,605) (70,228) (67,537)Shares withheld for employee taxes(1,338) (527) (882)Net cash provided by (used in) financing activities497,546 (106,842) 221,914Net increase (decrease) in cash, cash equivalents and restricted cash52,179 (34,682) 37,203Cash, cash equivalents and restricted cash, beginning of year57,272 91,954 54,751Cash, cash equivalents and restricted cash, end of year$109,451 $57,272 $91,954The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total ofthe same amounts shown in the consolidated statement of cash flows: Year ended December 31, 2019 2018 2017Cash and cash equivalents$99,303 $47,956 $82,610Restricted cash10,148 9,316 9,344Total cash, cash equivalents and restricted cash shown in Statement of Cash Flows$109,451 $57,272 $91,954The accompanying notes are an integral part of these consolidated financial statements.F-18American Assets Trust, Inc. and American Assets Trust, L.P.Notes to Consolidated Financial StatementsNOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBusiness and OrganizationAmerican Assets Trust, Inc. (which may be referred to in these financial statements as the “company,” “we,” “us,” or “our”) is a Maryland corporationformed on July 16, 2010 that did not have any operating activity until the consummation of our initial public offering (the “Offering”) and the related acquisitionon January 19, 2011 of certain assets of a combination of entities whose assets included entities owned and/or controlled by Ernest S. Rady and his affiliates,including the Rady Trust, which in turn owned (1) controlling interests in entities owning 17 properties and the property management business of American Assets,Inc. and (2) noncontrolling interests in entities owning four properties. The company is the sole general partner of American Assets Trust, L.P., a Maryland limitedpartnership 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 REIT subsidiary. Since the formation of our Operating Partnership, the company has controlled our Operating Partnership as its generalpartner and has consolidated its assets, liabilities and results of operations.We are a vertically integrated and self-administered REIT with 206 employees providing substantial in-house expertise in asset management, propertymanagement, property development, leasing, tenant improvement construction, acquisitions, repositioning, redevelopment and financing.Any reference to the number of properties or units, square footage or acres, employees; or references to beneficial ownership interests, are unaudited andoutside the scope of our independent registered public accounting firm's audit of our financial statements in accordance with the standards of the United StatesPublic Company Accounting Oversight Board.As of December 31, 2019, we owned or had a controlling interest in 28 office, retail, multifamily and mixed-use operating properties, the operations of whichwe consolidate. Additionally, as of December 31, 2019, we owned land at three of our properties that we classify as held for development and construction inprogress. A summary of the properties owned by us is as follows:RetailCarmel Country PlazaGateway MarketplaceAlamo Quarry MarketCarmel Mountain PlazaDel Monte CenterHassalo on Eighth - RetailSouth Bay MarketplaceGeary Marketplace Lomas Santa Fe PlazaThe Shops at Kalakaua Solana Beach Towne CentreWaikele Center OfficeLa Jolla CommonsOne Beach Street Torrey Reserve CampusFirst & Main Torrey PointLloyd District Portfolio Solana Crossing (formerly Solana BeachCorporate Centre)City Center Bellevue The Landmark at One Market MultifamilyLoma PalisadesHassalo on Eighth - Multifamily Imperial Beach Gardens Mariner's Point Santa Fe Park RV Resort Pacific Ridge Apartments Mixed-Use Waikiki Beach Walk Retail and Embassy Suites™ Hotel F-19Table of ContentsHeld for Development and Construction in ProgressLa Jolla Commons - Land Solana Crossing – Land Lloyd District Portfolio – Construction in Progress Basis of PresentationOur consolidated financial statements include the accounts of the company, our Operating Partnership and our subsidiaries. The equity interests of otherinvestors in our Operating Partnership are reflected as noncontrolling interests.All significant intercompany transactions and balances are eliminated in consolidation. Certain reclassifications have been made to conform to current periodpresentation.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,”requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingentassets and liabilities, and revenues and expenses. These estimates are prepared using management's best judgment, after considering past, current and expectedevents and economic conditions. Actual results could differ from these estimates.Consolidated Statements of Cash Flows-Supplemental DisclosuresThe following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows (in thousands): Year Ended December 31, 2019 2018 2017Supplemental cash flow information Total interest costs incurred$54,636 $53,736 $55,418Interest capitalized$628 $1,488 $1,570Interest expense$54,008 $52,248 $53,848Cash paid for interest, net of amounts capitalized$51,975 $52,632 $47,473Cash paid for income taxes$971 $462 $461Supplemental schedule of noncash investing and financing activities Accounts payable and accrued liabilities for construction in progress$25,413 $14,440 $6,863Accrued leasing commissions$3,345 $5,229 $1,694Reduction to capital for prepaid equity financing costs$— $241 $—Building recorded in termination of ground lease$4,518 $— $—Revenue Recognition and Accounts ReceivableOur leases with tenants are classified as operating leases. Substantially all such leases contain fixed rent escalations which occur at specified times during theterm of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, based onmanagement's assessment of credit, collection and other business risks. When we determine that we are the owner of tenant improvements and the tenant hasreimbursed us for a portion or all of the tenant improvement costs, we consider the amount paid to be additional rent, which is recognized on a straight-line basisover the term of the related lease. For first generation tenants, in instances in which we fund tenant improvements and the improvements are deemed to be ownedby us, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant.When we determine that the tenant is the owner of tenant improvements, tenant allowances are recorded as lease incentives and we commence revenue recognitionand lease incentive amortization when possession or control of the space is turned over to the tenant for tenant work to begin. Percentage rents, which representadditional rents based upon the level of sales achieved byF-20Table of Contentscertain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage rents arecollectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred.Other property income includes parking income, general excise tax billed to tenants and fees charged to tenants at our multifamily properties. Other propertyincome is recognized when we satisfy performance obligations as evidenced by the transfer of control of our services to customers. We measure other propertyincome based on the amount of consideration we expect to be entitled to in exchange for the services provided. We recognize general excise tax gross, with theamounts billed to tenants and customers recorded in other property income and the related taxes paid as rental expense. The general excise tax included in otherincome was $3.5 million, $3.6 million and $3.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. For a tenant to terminate its leaseagreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant hasrelinquished control of the space are generally recognized on the later of the termination date or the satisfaction of all conditions precedent to the lease termination,including, without limitation, payment of all lease termination fees. When a lease is terminated early but the tenant continues to control the space under a modifiedlease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement.Current accounts receivable from tenants primarily relate to contractual minimum rent and percentage rent as well as real estate tax and other costreimbursements. Accounts receivable from straight-line rent is typically longer term in nature and relates to the cumulative amount by which straight-line rentalincome recorded to date exceeds cash rents billed to date under the contractual lease agreement.We recognize revenue on the hotel portion of our mixed-use property from the rental of hotel rooms and guest services when we satisfy performanceobligations as evidenced by the transfer of control when the rooms are occupied and services have been provided. Food and beverage sales are recognized when thecustomer has been served or at the time the transaction occurs. Revenue from room rental is included in rental revenue on the statement of income. Revenue fromother sales and services provided is included in other property income on the statement of income.We make estimates of the collectability of our current accounts receivable and straight-line rents receivable which requires significant judgment bymanagement. The collectability of receivables is affected by numerous different factors including current economic conditions, tenant bankruptcies, the status ofcollectability of current cash rents receivable, tenants' recent and historical financial and operating results, changes in our tenants' credit ratings, communicationsbetween our operating personnel and tenants, the extent of security deposits and letters of credits held with respect to tenants, and the ability of the tenant toperform under the terms of their lease agreement. If our assessment of these factors indicates it is probable that we will be unable to collect substantially all rents,we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they becomeaccruable or cash collected. If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize anadjustment to rental income in the period we make a change to our prior conclusion.At December 31, 2019 and December 31, 2018, our allowance for doubtful accounts was $1.2 million and $0.6 million, respectively. Our allowance fordeferred rent receivables at December 31, 2019 and December 31, 2018 was $0.5 million and $0.3 million, respectively. Total bad debt expense was $1.8 million,$0.8 million and $0.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. Total bad debt expense for the year ended December 31, 2019was included as a reduction to rental income on the statement of income while the total bad debt expense for the years ended December 31, 2018 and 2017 wereincluded in rental income on the statement of income.Effective January 1, 2018, (upon the adoption of ASU 2014-09, Revenue from Contracts with Customers) sales of real estate are recognized generally uponthe transfer of control, which usually occurs when the real estate is legally sold. Prior to January 1, 2018, sales of real estate were recognized only when sufficientdown payments had been obtained, possession and other attributes of ownership had been transferred to the buyer and we had no significant continuinginvolvement. The application of these criteria can be complex and required us to make assumptions. We believe the relevant criteria were met for all real estatesold during the periods presented.Real EstateLand, buildings and improvements are recorded at cost. Depreciation is computed using the straight-line method. Estimated useful lives range generallyfrom 30 years to a maximum of 40 years on buildings and major improvements. Minor improvements, furniture and equipment are capitalized and depreciated overuseful lives ranging from 3 years to 15 years.F-21Table of ContentsMaintenance and repairs that do not improve or extend the useful lives of the related assets are charged to operations as incurred. Tenant improvements arecapitalized and depreciated over the life of the related lease or their estimated useful life, whichever is shorter. If a tenant vacates its space prior to the contractualtermination of its lease, the undepreciated balance of any tenant improvements are written off if they are replaced or have no future value. For the years endedDecember 31, 2019, 2018 and 2017, real estate depreciation expense was $85.3 million, $99.6 million and $70.2 million, respectively.Acquisitions of properties are accounted for in accordance with the authoritative accounting guidance on acquisitions and business combinations. Ourmethodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraisedvalues. When we acquire operating real estate properties, the purchase price is allocated to land and buildings, intangibles such as in-place leases, and to currentassets and liabilities acquired, if any. Such valuations include a consideration of the noncancelable terms of the respective leases as well as any applicable renewalperiods. The fair values associated with below market renewal options are determined based on a review of several qualitative and quantitative factors on a lease-by-lease basis at acquisition to determine whether it is probable that the tenant would exercise its option to renew the lease agreement. These factors include:(1) the type of tenant in relation to the property it occupies, (2) the quality of the tenant, including the tenant's long term business prospects and (3) whether thefixed rate renewal option was sufficiently lower than the fair rental of the property at the date the option becomes exercisable such that it would appear to bereasonably assured that the tenant would exercise the option to renew. The value allocated to in-place leases is amortized over the related lease term and reflectedas depreciation and amortization in the statement of income.The value of above and below market leases associated with the original noncancelable lease terms are amortized to rental income over the terms of therespective noncancelable lease periods and are reflected as either an increase (for below market leases) or a decrease (for above market leases) to rental income inthe statement of income. The value of the leases associated with below market lease renewal options that are likely to be exercised are amortized to rental incomeover the respective renewal periods. If a tenant vacates its space prior to contractual termination of its lease or the lease is not renewed, the unamortized balance ofany in-place lease value is written off to rental income and amortization expense.Transaction costs related to the acquisition of a business, such as broker fees, transfer taxes, legal, accounting, valuation, and other professional andconsulting fees, are expensed as incurred and included in “general and administrative expenses” in our consolidated statements of comprehensive income. For assetacquisitions not meeting the definition of a business, transaction costs are capitalized as part of the acquisition cost.Capitalized CostsWe capitalize certain costs related to the development and redevelopment of real estate including pre-construction costs, real estate taxes, insurance andconstruction costs and salaries and related costs of personnel directly involved. Additionally, we capitalize interest costs related to development and significantredevelopment activities. Capitalization of these costs begins when the activities and related expenditures commence and cease when the project is substantiallycomplete and ready for its intended use, at which time the project is placed in service and depreciation commences. Additionally, we make estimates as to theprobability of certain development and redevelopment projects being completed. If we determine that the completion of development or redevelopment is no longerprobable, we expense all capitalized costs which are not recoverable.Impairment of Long Lived AssetsWe review for impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying value of a property maynot be fully recoverable. Impairment is recognized on properties held for use when the expected undiscounted cash flows for a property are less than its carryingamount at which time the property is written-down to fair value. Properties held for sale are recorded at the lower of the carrying amount or the expected sales priceless costs to sell. There were no impairment charges during the years ended December 31, 2019, 2018 and 2017.Financial InstrumentsThe estimated fair values of financial instruments are determined using available market information and appropriate valuation methods. Considerablejudgment is necessary to interpret market data and develop estimated fair values. The use of different market assumptions or estimation methods may have amaterial effect on the estimated fair value amounts. Accordingly, estimated fair values are not necessarily indicative of the amounts that could be realized in currentmarket exchanges.Derivative InstrumentsF-22Table of ContentsAt times, we may use derivative instruments to manage exposure to variable interest rate risk. We may enter into interest rate swaps to manage our exposureto variable interest rate risk. If and when we enter into derivative instruments, we ensure that such instruments qualify as cash flow hedges and would not enter intoderivative instruments for speculative purposes.Any interest rate swaps associated with our cash flow hedges are recorded at fair value on a recurring basis. We assess effectiveness of our cash flow hedgesboth at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recordedin accumulated other comprehensive income (loss) and is subsequently reclassified into interest expense as interest is incurred on the related variable rate debt. Ourcash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts,settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness ofthe counterparty. When ineffectiveness exists, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges isrecognized in earnings in the period affected. See the discussion under Note 8 for certain quantitative details related to interest rate swaps and for a discussion onhow we value derivative financial instruments. Cash and Cash EquivalentsWe define cash and cash equivalents as cash on hand, demand deposits with financial institutions and short term liquid investments with an initial maturity ofless than 3 months. Cash balances in individual banks may exceed the federally insured limit of $250,000 by the Federal Deposit Insurance Corporation (the"FDIC"). No losses have been experienced related to such accounts. At December 31, 2019 and December 31, 2018, we had $36.2 million and $42.4 million,respectively, in excess of the FDIC insured limit. At December 31, 2019 and December 31, 2018, we had $52.5 million and $0.2 million, respectively, in moneymarket funds that are not FDIC insured.Restricted CashRestricted cash consists of amounts held by lenders to provide for future real estate tax expenditures, insurance expenditures and reserves for capitalimprovements. At December 31, 2019 and 2018, we had $10.1 million and $9.3 million, respectively, in restricted cash.Other AssetsOther assets consist primarily of lease costs, lease incentives, acquired in-place leases and acquired above market leases. Capitalized lease costs are directcosts incurred which were essential to originate a lease and would not have been incurred had the leasing transaction not taken place and include third partycommissions related to obtaining a lease. Capitalized lease costs are amortized over the life of the related lease and included in depreciation and amortizationexpense on the statement of income. If a tenant vacates its space prior to the contractual termination of its lease, the unamortized balance of any lease costs arewritten off. We view these lease costs as part of the up-front initial investment we made in order to generate a long-term cash inflow. Therefore, we classify cashoutflows for lease costs as an investing activity in our consolidated statements of cash flows.Variable Interest EntitiesCertain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from otherparties or in which equity investors do not have the characteristics of a controlling financial interest qualify as variable interest entities (“VIEs”). VIEs are requiredto be consolidated by their primary beneficiary. The primary beneficiary of a VIE is the party that has a controlling interest in the VIE. Identifying the party withthe controlling interest requires a focus on which entity has the power to direct the activities of the VIE that most significantly impact the VIE's economicperformance and (1) the obligation to absorb the expected losses of the VIE or (2) the right to receive the benefits from the VIE. At December 31, 2019 andDecember 31, 2018 we had no investments in real estate joint ventures, and no other interests in VIEs to be evaluated for consolidated.Stock-Based CompensationWe grant stock-based compensation awards to our employees and directors typically in the form of restricted shares of common stock, options to purchasecommon stock and/or shares of common stock. We measure stock-based compensation expense based on the fair value of the award on the grant date andrecognize the expense ratably over the vesting period.F-23Table of ContentsModifications of stock-based compensation awards are treated as an exchange of the original award for a new award with the resulting total compensationcost equal to the grant-date fair value of the original award plus the incremental value of the modification to the award. The calculation of the incremental value isbased on the excess of the fair value of the new (modified) award based on current circumstances over the fair value of the original option measured immediatelybefore its terms are modified. For the year ended December 31, 2017, we incurred incremental compensation cost of approximately $2.2 million related to thediscretionary vesting of previously granted restricted stock awards that did not meet the original vesting criteria. For the years ended December 31, 2019 and2018, there were no modifications of stock-based compensation awards.Deferred CompensationOur Operating Partnership has adopted the American Assets Trust Executive Deferral Plan V (“EDP V”) and the American Assets Trust Executive DeferralPlan VI (“EDP VI”). These plans were adopted by our Operating Partnership as successor plans to those deferred compensation plans maintained by AmericanAssets Inc. ("AAI") in which certain employees of AAI, who were transferred to us in connection with the Offering (the “Transferred Participants”), participatedprior to the Offering. EDP V and EDP VI contain substantially the same terms and conditions as these predecessor plans. AAI transferred to our OperatingPartnership the Transferred Participants' account balances under the predecessor plans. These transferred account balances represent amounts deferred by theTransferred Participants prior to the Offering while they were employed by AAI.At the time eligible participants defer compensation, we record compensation cost and a corresponding deferred compensation plan liability, which isincluded in other liabilities and deferred credits on our consolidated balance sheets. This liability is adjusted to fair value at the end of each accounting periodbased on the performance of the benchmark funds selected by each participant, and the impact of adjusting the liability to fair value is recorded as an increase ordecrease to compensation cost.Income TaxesWe elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) commencing with the taxable year endingDecember 31, 2011. To maintain our qualification as a REIT, we are required to distribute at least 90% of our REIT taxable income to our stockholders and meetthe various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stockownership. Provided we maintain our qualification for taxation as a REIT, we are generally not subject to corporate level income tax on the earnings distributedcurrently to our stockholders that we derive from our REIT qualifying activities. If we fail to maintain our qualification as a REIT in any taxable year, and areunable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to regular U.S. federal income tax. We aresubject to certain state and local income taxes. We, together with one of our subsidiaries, have elected to treat such subsidiary as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes.Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly.A TRS is subject to federal and state income taxes.Segment InformationSegment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in fourreportable segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use realestate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storagespace rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking andstorage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segmentinclude rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room all-suitehotel.Recent Accounting PronouncementsIn February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides the principles for the recognition, measurement, presentation anddisclosure of leases. This ASU significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lesseemodel, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases.F-24Table of ContentsWe adopted the provisions of ASU No. 2016-02 effective January 1, 2019 using the modified retrospective approach. In July 2018, the FASB issued ASU2018-11, Leases (Topic 842): Targeted Improvements, which allows lessors to elect a practical expedient by class of underlying assets to not separate non-leasecomponents 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-leasecomponent 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 thepractical expedient approach, for the year ended December 31, 2019, approximately $38.4 million of non-lease components are combined with lease rentalincome. ASU 2018-11 also includes an optional transition method in addition to the existing requirements for transition to the new standard by recognizing acumulative effect adjustment to the opening balance sheet of retained earnings in the period of adoption. Consequently, a company’s reporting for the comparativeperiods presented in the financial statements would continue to be in accordance with previous GAAP (Topic 840). The company elected this practical expedientas 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 inthe company’s consolidated statements of comprehensive income beginning in the year ended December 31, 2019.We evaluated all leases within this scope under existing accounting standards and under the new ASU lease standard recognized approximately $7.7million of right-of-use assets and lease liabilities for the year ended December 31, 2019. Effective January 1, 2019, approximately $0.8 million of deferred rentexpense was reclassified to lease liability within the other liabilities and deferred credits, net. As of December 31, 2019, the remaining contractual payments underlease agreements for which the company is the lessee aggregated approximately $5.6 million.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The pronouncement was issued to clarify the principles forrecognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards. Thepronouncement is effective for reporting periods beginning after December 15, 2017. We adopted the provisions of the ASU effective January 1, 2018 using themodified retrospective approach. As discussed above, lease are specifically excluded from this and will be 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 andconfirmed that there were no differences in the amounts recognized or the pattern of recognition. This evaluation included revenues from the hotel portion of ourmixed-use property, parking income and excise taxes charged to customers. Therefore, the adoption of this ASU did not result in an adjustment to the company’sretained earnings on January 1, 2018.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Topics. The pronouncement requirescompanies to adopt a new approach to estimating credit losses on certain types of financial instruments, such as trade and otherreceivables and loans. The standard requires entities to estimate a lifetime expected credit loss for most financial instruments,including trade receivables. The pronouncement is effective for fiscal years and for interim periods within those fiscal years,beginning after December 15, 2019, with early adoption permitted. In November 2018, the FASB issued ASU 2018-19,Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising fromoperating leases are not within the scope of the pronouncement. We evaluated the impact this pronouncement willhave on our consolidated financial statements and do not believe that the pronouncement will have a material impact on our consolidated financial statements asthe majority of our receivables are derived from operating leases andare excluded from this standard.F-25Table of ContentsNOTE 2. REAL ESTATE A summary of our real estate investments is as follows (in thousands): Retail Office Multifamily Mixed-Use Total December 31, 2019 Land$254,016 $225,238 $72,668 $76,635 $628,557 Buildings523,645 1,132,990 390,379 126,726 2,173,740 Land improvements46,335 11,097 7,106 2,606 67,144 Tenant improvements87,707 151,662 — 2,252 241,621 Furniture, fixtures, and equipment911 3,065 14,995 7,187 26,158 Construction in progress6,487 35,397 2,212 7,381 51,477(1) 919,101 1,559,449 487,360 222,787 3,188,697 Accumulated depreciation(294,189) (241,595) (86,208) (43,230) (665,222) Net real estate$624,912 $1,317,854 $401,152 $179,557 $2,523,475 December 31, 2018 Land$262,860 $143,467 $72,668 $76,635 $555,630 Buildings516,566 743,474 389,831 125,859 1,775,730 Land improvements43,412 8,825 6,778 2,606 61,621 Tenant improvements70,210 91,612 — 1,918 163,740 Furniture, fixtures, and equipment570 2,671 13,844 6,826 23,911 Construction in progress8,598 39,511 854 596 49,559(1) 902,216 1,029,560 483,975 214,440 2,630,191 Accumulated depreciation(273,482) (206,986) (71,933) (37,937) (590,338) Net real estate$628,734 $822,574 $412,042 $176,503 $2,039,853 (1) Land related to held for development and construction in progress is included in the Held for Development and Construction in Progress classifications on the consolidated balance sheets.DispositionsOn May 22, 2019, we sold Solana Beach – Highway 101. The property is located in Solana Beach, California and was previously included in our retailsegment. The sales price of this property was approximately $9.4 million, less costs to sell, and resulted in net proceeds to us of approximately $9.4 million.Accordingly, we recorded a gain on sale of approximately $0.6 million and nil for the years ended December 31, 2019 and 2018, respectively. Property Asset AcquisitionsOn April 28, 2017, we acquired the Pacific Ridge Apartments, a 533-unit luxury apartment community located in SanDiego, California. The purchase price was approximately $232 million, excluding closing costs of approximately $0.1 million.On July 6, 2017, we acquired Gateway Marketplace, an approximately 128,000 square feet dual-grocery anchoredshopping center located in Chula Vista, California. The purchase price was approximately $42 million, excluding closing costsof approximately $0.1 million.On June 20, 2019, we acquired La Jolla Commons, consisting of two office towers totaling approximately 724,000 square feet, an entitled developmentparcel and two parking structures, located in San Diego, California. The acquisition was classified as an asset acquisition with a purchase price of 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 proceedsF-26Table of Contentsfrom 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 allocations for La Jolla Commons during the year ended December 31,2019 (in thousands): La Jolla CommonsLand$82,759Building361,471Land improvements1,359Furniture, fixtures, and equipment30,822Total real estate476,411Lease intangibles40,082Prepaid expenses and other assets13Assets acquired$516,506Accounts payable and accrued expenses$3,578Security deposits payable443Other liabilities and deferred credits3,817Liabilities assumed$7,838The value allocated to lease intangibles is amortized over the related lease term as depreciation and amortization expense in the statement of comprehensiveincome. The remaining weighted average amortization period as of December 31, 2019, is 8.2 years.The following table summarizes the operating results for the La Jolla Commons included in the company’s historical consolidated statement ofcomprehensive income and in the office segment for the period of acquisition through December 31, 2019 (in thousands): June 20, 2019 through December31, 2019Revenues$20,579Operating expenses$18,140Operating income$2,439Net income attributable to American Assets Trust, Inc.$2,650Pro Forma Financial Information (Unaudited)The pro forma financial information set forth below is based upon the company’s historical consolidated statements of operations for the year endedDecember 31, 2019 and 2018, adjusted to give effect to the acquisition of La Jolla Commons, described above, as if such transaction had been completed onJanuary 1, 2018. The pro forma financial information includes adjustments to depreciation expense for acquired property and equipment and adjustments toamortization charges for acquired intangible assets and liabilities. The pro forma financial information set forth below is presented for informational purposes onlyand 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 torepresent the results of future operations (in thousands). Year Ended December 31, 2019 Year Ended December 31, 2018 As Reported ProForma As Reported ProFormaTotal revenue$366,741 $383,125 $330,867 $365,326Total operating expenses$253,056 $264,107 $251,332 $281,253Operating income$113,685 $119,018 $79,535 $84,073Net income$60,188 $64,278 $27,202 $30,662F-27NOTE 3. ACQUIRED IN-PLACE LEASES AND ABOVE/BELOW MARKET LEASESThe following summarizes our acquired lease intangibles, which are included in other assets and other liabilities and deferred credits (in thousands): December 31, 2019 December 31, 2018In-place leases$63,896 $40,884Accumulated amortization(32,672) (34,603)Above market leases7,534 11,963Accumulated amortization(7,351) (11,445)Acquired lease intangible assets, net$31,407 $6,799Below market leases$62,126 $63,172Accumulated accretion(36,674) (37,220)Acquired lease intangible liabilities, net$25,452 $25,952The value allocated to in-place leases is amortized over the related lease term as depreciation and amortization expense in the statement of income. Aboveand below market leases are amortized over the related lease term as additional rental income for below market leases or a reduction of rental income for abovemarket leases in the statement of income. Rental income (loss) includes net amortization from acquired above and below market leases of $3.8 million, $3.6million and $3.3 million in 2019, 2018 and 2017, respectively. The remaining weighted-average amortization period as of December 31, 2019, is 8.5 years, 4.6years and 11.0 years for in-place leases, above market leases and below market leases, respectively. Below market leases include $12.3 million related to belowmarket renewal options, and the weighted-average period prior to the commencement of the renewal options is 8.9 years.Increases (decreases) in net income as a result of amortization of our in-place leases, above market leases and below market leases are as follows (inthousands): Year Ended December 31, 2019 2018 2017Amortization of in-place leases$(4,762) $(2,090) $(8,769)Amortization of above market leases(345) (660) (934)Amortization of below market leases4,131 4,230 4,239Net income (loss)$(976) $1,480 $(5,464)As of December 31, 2019, the amortization for acquired leases during the next five years and thereafter, assuming no early lease terminations, is as follows(in thousands): In-PlaceLeases Above MarketLeases Below MarketLeasesYear Ending December 31, 2020$4,903 $62 $3,38220214,244 28 3,14820223,589 28 2,57920233,363 27 2,32920243,178 24 2,038Thereafter11,947 14 11,976 $31,224 $183 $25,452F-28NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTSA fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy for inputs used inmeasuring fair value is as follows:1.Level 1 Inputs—quoted prices in active markets for identical assets orliabilities2.Level 2 Inputs—observable inputs other than quoted prices in active markets for identical assets andliabilities3.Level 3 Inputs—unobservableinputsIn certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, thelevel within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. Financial assets and liabilities whose fair valueswe measure on a recurring basis using Level 2 inputs consist of our deferred compensation liability and interest rate swap liability. We measure the fair values ofthese liabilities based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques providedby third parties using proprietary valuation models and analytical tools as of December 31, 2019 and 2018. These valuation models and analytical tools use marketpricing or similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes,issuer spreads, two-sided markets, benchmark securities, bids and/or offers.A summary of our financial liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy is as follows (in thousands): December 31, 2019 December 31, 2018 Level 1Level 2Level 3Total Level 1Level 2Level 3TotalDeferred compensation liability$—$1,669$—$1,669 $—$1,424$—$1,424Interest rate swap asset$—$434$—$434 $—$6,002$—$6,002Interest rate swap liability$—$1,317$—$1,317 $—$801$—$801The fair value of our secured notes payable and unsecured notes payable is sensitive to fluctuations in interest rates. Discounted cash flow analysis (Level 2)is generally used to estimate the fair value of our mortgages and notes payable, using rates ranging from 2.9% to 4.1%.Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarilyindicative of the amounts that could be realized upon disposition of the financial instruments. The carrying values of our line of credit and term loan set forthbelow 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 ofour financial instruments, all of which are based on Level 2 inputs, is as follows (in thousands): December 31, 2019 December 31, 2018 Carrying Value Fair Value Carrying Value Fair ValueSecured notes payable$161,879 $166,885 $182,572 $183,253Unsecured term loan$248,864 $250,000 $248,765 $250,000Unsecured senior guaranteed notes$946,916 $975,291 $797,098 $790,267Unsecured line of credit$— $— $62,337 $64,000F-29NOTE 5. OTHER ASSETSOther assets consist of the following (in thousands): December 31, 2019 December 31, 2018Leasing commissions, net of accumulated amortization of $30,775 and $28,597, respectively$42,539 $28,796Interest rate swap asset434 6,002Acquired above market leases, net183 518Acquired in-place leases, net31,224 6,281Lease incentives, net of accumulated amortization of $565 and $299, respectively2,603 747Other intangible assets, net of accumulated amortization of $1,031 and $981, respectively2,893 2,994Debt issuance costs, net of accumulated amortization of $814 and $0, respectively1,256 —Right-of-use lease asset, net4,863 —Prepaid expenses, deposits and other7,225 6,683Total other assets$93,220 $52,021Lease incentives are amortized over the term of the related lease and included as a reduction of rental income in the statement of income.NOTE 6. OTHER LIABILITIES AND DEFERRED CREDITSOther liabilities and deferred credits consist of the following (in thousands): December 31, 2019 December 31, 2018Acquired below market leases, net$25,452 $25,952Prepaid rent and deferred revenue16,969 11,634Interest rate swap liability1,317 801Straight-line rent liability16,903 7,393Deferred rent expense and lease intangible28 2,210Deferred compensation1,669 1,424Deferred tax liability332 93Lease liability5,380 —Other liabilities60 40Total other liabilities and deferred credits, net$68,110 $49,547Straight-line rent liability relates to leases which have rental payments that decrease over time or one-time upfront payments for which the rental revenue isdeferred and recognized on a straight-line basis.F-30Table of ContentsNOTE 7. DEBTDebt 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 AssetsTrust, Inc. has guaranteed the Operating Partnership's Second Amended and Restated Credit Facility, term loan and carve-out guarantees on property-level debt.Debt of American Assets Trust, L.P.Secured notes payableThe following is a summary of the Operating Partnership's total secured notes payable outstanding as of December 31, 2019 and December 31, 2018 (inthousands):Description of DebtPrincipal Balance as of Stated Interest Rate Stated Maturity DateDecember 31, 2019 December 31, 2018 as of December 31, 2019 Torrey Reserve—North Court (1)(2)— 19,620 7.22% June 1, 2019Torrey Reserve—VCI, VCII, VCIII (2)6,498 6,635 6.36% June 1, 2020Solana Beach Corporate Centre I-II (2)10,270 10,502 5.91% June 1, 2020Solana Beach Towne Centre (2)34,235 35,008 5.91% June 1, 2020City Center Bellevue (3)111,000 111,000 3.98% November 1, 2022 162,003 182,765 Debt issuance costs, net of accumulated amortizationof $449 and $671, respectively(124) (193) Total Secured Notes Payable$161,879 $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, including the maintenance of minimum debt coverage ratios. As of December 31, 2019,we were in compliance with all loan covenants.F-31Table of ContentsUnsecured notes payableThe following is a summary of the Operating Partnership's total unsecured notes payable outstanding as of December 31, 2019 and December 31, 2018 (inthousands):Description of DebtPrincipal Balance as of Stated Interest Rate Stated Maturity Date December 31, 2019 December 31, 2018 as of December 31, 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 Senior Guaranteed Notes, Series G150,000 — 3.91%(8) July 30, 2030 1,200,000 1,050,000 Debt issuance costs, net of accumulatedamortization of $7,835 and $6,844, respectively(4,220) (4,137) Total Unsecured Notes Payable$1,195,780 $1,045,863 (1)The company has entered into an interest rate swap agreement that is intended to fix the interest rate associated with the Term Loan at approximately 3.08% through its maturity date andextension options, subject to adjustments based on the Operating Partnership's consolidated leverage ratio.(2)The company 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(see Note 8). 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% perannum.(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 maturitydate, 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 toadjustments 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 maturitydate, 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 toadjustments 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 contractwas 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 ofapproximately $10.4 million. The forward-starting interest swap rate contracts were deemed to be highly effective cash flow hedges, accordingly, the effective interest rate is approximately3.87% 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 contractwas 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 contractwas deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88% per annum.On March 1, 2016, the Operating Partnership entered into a Term Loan Agreement with each lender from time to time party thereto, and U.S. Bank NationalAssociation, as Administrative Agent (as amended, the “Term Loan Agreement”). The Term Loan Agreement provides for a new, seven years unsecured term loanto the Operating Partnership of $100 million that matures on March 1, 2023 (“Term Loan B”). Concurrent with the closing of the Term Loan Agreement, theOperating Partnership drew down the entirety of Term Loan B.On May 2, 2016, the Operating Partnership entered into a Joinder and First Amendment to the Term Loan Agreement to provide for a new lender to fund anincremental term loan. The Joinder and First Amendment provides for a new, seven years unsecured term loan to the Operating Partnership of $50 million thatmatures on March 1, 2023 ("Term Loan C"). Term LoanF-32Table of ContentsC has the same borrowing terms as the Term Loan Agreement noted below. Concurrent with the closing of the Joinder and First Amendment, the OperatingPartnership drew down the entirety of Term Loan C.Borrowings under the Term Loan Agreement with respect to Term Loan B and Term Loan C bear interest at floating rates equal to, at our option, either (1)LIBOR, plus a spread which ranges from 1.70% to 2.35% based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) 0%, (b) the primerate, (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 ourconsolidated leverage ratio. The company entered into interest rate swap agreements intended to fix the interest rates associated with Term Loan B and Term LoanC at approximately 3.15% and 3.14%, respectively, through the maturity dates, subject to adjustments based on our consolidated leverage ratio.The Term Loan Agreement contains a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured andunsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Term Loan Agreement, upon certain events of default, including, but notlimited to, (i) a default in the payment of any principal or interest under Term Loan B or Term Loan C, and (ii) a default in the payment of certain otherindebtedness of the Operating Partnership, the company or their subsidiaries, the principal and accrued and unpaid interest and prepayment penalties on theoutstanding Term Loan B or Term Loan C will become due and payable at the option of the lenders.On January 9, 2018, we entered into the Third Amendment (“Third Amendment”) to the Term Loan Agreement, which maintains the seven years $150million unsecured term loan (Term Loan B and Term Loan C) to the Operating Partnership that matures on March 1, 2023 (the “$150mm Term Loan”). Effectiveas 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 OperatingPartnership’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) abase 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 spreadwhich ranges from 0.70% to 1.35% based on the Operating Partnership’s consolidated leverage ratio. The foregoing rates are intended to be more favorable thanpreviously contained in the Term Loan Agreement. Additionally, the Operating Partnership may elect for borrowings to bear interest based on a ratings-basedpricing grid as per the Operating Partnership’s then-applicable investment grade debt ratings under the terms set forth in the Term Loan Agreement.On October 31, 2014, the Operating Partnership entered into a note purchase agreement (the "Note Purchase Agreement") with a group of institutionalpurchasers that provided for the private placement of an aggregate of $350 million of senior guaranteed notes, of which (i) $150 million are designated as 4.04%Senior Guaranteed Notes, Series A, due October 31, 2021 (the “Series A Notes”), (ii) $100 million are designated as 4.45% Senior Guaranteed Notes, Series B,due February 2, 2025 (the “Series B Notes”) and (iii) $100 million are designated as 4.50% Senior Guaranteed Notes, Series C, due April 1, 2025 (the “Series CNotes”). The Series A Notes were issued on October 31, 2014, the Series B Notes were issued on February 2, 2015 and the Series C Notes were issued on April 2,2015. The Series A Notes, the Series B Notes and the Series C Notes will pay interest quarterly on the last day of January, April, July and October until theirrespective maturities.On March 1, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $250 million of 4.29% Senior GuaranteedNotes, Series D, due March 1, 2027 (the "Series D Notes"). The Series D Notes were issued on March 1, 2017 and will pay interest quarterly on the last day ofJanuary, April, July and October until their respective maturities.On May 23, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $100 million of 4.24% Senior GuaranteedNotes, Series E, due May 23, 2029 (the "Series E Notes"). The Series E Notes were issued on May 23, 2017 and will pay interest semi-annually on the 23rd of Mayand November until their respective maturities.On July 19, 2017, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $100 million of 3.78% Senior GuaranteedNotes, Series F, due July 19, 2024 (the "Series F Notes"). The Series F Notes were issued on July 19, 2017 and will pay interest semi-annually on the 31st ofJanuary and July until their respective maturities.On July 30, 2019, the Operating Partnership entered into a Note Purchase Agreement for the private placement of $150 million of 3.91% Senior GuaranteedNotes, Series G, due July 30, 2030 (the "Series G Notes" and collectively with the Series A Notes, Series B Notes, Series C Notes, Series D Notes, Series E Notes,and Series G Notes are referred to herein as, theF-33Table of Contents“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 Notes, in an amount not less than 5% of the aggregate principalamount of any series of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid plus a Make-Whole Amount (asdefined in the Note Purchase Agreement).The Note Purchase Agreements contain a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured andunsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Note Purchase Agreement and the 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 Notes, and (ii) a default in the payment ofcertain other indebtedness by us or our subsidiaries, the principal, accrued and unpaid interest, and the Make-Whole Amount on the outstanding Notes will becomedue and payable at the option of the purchasers.The Operating Partnership's obligations under the Notes are fully and unconditionally guaranteed by the Operating Partnership and certain of the OperatingPartnership's subsidiaries.Certain loans require the Operating Partnership to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. Asof December 31, 2019, the Operating Partnership was in compliance with all loan covenants.Scheduled principal payments on secured and unsecured notes payable as of December 31, 2019 are as follows (in thousands):2020$51,0032021250,0002022111,0002023150,0002024100,000Thereafter700,000 $1,362,003Credit FacilityOn January 9, 2014, the company and the Operating Partnership entered into an amended and restated credit agreement (the "Prior Credit Facility"), or theamended and restated credit facility, which amended and restated the then in-place credit facility. The amended and restated credit facility provides for aggregate,unsecured borrowing of $350 million, consisting of a revolving line of credit of $250 million (the "Prior Revolver Loan") and a term loan of $100 million (the"Term Loan A"). The Prior Credit Facility had an accordion feature that allowed the Operating Partnership to increase the availability thereunder up to anadditional $250 million, subject to meeting specified requirements and obtaining additional commitments from lenders.On October 16, 2014, we entered into a first amendment to the Prior Credit Agreement that amended provisions of the Prior Credit Agreement to, amongother things, (1) describe the treatment of our pari passu obligations under the amended and restated credit agreement and (2) remove the material acquisitionprovisions previously set forth in the Prior Credit Agreement.Borrowings under the Prior Credit Facility initially bore interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from(a) 1.35%-1.95% (with respect to the Prior Revolver Loan) and (b) 1.30% to 1.90% (with respect to Term Loan A), in each case based on our consolidated leverageratio, 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, plus a spread whichranges from (i) 0.35%-0.95% (with respect to the Prior Revolver Loan) and (ii) 0.30% to 0.90% (with respect to Term Loan A), in each case based on ourconsolidated leverage ratio. The foregoing rates were more favorable than previously contained in the credit agreement in place as of December 31, 2013. IfAmerican Assets Trust, Inc. obtained an investment grade debt rating, under the terms set forth in the Prior Credit Facility, the spreads would further improve.The Prior Revolver Loan initially matured on January 9, 2018, subject to the Operating Partnership's option to extend the Prior Revolver Loan up to twotimes, with each such extension for a six months period. The Term Loan initially matured on January 9, 2016, subject to our option to extend the Term Loan A upto three times, with each such extension for a 12-monthF-34Table of Contentsperiod. The foregoing extension options were exercisable by us subject to the satisfaction of certain conditions. Effective as of January 8, 2018, the OperatingPartnership exercised the third of three options to extend the maturity date of Term Loan A to January 9, 2019.Concurrent with the closing of the Prior Credit Facility, the Operating Partnership drew down on the entirety of the $100 million Term Loan, which remainsoutstanding and is included in unsecured notes payable as discussed above.Additionally, the Prior Credit Facility included a number of financial covenants, including:•A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of60%,•A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of40%,•A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixedcharges) of 1.50x,•A minimum unsecured interest coverage ratio of 1.75x,•A maximum unsecured leverage ratio of 60%,•A minimum tangible net worth of $721.16 million, and 75% of the net proceeds of any additional equity issuances (other than additional equityissuances in connection with any dividend reinvestment program), and•Recourse indebtedness at any time cannot exceed 15% of total assetvalue.The Prior Credit Facility provided that American Assets Trust, Inc.'s annual distributions may not exceed the greater of (1) 95% of our funds from operations(“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 certainevents of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain ourstatus as a REIT.American Assets Trust, Inc. and certain of its subsidiaries guaranteed the obligations under the Prior Credit Agreement, and certain of its subsidiariespledged specified equity interests in our subsidiaries as collateral for our obligations under the Prior Credit Facility.On January 9, 2018, we entered into a second amended and restated credit agreement (the "Second Amended and Restated Credit Facility"), which amendedand restated the Prior Credit Agreement. 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 andRestated Credit Facility has an accordion feature that may allow us to increase the availability thereunder up to an additional $250 million, subject to meetingspecified requirements and obtaining additional commitments from lenders. At December 31, 2019, there was no outstanding balance under the Revolver Loan andwe had incurred approximately $1.3 million of debt issuance costs, net, which are recorded in other assets, net on the consolidated balance sheet.Borrowings under the Second Amended and Restated Credit Facility initially bear interest at floating rates equal to, at our option, either (1) LIBOR, plus aspread 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 onour 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 aspread 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 onour consolidated leverage ratio. The foregoing rates are more favorable than previously contained in the Prior Credit Facility in place as of December 31, 2017. Forthe year-ended December 31, 2019, the weighted average interest rate on the Revolver Loan was 3.55%.The Revolver Loan initially matures on January 9, 2022, subject to our option to extend the Revolver Loan up to two times, with each such extension for a sixmonths 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 thematurity date of Term Loan A to January 9, 2021, subject to three, one year extension options. Additionally, in connection with the First Amendment, borrowingsunder the Second Amended and Restated Credit Facility with respect to Term Loan bear interest at floating rates equal to, at our option, either (1) LIBOR, plus aspread 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) theF-35Table of Contentsfederal 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 totalleverage ratio. The foregoing rates are more favorable than previously contained in the Second Amended and Restated Credit Facility (prior to entry into the FirstAmendment) 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) of60%,•A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of40%,•A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixedcharges) 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 assetvalue.The Second Amended and Restated Credit Facility provides that our annual distributions may not exceed the greater of (1) 95% of our FFO or (2) the amountrequired 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 orwould 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 December 31, 2019, the Operating Partnership was in compliance with all then in-place Second Amended and Restated Credit Facility covenants.NOTE 8. DERIVATIVE AND HEDGING ACTIVITIESOur objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movement. To accomplishthese objectives, we use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve thereceipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of theunderlying notional amount. Concurrent with the closing of our amended and restated credit facility, we entered into an interest rate swap agreement that is intended to fix the interest rateassociated with our term loan of $100 million at approximately 3.08% through its maturity date and extension options, subject to adjustments based on ourconsolidated leverage ratio.On January 29, 2016, we entered into a forward-starting interest rate swap contract with U.S. Bank National Association to reduce the interest rate variabilityexposure of the projected interest cash flows of our then prospective $100 million seven-year term loan. The forward-starting seven years swap contract had anotional amount of $100 million, a termination date of March 1, 2023, a fixed pay rate of 1.4485%, and a receive rate equal to the one-month LIBOR, with fixedrate payments due monthly commencing April 1, 2016, floating payments due monthly commencing April 1, 2016, and floating reset dates two days prior to thefirst day of each calculation period. The forward-starting seven-year swap contract accrual period, March 1, 2016 to March 1, 2023, was designed to match theexpected tenor of our then prospective $100 million seven years term loan, which successfully closed on March 1, 2016.On March 23, 2016, we entered into a forward-starting interest rate swap contract with Wells Fargo Bank, National Association to reduce the interest ratevariability exposure of the projected interest cash flows of our then prospective incremental $50 million seven-year term loan. The forward-starting seven yearsswap contract had a notional amount of $50 million, a termination date of March 1, 2023, a fixed pay rate of 1.4410%, and a receive rate equal to the one-monthLIBOR, with fixed rate payments due monthly commencing June 1, 2016, floating payments due monthly commencing June 1, 2016, and floating reset dates twodays prior to the first day of each calculation period. The forward-starting seven-year swap contract accrual period, May 2, 2016 to March 1, 2023, was designedto match the expected tenor of our then prospective incremental $50 million seven years term loan, which successfully closed on May 2, 2016.On March 29, 2016, we entered into a forward-starting interest rate swap contract with Wells Fargo Bank, National Association to reduce the interest ratevariability exposure of the projected interest cash flows of our prospective new ten-yearF-36Table of Contentsdebt offering (private placement, investment grade bonds, term loan or otherwise) (anticipated to close on or before March 31, 2017). The forward-starting tenyears swap contract had a notional amount of $150 million, a termination date of March 31, 2027, a fixed pay rate of 1.8800%, and a receive rate equal to thethree-month LIBOR, with fixed rate payments due semi-annually commencing September 29, 2017, floating payments due semi-annually commencing September29, 2017, and floating reset dates the first day of each quarterly period. The forward-starting ten-year swap contract accrual period, March 31, 2017 to March 31,2027, was designed to match the expected tenor of our prospective new ten years debt offering (private placement, investment grade bonds, term loan orotherwise).On April 7, 2016, we entered into a forward-starting interest rate swap contract with Wells Fargo Bank, National Association to reduce the interest ratevariability exposure of the projected interest cash flows of our prospective new ten-year debt offering (private placement, investment grade bonds, term loan orotherwise) (anticipated to close on or before March 31, 2017). The forward-starting ten years swap contract had a notional amount of $100 million, a terminationdate of March 31, 2027, a fixed pay rate of 1.7480%, and a receive rate equal to the three-month LIBOR, with fixed rate payments due semi-annually commencingSeptember 29, 2017, floating payments due semi-annually commencing September 29, 2017, and floating reset dates the first day of each quarterly period. Theforward-starting ten-year swap contract accrual period, March 31, 2017 to March 31, 2027, was designed to match the expected tenor of our prospective new tenyears debt offering (private placement, investment grade bonds, term loan or otherwise).On January 18, 2017, we settled the March 29, 2016 $150 million and April 7, 2016 $100 million ten-year forward-starting interest rate swaps resulting in anaggregate gain of approximately $10.4 million. This gain is included in accumulated other comprehensive income and will be amortized to interest expense overthe life of the Series D Notes. The forward-starting interest rate swap contracts have been deemed to be highly effective cash flow hedges and we elected todesignate all the forward-starting swap contracts as accounting hedges.On April 25, 2017, we entered into a treasury lock contract (the "April 2017 Treasury Lock") with Bank of America, National Association, to reduce theinterest rate variability exposure of the projected interest cash flows of our then prospective new twelve years private placement. The April 2017 Treasury Lockhad a notional amount of $100 million, termination date of May 18, 2017, a fixed pay rate of 2.313%, and a receive rate equal to the ten years treasury rate on thesettlement date.On May 11, 2017, we settled the April 2017 Treasury Lock, resulting in a gain of approximately $0.7 million. This gain is included in accumulated othercomprehensive income and will be amortized to interest expense over ten years. The April 2017 Treasury Lock has been deemed to be a highly effective cash flowhedge and we elected to designate the April 2017 Treasury Lock as an accounting hedge.On May 31, 2017, we entered into a treasury lock contract (the "May 2017 Treasury Lock") with Bank of America, National Association, to reduce theinterest rate variability exposure of the projected interest cash flows of our then prospective new seven years private placement. The May 2017 Treasury Lock hada notional amount of $100 million, termination date of July 26, 2017, a fixed pay rate of 2.064%, and a receive rate equal to the seven years treasury rate on thesettlement date.On June 23, 2017, we settled the May 2017 Treasury Lock, resulting in a loss of approximately $0.5 million. This loss is included in accumulated othercomprehensive income and will be amortized to interest expense over seven years. The May 2017 Treasury Lock has been deemed to be a highly effective cashflow hedge and we elected to designate the May 2017 Treasury Lock as an accounting hedge.On November 26, 2018, we entered into an interest rate swap agreement with Bank of America, National Association, to fix the interest rate associated withTerm Loan A associated with our then prospective First Amendment at approximately 4.13% through its maturity date of January 9, 2021, subject to adjustmentsbased on our consolidated leverage ratio.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 ratevariability 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.On July 17, 2019, we settled the June 2019 Treasury Lock, resulting in a gain of approximately $0.5 million, which is included in accumulated othercomprehensive income and will be amortized to interest expense over ten years. The treasury lock contract has been deemed to be a highly effective cash flowhedge and we elected to designate the treasury lock contract as an accounting hedge.F-37Table of ContentsThe forward-starting interest rate swap contracts have been deemed to be highly effective cash flow hedges and we elected to designate all the forward-starting swap contracts as accounting hedges.The following is a summary of the terms of the interest rate swaps as of December 31, 2019 (dollars in thousands):Swap Counterparty Notional Amount Effective Date Maturity Date Fair ValueBank of America, N.A. $100,000 1/9/2019 1/9/2021 $(1,317)U.S. Bank N.A. $100,000 3/1/2016 3/1/2023 $279Wells Fargo Bank, N.A. $50,000 5/2/2016 3/1/2023 $155The effective portion of changes in the fair value of the derivatives that are designated as cash flow hedges are being recorded as accumulated othercomprehensive income and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. During thenext 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 cashflows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs,including interest rate curves, and implied volatilities. The fair value of the interest rate swaps is determined using the market standard methodology of netting thediscounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) arebased on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. NOTE 9. PARTNERS' CAPITAL OF AMERICAN ASSETS TRUST, L.P.As of December 31, 2019, the Operating Partnership had 16,390,548 common units (the “Noncontrolling Common Units”) outstanding. American AssetsTrust, Inc. owned 78.5% of the Operating Partnership at December 31, 2019. The remaining 21.5% of the partnership interests are owned by non-affiliatedinvestors and certain of our directors and executive officers. Common units and shares of the company's common stock have essentially the same economiccharacteristics in that common units and shares of the company's common stock share equally in the total net income or loss distributions of the OperatingPartnership.American Assets Trust, Inc. is the Operating Partnership’s general partner and is responsible for the management of the Operating Partnership’s business. Asthe general partner of the Operating Partnership, the company effectively controls the ability to issue common stock of American Assets Trust, Inc. upon a limitedpartner’s notice of redemption. Investors who own common units have the right to cause the Operating Partnership to redeem any or all of their common units forcash equal to the then-current market value of one share of the company's common stock, or, at the company's election, shares of the company's common stock ona one-for-one basis. In addition, American Assets Trust, Inc. has generally acquired common units upon a limited partner’s notice of redemption in exchange forshares of the company's common stock. The redemption provisions of common units owned by limited partners that permit the Operating Partnership to settle ineither cash or common stock at the option of the company are further evaluated in accordance with applicable accounting guidance to determine whethertemporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement tosettle in unregistered shares, and determined that these common units meet the requirements to qualify for presentation as permanent equity.During the years ended December 31, 2019, 2018 and 2017, approximately 787,060, 17,372 and 693,842, respectively, common units were converted intoshares of the company's common stock.F-38Table of ContentsNOTE 10. EQUITY OF AMERICAN ASSETS TRUST, INC.Stockholders' EquityOn May 6, 2013, we entered into an at-the-market (“ATM”) equity program with four sales agents pursuant to which we may, from time to time, offer andsell shares of our common stock having an aggregate offering price of up to $150.0 million. We completed $150.0 million of issuances under such ATM programon May 21, 2015. On May 27, 2015, we entered into a new ATM equity program with five sales agents under which we may, from time to time, offer and sellshares of our common stock having an aggregate offering price of up to $250.0 million. The sales of shares of our common stock made through the ATM equityprogram are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. For the year ended December 31, 2019, we issued946,552 shares of common stock through the ATM equity program at a weighted average price per share of $46.04 for gross proceeds of $43.6 million and paid$0.4 million in sales agent compensation and $0.5 million in additional offering expenses related to the sales of these shares of common stock.We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from timeto time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As ofDecember 31, 2019, we had the capacity to issue up to an additional $132.6 million in shares of our common stock under our ATM equity program. Actual futuresales 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 noobligation to sell the remaining shares available for sale under the active ATM equity program.In June 2019, we issued and sold 10,925,000 shares of common stock in an underwritten public offering. The shares ofcommon stock that we issued and sold included the full exercise of the underwriters' option to purchase 1,425,000 additionalshares. We received net proceeds of approximately $472.6 million, after deducting underwriting discounts, commissions andoffering expenses.Preferred Stock Authorized SharesWe have been authorized to issue 10,000,000 shares of preferred stock with a par value of $0.01, of which no shares were outstanding at December 31, 2019.Upon issuance, our board of directors has the ability to define the terms of the preferred shares, including voting rights, liquidation preferences, conversion andredemption provisions and dividend rates. DividendsThe following table lists the dividends declared and paid on our shares of common stock and Noncontrolling Common Units for the years endedDecember 31, 2019, 2018 and 2017:Period Amount perShare/Unit Period Covered Dividend Paid DateFirst Quarter 2017 $0.26 January 1, 2017 to March 31, 2017 March 30, 2017Second Quarter 2017 $0.26 April 1, 2017 to June 30, 2017 June 29, 2017Third Quarter 2017 $0.26 July 1, 2017 to September 30, 2017 September 28, 2017Fourth Quarter 2017 $0.27 October 1, 2017 to December 31, 2017 December 21, 2017First Quarter 2018 $0.27 January 1, 2018 to March 31, 2018 March 19, 2018Second Quarter 2018 $0.27 April 1, 2018 to June 30, 2018 June 28, 2018Third Quarter 2018 $0.27 July 1, 2018 to September 30, 2018 September 27, 2018Fourth Quarter 2018 $0.28 October 1, 2018 to December 31, 2018 December 27, 2018First Quarter 2019 $0.28 January 1, 2019 to March 31, 2019 March 28, 2019Second Quarter 2019 $0.28 April 1, 2019 to June 30, 2019 June 27, 2019Third Quarter 2019 $0.28 July 1, 2019 to September 30, 2019 September 26, 2019Fourth Quarter 2019 $0.30 October 1, 2019 to December 31, 2019 December 26, 2019F-39Table of ContentsTaxability of DividendsEarnings and profits, which determine the taxability of distributions to stockholders and holders of common units, may differ from income reported forfinancial reporting purposes due to the differences for federal income tax purposes in the treatment of loss on extinguishment of debt, revenue recognition andcompensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation. A summary of the income tax status ofdividends per share paid is as follows: Year Ended December 31, 2019 2018 2017 Per Share % Per Share % Per Share %Ordinary income $1.09 95.6% $1.05 96.3% $1.05 100.0%Capital gain — —% — —% — —%Return of capital 0.05 4.4% 0.04 3.7% — —%Total $1.14 100.0% $1.09 100.0% $1.05 100.0%Stock-Based CompensationThe company has established the 2011 Equity Incentive Award Plan (the "2011 Plan"), which provides for grants to directors, employees and consultants ofthe company and the Operating Partnership of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stockappreciation rights and other incentive awards. An aggregate of 4,054,411 shares of our common stock are authorized for issuance under awards granted pursuantto the 2011 Plan, and as of December 31, 2019, 2,422,181 shares of common stock remain available for future issuance.The following shares of restricted common stock have been issued as of December 31, 2019:GrantFair Value at Grant DateNumberJune 13, 2017 (1)$40.994,880December 15, 2017 (2)$27.27145,218June 12, 2018 (1)$37.585,320December 6, 2018 (3)$25.68 - $28.18199,790June 11, 2019 (1)$45.354,412December 9, 2019 (4)$28.06 - $30.97168,596(1)Restricted common stock issued to members of the company's non-employee directors. These awards of restricted stock will vest subject to the director's continued service on the Board ofDirectors on the earlier of (i) the one year anniversary of the date of grant or (ii) the date of the next annual meeting of our stockholders, if such non-employee director continues his or herservice on the Board of Directors until the next annual meeting of stockholders, but not thereafter, pursuant to our independent director compensation policy.(2)Restricted common stock issued to certain of the company's senior management and other employees, which are subject to pre-defined market specific performance criteria based vesting.Up to one-third of the shares of restricted stock may vest based on performance calculations determined as of November 30, 2018, subject to the employee's continued employment onNovember 30, 2018, 2019 and 2020.(3)Restricted common stock issued to certain of the company's senior management and other employees, which are subject to quantitative and qualitative performance criteria based vesting.Up to one-third of the shares of restricted stock may vest based on such performance criteria determined as of November 30, 2019, 2020 and 2021, subject to the employee's continuedemployment on those dates.(4)Restricted common stock issued to certain of the company's senior management and other employees, which are subject to quantitative and qualitative performance criteria based vesting.Up to one-third of the shares of restricted stock may vest based on such performance criteria determined as of November 30, 2020, 2021 and 2022, subject to the employee's continuedemployment on those dates.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 thestock prices of the group of peer REITs, is assumed to follow the Multivariate Geometric Brownian Motion Process. Multivariate Geometric Brownian Motion is acommon assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current valueand take any value greater than zero. The volatilities of the returns on the stock price of the company and the group REITs were estimated based on a three yearlook-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 freerate 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 thegrant date.F-40Table of ContentsThe following table summarizes the activity of non-vested restricted stock awards during the year ended December 31, 2019: 2019 Units Weighted Average GrantDate Fair ValueBalance at beginning of year342,093 $28.33Granted173,008 29.99Vested(99,304) 28.23Forfeited(70,644) 30.44Balance at end of year345,153 $28.75We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $4.5 million, $3.0 million and $4.7 million innoncash compensation expense for the years ended December 31, 2019, 2018 and 2017, respectively, each of which is included in general and administrativeexpense on the statement of income. Unrecognized compensation expense was $7.1 million at December 31, 2019, which will be recognized over a weighted-average period of 1.6 years.Earnings Per ShareWe have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS foreach class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings. For the yearsended December 31, 2019, 2018 and 2017, we had a weighted average of approximately 330,197 shares, 271,905 shares and 230,602 unvested shares outstanding,respectively, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares andunvested shares.Diluted EPS is calculated by dividing the net income attributable to common stockholders for the period by the weighted average number of common anddilutive instruments outstanding during the period using the treasury stock method. For the year ended December 31, 2019, diluted shares exclude incentiverestricted stock as these awards are considered contingently issuable. Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive forall periods presented and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.Earnings Per Unit of the Operating PartnershipBasic earnings (loss) per unit (“EPU”) of the Operating Partnership is computed by dividing income (loss) applicable to unitholders by the weightedaverage Operating Partnership units outstanding, as adjusted for the effect of participating securities. Operating Partnership units granted in equity-based paymenttransactions are considered participating securities prior to vesting. The impact of unvested Operating Partnership unit awards on EPU has been calculated usingthe two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested OperatingPartnership units’ participation rights in undistributed earnings (losses).The calculation of diluted earnings per unit for the year ended December 31, 2019, 2018 and 2017 does not include 330,197 units, 271,905 units, and230,602 unvested weighted average Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect ofincluding these equity securities was anti-dilutive.F-41Table of ContentsThe computation of basic and diluted EPS for American Assets Trust, Inc. is presented below (dollars in thousands, except share and per share amounts): Year Ended December 31, 2019 2018 2017NUMERATOR Net income$60,188 $27,202 $40,132Less: Net income attributable to restricted shares(381) (311) (241)Less: Income attributable to unitholders in the Operating Partnership(14,089) (7,205) (10,814)Net income attributable to common stockholders—basic$45,718 $19,686$29,077Income attributable to American Assets Trust, Inc. common stockholders—basic$45,718 $19,686 $29,077Plus: Income attributable to unitholders in the Operating Partnership14,089 7,205 10,814Net income attributable to common stockholders—diluted$59,807 $26,891 $39,891DENOMINATOR Weighted average common shares outstanding—basic54,110,949 46,950,812 46,715,520Effect of dilutive securities—conversion of Operating Partnership units16,675,183 17,185,747 17,371,730Weighted average common shares outstanding—diluted70,786,132 64,136,559 64,087,250 Earnings per common share, basic$0.84 $0.42 $0.62 Earnings per common share, diluted$0.84 $0.42 $0.62NOTE 11. INCOME TAXESWe 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 taxableyear ending December 31, 2011. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholdersthat we derive from our REIT qualifying activities. Taxable income from non-REIT activities managed through our TRS is subject to federal and state incometaxes.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 andliability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carryingamounts and their respective tax bases. Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic740, Income Taxes.A deferred tax liability is included in our consolidated balance sheets of $0.3 million and $0.1 million as of December 31, 2019 and 2018, respectively, inrelation to real estate asset basis differences and prepaid expenses for our TRS.The income tax provision included in other income (expense) on the consolidated statement of income is as follows (in thousands): Year Ended December 31, 2019 2018 2017Current: Federal$48 $60 $—State625 465 422Deferred: Federal$237 $(6) $—State(91) (192) (208)Provision for income taxes$819 $327 $214F-42Table of ContentsNOTE 12. COMMITMENTS AND CONTINGENCIESLegalWe 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 bereasonably 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 asincurred. 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 financialposition or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also, under our leases, tenants are typically obligated toindemnify 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 theoperation of the properties by the tenant.CommitmentsSee Footnote 13 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 theretail and hotel portions of the Waikiki Beach Walk property. Under the management agreement with Outrigger relating to the retail portion of Waikiki BeachWalk (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 ordestruction at the property, a condemnation or our failure to make required working capital infusions, we would be obligated to pay Outrigger a termination feeequal to the sum of the management fees paid for the two months immediately preceding the termination date. The retail management agreement may not beterminated by us or by Outrigger without cause. Under our management agreement with Outrigger relating to the hotel portion of Waikiki Beach Walk (the “hotelmanagement 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 tothe 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 byus under the hotel management agreement, we would be required to pay a cancellation fee calculated by multiplying (1) the management fees for the previous 12months 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 SuitesFranchise LLC, the franchisor of the brand “Embassy Suites™,” to obtain the non-exclusive right to operate the hotel under the Embassy Suites brand for 20 years.The franchise license agreement provides that WBW Hotel Lessee LLC must comply with certain management, operational, record keeping, accounting, reportingand marketing standards and procedures. In connection with this agreement, we are also subject to the terms of a product improvement plan pursuant to which weexpect to undertake certain actions to ensure that our hotel's infrastructure is maintained in compliance with the franchisor's brand standards. In addition, we mustpay 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 thehotel'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 dueto 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 beas high as $7.6 million based on operating performance through December 31, 2019.F-43Table of ContentsOur Del Monte Center property has ongoing environmental remediation related to ground water contamination. The environmental issue existed at purchaseand is currently in the final stages of remediation. The final stages of the remediation will include routine, long term ground monitoring by the appropriateregulatory agency over the next five years to seven years years. The work performed is financed through an escrow account funded by the seller upon our purchaseof 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 requiredcosting 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 theprior owner or our environmental remediation consultant.As of December 31, 2019, the company accrued approximately $6.6 million for transfer taxes in connection with its Offering. The company believes that ithas filed all necessary forms with the requisite taxing authorities.Concentrations of Credit RiskOur properties are located in Southern California, Northern California, Hawaii, Oregon, Texas and Washington. The ability of the tenants to honor the termsof their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate. Fifteen of ourconsolidated properties, representing 37.6% of our total revenue for the year ended December 31, 2019, are located in Southern California, which exposes us togreater economic risks than if we owned a more geographically diverse portfolio. Our mixed-use property located in Honolulu, Hawaii accounted for 17.3% oftotal revenues for the year ended December 31, 2019.Tenants in the retail industry accounted for 29.3% and 31.9% of total revenues for the years December 31, 2019 and 2018, respectively. This makes ussusceptible 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 retailindustry. Two retail properties, Alamo Quarry Market and Waikele Center, accounted for 10.0% and 11.7% of total revenues for the years ended December 31,2019 and 2018, respectively.Tenants in the office industry accounted for 39.5% and 34.0% of total revenues for the years December 31, 2019 and 2018, respectively. This makes ussusceptible 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 officeindustry.For the years ended December 31, 2019 and 2018, no tenant accounted for more than 10.0% of our total rental revenue. At December 31, 2019, LPLHoldings, Inc. at La Jolla Commons accounted for 7.5% of total annualized base rent. Three other tenants (Google LLC, Autodesk, Inc., and Lowe's) comprise13.9% of our total annualized base rent at December 31, 2019, in the aggregate. No other tenants represent greater than 2.0% of our total annualized base rent.Total annualized base rent used for the percentage calculations includes the annualized base rent as of December 31, 2019 for our office properties, retail propertiesand the retail portion of our mixed-use property.NOTE 13. LEASESLessor Operating LeasesWe determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreementscontain leases generally does not require significant estimates or judgments. We lease real estate under 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 retailportion 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 minimumrents, 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 ofpercentage rents based on the tenant’s level of sales achieved in excess of a breakpoint threshold. Leases on apartments generally range from seven months tofifteen months, with a majority having 12 months lease terms. Rooms at the hotel portion of our mixed-use property are rented on a nightly basis.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. Theextension options are generally for 3 to 10 years and contain primarily rent at fixed rates or the prevailing market rent. The extension options are generallyexercisable 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 notextended. We maintain a proactive leasing and capital improvement program that, combined withF-44Table of Contentsthe 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 tovarious market-specific, asset-specific, and tenant-specific risks and characteristics. At December 31, 2019, our retail, office and mixed-use properties are located in five states: California, Oregon, Hawaii, Washington and Texas. AtDecember 31, 2019, we had approximately 861 leases with office and retail tenants, including the retail portion of our mixed-use property. Our multifamilyproperties are located in Southern California and Portland, Oregon, and we had approximately 1,849 leases with residential tenants at December 31, 2019,excluding Santa Fe Park RV Resort.As of December 31, 2019, minimum future rentals from noncancelable operating leases before any reserve for uncollectible amounts and assuming no earlylease terminations, at our office and retail properties and the retail portion of our mixed-use property are as follows for the years ended December 31 (inthousands):2020$216,9692021212,7282022196,3452023175,6862024146,164Thereafter523,183Total$1,471,075The above future minimum rentals exclude residential leases, which are typically range from seven months to fifteen months, and exclude the hotel, asrooms are rented on a nightly basis. Lessee Operating LeasesWe determine if an arrangement is a lease at inception. Our lease agreements are generally for real estate, and the determination of whether such agreementscontain 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 throughJune 30, 2021, which we have the option to extend until 2031 by way of two five years extension options (the "Annex Lease"). The lease payments under theextension options 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 arenot included in the calculation of the right-of-use asset or lease liability due to electing the practical expedient to not reassess the lease term of existing leases.At Waikiki Beach Walk, we lease a portion of the building of which Quiksilver is currently in possession, under an operating lease effective throughDecember 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 ourincremental borrowing rate based on the information available at commencement in determining the present value of lease payments.F-45Table of ContentsCurrent annual payments under the operating leases are as follows, as of December 31, 2019 (in thousands): Year Ending December 31, 2020$3,42220212,1532022—2023—2024—Thereafter—Total lease payments$5,575Imputed interest$(195)Present value of lease liability$5,380Lease costs under the operating leases are as follows (in thousands): Year Ended December31, 2019Operating lease cost$3,334Variable lease cost—Sublease income(3,098)Total lease (income) cost$236 Weighted-average remaining lease term - operating leases (in years)1.7Weighted-average discount rate - operating leases4.13%Supplemental cash flow information and non-cash activity related to our operating leases are as follow (in thousands): Year Ended December 31, 2019Operating cash flow information: Cash paid for amounts included in the measurement of lease liabilities$3,347Non-cash activity: Right-of-use assets obtained in exchange for operating lease obligations$7,661SubleasesAt The Landmark at One Market, we (as sublandlord) sublease the Annex Lease building under operating leases effective through December 31, 2029. Thesubleases contain extension options, subject to our ability to extend the Annex Lease, that can extend the subleases through December 31, 2039 at the fair rentalvalue 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.F-46Table of ContentsNOTE 14. COMPONENTS OF RENTAL INCOME AND EXPENSEThe principal components of rental income are as follows (in thousands): Year Ended December 31, 2019 2018 2017Minimum rents Office$136,118 $95,081 $93,128Retail99,601 77,147 76,201Multifamily47,448 46,897 40,217Mixed-Use15,702 11,019 10,564Cost reimbursement— 34,584 34,267Percentage rent2,476 3,149 3,214Hotel revenue40,297 40,049 39,545Other2,223 1,611 1,667Total rental income$343,865 $309,537 $298,803Minimum rents include $3.2 million, $2.4 million and $0.8 million for the years ended December 31, 2019, 2018 and 2017, respectively, to recognizeminimum rents on a straight-line basis. In addition, minimum rents include $3.8 million, $3.6 million and $3.3 million for the years ended December 31, 2019,2018 and 2017, respectively, to recognize the amortization of above and below market leases.The principal components of rental expenses are as follows (in thousands): Year Ended December 31, 2019 2018 2017Rental operating$38,331 $37,322 $34,944Hotel operating24,522 24,030 24,254Repairs and maintenance17,035 13,486 13,136Marketing2,538 2,108 2,053Rent3,372 3,216 3,119Hawaii excise tax4,160 4,333 4,454Management fees2,009 1,987 2,046Total rental expenses$91,967$86,482$84,006NOTE 15. OTHER INCOME (EXPENSE)The principal components of other income (expense), net are as follows (in thousands): Year Ended December 31, 2019 2018 2017Interest and investment income$696 $238 $548Income tax expense(819) (327) (214)Other non-operating income1 4 —Total other income (expense)$(122) $(85) $334F-47Table of ContentsNOTE 16. RELATED PARTY TRANSACTIONSAt Torrey Reserve Campus, we previously leased space to ICW, an entity owned and controlled by Ernest Rady. Rental revenue recognized on the leases of$0.0 million, $0.1 million and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively, is included in rental income. Additionally, on July1, 2014, we entered into a workers' compensation insurance policy with ICW. The policy premium was approximately $0.4 million for the period July 1, 2014through July 1, 2015. We renewed this policy with ICW on July 1, 2015 and the premium was approximately $0.2 million for the period July 1, 2015 through July1, 2016. We renewed this policy with ICW on July 1, 2016 and the premium was approximately $0.2 million for the period July 1, 2016 through July 1, 2017. Werenewed this policy with ICW on June 30, 2017 and the premium is approximately $0.2 million for the period July 1, 2017 through July 1, 2018. We did not renewthis 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. ("AAI"), an entity owned and controlled by Mr. Rady, andentered into a new lease agreement with AAI for office space at Torrey Reserve Campus. Rents commenced on March 1, 2019 for an initial lease term of threeyears at an average annual rental rate of $0.2 million. Rental revenue recognized on the leases of $0.2 million and $0.1 million for the years ended December 31,2019 and 2018 is included in rental income on the consolidated statements of comprehensive income.At Torrey Reserve Campus, we lease space to EDisability, LLC, an entity majority owned and controlled by Ernest Rady. Rent revenue recognized on thelease of $0.2 million and $0.1 million for the years ended December 31, 2019 and 2018 is included in rental income on the consolidated statements ofcomprehensive income.On occasion, the company utilizes aircraft services provided by AAI Aviation, Inc. ("AAIA"), an entity owned and controlled by Ernest Rady. For the yearsending December 31, 2019, 2018 and 2017, we incurred approximately $0.2 million, $0.1 million and $0.1 million, respectively, of expenses related to aircraftservices of AAIA or reimbursement to Mr. Rady (or his trust) for use of the aircraft owned by AAIA. These expenses are recorded as general and administrativeexpenses in our consolidated statements of comprehensive income.As of December 31, 2019, Mr. Rady and his affiliates owned approximately 12.6% of our outstanding common stock and 19.5% of our outstanding commonunits, which together represent an approximate 32% beneficial interest in our company on a fully diluted basis.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 waterplant to provide air conditioning to the property and other adjacent facilities. The operating expenses of WBW CHP LLC are recovered through reimbursementsfrom its members, and reimbursements to WBW CHP LLC of $1.1 million, $1.1 million and $1.0 million were made for the years ended December 31, 2019, 2018and 2017, respectively, and included in rental expenses on the statements of income.NOTE 17. SEGMENT REPORTINGSegment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We reviewoperating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. However, wehave aggregated our properties into reportable segments as the properties share similar long-term economic characteristics and have other similarities including thefact that they are operated using consistent business strategies.We operate in four business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily realestate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenantreimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, includingtenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. Theproducts of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental andoperation 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 assetinformation as a measure to assess performance and make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated amongsegments. General and administrative expenses,F-48Table of Contentsinterest expense, depreciation and amortization expense and other income and expense are not included in segment profit as our internal reporting addresses theseitems 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 availableto 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 samemanner. We consider segment profit to be an appropriate supplemental measure to net income because it assists both investors and management in understandingthe core operations of our properties.The following table represents operating activity within our reportable segments (in thousands): Year Ended December 31, 2019 2018 2017Total Office Property revenue144,683 112,362 105,694Property expense(42,234) (33,860) (33,120)Segment profit102,449 78,502 72,574Total Retail Property revenue$107,604 $105,552 $103,968Property expense(30,633) (30,078) (28,524)Segment profit76,971 75,474 75,444Total Multifamily Property revenue51,066 50,627 43,533Property expense(20,863) (20,441) (17,898)Segment profit30,203 30,186 25,635Total Mixed-Use Property revenue63,388 62,326 61,788Property expense(38,250) (37,076) (37,135)Segment profit25,138 25,250 24,653Total segments’ profit$234,761 $209,412 $198,306 The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands): Year Ended December 31, 2019 2018 2017Total segments' profit$234,761 $209,412 $198,306General and administrative(24,871) (22,784) (21,382)Depreciation and amortization(96,205) (107,093) (83,278)Interest expense(54,008) (52,248) (53,848)Gain on sale of real estate633 — —Other income (expense), net(122) (85) 334Net income60,188 27,202 40,132Net income attributable to restricted shares(381) (311) (241)Net income attributable to unitholders in the Operating Partnership(14,089) (7,205) (10,814)Net income attributable to American Assets Trust, Inc. stockholders$45,718 $19,686 $29,077F-49Table of ContentsThe following table shows net real estate and secured note payable balances for each of the segments, along with their capital expenditures for each year (inthousands): December 31, 2019 December 31, 2018Net real estate Office$1,317,854 $822,574Retail624,912 628,734Multifamily401,152 412,042Mixed-Use179,557 176,503 $2,523,475 $2,039,853Secured Notes Payable (1) Office$127,768 $147,757Retail34,235 35,008 $162,003 $182,765Capital Expenditures (2) Office$64,549 $45,192Retail22,844 14,219Multifamily3,711 3,659Mixed-Use8,490 1,277 $99,594 $64,347(1)Excludes unamortized debt issuance costs of $0.1 million and $0.2 million as of December 31, 2019 and 2018, respectively.(2)Capital expenditures represent cash paid for capital expenditures during the year and includes leasing commissions paid.F-50NOTE 18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)The tables below reflect selected American Assets Trust, Inc. quarterly information for 2019 and 2018 (in thousands, except per shares data): Three Months Ended December 31,2019 September 30,2019 June 30,2019 March 31,2019Total revenue$98,947 $98,362 $84,113 $85,319Operating income29,993 30,384 24,487 28,821Net income16,485 16,519 11,941 15,243Net income attributable to restricted shares(104) (92) (92) (93)Net income loss attributable to unitholders in the Operating Partnership(3,536) (3,565) (2,933) (4,055)Net income attributable to American Assets Trust, Inc. stockholders$12,845 $12,862 $8,916 $11,095Net income per share attributable to common stockholders - basic anddiluted$0.22 $0.22 $0.18 $0.24 Three Months Ended December 31,2018 September 30,2018 June 30,2018 March 31,2018Total revenue$82,605 $82,507 $85,023 $80,732Operating income22,091 27,275 17,249 12,920Net income (loss)9,209 14,271 4,413 (691)Net (income) loss attributable to restricted shares(96) (71) (216) 72Net (income) loss attributable to unitholders in the OperatingPartnership(2,440) (3,806) (1,125) 166Net income (loss) attributable to American Assets Trust, Inc.stockholders$6,673 $10,394 $3,072 $(453)Net income (loss) per share attributable to common stockholders - basicand diluted$0.14 $0.22 $0.07 $(0.01)F-51The tables below reflect selected American Assets Trust, L.P. quarterly information for 2019 and 2018 (in thousands, except per shares data): Three Months Ended December 31,2019 September 30,2019 June 30,2019 March 31,2019Total revenue$98,947 $98,362 $84,113 $85,319Operating income29,993 30,384 24,487 28,821Net income16,485 16,519 11,941 15,243Net income attributable to restricted shares(104) (92) (92) (93)Net income attributable to American Assets Trust, L.P. unit holders$16,381 $16,427 $11,849 $15,150Net income per unit attributable to unit holders - basic and diluted$0.22 $0.22 $0.18 $0.24 Three Months Ended December 31,2018 September 30,2018 June 30,2018 March 31,2018Total revenue$82,605 $82,507 $85,023 $80,732Operating income22,091 27,275 17,249 12,920Net income (loss)9,209 14,271 4,413 (691)Net (income) loss attributable to restricted shares(96) (71) (216) 72Net income (loss) attributable to American Assets Trust, L.P. unitholders$9,113 $14,200 $4,197 $(619)Net income per unit attributable to common unit holders - basic anddiluted$0.14 $0.22 $0.07 $(0.01)F-52Table of Contents American Assets Trust, Inc. and American Assets Trust, L.P.SCHEDULE III—Consolidated Real Estate and Accumulated Depreciation(In Thousands) Encumbrance asof December 31,2019 Initial Cost CostCapitalizedSubsequenttoAcquisition Gross Carrying Amountat December 31, 2019 AccumulatedDepreciation andAmortization Year Built/Renovated DateAcquired Life onwhichdepreciationin latestincomestatements iscomputedDescription Land Building andImprovements Land Building andImprovements Alamo QuarryMarket$— $26,396 $109,294 $18,142 $26,816 $127,016 $(61,257) 1997/1999 12/9/2003 35 yearsCarmel CountryPlaza— 4,200 — 12,899 4,200 12,899 (8,675) 1991 1/10/1989 35 yearsCarmel MountainPlaza— 22,477 65,217 38,563 31,034 95,223 (44,156) 1994/2014 3/28/2003 35 yearsDel Monte Center— 27,412 87,570 34,379 27,117 122,244 (66,204) 1967/1984/2006 4/8/2004 35 yearsGatewayMarketplace— 17,363 21,644 1,097 17,363 22,741 (2,040) 1997/2016 7/6/2017 35 yearsGeary Marketplace— 8,239 12,353 171 8,239 12,524 (2,800) 2012 12/19/2012 35 yearsHassalo on Eighth -Retail— — — 28,364 597 27,767 (5,106) 2015 7/1/2011 35 yearsLomas Santa FePlaza— 8,600 11,282 13,805 8,620 25,067 (17,166) 1972/1997 6/12/1995 35 yearsThe Shops atKalakaua— 13,993 10,817 (6) 14,006 10,798 (4,674) 1971/2006 3/31/2005 35 yearsSolana BeachTowne Centre34,235 40,980 38,842 4,222 40,980 43,064 (12,291) 1973/2000/2004 1/19/2011 35 yearsSouth BayMarketplace— 4,401 — 12,760 4,401 12,760 (7,695) 1997 9/16/1995 35 yearsWaikele Center— 55,593 126,858 41,174 70,643 152,982 (62,126) 1993/2008 9/16/2004 35 yearsCity CenterBellevue111,000 25,135 190,998 46,320 25,135 237,318 (52,543) 1987 8/21/2012 40 yearsFirst & Main— 14,697 109,739 7,708 14,697 117,447 (32,259) 2010 3/11/2011 40 yearsThe Landmark atOne Market— 34,575 141,196 13,351 34,575 154,547 (36,102) 1917/2000 6/30/2010 40 yearsLloyd DistrictPortfolio— 18,660 61,401 90,191 11,845 158,407 (34,828) 1940-2015 7/1/2011 40 yearsOne Beach Street— 15,332 18,017 3,353 15,332 21,370 (5,716) 1924/1972/1987/1992 1/24/2012 40 yearsSolana BeachCorporate Centre: Solana BeachCorporate CentreI-II10,270 7,111 17,100 6,876 7,111 23,976 (6,515) 1982/2005 1/19/2011 40 yearsSolana BeachCorporate CentreIII-IV— 7,298 27,887 4,448 7,298 32,335 (8,429) 1982/2005 1/19/2011 40 yearsSolana BeachCorporate CentreLand— 487 — 60 547 — — N/A 1/19/2011 N/ATorrey ReserveCampus: Torrey Plaza— 4,095 — 52,130 5,408 50,817 (18,440) 1996-1997/2014 6/6/1989 40 yearsPacific NorthCourt— 3,263 — 26,182 4,309 25,136 (12,015) 1997-1998 6/6/1989 40 yearsPacific SouthCourt— 3,285 — 39,489 4,226 38,548 (14,733) 1996-1997 6/6/1989 40 yearsPacific VC6,498 1,413 — 10,154 2,148 9,419 (5,234) 1998/2000 6/6/1989 40 yearsPacific TorreyDaycare— 715 — 1,914 911 1,718 (939) 1996-1997 6/6/1989 40 yearsTorrey ReserveBuilding 6— — — 8,006 682 7,324 (1,787) 2013 6/6/1989 40 yearsTorrey ReserveBuilding 5— — — 4,010 1,017 2,993 (358) 2014 6/6/1989 40 yearsTorrey ReserveBuilding 13 & 14— — — 15,916 2,188 13,728 (1,981) 2015 6/6/1989 40 yearsTorrey Point— 2,073 741 45,229 5,050 42,993 (1,655) 2018 5/9/1997 40 yearsLa Jolla Commons La JollaCommons I-II— 62,312 393,662 882 62,312 394,544 (8,060) 2008-2014 6/20/2019 40 yearsLa JollaCommons Land— 20,446 — 1,592 20,446 1,592 — N/A 6/20/2019 N/AImperial BeachGardens— 1,281 4,820 5,049 1,281 9,869 (8,209) 1959/2008 7/31/1985 30 yearsLoma Palisades— 14,000 16,570 28,085 14,052 44,603 (29,226) 1958/2001-2008 7/20/1990 30 yearsMariner’s Point— 2,744 4,540 1,695 2,744 6,235 (3,683) 1986 5/9/2001 30 yearsSanta Fe Park RVResort— 401 928 1,061 401 1,989 (1,515) 1971/2007-2008 6/1/1979 30 yearsPacific RidgeApartments— 47,971 178,497 1,643 47,971 180,140 (17,930) 2013 4/28/2017 30 yearsHassalo on Eighth -Multifamily— — — 178,075 6,219 171,856 (25,645) 2015 7/1/2011 30 yearsF-53Table of Contents American Assets Trust, Inc. and American Assets Trust, L.P.SCHEDULE III—Consolidated Real Estate and Accumulated Depreciation(In Thousands) Encumbrance asof December 31,2019 Initial Cost CostCapitalizedSubsequenttoAcquisition Gross Carrying Amountat December 31, 2019 AccumulatedDepreciation andAmortization Year Built/Renovated DateAcquired Life onwhichdepreciationin latestincomestatements iscomputedDescription Land Building andImprovements Land Building andImprovements Waikiki Beach Walk: Retail— 45,995 74,943 851 45,995 75,794 (21,039) 2006 1/19/2011 35 yearsHotel— 30,640 60,029 10,329 30,640 70,358 (22,191) 2008/2014 1/19/2011 35 years $162,003 $593,583 $1,784,945 $810,169 $628,556 $2,560,141 $(665,222) (1) For Federal tax purposes, the aggregate tax basis is approximately $2.4 billion as of December 31, 2019.F-54Table of Contents American Assets Trust, Inc. and American Assets Trust, L.P.SCHEDULE III—Consolidated Real Estate and Accumulated Depreciation -(Continued)(In Thousands) Year Ended December 31, 2019 2018 2017Real estate assets Balance, beginning of period$2,630,191 2,614,138 2,301,006Additions: Property acquisitions476,421 — 270,602Improvements101,285 62,790 44,755Deductions: Cost of Real Estate Sold(8,845) — —Other (1)(10,355) (46,737) (2,225)Balance, end of period$3,188,697 $2,630,191 $2,614,138Accumulated depreciation Balance, beginning of period$590,338 $537,431 $469,460Additions—depreciation85,428 99,644 70,196Deductions: Cost of Real Estate Sold(189) — —Other (1)(10,355) (46,737) (2,225)Balance, end of period$665,222 $590,338 $537,431(1)Other deductions for the years ended December 31, 2019, 2018 and 2017 represent the write-off of fully depreciated assets.F-55DESCRIPTION OF THE REGISTRANT’S SECURITIESREGISTERED PURSUANT TO SECTION 12 OF THESECURITIES EXCHANGE ACT OF 1934References to “we,” “us,” “our,” or “the company” mean, unless the context indicates otherwise, American Assets Trust, Inc., notincluding any of the entities/subsidiaries owned or controlled by American Assets Trust, Inc. When we refer to the company’s “Charter,” wemean the company’s articles of incorporation, as amended, supplemented and restated from time to time. When we refer to our “operatingpartnership” we mean American Assets Trust, L.P.Description of Capital StockThe following is a summary of the general terms of the company’s common stock. This description is not complete and is subject to, andqualified in its entirety by reference to, the Maryland General Corporation Law (or “MGCL”) and our Charter and Bylaws, copies of whichare exhibits to this Annual Report on Form 10-K.GeneralAs of December 31, 2019, the total number of shares of stock of all classes which the company has authority to issue is 500,000,000shares, consisting of 490,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value$0.01 per share. Our Charter authorizes the Board of Directors of the Company (the “Board of Directors”), with the approval of a majority ofthe entire Board of Directors and without any action by our stockholders, to amend our Charter to increase or decrease the aggregate numberof authorized shares of stock or the number of authorized shares of any class or series of our stock that we have the authority to issue.Under Maryland law, stockholders generally are not personally liable for our debts or obligations solely as a result of their status asstockholders.Common StockDividendsSubject to the preferential rights of holders of any other class or series of our stock and to the provisions of our Charter regarding therestrictions on ownership and transfer of our stock, holders of shares of our common stock are entitled to receive dividends and otherdistributions on such shares if, as and when authorized by the Board of Directors out of assets legally available therefor and declared by usand to share ratably in the assets of our company legally available for distribution to our stockholders in the event of our liquidation,dissolution or winding up after payment or establishment of reserves for all known debts and liabilities of our company..Voting RightsSubject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock and except as may otherwise bespecified in the terms of any class or series of our stock, each outstanding share of our common stock entitles the holder to one vote on allmatters submitted to a vote of stockholders, including the election of directors, and the holders of shares of our common stock will possessthe exclusive voting power. There is no cumulative voting in the election of our directors. Directors are elected by a plurality of all of thevotes cast in the election of directors.Other RightsHolders of shares of our common stock have no preference, conversion, exchange, sinking fund or redemption rights and have nopreemptive rights to subscribe for any securities of our company. Our Charter provides that our stockholders generally have no appraisalrights unless the Board of Directors determines prospectively that appraisal rights will apply to one or more transactions in which holders ofour common stock would otherwise be entitled to exercise appraisal rights. Subject to the provisions of our Charter regarding the restrictionson ownership and transfer of our stock, holders of our common stock will have equal dividend, liquidation and other rights.Liquidation RightsUnder the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, convert, consolidate, sell all orsubstantially all of its assets or engage in a statutory share exchange unless declared advisable by its board of directors and approved by theaffirmative vote of stockholders entitled to cast at least two-thirds of all of the votes entitled to be cast on the matter unless a lesserpercentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. OurCharter provides for approval of any of these matters by the affirmative vote of stockholders entitled to cast a majority of the votes entitled tobe cast on such matters, except that the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be castgenerally in the election of directors is required to remove a director and the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on such matter is required to amend the provisions of our Charter relating to the removal of directors,specifying that our stockholders may act without a meeting only by unanimous consent, or specifying the vote required to amend suchprovisions. Maryland law also permits a Maryland corporation to transfer all or substantially all of its assets without the approval of itsstockholders to an entity if all of the equity interests of the entity are owned, directly or indirectly, by the corporation. Because our operatingassets may be held by our operating partnership or its subsidiaries, these subsidiaries may be able to merge or transfer all or substantially allof their assets without the approval of our stockholders.Undesignated StockOur Charter authorizes the Board of Directors to reclassify any unissued shares of our common stock into other classes or series of stock,to establish the designation and number of shares of each such class or series and to set, subject to the provisions of our Charter relating to therestrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as todividends or other distributions, qualifications or terms or conditions for redemption of each such class or series.Restrictions on Ownership and TransferIn order for us to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, our stock must be beneficiallyowned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be aREIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding sharesof stock (after taking into account options to acquire shares of stock) may be owned, directly, indirectly or through application of certainattribution rules by five or fewer individuals (as defined in the Code to include certain entities such as private foundations) at any time duringthe last half of a taxable year (other than the first year for which an election to be a REIT has been made).Our Charter contains restrictions on the ownership and transfer of our stock that are intended to assist us in complying with theserequirements and continuing to qualify as a REIT. The relevant sections of our Charter provide that, subject to the exceptions describedbelow, no person or entity may actually or beneficially own, or be deemed to own by virtue of the applicable constructive ownershipprovisions of the Code, more than 7.275% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstandingshares of our common stock, or 7.275% in value of the aggregate of the outstanding shares of all classes and series of our stock, in each caseexcluding any shares of our common stock that are not treated as outstanding for federal income tax purposes. We refer to each of theserestrictions as an “ownership limit” and collectively as the “ownership limits.” A person or entity that would have acquired actual, beneficialor constructive ownership of our stock but for the application of the ownership limits or any of the other restrictions on ownership andtransfer of our stock discussed below is referred to as a “prohibited owner.”The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group ofrelated individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 7.275% ofour common stock (or the acquisition of an interest in an entity that owns, actually or constructively, our common stock) by an individual orentity, could, nevertheless cause that individual or entity, or another individual or entity, to own constructively in excess of 7.275% of ouroutstanding common stock and thereby violate the applicable ownership limit.The Board of Directors, in its sole and absolute discretion, prospectively or retroactively, may exempt a person from either or both of theownership limits if doing so would not result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard towhether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT and our Board ofDirectors reasonably determines that such waiver will not cause or allow:•five or fewer individuals to actually or beneficially own more than 49% in value of the aggregate of the outstanding shares of allclasses and series of our stock; and•subject to certain exceptions, us to own, actually or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in a tenant of ours (or a tenant of an entity owned in whole or in part by us).As a condition of the exception, our Board of Directors may require an opinion of counsel or Internal Revenue Service, or IRS, ruling, ineither case in form and substance satisfactory to the Board of Directors, in its sole and absolute discretion, in order to determine or ensure ourstatus as a REIT and such representations, covenants and undertakings from the person requesting the exception as are reasonably necessaryor prudent to make the determinations above. The Board of Directors may impose such conditions or restrictions as it deems appropriate inconnection with such an exception.In connection with past offerings of our common stock, the Board of Directors has granted to Mr. Rady (and certain of his affiliates) anexemption from the ownership limits that will allow him to own, in the aggregate, up to 19.9% in value or in number of shares, whichever ismore restrictive, of our outstanding common stock, subject to various conditions and limitations.In connection with a waiver of an ownership limit or at any other time, the Board of Directors may, in its sole and absolute discretion,increase or decrease one or both of the ownership limits for one or more persons, except that a decreased ownership limit will not be effectivefor any person whose actual, beneficial or constructive ownership of our stock exceeds the decreased ownership limit at the time of thedecrease until the person’s actual, beneficial or constructive ownership of our stock equals or falls below the decreased ownership limit,although any further acquisition of our stock will violate the decreased ownership limit. The Board of Directors may not increase or decreaseany ownership limit if, among other limitations, the new ownership limit would allow five or fewer persons to actually or beneficially ownmore than 49% in value of our outstanding stock or could otherwise cause us to fail to qualify as a REIT.Our Charter provisions further prohibit:•any person from actually, beneficially or constructively owning shares of our stock that could result in us being “closely held”under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year)or otherwise cause us to fail to qualify as a REIT (including, but not limited to, actual, beneficial or constructive ownership ofshares of our stock that could result in (i) us owning (actually or constructively) an interest in a tenant that is described in Section856(d)(2)(B) of the Code, or (ii) any manager of a “qualified lodging facility,” within the meaning of Section 856(d)(9)(D) of theCode, leased by us to one of our taxable REIT subsidiaries failing to qualify as an “eligible independent contractor” within themeaning of Section 856(d)(9)(A) of the Code, in each case if the income we derive from such tenant or such taxable REITsubsidiary, taking into account our other income that would not qualify under the gross income requirements of Section 856(c) ofthe Code, would cause us to fail to satisfy any of the gross income requirements imposed on REITs); and•any person from transferring shares of our stock if such transfer would result in shares of our stock being beneficially owned byfewer than 100 persons (determined without reference to any rules of attribution).Any person who acquires or attempts or intends to acquire actual, beneficial or constructive ownership of shares of our stock that will ormay violate the ownership limits or any of the other restrictions on ownership and transfer of our stock described above must give writtennotice immediately to us or, in the case of a proposed or attempted transaction, provide us at least 15 days’ prior written notice, and provideus with such other information as we may request in order to determine the effect of such transfer on our status as a REIT.The ownership limits and other restrictions on ownership and transfer of our stock described above will not apply if our Board ofDirectors determines that it is no longer in our best interest to attempt to qualify, or to continue to qualify, as a REIT or that compliance is nolonger required in order for us to qualify as a REIT.Pursuant to our Charter, if any purported transfer of our stock or any other event would otherwise result in any person violating theownership limits or such other limit established by our Board of Directors, or could result in us being “closely held” within the meaning ofSection 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwisefailing to qualify as a REIT, then that number of shares causing the violation (rounded up to the nearest whole share) will be automaticallytransferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us. The prohibited owner willhave no rights in shares of our stock held by the trustee. The automatic transfer will be effective as of the close of business on the businessday prior to the date of the violative transfer or other event that results in the transfer to the trust. Any dividend or other distribution paid tothe prohibited owner prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid tothe trustee upon demand. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation ofthe applicable restriction on ownership and transfer of our stock, then that transfer of the number of shares that otherwise would cause anyperson to violate the above restrictions will be void. If any transfer of our stock would result in shares of our stock being beneficially ownedby fewer than 100 persons (determined without reference to any rules of attribution), then any such purported transfer will be void and of noforce or effect and the intended transferee will acquire no rights in the shares.Shares of our stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of(1) the price per share paid in the transaction that resulted in the transfer of the shares to the trust (or, in the event of a gift, devise or othersuch transaction, the last reported sale price on the NYSE on the day of the transfer or other event that resulted in the transfer of such sharesto the trust) and (2) the last reported sale price on the NYSE on the date we accept, or our designee accepts, such offer. We must reduce theamount payable to the prohibited owner by the amount of dividends and other distributions paid to the prohibited owner and owed by theprohibited owner to the trustee and pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We have theright to accept such offer until the trustee has sold the shares of our stock held in the trust. Upon a sale to us, the interest of the charitablebeneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the prohibited owner, and any dividendsor other distributions held by the trustee with respect to such stock will be paid to the charitable beneficiary.If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell theshares to a person or persons designated by the trustee who could own the shares without violating the ownership limits or other restrictionson ownership and transfer of our stock. Upon such sale, the trustee must distribute to the prohibited owner an amount equal to the lesser of(1) the price paid by the prohibited owner for the shares (or, if the prohibited owner did not give value in connection with the transfer or otherevent that resulted in the transfer to the trust (e.g., a gift, devise or other such transaction), the last reported sale price on the NYSE on the dayof the transfer or other event that resulted in the transfer of such shares to the trust) and (2) the sales proceeds (net of commissions and otherexpenses of sale) received by the trustee for the shares. The trustee will reduce the amount payable to the prohibited owner by the amount ofdividends and other distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net sales proceeds inexcess of the amount payable to the prohibited owner will be immediately paid to the charitable beneficiary, together with any dividends orother distributions thereon. In addition, if prior to discovery by us that shares of our stock have been transferred to the trustee, such shares ofstock are sold by a prohibited owner, then such shares shall be deemed to have been sold on behalf of the trust and, to the extent that theprohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled toreceive, such excess amount shall be paid to the trustee upon demand.The trustee will be designated by us and will be unaffiliated with us and with any prohibited owner. Prior to the sale of any shares by thetrust, the trustee will receive, in trust for the charitable beneficiary, all dividends and other distributions paid by us with respect to suchshares, and may exercise all voting rights with respect to such shares for the exclusive benefit of the charitable beneficiary.Subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee may, at the trustee’s solediscretion:•rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and•recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote.If our Board of Directors determines in good faith that a proposed transfer or other event has taken place that violates the restrictions onownership and transfer of our stock set forth in our Charter, our Board of Directors may take such action as it deems advisable in its solediscretion to refuse to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem shares of stock, refusing togive effect to the transfer on our books or instituting proceedings to enjoin the transfer.Every owner of 5% or more (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) ofthe outstanding shares of our stock, within 30 days after the end of each taxable year, must give written notice to us stating the name andaddress of such owner, the number of shares of each class and series of our stock that the owner beneficially owns and a description of themanner in which the shares are held. Each such owner also must provide us with any additional information that we request in order todetermine the effect, if any, of the person’s actual or beneficial ownership on our status as a REIT and to ensure compliance with theownership limits. In addition, any person that is an actual owner, beneficial owner or constructive owner of shares of our stock and anyperson (including the stockholder of record) who is holding shares of our stock for an actual owner, beneficial owner or constructive ownermust, on request, disclose to us such information as we may request in good faith in order to determine our status as a REIT and comply withrequirements of any taxing authority or governmental authority or to determine such compliance.Any certificates representing shares of our stock will bear a legend referring to the restrictions on ownership and transfer of our stockdescribed above.These restrictions on ownership and transfer could delay, defer or prevent a transaction or a change of control of our company that mightinvolve a premium price for our common stock that our stockholders believe to be in their best interest.ListingThe common stock is listed on the New York Stock Exchange under the symbol “AAT.”Transfer Agent and RegistrarThe transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.Our Board of DirectorsOur Charter and Bylaws provide that the number of directors of our company may be established, increased or decreased only by amajority of our entire Board of Directors but may not be fewer than the minimum number required under the MGCL nor, unless our Bylawsare amended, more than 15.We have elected by a provision of our Charter to be subject to a provision of Maryland law requiring that, except as otherwise provided inthe terms of any class or series of our stock, vacancies on our Board of Directors may be filled only by the remaining directors and that anyindividual elected to fill a vacancy will serve for the remainder of the full term of the class of directors in which the vacancy occurred anduntil his or her successor is duly elected and qualifies.Removal of DirectorsOur Charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one ormore directors, a director may be removed only for cause (as defined in our Charter) and only by the affirmative vote of at least two-thirds ofthe votes entitled to be cast generally in the election ofdirectors. This provision, when coupled with the exclusive power of our Board of Directors to fill vacant directorships, may precludestockholders from removing incumbent directors except for cause and by a substantial affirmative vote and filling the vacancies created bysuch removal with their own nominees.Business CombinationsUnder the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in certain circumstancesspecified under the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and anyinterested stockholder, or an affiliate of such an interested stockholder, are prohibited for five years after the most recent date on which theinterested stockholder becomes an interested stockholder. Maryland law defines an interested stockholder as:•any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding votingstock; or•an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficialowner, directly or indirectly, of 10% or more of the voting power of the then outstanding voting stock of the corporation.A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which theperson otherwise would have become an interested stockholder. In approving a transaction, however, a board of directors may provide that itsapproval is subject to compliance, at or after the time of the approval, with any terms and conditions determined by it.After such five-year period, any such business combination must be recommended by the Board of Directors of the corporation andapproved by the affirmative vote of at least:•80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and•two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interestedstockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of theinterested stockholder.These supermajority approval requirements do not apply if, among other conditions, the corporation’s common stockholders receive aminimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid bythe interested stockholder for its shares.These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a corporation’s boardof directors prior to the time that the interested stockholder becomes an interested stockholder. Our Board of Directors has, by boardresolution, elected to opt out of the business combination provisions of the MGCL. However, our Board of Directors could opt to be subjectto such business combination provisions in the future. Notwithstanding the foregoing, an alteration or repeal of this resolution will not haveany effect on any business combinations that have been consummated or upon any agreements existing at the time of such modification orrepeal.Control Share AcquisitionsThe MGCL provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no votingrights with respect to any control shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to becast in the election of directors, generally, excluding shares of stock in a corporation in respect of which any of the following persons isentitled to exercise or direct the exercise of the voting power of such shares in the election of directors: (1) the person who made or proposesto make a control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is also a director of thecorporation. “Control shares” are voting shares of stock that, if aggregated with all other such shares of stock previously acquired by theacquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocableproxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:•one-tenth or more but less than one-third;•one-third or more but less than a majority; or•a majority or more of all voting power.Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholderapproval or shares acquired directly from the corporation. A “control share acquisition” means the acquisition, directly or indirectly, ofownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares, subject to certainexceptions.A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertakingto pay expenses and making an “acquiring person statement” as described in the MGCL), may compel the corporation to call a specialmeeting of stockholders to be held within 50 days of demand to consider the voting rights of the control shares. If no request for a specialmeeting is made, the corporation may itself present the question at any stockholders meeting.If voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an “acquiring personstatement” as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the controlshares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence ofvoting rights for the control shares, as of the date of any meeting of stockholders at which the voting rights of such shares are considered andnot approved or, if no such meeting is held, as of the date of the last control share acquisition by the acquirer. If voting rights for controlshares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all otherstockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be lessthan the highest price per share paid by the acquirer in the control share acquisition.The control share acquisition statute does not apply to: (1) shares acquired in a merger, consolidation or share exchange if the corporationis a party to the transaction or (2) acquisitions approved or exempted by the charter or bylaws of the corporation.Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares ofour stock.Subtitle 8Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act andat least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors andnotwithstanding any contrary provision in the charter or bylaws, to any or all of the following five provisions:•a classified board,•a two-thirds vote requirement to remove a director,•a requirement that the number of directors be fixed only by the vote of the directors,•a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the classof directors in which the vacancy occurred, or•a majority requirement for the calling of a stockholder-requested special meeting of stockholders.We have elected by a provision in our Charter to be subject to the provisions of Subtitle 8 relating to the filling of vacancies on our Boardof Directors. Through provisions in our Charter and Bylaws unrelated to Subtitle 8, we already (1) require a two-thirds vote for the removalof any director from the board, which removal will be allowed only for cause, (2) vest in the board the exclusive power to fix the number ofdirectorships, subject to limitations set forth in our Charter and Bylaws, and (3) require, unless called by the chairman of our Board ofDirectors, our president, our chief executive officer or our Board of Directors, the request of stockholders entitled to cast not less than amajority of all votes entitled to be cast on a matter at such meeting to call a special meeting to consider and vote on any matter that mayproperly be considered at a meeting of stockholders. We have not elected to create a classified board. In the future, our Board of Directorsmay elect, without stockholder approval, to create a classified board or elect to be subject to one or more of the other provisions of Subtitle 8.Amendments to Our Charter and BylawsOther than amendments to certain provisions of our charter described below and amendments permitted to be made without stockholderapproval under Maryland law or by a specific provision in the charter, our Charter maybe amended only if such amendment is declared advisable by our Board of Directors and approved by the affirmative vote of stockholdersentitled to cast a majority of all of the votes entitled to be cast on the matter. The provisions of our Charter relating to the removal of directorsor specifying that our stockholders may act without a meeting only by unanimous consent, or the provision specifying the vote required toamend such provisions, may be amended only if such amendment is declared advisable by our Board of Directors and approved by theaffirmative vote of stockholders entitled to cast not less than two-thirds of all of the votes entitled to be cast on the matter. Our Board ofDirectors has the exclusive power to adopt, alter or repeal any provision of our Bylaws or to make new bylaws.Transactions Outside the Ordinary Course of BusinessWe generally may not merge with or into, convert into or consolidate with another company, sell all or substantially all of our assets orengage in a statutory share exchange unless such transaction is declared advisable by our Board of Directors and approved by the affirmativevote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. In addition, to the extent that such a merger,conversion, consolidation, sale of assets of statutory share exchange would require the approval of our stockholders, such transaction mayalso require the approval of the limited partners of our operating partnership.Dissolution of Our CompanyThe dissolution of our company must be declared advisable by a majority of our entire Board of Directors and approved by theaffirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.Meetings of StockholdersUnder our Bylaws, annual meetings of stockholders must be held each year at a date, time and place determined by our Board ofDirectors. Special meetings of stockholders may be called by the chairman of our Board of Directors, our chief executive officer, ourpresident and our Board of Directors. Additionally, subject to the provisions of our Bylaws, a special meeting of stockholders to act on anymatter that may properly be considered at a meeting of stockholders must be called by our secretary upon the written request of stockholdersentitled to cast a majority of all of the votes entitled to be cast on the matter at such meeting who have requested the special meeting inaccordance with the procedures specified in our Bylaws and provided the information and certifications required by our Bylaws. Onlymatters set forth in the notice of a special meeting of stockholders may be considered and acted upon at such a meeting.Advance Notice of Director Nominations and New BusinessOur Bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to the Board ofDirectors and the proposal of business to be considered by stockholders at the annual meeting may be made only:•pursuant to our notice of the meeting;•by or at the direction of our Board of Directors; or•by a stockholder who was a stockholder of record both at the time of giving of the notice required by our Bylaws and at the timeof the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on such otherbusiness and who has provided the information and certifications required by the advance notice procedures set forth in ourBylaws.Our Bylaws provide that, with respect to special meetings of stockholders, only the business specified in our notice of meeting may bebrought before the meeting of stockholders, and nominations of individuals for election to our Board of Directors may be made only:•by or at the direction of our Board of Directors; or•provided that the meeting has been called for the purpose of electing directors, by a stockholder who is a stockholder of recordboth at the time of giving of the notice required by our Bylaws and at the time of the meeting, who is entitled to vote at themeeting in the election of each individual so nominated and who has provided the information and certifications required by theadvance notice procedures set forth in our Bylaws.The purpose of requiring stockholders to give advance notice of nominations and other proposals is to afford our Board of Directors theopportunity to consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considerednecessary by our Board of Directors, to inform stockholders and make recommendations regarding the nominations or other proposals. Theadvance notice procedures also permit a more orderly procedure for conducting our stockholder meetings.Anti-takeover Effect of Certain Provisions of Our Charter and BylawsThe restrictions on ownership and transfer of our stock, the provisions of our Charter regarding the removal of directors, the exclusivepower of our Board of Directors to fill vacancies on the board and the advance notice provisions of our Bylaws could delay, defer or preventa transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be intheir best interests.Indemnification and Limitation of Directors’ and Officers’ LiabilityMaryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers tothe corporation and its stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit inmoney, property or services or active and deliberate dishonesty that is established by a final judgment and is material to the cause of action.Our Charter contains a provision that eliminates such liability to the maximum extent permitted by Maryland law.Our Charter and Bylaws also permit us, with the approval of our Board of Directors, to indemnify and advance expenses to any personwho served a predecessor of ours as a director or officer and to any employee or agent of our company or a predecessor of our company.We have entered into indemnification agreements with each of our executive officers and directors whereby we have agreed to indemnifysuch executive officers and directors to the fullest extent permitted by Maryland law against all expenses and liabilities, subject to limitedexceptions. These indemnification agreements also provide that, upon an application for indemnity by an executive officer or director to acourt of appropriate jurisdiction, such court may order us to indemnify such executive officer or director.The partnership agreement also provides that we, as general partner, and our directors, officers, employees, agents and designees areindemnified to the extent provided therein.Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under theSecurities Act, we have been informed that in the opinion of the SEC, this indemnification is against public policy as expressed in theSecurities Act and is therefore unenforceable.REIT QualificationOur Charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without approval of ourstockholders, if it determines that it is no longer in our best interests to continue to be qualified as a REIT.Executive Version (12-19)AMERICAN ASSETS TRUST, INC.2011 EQUITY INCENTIVE AWARD PLANRESTRICTED STOCK AWARD GRANT NOTICE ANDRESTRICTED STOCK AWARD AGREEMENTAmerican Assets Trust, Inc., a Maryland corporation (the “Company”), pursuant to its 2011 Equity Incentive Award Plan (the“Plan”), hereby grants to the individual listed below (“Participant”) the number of shares of the Company’s Stock (the “Shares”) set forthbelow. This Restricted Stock award (the “Award”) is subject to all of the terms and conditions as set forth herein and in the Restricted StockAward Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the Plan, which are incorporated herein byreference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and theRestricted Stock Agreement.Participant:[__________]Grant Date:[__________]Grant Number:[__________] Maximum Number of Shares of RestrictedStock (“Maximum Shares”):[__________] Target Number of Shares of RestrictedStock (“Target Shares”):[__________] Vesting Schedule:This Award shall vest in accordance with the vesting schedule set forth onExhibit C attached hereto.By his or her signature, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement andthis Grant Notice. Participant has reviewed the Restricted Stock Agreement, the Plan and this Grant Notice in their entirety, has had anopportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, theRestricted Stock Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretationsof the Administrator of the Plan upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Agreement.AMERICAN ASSETS TRUST, INC. PARTICIPANTBy: By: Ernest Rady, Chairman/President/CEO11455 El Camino Real, #200San Diego, CA 92130 11455 El Camino Real, #200San Diego, CA 92130A-1Executive Version (12-19)EXHIBIT ATO RESTRICTED STOCK AWARD GRANT NOTICERESTRICTED STOCK AWARD AGREEMENTPursuant to the Restricted Stock Award Grant Notice (“Grant Notice”) to which this Restricted Stock Award Agreement (this“Agreement”) is attached, American Assets Trust, Inc., a Maryland corporation (the “Company”), has granted to Participant the right topurchase the number of shares of Restricted Stock under the Company’s 2011 Equity Incentive Award Plan (the “Plan”) indicated in theGrant Notice. The Shares are subject to the terms and conditions of the Plan which are incorporated herein by reference. Capitalized terms notspecifically defined herein shall have the meanings specified in the Plan and the Grant Notice.ARTICLE IISSUANCE OF SHARES1.1 Issuance of Shares. Pursuant to the Plan and subject to the terms and conditions of this Agreement, effective on the Grant Date,the Company irrevocably grants to Participant the number of shares of Stock set forth in the Grant Notice (the “Shares”), in consideration ofParticipant’s employment with or service to the Company, the Partnership or one of their Subsidiaries on or before the Grant Date, for whichthe Administrator has determined Participant has not been fully compensated, and the Administrator has determined that the benefit receivedby the Company as a result of such employment or service has a value that exceeds the aggregate par value of the Shares, which Shares, whenissued in accordance with the terms hereof, shall be fully paid and nonassessable.1.2 Issuance Mechanics. On the Grant Date, the Company shall issue the Shares to Participant and shall (a) cause a stock certificateor certificates representing the Shares to be registered in the name of Participant, or (b) cause such Shares to be held in book entry form. If astock certificate is issued, it shall be delivered to and held in custody by the Company and shall bear the restrictive legends required bySection 4.1 below. If the Shares are held in book entry form, then such entry will reflect that the Shares are subject to the restrictions of thisAgreement. Participant’s execution of a stock assignment in the form attached as Exhibit B to the Grant Notice (the “Stock Assignment”)shall be a condition to the issuance of the Shares.ARTICLE IIFORFEITURE AND TRANSFER RESTRICTIONS2.1 Forfeiture Restriction. Subject to the provisions of Section 2.2 below, in the event of Participant’s cessation of Service for anyreason, including as a result of Participant’s death or Disability, all of the Unreleased Shares (as defined below) shall thereupon be forfeitedimmediately and without any further action by the Company (the “Forfeiture Restriction”). Upon the occurrence of such a forfeiture, theCompany shall become the legal and beneficial owner of the Unreleased Shares and all rights and interests therein or relating thereto, and theCompany shall have the right to retain and transfer to its own name the number of Unreleased Shares being forfeited by Participant. TheUnreleased Shares and Participant’s executed stock assignment in the form attached as Exhibit B to the Grant Notice shall be held by theCompany in accordance with Section 2.4 until the Shares are forfeited as provided in this Section 2.1, until such Unreleased Shares are fullyreleased from the Forfeiture Restriction, or until such time as this Agreement no longer is in effect. Participant hereby authorizes and directsthe Secretary of the Company, or such other person designated by the Administrator, to transfer the Unreleased Shares which have beenforfeited pursuant to this Section 2.1 from Participant to the Company.2.2 Release of Shares from Forfeiture Restriction. The Shares shall be released from the Forfeiture Restriction in accordance withthe vesting schedule set forth in Exhibit C attached to the Grant Notice. Any of the Shares which, from time to time, have not yet beenreleased from the Forfeiture Restriction are referred to herein as “Unreleased Shares.” As soon as administratively practicable following therelease of any Shares from the Forfeiture Restriction, the Company shall, as applicable, either deliver to Participant the certificate orcertificates representing such Shares in the Company’s possession belonging to Participant, or, if the Shares are held in book entry form, thenA-2Executive Version (12-19)the Company shall remove the notations on the book form. Participant (or the beneficiary or personal representative of Participant in theevent of Participant’s death or incapacity, as the case may be) shall deliver to the Company any representations or other documents orassurances as the Company or its representatives deem necessary or advisable in connection with any such delivery.2.3 Transfer Restriction. No Unreleased Shares or any interest or right therein or part thereof shall be liable for the debts, contractsor engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation,pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law byjudgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted dispositionthereof shall be null and void and of no effect.2.4 Escrow. The Unreleased Shares and Participant’s executed Stock Assignment shall be held by the Company until the Shares areforfeited as provided in Section 2.1, until such Unreleased Shares are fully released from the Forfeiture Restriction, or until such time as thisAgreement no longer is in effect. In such event, Participant shall not retain physical custody of any certificates representing UnreleasedShares issued to Participant. Participant, by acceptance of this Award, shall be deemed to appoint, and does so appoint, the Company andeach of its authorized representatives as Participant’s attorney(s)-in-fact to effect any transfer of forfeited Unreleased Shares to the Companyas may be required pursuant to the Plan or this Agreement, and to execute such representations or other documents or assurances as theCompany or such representatives deem necessary or advisable in connection with any such transfer. The Company, or its designee, shall notbe liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise ofits judgment.2.5 Rights as Stockholder. Except as otherwise provided herein, upon issuance of the Shares by the Company, Participant shallhave all the rights of a stockholder with respect to said Shares, subject to the restrictions herein, including the right to vote the Shares and toreceive all dividends or other distributions paid or made with respect to the Shares.2.6 Ownership Limit and REIT Status. The Forfeiture Restriction on the Shares shall not lapse if the lapsing of such restrictionswould likely result in any of the following: (a) a violation of the restrictions or limitations on ownership provided for from time to time under the terms of the organizationaldocuments of the Company; or(b) income to the Company that could impair the Company’s status as a real estate investment trust, within the meaning ofSection 856 through 860 of the Code. ARTICLE IIITAXATION REPRESENTATIONS3.1 Tax Representation. Participant represents to the Company that Participant has reviewed with his or her own tax advisors thefederal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agree-ment. Participant isrelying solely on such advisors and not on any state-ments or represen-tations of the Company or any of its agents. Participant understandsthat Participant (and not the Company) shall be responsible for his or her own tax liability that may arise as a result of this investment or thetransactions contem-plated by this Agreement.3.2 No 83(b) Election Without Administrator Consent. Participant covenants that he or she will not make an election under Section83(b) of the Code with respect to the receipt of any of the Shares without the consent of the Administrator, which the Administrator maygrant or withhold in its sole discretion.3.3 Tax Withholding. Notwithstanding anything to the contrary in this Agreement, the Company, the Partnership and theirSubsidiaries shall be entitled to require payment of any sums required by federal, state and local income and employment or payroll tax lawto be withheld with respect to the issuance, lapsing of restrictions on orA-3Executive Version (12-19)sale of the Shares. The Company, the Partnership and their Subsidiaries may withhold or the Participant may make such payment in one ormore of the forms specified below:(a) by cash or check made payable to the Company;(b) by the deduction of such amount from other compensation payable to Participant;(c) with respect to any withholding taxes arising in connection with the vesting of the Shares, and with the consent of theAdministrator, through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company withrespect to those Shares that are then becoming vested and that the broker has been directed to pay a sufficient portion of the net proceeds ofthe sale to the Company, the Partnership or any Subsidiary with respect to which the withholding obligation arises in satisfaction of suchwithholding taxes; provided that payment of such proceeds is then made to the Company, the Partnership or the applicable Subsidiary at suchtime as may be required by the Administrator, but in any event not later the settlement of such;(d) with respect to any withholding taxes arising in connection with the vesting of the Shares, and with the consent of theAdministrator, by requesting that the Company withhold a net number of vested Shares otherwise deliverable pursuant to this Agreementhaving a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company, thePartnership and their Subsidiaries based on the minimum applicable statutory withholding rates for federal, state and local income tax andpayroll tax purposes;(e) with respect to any withholding taxes arising in connection with the vesting of the Shares, and with the consent of theAdministrator, by tendering vested shares of Stock owned by Participant having a then current Fair Market Value not exceeding the amountnecessary to satisfy the withholding obligation of the Company, the Partnership and their Subsidiaries based on the minimum applicablestatutory withholding rates for federal, state and local income tax and payroll tax purposes; or(f) in any combination of the foregoing.In the event Participant either (i) fails to provide timely payment of all sums required pursuant to this Section 3.3 or (ii) fails toinform the Company as to his or her intentions as to the method of payment of all sums required pursuant to this Section 3.3 at least five (5)days prior to the date on with any tax withholding obligation arises, the Company shall have the right and option, but not the obligation, totreat either of such failures as an election by Participant to satisfy all or any portion of Participant’s required payment obligation pursuant toclauses (c) or (d) above, at the Company’s option. The Company shall not be obligated to deliver any stock certificate representing vestedShares to Participant or Participant’s legal representative, or, if the Shares are held in book entry form, to remove the notations on the bookform, unless and until Participant or Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal,state and local taxes applicable to the taxable income of Participant resulting from the issuance, lapsing of restrictions on or sale of theShares.In the event any tax withholding obligation arising in connection with the Shares will be satisfied under clause (c) above,then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’sbehalf a whole number of shares of Stock from those Shares that are then becoming vested as the Company determines to be appropriate togenerate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company, thePartnership or any Subsidiary with respect to which the withholding obligation arises. Participant’s acceptance of this Award constitutesParticipant’s instruction and authorization to the Company and such brokerage firm to complete the transactions described in this paragraph,including the transactions described in the previous sentence, as applicable. The Company may refuse to deliver any certificate representingthe Shares to Participant or his or her legal representative until the foregoing tax withholding obligations are satisfied. In the event of anybroker-assisted sale of shares of Stock in connection with the payment of withholding taxes as provided in this Section 3.3: (i) any shares ofStock to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation arises or as soon thereafter aspracticable; (ii) such shares of Stock may be sold as part of a block trade with other participants in the Plan in which all participants receivean average price; (iii) Participant will be responsible for all broker’s fees and other costs of sale, and Participant agreesA-4Executive Version (12-19)to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent theproceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Participant as soonas reasonably practicable; (v) Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale atany particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (vi)in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Participant agrees to payimmediately upon demand to the Company, the Partnership or any Subsidiary with respect to which the withholding obligation arises anamount in cash sufficient to satisfy any remaining portion of the Company’s, the Partnership's or the applicable Subsidiary’s withholdingobligation.ARTICLE IVRESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS4.1 Legends. The certificate or certificates representing the Shares, if any, shall bear the following legend (as well as any legendsrequired by the Company’s charter and applicable state and federal corporate and securities laws):THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OFTHE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF ARESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, ACOPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.4.2 Refusal to Transfer; Stop-Transfer Notices. The Company shall not be required (a) to transfer on its books any Shares that havebeen sold or otherwise transferred in violation of any of the provisions of this Agreement or (b) to treat as owner of such Shares or to accordthe right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. Participant agreesthat, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions toits transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its ownrecords.4.3 Removal of Legend. After such time as the Forfeiture Restriction shall have lapsed with respect to the Shares, and uponParticipant’s request, a new certificate or certificates representing such Shares shall be issued without the legend referred to in Section 4.1,and delivered to Participant. If the Shares are held in book entry form, the Company shall cause any restrictions noted on the book form to beremoved.ARTICLE VMISCELLANEOUS5.1 Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties heretoshall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles ofconflicts of law.5.2 Entire Agreement; Enforcement of Rights. This Agreement and the Plan set forth the entire agreement and understanding of theparties relating to the subject matter herein and merge all prior discussions between them. No modification of or amendment to thisAgreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement.5.3 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree torenegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for suchprovision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if suchprovision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms.A-5Executive Version (12-19)5.4 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when deliveredpersonally or sent by electronic mail (with return receipt requested and received) or fax or forty-eight (48) hours after being deposited in theU.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified, if to the Company, at its principaloffices, and if to Participant, at Participant’s address, electronic mail address or fax number in the Company’s employee records or assubsequently modified by written notice.5.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and allof which together shall constitute one instrument.5.6 Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by theCompany’s successors and assigns. The Company may assign its rights under this Agreement to any successor (whether direct or indirect, bypurchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company without the prior writtenconsent of Participant. The rights and obligations of Participant under this Agreement may only be assigned with the prior written consent ofthe Company.5.7 Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with allprovisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and ExchangeCommission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall beadministered, and the Shares are to be issued, only in such a manner as to conform to such laws, rules and regulations. To the extent permittedby applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules andregulations.5.8 Electronic Signature. Company and Participant consent to the use of electronic signatures on this Agreement and all documentsrelating to this Agreement. Company and Participant agree that any electronic signatures appearing on this Agreement are the same ashandwritten signatures for the purposes of validity, enforceability and admissibility, and shall, for all purposes of this Amendment andapplicable law, be deemed to be “written” or “in writing,” to have been executed, and to constitute an original written record when printed,and shall be fully admissible in any legal proceeding. For purposes hereof, “electronic signature” shall have the meaning set forth in theUniform Electronic Transactions Act, as the same may be amended from time to time.5.9 No Right to Continued Service. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE LAPSING OFTHE FORFEITURE RESTRICTION PURSUANT TO SECTION 2.1 HEREOF IS EARNED ONLY BY CONTINUINGSERVICE TO THE COMPANY, THE PARTNERSHIP OR ONE OF THEIR SUBSIDIARIES AS AN “AT WILL” EMPLOYEEOR CONSULTANT OF THE COMPANY, THE PARTNERSHIP OR ONE OF THEIR SUBSIDIARIES OR AN INDEPENDENTDIRECTOR OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR ACQUIRING SHARESHEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THETRANSACTIONS CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET FORTHHEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS ANEMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD, FOR ANY PERIOD, OR AT ALL, ANDSHALL NOT INTERFERE WITH THE COMPANY’S, THE PARTNERSHIP’S OR ANY OF THEIR SUBSIDIARIES’ RIGHTTO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO THE COMPANY AT ANY TIME, WITH ORWITHOUT CAUSE.A-6Executive Version (12-19)EXHIBIT BTO RESTRICTED STOCK AWARD GRANT NOTICESTOCK ASSIGNMENTFOR VALUE RECEIVED, the undersigned, _________, hereby sells, assigns and transfers unto AMERICAN ASSETS TRUST,INC., a Maryland corporation, __________ shares of the Common Stock of AMERICAN ASSETS TRUST, INC., a Maryland corporation,standing in its name of the books of said corporation represented by Certificate No. __________ herewith and do hereby irrevocablyconstitute and appoint ___________________ to transfer the said stock on the books of the within named corporation with full power ofsubstitution in the premises.This Stock Assignment may be used only in accordance with the Restricted Stock Award Grant Notice and Restricted Stock AwardAgreement between AMERICAN ASSETS TRUST, INC. and the undersigned dated December __, 2019.Dated: _______________, ________ ________________________________________INSTRUCTIONS: Please do not fill in the blanks other than the signature line. The purpose of this assignment is to enable the Company toenforce the Forfeiture Restriction as set forth in the Restricted Stock Award Grant Notice and Restricted Stock Award Agreement, withoutrequiring additional signatures on the part of the stockholder.B-1Executive Version (12-19)EXHIBIT CTO RESTRICTED STOCK AWARD GRANT NOTICEVESTING SCHEDULECapitalized terms used in this Exhibit C and not defined in Section 3 below shall have the meanings given them in the Agreement towhich this Exhibit C is attached.1.Performance Vesting. Subject to clauses (b), (c) and (d) and Section 2 below, the Shares shall vest based on the Company’sRelative TSR Performance (as defined below) for the Performance Periods. Subject to clauses (c) and (d) below, with respect to eachPerformance Period, Participant must continue to be an Employee, Independent Director or Consultant on the applicable Measurement Datein order to be eligible to vest in the Shares pursuant to this Section 1.(a)Performance Vesting. For each of the Performance Periods, such number of Shares shall vest on the applicableDetermination Date based on the Company's Relative TSR Performance for such Performance Period as is determined by multiplying (i) theTarget Shares set forth in the Grant Notice, by (ii) one-third (1/3), by (iii) the TSR Performance Multiplier (as determined below) for suchPerformance Period (rounded to the nearest whole Share). The “TSR Performance Multiplier” means, for each Performance Period, theperformance multiplier determined pursuant to the chart below based on the Company’s Relative TSR Performance relative to the Index forsuch Performance Period. If the Company achieves a Relative TSR Performance that falls between the foregoing levels, the TSRPerformance Multiplier will be determined by linear interpolation between the applicable levels.Relative TSR Performance Relative to the Index for the PerformancePeriodTSR Performance Multiplier+500 bps and above150%+400 bps140%+300 bps130%+200 bps120%+100 bps110%0 bps100%-100 bps90%-200 bps80%-300 bps70%-400 bps60%-499 bps50%-500 bps and belowUp to 50% as determined by the Administrator inits reasonable discretion based on theAdministrator's qualitative assessment of overallCompany and Participant performance during thePerformance PeriodThe Administrator retains the discretion to adjust the TSR Performance Multiplier to address events or circumstances that areextraordinary or unusual in nature or infrequent in occurrence or that otherwise have an unintended effect on the calculation of the TSRPerformance Multiplier.(b) Effect of a Change in Control Prior to Final Measurement Date. In the event of a Change in Control prior to the FinalMeasurement Date, the number of Shares in which Participant shall be eligible to vest pursuant to this Award following the date of suchChange in Control (the “Vesting Eligible Shares”) shall be equal to (i) the Maximum Shares set forth in the Grant Notice, multiplied by (ii)one-third (1/3), multiplied by (iii) the number of Performance Periods that have not yet been completed prior to the date of such Change inControl. The Vesting EligibleC-1-1Executive Version (12-19)Shares will continue to vest in equal installments on each Measurement Date occurring following the Change in Control, subject toParticipant's continued status as an Employee, Independent Director or Consultant on the applicable Measurement Date; provided, however,that in the event of Participant’s Qualifying Termination (as defined below) or termination as a result of death or Disability (as defined below)following the date of a Change in Control, all of the Vesting Eligible Shares shall vest as of the date of termination. In addition, if a Changein Control occurs following the occurrence of a Measurement Date but prior to the corresponding Determination Date, Participant shall veston the date of such Change in Control in such number of Shares as is determined pursuant to this Section 1 for such completed PerformancePeriod.(c) Effect of Termination Due to Death or Disability Prior to Final Measurement Date and Prior to a Change in Control. Inthe event of Participant’s termination of Service as a result of his or her death or Disability prior to the Final Measurement Date and prior to aChange in Control, on the date of Participant's termination of Service, Participant shall vest in such number of Shares as is equal to (i) theMaximum Shares set forth in the Grant Notice, multiplied by (ii) one-third (1/3), multiplied by (iii) the number of Performance Periods thathave not yet been completed prior to the date of such termination of Service. In addition, if Participant’s termination of Service as a result ofhis or her death or Disability occurs following the occurrence of any Measurement Date but prior to the corresponding Determination Date,Participant shall also remain eligible to vest on such Determination Date in such number of Shares as is determined pursuant to this Section 1for such completed Performance Period.(d) Effect of a Qualifying Termination Prior to Final Measurement Date and Prior to a Change in Control. In the event ofParticipant’s Qualifying Termination prior to the Final Measurement Date and prior to a Change in Control, on the date of Participant'stermination of Service, Participant shall vest in such number of Shares as is equal to (i) the Maximum Shares set forth in the Grant Notice,multiplied by (ii) one-third (1/3), multiplied by (iii) the number of Performance Periods that have not yet been completed prior to the date ofsuch termination of Service. In addition, if Participant’s Qualifying Termination occurs following the occurrence of any Measurement Datebut prior to the corresponding Determination Date, Participant shall also remain eligible to vest on such Determination Date in such numberof Shares as is determined pursuant to this Section 1 for such completed Performance Period.(e) Maximum Shares. In no event shall a number of Shares greater than the Maximum Shares set forth in the Grant Notice vestpursuant to this Exhibit C.2. Forfeiture. Any Unreleased Shares which do not vest pursuant to Section 1 above (or which are no longer eligible to vestpursuant to this Exhibit C for any future Performance Period after the completion of a Performance Period as a result of the TSR PerformanceMultiplier for such Performance Period being less than 150%) shall automatically and without further action be cancelled and forfeited byParticipant, and Participant shall have no further right or interest in or with respect to such Unreleased Shares. In addition, in the event thatParticipant’s employment is terminated for any reason (other than as a result of his or her Qualifying Termination, Disability or death) priorto the Measurement Date for a Performance Period, then the remaining Unreleased Shares as of the date of such termination that would havebeen eligible to vest with respect to such Performance Period that has not yet been completed shall automatically and without further actionbe cancelled and forfeited by Participant, and Participant shall have no further right or interest in or with respect to such remainingUnreleased Shares.3. Interaction with Employment Agreement. Notwithstanding anything to the contrary in the Employment Agreement (as definedbelow), the accelerated vesting of the Shares in the event of a Change in Control or Participant’s termination of Service by reason of death,Disability or a Qualifying Termination shall be governed by the terms of this Agreement and not the provisions of the EmploymentAgreement.4. Definitions. For purposes of this Exhibit C, the following terms shall have the meanings given below:(a)“Beginning Market Value” means, for each Performance Period, the Market Value on the first day of suchPerformance Period.C-2Executive Version (12-19)(b)“Index” means the Bloomberg Shopping Center REIT Index, or, in the event such index is discontinued, suchindex’s methodology is significantly changed or such index no longer presents as a proper comparison to the Company, a comparable indexselected by the Administrator in good faith.(c)“Index TSR” means the compounded annual total shareholder return for the Index for a Performance Period (and,for the avoidance of doubt, assuming the reinvestment of all dividends).(d)“Company TSR” means the Company’s compounded annual total shareholder return for a Performance Periodcalculated in accordance with the total shareholder return calculation methodology used in the Index (and, for the avoidance of doubt,assuming the reinvestment of all dividends paid on a share of Stock); provided, however, that for purposes of calculating the Company’s TSRfor a Performance Period, the share price on the first day of the Performance Period shall be equal to the Beginning Market Value and theshare price on the last day of the Performance Period shall be the Ending Market Value.(e)“Determination Date” means, for each Performance Period, the date on which the Administrator certifies inwriting the TSR Performance Multiplier for such Performance Period. The Determination Date will occur within ten (10) days following theapplicable Measurement Date; provided that if a Change in Control occurs following a Measurement Date but prior to the occurrence of theDetermination Date for the completed Performance Period, the Determination Date for such completed Performance Period shall occur in noevent later than the date of such Change in Control.(f)“Disability” shall have the meaning given to such term in the Employment Agreement.(g)“Employment Agreement” means that certain Amended and Restated Employment Agreement between theCompany and Participant effective as of March 25, 2014.(h)“Ending Market Value” means, for each Performance Period, the Market Value on the Measurement Date forsuch Performance Period.(i)“Final Measurement Date” means November 30, 2022.(j)“First Performance Period” means the period beginning on December 1, 2019 and ending on the MeasurementDate occurring on November 30, 2020.(k)“Market Value” means the closing price per share of Stock for the date of determination as reported by the NYSEor such other authoritative source as the Administrator may determine.(l)“Measurement Date” means each of November 30, 2020, 2021 and 2022, or, if any such date is not a trading day,the immediately preceding trading day.(m)“Performance Periods” means each of the First Performance Period, the Second Performance Period and theThird Performance Period.(n)“Qualifying Termination” means (i) a termination of Participant's employment by the Company without Cause(as defined in the Employment Agreement) (and other than by reason of Participant’s death or Disability), or (ii) a termination of Participant'semployment by Participant for Good Reason (as defined in the Employment Agreement).(o)“Relative TSR Performance” means the Company TSR less the Index TSR, in each case for the applicablePerformance Period, expressed in basis points.(p)“Second Performance Period” means the period beginning on December 1, 2019 and ending on the MeasurementDate occurring on November 30, 2021.C-3Executive Version (12-19)(q)“Third Performance Period” means the period beginning on December 1, 2019 and ending on the MeasurementDate occurring on November 30, 2022.C-4AMERICAN ASSETS TRUST, INC.AMERICAN ASSETS TRUST, L.P.AMENDED AND RESTATEDINCENTIVE BONUS PLANThis Amended and Restated Incentive Bonus Plan (the “Plan”) is intended to provide an additional incentive for employees ofAmerican Assets Trust, Inc. (the “REIT”), a Maryland corporation, and American Assets Trust, L.P. (the “Partnership”), a Maryland limitedpartnership, and their subsidiaries (collectively, the “Company”), to perform to the best of their abilities, to further the growth, developmentand financial success of the Company, and to enable the Company to attract and retain highly qualified employees. The Plan is for the benefitof the Participants (as defined below).The Compensation Committee (the “Committee”) of the Board of Directors of the REIT (the “Board”) has adopted the Plan, to beeffective December 5, 2019.1. Participants. Participation in the Plan shall be limited to such employees of the Company and its subsidiaries whom theCommittee from time to time determines shall be eligible to receive a bonus award (a “Bonus”) hereunder (the “Participants”).2. Administration. The Plan shall be administered by the Committee. The Committee shall have the discretion and authority toadminister and interpret the Plan, including the authority to establish bonus programs or guidelines under the Plan (the “Bonus Guidelines”)from time to time containing such terms and conditions as the Committee may determine or deem appropriate in its discretion, including,without limitation, terms and conditions relating to the administration of the Plan and/or the determination and payment of Bonuseshereunder. The Committee may modify, suspend, terminate or supersede the Bonus Guidelines at any time in its sole discretion. Any and allBonus Guidelines adopted by the Committee shall be subject to the terms and conditions of the Plan. Any disputes under the Plan shall beresolved by the Committee or its designee, whose decision will be final.3. Performance Goals. The Plan is intended to provide incentives for the achievement of approved annual corporate and individualobjectives (the “Performance Goals”), as determined by the Committee with respect to each calendar year during the term of the Plan (eachan “Incentive Plan Year”).(a) Corporate Performance Goals. At the beginning of each Incentive Plan Year, the Committee shall select such objectivecorporate Performance Goals as the Committee may determine in its sole discretion. It is intended that the corporate performance goals beobjectively determinable, with the weighting of the various corporate Performance Goals to be approved by the Committee.(b) Individual Performance Goals. A portion of each Participant’s Bonus will be determined in the sole discretion of theCommittee based on individual performance and the consideration of such other factors as the Committee determines to be appropriate. Ifindividual Performance Goals are to be established for an Incentive Plan Year, each Participant in the Plan will work with his or her directmanager to develop a list of key individual Performance Goals. The Chairman of the Board of the REIT will work with the Committee todevelop his individual Performance Goals.A Performance Goal may be a single goal or a range of goals with a minimum goal up to a maximum goal. Unless otherwisedetermined by the Committee, the amount of each Participant’s Bonus shall be based upon a bonus formula determined by the Committee inits sole discretion that ties such Bonus to the attainment of the applicable Performance Goals. The Committee may in its sole discretionmodify, change, add or remove the bonus formulas and/or Performance Goals at any time and from time to time during or upon completion ofan Incentive Plan Year. 4. Target Bonuses. Each Participant will be assigned a “Target Bonus Percentage” based on his or her job classification andresponsibilities. If a Participant moves from one Target Bonus Percentage level to another during an Incentive Plan Year, his or her TargetBonus Percentage will be based on the Target Bonus in effect at the end ofthe Incentive Plan Year. A “Target Bonus” for each Participant will be determined by multiplying his or her Target Bonus Percentage by hisor her Base Salary (as defined below) for the relevant Incentive Plan Year. For purposes of this Plan, “Base Salary” shall mean the actualbase salary paid in effect for a Participant, at the end of the Incentive Plan Year. The Target Bonus Percentages for each Participant shall beapproved by the Committee for each Incentive Plan Year. A Participant’s maximum Bonus under the Plan shall not exceed 250% of his orher Target Bonus, unless the Committee elects to amend the Plan with respect to a Participant or Participants.Effective for 2020, and unless and until changed by the Committee, in its sole discretion, the Target Bonus Percentages for theexecutive officers of the Company for purposes of this Plan shall be as follows:Position Target Bonus Percentage(as % of Base Salary) Executive Vice President and Chief Financial Officer 100%Executive Vice President and Chief Operating Officer 85%Vice President of Construction and Development 50% The Chairman of the Board, President and Chief Executive Officer shall not be a Participant under the Plan; and as such, any cash bonusfor the Chairman of the Board, President and Chief Executive Officer shall be entirely at the discretion of the Committee. 5. Performance Multipliers. Following the completion of each Incentive Plan Year, separate “Performance Multipliers” will beestablished by the Committee with respect to each of the corporate and individual components of each Bonus for each Incentive Plan Year.(a) Corporate Performance Multiplier. The executive officers of the Company will present to the Committee for its approval theirassessment of the level of the Company’s performance relative to the corporate Performance Goals, which performance levels will be used tocalculate an overall Performance Multiplier for the corporate component of each Bonus. Such corporate Performance Multiplier shall beexpressed as a percentage within the range specified by the Committee with respect to each Incentive Plan Year. The same PerformanceMultiplier, as approved by the Committee, shall be used for the corporate component of each Participant’s Bonus. The Committee may, in itsdiscretion, establish minimum corporate Performance Multipliers which, if not achieved for an Incentive Plan Year, will result in no Bonusesbeing paid. The corporate Performance Multiplier will not exceed 200% of targeted levels.(b) Individual/Discretionary Performance Multiplier. The Committee will establish an individual Performance Multiplierfor the individual component of each Bonus based on individual performance, including performance relative to his or her individualPerformance Goals, if any, and the consideration of such other factors as the Committee determines to be appropriate, in its sole discretion.The individual Performance Multiplier will not exceed 250% of targeted levels.6. Calculation of Bonuses. The actual Bonus for a Participant will be calculated by the Committee (or the Corporation, upon theCommittee’s request and ultimate approval) as soon as practicable following the completion of the relevant Incentive Plan year by applyingthe Performance Multipliers to the Target Bonus for such Participant according to the weightings and methods approved by the Committeefor such Incentive Plan Year. The Committee may, in its discretion, increase, reduce or eliminate a Bonus otherwise payable to anyParticipant. Any such increase, reduction or elimination may be made based on objective or subjective determinations as the Committeedetermines appropriate.7. Payment of Bonuses. The payment of Bonuses under the Plan shall be made in cash between December 1 (of the Incentive PlanYear to which such Bonuses relate) and March 15 (of the calendar year following the Incentive Plan Year to which such Bonuses relate) onsuch date or dates determined by the Committee and shall be subject to such terms and conditions as may be determined by the Committee inits sole discretion.Except as otherwise provided in a written employment agreement between a Participant and the Company or as otherwisedetermined by the Committee, a Participant must be an active employee of the Company or its subsidiaries or affiliates and in good standingas of the date on which the Bonus is paid in order to be entitled to receive such Bonus. If a Participant dies or a Participant’s employment isterminated for any reason prior to the payment of his or her Bonus, the payment of any Bonus (and in the case of death, the person or personsto whom such payment shall be made) shall be determined at the sole discretion of the Committee.8. Amendment, Suspension and Termination of the Plan. The Committee shall have the authority to amend, suspend or terminate thePlan at any time in its sole discretion.9. Miscellaneous.(a) The Company shall deduct all federal, state, and local taxes required by law or Company policy from any Bonuses paidhereunder.(b) Nothing contained in this Plan shall confer upon any Participant any right to continue in the employ of the Company, orshall interfere with or restrict in any way the right of the Company, which is hereby expressly reserved, to discharge any Participant at anytime for any reason whatsoever, with or without cause. Notwithstanding anything to the contrary contained in the Plan, nothing in the Planshall adversely affect any rights that a Participant may otherwise have under an employment or severance agreement or plan with ormaintained by the Company to which such Participant is a party or under which such Participant is a beneficiary.(c) The Plan shall be unfunded. Amounts payable under the Plan are not and will not be transferred into a trust or otherwiseset aside. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure thepayment of any Bonus under the Plan. Any accounts under the Plan are for bookkeeping purposes only and do not represent a claim againstthe specific assets of the Company.(d) Any payments made by the Company to a Participant as a “matching” contribution to a Participant’s 401(k) plan (orsimilar retirement plan) shall be separate and distinct from this Plan, and have no applicability hereunder.(e) No Bonus granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.All rights with respect to a Bonus granted to a Participant under the Plan shall be available during his or her lifetime only to the Participant.(f) Notwithstanding anything in the Plan to the contrary, any and all amounts payable to any Participant under the Plan fromtime to time may, in the Committee’s sole discretion, be reduced or offset by any amounts then due or owing by such Participant to theCompany or any of its affiliates pursuant to or in accordance with any benefit or compensation plan, program, policy or arrangementmaintained by the Company or such affiliates.(g) Any provision of the Plan that is prohibited or unenforceable shall be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions of the Plan.(h) The Plan shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the Stateof California. Should any provision of the Plan be determined by a court of law to be illegal or unenforceable, the other provisions shallnevertheless remain effective and shall remain enforceable. Any and all controversies or disputes involving, relating to, or arising out of, orunder, this Plan, including but not limited to its construction, interpretation or enforcement, shall be litigated exclusively in the state or federalcourts sitting in San Diego County, California. Each Participant is hereby deemed to irrevocably and unconditionally consent to the personaljurisdiction of the state courts in San Diego County, California with regard to any and all controversies or disputes involving, relating to, orarising out of, or under, the Plan. Each Participant is further deemed to irrevocably and unconditionally waive any defense or objection oflack of personal jurisdiction over Participant by the state or federal courts sitting in San Diego County, California.(i) Bonus payments are not intended to constitute a deferral of compensation subject to Section 409A of the Code and areintended to satisfy the “short-term deferral” exemption under Section 409A of the Code and the Treasury Regulations issued thereunder.Accordingly, to the extent necessary to cause Bonus payments hereunder to satisfy the “short-term deferral” exemption under Section 409Aof the Code and the Treasury Regulations issued thereunder, a Bonus payment shall be made not later than the later of (i) the fifteenth day ofthe third month following the Participant’s first taxable year in which the Bonus payment is no longer subject to a substantial risk offorfeiture, or (ii) the fifteenth day of the third month following the Company’s first taxable year in which the Bonus payment is no longersubject to a substantial risk of forfeiture; provided, however, that if due to administrative reasons Bonuses are not paid within the foregoingtime periods, then such Bonuses will be paid as soon as administratively feasible but no later than the last day of the calendar year followingthe end of the Incentive Plan Year to which such Bonuses relate.Exhibit 21.1Subsidiaries of American Assets Trust, Inc.The following list sets forth American Assets Trust, Inc.'s subsidiaries as of December 31, 2019.Name Jurisdiction of Formation/IncorporationAAT CC Bellevue, LLC DelawareAAT Geary Marketplace, LLC DelawareAAT Lloyd District, LLC DelawareAAT La Jolla Commons, LLC DelawareAAT One Beach, LLC DelawareAAT Oregon Office I, LLC DelawareAAT Solana 101, LLC DelawareAAT Torrey Point, LLC DelawareAAT Torrey Reserve 5, LLC DelawareAAT Torrey Reserve 6, LLC DelawareAAT Torrey 13-14, LLC DelawareAAT Alamo Quarry, LLC DelawareAAT Del Monte, LLC DelawareAAT Del Monte 2, LLC DelawareAAT Waikele Center, LLC DelawareAAT Pacific Ridge, LLC DelawareAAT Gateway Marketplace, LLC DelawareABW 2181 Holdings, LLC HawaiiABW Holdings, LLC DelawareABW Lewers, LLC HawaiiAmerican Assets Services, Inc. DelawareAmerican Assets Trust Management, LLC DelawareAmerican Assets Trust, LP MarylandBeach Walk Holdings, LLC DelawareBroadway 225 Sorrento Holdings, LLC DelawareBroadway 225 Stonecrest Holdings, LLC DelawareCarmel County Plaza, LP CaliforniaCarmel Mountain Pad, LLC CaliforniaEBW Hotel, LLC HawaiiICW Café Lessee, LLC DelawareAAT Torrey Plaza, LLC DelawareICW Plaza Merger Sub, LLC DelawareImperial Strand Holdings, LLC DelawareLandmark FireHill Holdings, LLC DelawareLandmark Venture Holdings, LLC DelawareLandmark Venture JV, LLC DelawareLloyd District TRS, LLC DelawareLomas Palisades CA general partnership CaliforniaLomas Palisades GP LLC DelawareMariner's Point Holdings, LLC DelawarePacific Carmel Mountain Assets, LLC DelawarePacific Carmel Mountain Holdings, LP CaliforniaPacific Del Mar Assets, LLC DelawareName Jurisdiction of Formation/IncorporationPacific Firecreek Holdings, LLC DelawarePacific North Court GP, LLC DelawarePacific North Court Holdings, LP CaliforniaPacific Santa Fe Assets, LLC DelawarePacific Santa Fe Holdings, LP CaliforniaPacific Solana Beach Assets, LLC DelawarePacific Solana Beach Holdings, LP CaliforniaPacific South Court Assets, LLC DelawarePacific South Court Holdings, LP CaliforniaPacific Torrey Daycare Assets, LLC DelawarePacific Torrey Daycare Holdings, LP CaliforniaPacific VC Holdings, LLC DelawarePacific Waikiki Assets, LLC DelawarePacific Waikiki Holdings, LP. CaliforniaSB Corporate Centre III-IV, LLC DelawareSB Corporate Centre, LLC CaliforniaSB Towne Centre, LLC CaliforniaSBCC Holdings, LLC DelawareSBTC Holdings, LLC DelawareSouthbay Marketplace Holding, LLC DelawareWaikele Venture Holdings, LLC DelawareWBW Hotel Lessee, LLC DelawareExhibit 23.1Consent of Independent Registered Public Accounting Firm for American Assets Trust, Inc.We consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-3ASR No. 333-222876) of American Assets Trust,Inc.,(2)Registration Statement (Form S-3ASR No. 333-222882) of American Assets Trust, Inc. and American Assets Trust, L.P.,and(3)Registration Statement (Form S-8 No. 333-171752) pertaining to the American Assets Trust, Inc. and American Assets Trust, L.P. 2011 Equity IncentiveAward Plan;of our reports dated February 14, 2020, with respect to the consolidated financial statements and schedule of American Assets Trust, Inc. and the effectiveness ofinternal control over financial reporting of American Assets Trust, Inc., included in this Annual Report (Form 10-K) of American Assets Trust, Inc. for the yearended December 31, 2019. /s/ Ernst & Young LLPSan Diego, CaliforniaFebruary 14, 2020Exhibit 23.2Consent of Independent Registered Public Accounting Firm for American Assets Trust, L.P. We consent to the incorporation by reference in the Registration Statement (Form S-3 ASR No. 333-222882) of American Assets Trust, Inc. and American AssetsTrust, L.P., and in the related Prospectus, of our report dated February 14, 2020, with respect to the consolidated financial statements and schedule of AmericanAssets Trust, L.P., included in this Annual Report (Form 10-K) for the year ended December 31, 2019. /s/ Ernst & Young LLPSan Diego, CaliforniaFebruary 14, 2020Exhibit 31.1CERTIFICATION PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Ernest Rady, certify that:1.I have reviewed this annual report on Form 10-K of American Assets Trust,Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date:February 14, 2020/s/ ERNEST RADY Ernest Rady Chairman, President and Chief Executive OfficerExhibit 31.2CERTIFICATION PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Ernest Rady, certify that:1.I have reviewed this annual report on Form 10-K of American Assets Trust,L.P.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date:February 14, 2020/s/ ERNEST RADY Ernest Rady Chairman, President and Chief Executive OfficerExhibit 31.3CERTIFICATION PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Robert F. Barton, certify that:1.I have reviewed this annual report on Form 10-K of American Assets Trust,Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date:February 14, 2020/s/ ROBERT F. BARTON Robert F. Barton EVP and Chief Financial OfficerExhibit 31.4CERTIFICATION PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Robert F. Barton, certify that:1.I have reviewed this annual report on Form 10-K of American Assets Trust,L.P.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date:February 14, 2020/s/ ROBERT F. BARTON Robert F. Barton EVP and Chief Financial OfficerExhibit 32.1CERTIFICATIONThe undersigned, Ernest Rady and Robert F. Barton, the Chief Executive Officer and Chief Financial Officer, respectively, of American Assets Trust, Inc.(the “Company”), pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each hereby certifies that, to the best of hisknowledge:(i) the Annual Report for the period ended December 31, 2019 of the Company (the “Report”) fully complies with the requirements of Section 13(a) orSection 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ ERNEST RADYErnest RadyChairman, President and Chief Executive Officer /s/ ROBERT F. BARTONRobert F. BartonEVP and Chief Financial OfficerDate: February 14, 2020Exhibit 32.2CERTIFICATIONThe undersigned, Ernest Rady and Robert F. Barton, the Chief Executive Officer and Chief Financial Officer, respectively, of American Assets Trust, L.P.(the “Operating Partnership”), pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each hereby certifies that, tothe best of his knowledge:(i) the Annual Report for the period ended December 31, 2019 of the Operating Partnership (the “Report”) fully complies with the requirements ofSection 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the OperatingPartnership. /s/ ERNEST RADYErnest RadyChairman, President and Chief Executive Officer /s/ ROBERT F. BARTONRobert F. BartonEVP and Chief Financial OfficerDate: February 14, 2020

Continue reading text version or see original annual report in PDF format above