AAT 10-K & 10-Q changes, risk factors and insider trading

In 2024,2025, approximately 53%52% of our net operating income was from our office properties. Work from home, flexible work schedules, open workplaces, videoconferencing, and teleconferencing have become more common, particularly as a result of the pandemic. These practices may enable businesses to reduce their office space requirements. There is also an increasing trend among some businesses to utilize shared office spaces and co-working spaces. A continuation of the movement towards these practices could, over time, erode the overall demand for office space and, in turn, place downward pressure on occupancy, rental rates and property valuations, which may adversely affect our financial condition, results of operations and cash flow.

At February 11,6, 2025,2026, we had total debt outstanding of $1.70 billion, excluding debt issuance costs, a portion of which contains non-recourse carve-out guarantees and environmental indemnities from us and our Operating Partnership, and we may incur significant additional debt to finance future acquisition and development activities. At December 31, 2024,2025, we also had a third amended and restated credit facility with a capacity of $500 million, consisting of a revolving line of credit of $400 million and an unsecured term loan of $100 million (Term Loan A). On September 17, 2024, the Operating Partnership issued $525 million of senior unsecured notes (6.150% Senior Notes), the net proceeds of which were used to repay $300 million of debt maturities and the remaining of which will be used for general working capital and for corporate purposes. Payments of principal and interest on borrowings may leave us with insufficient cash resources to operate our properties or to pay the dividends currently contemplated or necessary to maintain our REIT qualification. Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

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 the market for retail space. The retail environment and the market for retail space have previously been, and could again be, adversely affected by weakness in the national, regional and local economies, inflation, high interest rate environments, the level of consumer spending and consumer confidence, the adverse financial condition of some large retailing companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets, increasing competition from discount retailers, outlet malls, internet retailers (including Amazon.com) and other online businesses and communicable diseases.businesses. Increases in consumer spending via the internet may significantly affect 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 face competition from the expanding market for digital content and hardware. New and enhanced technologies, including new digital technologies and new web services technologies, may increase competition for certain of our retail tenants. While we devote considerable effort and resources to analyze and respond to tenant trends, preferences and consumer spending patterns, we cannot predict with certainty what future tenants will want, what future retail spaces will look like and 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. We also might be susceptible to weakness in retail real estate as a result of trends relating to consumers preference to utilize e-commerce in lieu of in-person shopping experiences.

As a result of various factors, including competitive pricing pressure in our submarkets, adverse conditions in the California, Washington, Oregon, Texas and Hawaii real estate markets and the desirability of our properties compared to other properties in our submarkets, we may be unable to realize the asking rents across 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 from property 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 asking rents 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 time as 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 cannot reliably predict the extent, rate, or impact of climate change. As such, the potential physical impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances in areas in which we operate. These may include changes in global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, increased risks of wildfires, changing sea levels and changing temperature averages or extremes. Further, population migration may occur in response to these or other factors and negatively impact our properties. Climate and other environmental changes may result in volatile or decreased demand for space at certain of our properties or, in extreme cases, our inability to operate certain properties at all. Climate change may also have indirect effects on our business by increasing the cost of insurance, or making insurance unavailable. Although we strive to identify, analyze, and respond to the risk and opportunities that climate change presents, at this time, there can be no assurance that climate change will not have an adverse effect on the value of our properties and our financial performance.

A significant number of our properties are located in areas that are susceptible to earthquakes, tropical storms, tornadoes, wildfires, and sea-level rise due to climate change, and other natural disasters. At December 31, 2024,2025, 57.1%54.1% of the gross leaseable area of our portfolio is located in the State of California. Additionally, 14.1%,15.2%, 13.4%,14.4%, and 8.1%8.7% of the gross leaseable area of our portfolio is located in the States of Washington, Oregon and Texas, respectively, and we have a meaningful presence in Oahu, Hawaii. Insurance costs for properties in these areas have increased, and recent intense weather conditions may cause property insurance premiums to increase significantly in the future. We recognize that the frequency and/or intensity of extreme weather events, wildfires, sea-level rise, and other climatic changes may continue to increase, and as a result, our exposure to these events may increase. These weather conditions may disrupt our business and the business of our tenants, which may affect the ability of some tenants to pay rent and may reduce the willingness of tenants or residents to remain in or move to these affected areas. Therefore, as a result of the geographic concentration of our properties, we face risks, including disruptions to our business and the businesses of our tenants and higher costs, such as uninsured property losses, higher insurance premiums, and potential additional regulatory requirements by government agencies in response to perceived risks.

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 existing specifications. Further, reconstruction or improvement of such a property would likely require significant upgrades to meet zoning and building code requirements. Environmental and legal restrictions could also restrict the rebuilding of our properties. For example, if we experienced a substantial or comprehensive loss of our Torrey Reserve CampusPoint in San Diego, California, reconstruction could be delayed or prevented by the California Coastal Commission, which regulates land use in the California coastal zone.

Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property, or adjacent properties, for commercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. For example, Del Monte Center is currently undergoing the final stages of remediation of dry cleaning solvent contamination from a former onsite dry cleaner, which entails the long term ground monitoring by the appropriate regulatory agency over the next 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 remediation will be completed for approximately $3.5 million, with the remediation costs paid for through funds held in an escrow account funded by the prior owner. We expect that the funds in this escrow account will cover all remaining costs and expenses of the environmental remediation. However, if the Regional Water Quality Control Board - Central Coast 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 a claim for such costs against the prior owner or our environmental remediation consultant. In addition to the foregoing,Although we possess Phaseenvironmental Isite Environmental Site Assessmentsassessments for certain of the properties in our portfolio, these 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 have Phaseenvironmental Isite Environmental Site Assessmentassessment reports for all of the properties in our portfolio and, as such, we may not be aware of all potential or existing environmental contamination liabilities at the properties in our portfolio. As a result, we could potentially incur material liability for these issues, which could adversely impact our financial condition, results of operations, cash flow and the per share trading price of our common stock.

We are a full service, vertically integrated and self-administered REIT that owns, operates, acquires and develops high quality office, retail, multifamily and mixed-use properties in attractive, high-barrier-to-entry markets in Southern California, Northern California, Washington, Oregon, Texas, and Hawaii. As of December 31, 2024,2025, our portfolio was comprised of twelve office properties; twelveeleven retail shopping centers; a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center; and sixseven multifamily properties. Additionally, as of December 31, 2024,2025, we owned land at threetwo of our properties that we classified as held for development or construction in progress. La Jolla Commons - Land, related to the development of La Jolla Commons III, was previously classified as held for development. The development of La Jolla Commons III is now complete and the building, inclusive of the land, was placed in operations as of April 1, 2025. Our core markets include San Diego, California; the San Francisco Bay Area, California; Bellevue, Washington; Portland, Oregon, and Oahu, Hawaii. American Assets Trust, Inc., as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.9%78.95% of our Operating Partnership as of December 31, 2024.2025. Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership.

We intend to opportunistically pursue projects in our development pipelinepipeline, including future phases of Lloyd Portfolio, other redevelopments at Waikele Center, as well as multifamily development opportunities within our existing portfolio, namely at Lomas Santa Fe Plaza, Solana Beach Towne Centre andCentre, Carmel Mountain Plaza.Plaza, and Genesee Park. The commencement of these developments is based on, among other things, market conditions and our evaluation of whether such opportunities would generate appropriate risk adjustedrisk-adjusted financial returns. Our redevelopment and development opportunities are subject to various factors, including market conditions and may not ultimately come to fruition. We continue to review acquisition opportunities in our primary markets that would complement our portfolio and provide long-term growth opportunities. Some of our acquisitions do not initially contribute significantly to earnings growth; however, we believe they provide long-term re-leasing growth, redevelopment opportunities and other strategic opportunities. Any growth from acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance a property acquisition. Generally, our acquisitions are initially financed by available cash, mortgage loans and/or borrowings under our credit facility, which may be repaid later with funds raised through the issuance of new equity or new long-term debt.

We have provided certain information on a total portfolio, same-store and redevelopment same-store basis. Information provided on a same-store basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant redevelopment or expansion occurred during either of the periods being compared, properties under development, properties classified as held for development and properties classified as discontinued operations. Information provided on a redevelopment same-store basis includes the results of properties undergoing significant redevelopment for the entirety or portion of both periods being compared. Same-store and redevelopment same-store isare considered by management to be an important measuremeasures because itthey assistsassist in eliminating disparities due to the development, acquisition or disposition of properties during the particular period presented, and thus providesprovide a more consistent performance measure for the comparison of the company's stabilized and redevelopment properties, as applicable. Additionally, redevelopment same-store is considered by management to be an important measure because it assists in evaluating the timing of the start and stabilization of our redevelopment opportunities and the impact that these redevelopments have in enhancing our operating performance.

While there is judgment surrounding changes in designations, we typically reclassify significant development, redevelopment or expansion properties tointo same-store properties once they are stabilized. Properties are deemed stabilized typically at the earlier of (1) reaching 90% occupancy or (2) four quarters following a property's inclusion in operating real estate. We typically remove properties from same-store properties when the development, redevelopment or expansion has or is expected to have a significant impact on the property's annualized base rent, occupancy and operating income within the calendar year. Our evaluation of significant impact related to development, redevelopment or expansion activity is based on quantitative and qualitative measures including, but not limited to, the following: the total budgeted cost of planned construction activity compared to the property’s annualized base rent, occupancy and operating income within the calendar year; percentage of development, redevelopment or expansion square footage to total property square footage; and the ability to maintain historic occupancy and rental rates. In consideration of these measures, we generally remove properties from same-store properties when we see a decline in a property's annualized base rent, occupancy and operating income within the calendar year as a direct result of ongoing redevelopment, development or expansion activity. Acquired properties are classified tointo same-store properties once we have owned such properties for the entirety of comparable period(s) and the properties are not under significant development or expansion.

Below is a summary of our same-store composition for the years ended December 31, 2024, 2023 and 2022. For the year ended December 31, 2024, when compared to the designations for the year ended December 31, 2023, Timber Springs iswas classified as a same-store property for the year ended December 31, 2024, because the property was acquired on March 8, 2022. The 710 building within the Lloyd Portfolio iswas classified as a same-store property when compared to the designation for the year ended December 31, 2023, because the property hashad been in operation for a full year since it was placed in service in November 2022. One Beach Street continues to beis identified as a same-store redevelopmentnon-same-store property for the years ended December 31, 2024 and 2023, due to significant redevelopment activity. Additionally, this property was placed into operations on August 1, 2024, approximately one year after completing renovations.

Retail Leases. Our retail portfolio included twelveeleven properties with a total of approximately 3.12.4 million rentable square feet available for lease as of December 31, 2024.2025. As of December 31, 2024,2025, these properties were 94.5%97.7% leased. For the year ended December 31, 2024,2025, the retail segment contributed 23.8%,21.8%, 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. In a 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, but rather 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 are paid by the landlord, is reflected in operating expenses, and the reimbursement is reflected as rental income in the statements of operations.

Multifamily Leases. Our multifamily portfolio included six apartment properties, as well as an RV resort, with a total of 2,1102,302 units (including 120 RV spaces) available for lease as of December 31, 2024.2025. As of December 31, 2024,2025, these properties were 91.8%91.1% leased.occupied. For the year ended December 31, 2024,2025, the multifamily segment contributed 14.3%15.8% of our total revenue. Our multifamily leases, other than at our RV resort, generally have lease terms ranging from 7 to 15 months, 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 leasedoccupied unit as of December 31, 20242025 was $2,683,$2,684, compared to $2,619$2,683 at December 31, 2023.2024.

During the twelve months ended December 31, 2024,2025, we signed 6782 office leases for a total of 398,506616,680 square feet of office space including 247,551370,619 square feet of comparable space leases,leases (leases for which there was a previous tenant), at an average rental rate increase of 6.0% on a cash and GAAP basis of 6.4% and an13.8%, average rental increase of 13.0% on a straight-line basis.respectively. New office leases for comparable spaces were signed for 84,435119,206 square feet at an average rental rate increase of 8.0% on a cash and GAAP basis of 3.4% and an16.3%, average rental rate increase of 18.5% on a straight-line basis.respectively. Renewals for comparable office spaces were signed for 163,116251,413 square feet at an average rental rate increase of 5.0% on a cash and GAAP basis of 7.7% and increase12.8%, of 10.4% on a straight-line basis.respectively. Tenant improvements and incentives were $37.05$28.33 per square foot of office space for comparable new leases for the twelve months ended December 31, 2024.2025, mainly due to new tenants at City Center Bellevue, Lloyd Portfolio and 14Acres. There were $25.15$21.47 per square foot of office space of tenant improvement or incentives for comparable renewal leases for the twelve months ended December 31, 2024.2025.

During the twelve months ended December 31, 2024,2025, we signed 9591 retail leases for a total of 428,981546,406 square feet of retail space including 392,350509,924 square feet of comparable space leases, at an average rental rate increase of 4.5% on a cash and GAAP basis of 7.1% and an21.8%, average rental increase of 25.0% on a straight-line basis.respectively. New retail leases for comparable spaces were signed for 9,29425,372 square feet at an average rental rate increase of 16.0% on a cash and GAAP basis of 9.9% and an average rental rate increase of 669.3% on a straight-line basis436.8% (due to the modification of prior tenants' rent to cash-basis, which precluded straight-line rent for comparison)., respectively. Renewals for comparable retail spaces were signed for 383,056484,552 square feet at an average rental rate increase of 4.0% on a cash and GAAP basis of 6.9% and an15.6%, increase of 18.1% on a straight-line basis.respectively. Tenant improvements and incentives were $32.36$42.85 per square foot of retail space for comparable new leases for the twelve months ended December 31, 2024.2025, mainly due to new tenants at Gateway Marketplace, Alamo Quarry Market, Lomas Santa Fe Plaza and Carmel Country Plaza. There were $2.68$5.78 per square foot of retail space of tenant improvement or incentives for comparable renewal leases for the twelve months ended December 31, 2024.2025.

We capitalized external and internal costs related to bothnew developmentdevelopment, redevelopment, expansion and redevelopmentrepositioning activities combined of $16.3$22.7 million and $24.0$16.3 million for the years ended December 31, 20242025 and 2023,2024, respectively.

The increase in tenant improvements and leasing commissions for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily related to new tenant buildoutsbuild-outs at Coastal Collection at Torrey Reserve, Solana Crossing, 14 Acres, Timber Ridge and Carmel Country Plaza during the year ended December 31, 2025, partially offset by tenant build-outs completed at La Jolla Commons, Lloyd Portfolio, Del Monte Center, City Center Bellevue and Alamo Quarry Market during the year ended December 31, 2024,2024. partiallyAdditionally, offsetthe bydecrease in retail tenant buildouts completed at Torrey Reserve Campus, Torrey Pointimprovements and Carmelleasing Mountaincommissions Plazais due to the sale of Del Monte Center during the yearfirst endedquarter Decemberof 31, 2023.2025.

The decrease in capital expenditures for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily related to the renovations completed at CityImperial CenterBeach, Bellevue14 Acres and LaLloyd Jolla CommonsPortfolio during the year ended December 31, 2023,2024, partially offset by an increase at La Jolla Commons I and II, First & Main and Alamo Quarry Market during the year ended December 31, 2024.2025.

Beginning with the second quarter of 2025, this capital expenditures category includes spending related to repositioning initiatives at operating properties, as well as planned capital expenditures identified at the time of acquisition. The decreaseincrease in newredevelopment, developmentexpansions and repositioning expenditures for the year ended December 31, 20242025 compared to the year ended December 31, 20232024, wasis primarily relateddue to the costs incurred forat the14 developmentAcres, ofTimber TowerSprings, 3Timber atSprings, Genesee Park and La Jolla Commons during the year ended December 31, 2023.2025, Thepartially offset by a decrease in redevelopment expenditures for the year ended December 31, 2024 compared to the year ended December 31, 2023, was primarily related to the majority completion of the One Beach Street redevelopment during the year ended December 31, 2023.2024.

Our capital expenditures for the year ending December 31, 20252026 will depend upon acquisition opportunities, the level of improvements and renovations on existing properties and the timing and cost of development of our held for development and construction in progress properties. While the amount of future expenditures will depend on numerous factors, we expect expenditures incurred in the year ending December 31, 20252026 to decreaseincrease from the year ending December 31, 20242025 as we reachedcontinue completionour ofrenovations theat developmentGenesee activitiesPark, build-out amenities and speculative suites at One Beach Street and incur first generation tenant improvements at La Jolla Commons in the year ended December 31, 2024.III.

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 hedges both 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 recorded in other comprehensive income which is included in accumulated other comprehensive income on our consolidated balance sheet and our consolidated statement of 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 periods and the use of SOFR.Secured Overnight Financing Rate (SOFR). In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness of the counterparty which includes reviewing debt ratings and financial performance. However, management does not anticipate non-performance by the counterparty. If a cash flow hedge is deemed 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 period affected.

The following summarizes our consolidated results of operations for the year ended December 31, 20242025 compared to our consolidated results of operations for the year ended December 31, 2023.2024. As of December 31, 2025, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 6.8 million rentable square feet of office and retail space (including mixed-use retail space), 2,302 residential units (including 120 RV spaces) and a 369-room hotel. Additionally, as of December 31, 2025, we owned land at two of our properties that we classified as held for development or construction in progress. As of December 31, 2024, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 7.3 million rentable square feet of office and retail space (including mixed-use retail space), 2,110 residential units (including 120 RV spaces) and a 369-room hotel. Additionally, as of December 31, 2024, we owned land at three of our properties that we classified as held for development or construction in progress. As of December 31, 2023, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 7.3 million rentable square feet of office and retail space (including mixed-use retail space), 2,110 residential units (including 120 RV spaces) and a 369-room hotel. Additionally, as of December 31, 2023, we owned land at three of our properties that we classified as held for development or construction in progress.

Total property revenues. Total property revenue consists of rental revenue and other property income. Total property revenue increaseddecreased $16.7$21.7 million, or 4%,5%, to $436.2 million for the year ended December 31, 2025, compared to $457.9 million for the year ended December 31, 2024, compared to $441.2 million for the year ended December 31, 2023.2024. The percentage leased was as follows for each segment as of December 31, 20242025 and 20232024:

(1)The percentage leased includes the square footage under lease, including leases which may not have commenced as of December 31, 20242025 or December 31, 2023,2024, as applicable. Leased units for our multifamily properties include total units leased and occupied as of the applicable date.

The increasedecrease in total property revenue was attributable primarily to the factors discussed below.

Rental revenues. Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents. Rental revenue increaseddecreased $4.2$13.1 million, or 1%,3%, to $410.5 million for the year ended December 31, 2025, compared to $423.6 million for the year ended December 31, 2024, compared to $419.4 million for the year ended December 31, 2023.2024. Rental revenue by segment was as follows (dollars in thousands):

(1)For this table and the tables following, the same-store portfolio excludes: (i) One Beach Street (office) due to significant redevelopment; (ii) Del Monte Center (retail), which was sold on February 25, 2025; (iii) Genesee Park (multifamily), which was acquired on February 28, 2025, (iv) La Jolla Commons III (office), which was placed into operations on April 1, 2025 and (v) land held for development.development (office).

MultifamilyTotal office rental revenue increaseddecreased $3.5$1.2 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to anlower overalloccupancy increaseat inCoastal averageCollection monthlyat baseTorrey rentReserve and First & Main. This decrease was partially offset by an increase in occupancy.occupancy Averageand monthlyannualized base rentrents at City Center Bellevue and occupancyTimber wasRidge. $2,718Additionally, andwith 91.0%new fortenant thelease yearcommencements endedat DecemberLa 31,Jolla 2024,Commons comparedIII, towe $2,581recognized and$1.0 90.0%million forin thenon-same yearstore endedrental December 31, 2023.revenue.

RetailTotal otherretail propertyrental incomerevenue increaseddecreased $0.2$13.4 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to leasethe terminationsale feesof receivedDel atMonte AlamoCenter Quarryon MarketFebruary 25, 2025. Same-store retail rental revenue increased $0.8 million due to new tenant leases and Solanascheduled Beachrent Towne Center in 2024, offset by lease termination fees receivedincreases at Carmel Mountain Plaza and SouthbayAlamo MarketplaceQuarry in 2023.Market.

Mixed-use otherrental propertyrevenue incomedecreased increased $0.6$2.1 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to ana increasedecrease in othertourism, which led to a decrease in average occupancy and revenue per available room rentalto income82.3% atand $296 for the hotelyear portionended ofDecember our31, mixed-use2025 propertycompared to 85.9% and $319 for the year ended December 31, 2024. This decrease was partially offset by an increase in parkingrental garage incomerevenue at the retail portion of our mixed-use property.property, primarily due to new tenant leases commencing at higher base rents and an increase in cost recoveries.

Total retailoffice rental expenses increased $0.6$3.0 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to ana $1.5 million increase inat La Jolla Commons Tower III related to new operations and amenities. Same-store office rental expense increased $1.6 million due to higher utilities expense, facilities services,services utilities expensesexpense and insurancerepairs expenses.and maintenance expense.

Multifamily rental expenses increased $0.8$2.2 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to a $1.8 million increase related to the acquisition of Genesee Park in the first quarter of 2025. Same-store multifamily rental expenses increased due to an overall increase in insurance expense, facilities services,services utilities expenses, insurance expensesexpense and anrepairs increaseand inmaintenance property-levelexpense personnelacross compensationmost expenses.of our other multifamily properties.

Mixed-use rental expenses increaseddecreased $0.8$0.4 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to ana increase of $0.4 milliondecrease in hotel room expenses, personnel expenses and excise taxroom-related expenses at the hotel portion of our mixed-use propertyproperty, duringpartially theoffset period. There was alsoby an increase in rentalutilities expensesexpense ofand $0.4facilities millionservices expense at the retail portion of our mixed-use property related to excise taxes, employee costs and facilities expenses.property.

Real Estate Taxes. Real estate tax expense decreasedincreased $0.9$0.8 million, or 2%, to $45.0 million for the year ended December 31, 2025, compared to $44.2 million for the year ended December 31, 2024, compared to $45.2 million for the year ended December 31, 2023.2024. Real estate tax expense by segment was as follows (dollars in thousands):

RetailTotal office real estate taxes increased $0.5$1.6 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to an increase inat propertyLa taxJolla assessmentCommons III and One Beach Street since we stopped capitalizing real estate taxes when the buildings were placed into service on April 1, 2025 and August 1, 2024, respectively. Additionally, there was an increase at AlamoLa QuarryJolla MarketCommons I and II due to real estate tax refunds received during the year ended December 31, 2024. These increases were offset by a decrease in property tax assessments at CarmelCity MountainCenter PlazaBellevue, during14Acres 2023.and Timber Ridge.

Mixed-useRetail real estate taxes increaseddecreased $0.3$2.0 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to anthe increasesale of Del Monte Center on February 25, 2025 and a decrease in property tax assessment.assessments at Alamo Quarry Market and real estate tax refunds received at Alamo Quarry Market and Carmel Mountain Plaza in 2025.

Property operating income increaseddecreased $12.9$23.5 million, or 5%,8%, to $266.6 million for the year ended December 31, 2025, compared to $290.1 million for the year ended December 31, 2024, compared to $277.2 million for the year ended December 31, 2023.2024. Property operating income by segment was as follows (dollars in thousands):

We are a full service, vertically integrated and self-administered REIT that owns, operates, acquires and develops high quality retail, office, multifamily and mixed-use properties in attractive, high-barrier-to-entry markets in Southern California, Northern California, Washington, Oregon, Texas and Hawaii. As of MarchJune 31,30, 2026, our portfolio was comprised of twelve office properties; eleven retail shopping centers; a mixed-use property consisting of a 369-room all-suite hotel and a retail shopping center; and seven multifamily properties. Additionally, as of MarchJune 31,30, 2026, we owned land at two of our properties that we classified as held for development and/or construction in progress. Our core markets include San Diego, California; the San Francisco Bay Area, California; Bellevue, Washington; Portland, Oregon and Oahu, Hawaii. We are a Maryland corporation formed on July 16, 2010 to acquire the entities owning various controlling and noncontrolling interests in real estate assets owned and/or managed by Ernest S. Rady or his affiliates, including the Ernest Rady Trust U/D/T March 13, 1983, or the Rady Trust, and did not have any operating activity until the consummation of our initial public offering on January 19, 2011. Our Company, as the sole general partner of our Operating Partnership, has control of our Operating Partnership and owned 78.95%78.96% of our Operating Partnership as of MarchJune 31,30, 2026. Accordingly, we consolidate the assets, liabilities and results of operations of our Operating Partnership.

Below is a summary of our same-store and redevelopment same-store composition for the three and six months ended MarchJune 31,30, 2026 and 2025. One Beach Street is classified as a same-store property when compared to the designation for the three and six months ended MarchJune 31,30, 2025, as this property was placed into service on August 1, 2024. Genesee Park is classified as a same-store property when compared to the designation for the three months ended June 30, 2025 and a non-same-store property becausewhen compared to the designation for the six months ended June 30, 2025 as it was acquired on February 28, 2025, and thus has not been owned for the comparable period.2025. La Jolla Commons III is classified as a non-same storesame-store property when compared to the designationsdesignation for the three months ended MarchJune 31,30, 2025 and a non-same-store property when compared to the designation for the six months ended June 30, 2025, as it was placed into service on April 1, 2025. La Jolla Commons III is a part of the La Jolla Commons office project, and not a stand-alone property.

During the three months ended MarchJune 31,30, 2026, we signed 2914 office leases for a total of 236,670109,715 square feet of office space including 108,45675,416 square feet of comparable space leases (leases for which there was a prior tenant), at an average rental rate increase on a cash and GAAP basis of 4.8%9.1% and 10.6%,10.2%, respectively. New office leases for comparable spaces were signed for 28,87529,529 square feet at an average rental rate increase on a cash and GAAP basis of 3.7%14.3% and 8.9%,12.8%, respectively. Renewals for comparable office spaces were signed for 79,58145,887 square feet at an average rental rate increase on a cash and GAAP basis of 5.1%5.9% and 11.2%,8.6%, respectively. Tenant improvements and incentives were $24.68$24.35 per square foot of office space for comparable new leases for the three months ended MarchJune 31,30, 2026, mainly due to new tenants at TimberCity RidgeCenter Bellevue and Coastal Collection at Torrey Reserve.

During the three months ended MarchJune 31,30, 2026, we signed 1420 retail leases for a total of 38,581138,993 square feet of retail space including 37,593133,828 square feet of comparable space leases (leases for which there was a prior tenant), at an average rental rate decrease on a cash basis of 2.0% and increase on a GAAP basis of 1.3%, respectively. New retail leases for comparable spaces were signed for 10,000 square feet at an average rental rate decrease on a cash and GAAP basis of 17.8% and 22.0%, respectively. Renewals for comparable retail spaces were signed for 27,593 square feet at an average rental rate increase on a cash and GAAP basis of 3.8%3.0% and 13.0%,20.2%, respectively. TenantThere improvementswere andno comparable new leases, tenant improvements, or incentives were $22.50 per square foot ofon retail space for comparable new leases forduring the three months ended MarchJune 31,30, 2026, mainly due to a new tenant at Solana Beach Towne Center.2026.

We capitalized external and internal costs related to new development, redevelopment, expansion and repositioning activities combined of $7.7$15.5 million and $2.0$8.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $23.2 million and $10.6 million for the six months ended June 30, 2026 and 2025, respectively.

We capitalized external and internal costs related to other property improvements combined of $14.3 million and $12.3$12.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $28.7 million and $25.2 million for the six months ended June 30, 2026 and 2025, respectively.

Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed into service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use as noted above. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income. If the time period for capitalizing interest is extended, however, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period. Because the development of La Jolla Commons III is now complete and the building, inclusive of the land, was placed into service as of April 1, 2025, there were no capitalized interest costs related to development activities after the three months ended March 31, 2025. We capitalized interest costs related to development activities of $1.4 million for the threesix months ended MarchJune 31,30, 2025.

Comparison of the three months ended MarchJune 31,30, 2026 to the three months ended MarchJune 31,30, 2025

The following summarizes our consolidated results of operations for the three months ended MarchJune 31,30, 2026 compared to our consolidated results of operations for the three months ended MarchJune 31,30, 2025. As of MarchJune 31,30, 2026,2026 and June 30, 2025 our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 6.8 million rentable square feet of office and retail space, including the retail portion of our mixed-use property, 2,302 residential units (including 120 RV spaces) and a 369-room hotel. Additionally, as of MarchJune 31,30, 2026,2026 and June 30, 2025, we owned land at two of our properties that we classified as held for development and/or construction in progress. As of March 31, 2025, our operating portfolio was comprised of 31 office, retail, multifamily and mixed-use properties with an aggregate of approximately 6.6 million rentable square feet of office and retail space, including the retail portion of our mixed-use property, 2,302 residential units (including 120 RV spaces) and a 369-room hotel. Additionally, as of March 31, 2025, we owned land at three of our properties that we classified as held for development and/or construction in progress.

The following table sets forth selected data from our unaudited consolidated statements of comprehensive income for the three months ended MarchJune 31,30, 2026 and 2025 (dollars in thousands):

Total property revenues. Total property revenue consists of rental revenue and other property income. Total property revenue increased $2.0$1.6 millionmillion, or 1%, to $110.6$109.5 million for the three months ended MarchJune 31,30, 2026 compared to $108.6$107.9 million for the three months ended MarchJune 31,30, 2025. The percentage leased was as follows for each segment as of MarchJune 31,30, 2026 and 2025:

(1)The percentage leased for our retail and office segments and the retail portion of our mixed-use segment includes the square footage under lease, including leases which may not have commenced as of MarchJune 31,30, 2026 or 2025, as applicable. LeasedPercentage unitsleased for our multifamily properties includeincludes total units leased and occupied as of the applicable date.

Rental revenues. Rental revenue includes minimum base rent, cost reimbursements, percentage rents and other rents. Rental revenue increased $1.5$2.0 million, or 1%,2%, to $104.4$103.1 million for the three months ended MarchJune 31,30, 2026 compared to $103.0$101.1 million for the three months ended MarchJune 31,30, 2025. Rental revenue by segment was as follows (dollars in thousands):

Office rental revenue increased $1.5$0.5 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to new tenant leases at La Jolla Commons III. Same-store office rental revenue increased $0.7 million primarily due to an increase in occupancy and base rent atIII, City Center Bellevue, Timber Ridge and LloydOne Portfolio.Beach Street. These increases were offset by lower occupancy at First14Acres &and Main.a one-time reserve for certain receivables related to an office tenant at Coastal Collection at Torrey Reserve. The company continues to pursue recovery of the outstanding amounts.

Retail rental revenue decreasedincreased $1.3$0.7 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to thea sale of Del Monte Center on February 25, 2025. Same-store retail revenue increased $0.3$0.4 million primarilyincrease duerelated to new tenant leases and scheduled rent increases at Alamo Quarry Market.Market, Lomas Santa Fe Plaza, Carmel Country Plaza and Waikele Center. Additionally, there was an increase in cost recoveries of $0.3 million.

Total mixed-useMultifamily rental revenue increased $0.3$0.2 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to an overall increase in average occupancymonthly base rent and revenuea perslight availabledecrease roomin tooverall 91.9%occupancy. Average monthly base rent and $305occupancy was $2,796 and 89.3%, for the three months ended MarchJune 31,30, 2026, respectively, compared to 84.6%$2,725 and $29889.5%, for the three months ended MarchJune 31,30, 2025, respectively.

Other property income. Other property income increaseddecreased $0.5 million, or 9%,7%, to $6.2$6.4 million for the three months ended MarchJune 31,30, 2026 compared to $5.7$6.9 million for the three months ended MarchJune 31,30, 2025. Other property income by segment was as follows (dollars in thousands):

MultifamilyOffice other property income increaseddecreased $0.3$0.6 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to anlease increasetermination infees parking income and other operating incomereceived at HassaloTimber onRidge Eighthduring - Multifamily.2025.

Mixed-useRetail other property income increaseddecreased $0.2 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to anlease increasetermination infees resort fee income driven by higher occupancyreceived at theAlamo hotelQuarry portionMarket ofduring our mixed-use property and parking income at the retail portion of our mixed-use property.2025.

Total Property Expenses. Total property expenses consist of rental expenses and real estate taxes. Total property expenses increased $2.4$1.2 million, or 6%,3%, to $43.7$41.6 million for the three months ended MarchJune 31,30, 2026 compared to $41.3$40.3 million for the three months ended MarchJune 31,30, 2025.

RealRental EstateExpenses. Taxes.Rental Real estate taxesexpenses increased $0.9$2.1 million, or 9%,7%, to $11.9$31.8 million for the three months ended MarchJune 31,30, 2026 compared to $11.0$29.7 million for the three months ended MarchJune 31,30, 2025. Real estate taxRental expense by segment was as follows (dollars in thousands):

Office realrental estate taxesexpense increased $0.4$1.3 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to an increase in realfacilities estateservices taxesexpense, atutilities Laexpense Jollaand Commonsrepairs IIIand duemaintenance to the fact that we stopped capitalizing real estate taxes when the building was placed into service on April 1, 2025.expense.

Multifamily realrental estate taxesexpense increased $0.3$0.1 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to thean acquisitionincrease ofin repairs and maintenance expense and security expense at Pacific Ridge Apartments, Genesee Park.Park Same-storeand multifamilyHassalo realon estateEighth taxes- increasedMultifamily. $0.1These millionincreases primarilywere duepartially tooffset higherby taxa assessmentsdecrease in contract labor service expense at Pacific Ridge Apartments and LomaGenesee Palisades.Park.

Property operating income decreasedincreased $0.4$0.3 million, or 1%,million to $66.9$67.9 million for the three months ended MarchJune 31,30, 2026, compared to $67.3$67.6 million for the three months ended MarchJune 31,30, 2025. Property operating income by segment was as follows (dollars in thousands):

OfficeRetail operating income increased $0.2$0.1 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025,2025 primarily due to new tenant leases at LaAlamo JollaQuarry CommonsMarket, III,Lomas whichSanta wasFe Plaza, Carmel Country Plaza and Waikele Center, and higher cost recoveries. These increases were offset by ana increasedecrease in rentalother expensesproperty income due to newlease operationstermination andfees amenitiesreceived at Alamo Quarry Market during 2025 and higher real estate taxes at LaAlamo JollaQuarry CommonsMarket III.due Same-storeto officeincreased operatingproperty incometax remainedassessments flatduring as the increase in occupancy2026 and basereal rentsestate attax Cityrefunds Centerreceived Bellevue,during Timber Ridge and Lloyd Portfolio were offset by lower occupancy at First & Main and higher rental expenses.2025.

Total mixed-useMultifamily operating income decreased $0.1 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to higher room-relatedrental expenses at thePacific hotelRidge portionApartments, ofGenesee our mixed-use property,Park and anHassalo increaseon Eighth - Multifamily, higher real estate taxes at Genesee Park and a real estate tax refund received at Pacific Ridge Apartments during 2025. These increases in personnel expenses at the retail portion of our mixed-use property. These decreases were partially offset by an increase in rental revenue due to higher average monthly base rent and a slight decrease in occupancy andof revenue per available room to 91.9%$2,796 and $305,89.3%, respectively, for the three months ended MarchJune 31,30, 2026,2026 compared to 84.6%$2,725 and $298,89.5%, respectively, for the three months ended MarchJune 31,30, 2025.

General and Administrative. General and administrative expenses decreasedincreased $0.5$0.1 million, or 6%,1%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. This decreaseincrease was primarily due to lowerhigher employee-relatedcorporate costs,legal including, without limitation, with respect to base pay, bonusexpenses and benefitsconsulting for certain salaried and hourly workers.fees.

Depreciation and Amortization. Depreciation and amortization expense increaseddecreased $1.8$0.1 million, or 6%,million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. This increasedecrease was primarily due to $1.1$0.9 million related to Laleases-in-place Jollaat CommonsGenesee III,Park, which wasfully placedamortized intowithin servicea on April 1, 2025, $0.2 million related to the acquisitionyear of Geneseeacquisition. ParkThis ondecrease Februarywas 28,offset 2025by andan increase in new tenant improvements,improvements and building improvements and leasing commission assets placed into service.

Interest Expense, net. Interest expense increased $0.9$0.1 million, or 5%,1%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. This increase was primarily due to athe decreaseamortization inof capitalizedthe interestnew relatedloan tofees Laassociated Jollawith Commonsthe IIIFourth beingAmended placedand Restated Credit Facility entered into service on April 1, 2025. This increase was partially offset by a decrease in interest expense related to the maturity and repayment of our Series C Notes on February 3, 2025.2026.

Other Income, net. Other income, net decreased $0.3$0.5 million, or 33%,54%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. This decrease was primarily due to lower interest and investment income attributed to a decrease in yield on our average cash balance during the period, partially offset by lower income tax expense.period.