Good day, ladies and gentlemen, and welcome to the Q2 2019 American Assets Trust, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Senior Vice President, General Counsel, Adam Wyll.

Good morning. I'd like to thank everyone for joining us today for American Assets Trust 2019 Second Quarter Earnings Conference Call. Joining me on the call are Ernest Rady and Bob Barton. These and other members of our management team are available to take your questions at the conclusion of our prepared remarks. Our 2019 second quarter supplemental disclosure package provides a significant amount of valuable information with respect to the company's operating and financial performance. The document is currently available on Web site. Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, our future operations and our actual performance may differ materially from the information contained in our forward-looking statements, and we can give no assurance that these expectations will be attained. Risks inherent in these assumptions include, but are not limited to, future economic conditions, including interest rates, real estate conditions and the risks and costs of construction. The earnings release and supplemental reporting package that we issued yesterday and our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial conditions and results of operations. Additionally, this call will contain non-GAAP financial information, including funds from operations, or FFO; earnings before interest, taxes, depreciation and amortization, or EBITDA; and net operating income, or NOI. American Assets is providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Explanations of such non-GAAP items and reconciliations to net income are contained in the company's supplemental operating and financial data for the second quarter of 2019 furnished to the Securities and Exchange Commission, and this information is available on the company's Web site at www.americanassetstrust.com. I'll now turn the call over to our Chairman, President and CEO, Ernest Rady, to begin our discussion of second quarter results. Ernest?

Thank you, Adam. That was very eloquent, and good morning everyone. Thank you for joining American Assets Trust second quarter 2019 earnings call. We continue to make good progress on all fronts as we continue to focus our efforts on earnings growth, combined with growth and asset value for our shareholders. We saw a lot of positive developments during the second quarter '19, and we remain very optimistic going forward. First of all, I want to welcome all of our new stockholders, and we sincerely appreciate your confidence and support. The whole transaction turned out well for everyone. The existing stockholders got enhanced marketability and another investment property for growth. Our new stockholders got immediate appreciation. So far, we've had better-than-expected leasing success with our recent acquisition of La Jolla Commons as we were very fortunate to be able to source and sign a new 73,000 square-foot lease within two weeks of closing. Bob will talk more about the details of the acquisition and impact of the recent lease that was signed. Secondly, at Oregon Square, we have completed the modern renovation of the 830 building and increased the square footage from 33,000 square feet to 55,000 square feet. The 830 building is now a 100% leased to WeWork at current market rates, slightly above our initial estimates. We are now pursuing to do a similar modern renovation on the adjacent 710 building at Oregon Square and prospective tenants of ours began indicating interest. Also, during the second quarter, our sustainability achievements include Hassalo on Eighth in Portland being designated as the first in the world to receive neighborhood LEED green certification, the Landmark at One Market being designated as the first BREEAM USA certification in San Francisco. BREEAM is B-R-E-E-A-M. We filed our first comprehensive sustainability report with GRESB. We posted our net asset value internal estimate of $51.50 a share on our Web site, and Bob will discuss that in more detailed later. In our view, the office markets in both San Francisco and Bellevue, Washington remain strong. The Safeway store at Waikele Center remains on track to open in the fourth quarter of '19. We continue to reinvest and improve our existing assets and remain optimistic about the future of this portfolio and our ability to narrow the price-to-net asset value gap. On behalf of all of us at American Assets Trust, we thank you for your confidence and allowing us to manage your company, and we look forward to your continued support. I'll now turn it over to Bob Barton, our Executive Vice President and CFO. Bob, please.

Good morning, and thank you, Ernest. Last night, we reported second quarter 2019 FFO of $0.51 per share and net income attributable to common stockholders of $0.18 per share for the second quarter. Second quarter results are primarily comprised of the following four highlights. First, on June 20, we acquired the La Jolla Commons office campus in San Diego comprised of two Class A+ office towers in University Town Center, also known as UTC, one of the most desirable submarkets in the city of San Diego, which we believe is on the forefront of significant and prolonged growth. The acquisition also includes a fully entitled development parcel for an approximately 224,000 square-foot Class A office tower. La Jolla Commons I was built in 2008 and consists of approximately 303,000 square feet that was approximately 72% leased at the time of acquisition to a diversified credit tenant base. La Jolla Commons II was built in 2014 and is 100% leased to LPL Financial that as of today has a market cap of approximately $7 billion and a weighted average lease term remaining at La Jolla Commons of 9.9 years. As of the date of the acquisition, the combined project was approximately 88% leased in a submarket with approximately 97% occupancy. Our underwriting assumed a lease-up of approximate -- to approximately 96% leased by the beginning of the third quarter of 2020. We saw the scarcity of large contiguous spaces in the UTC submarket and were able to sign a new lease with Alumina less than 2 weeks after our closing at rates that were approximately 10% higher than what we modeled in our underwriting. This also confirms that our in-place rents are approximately 10% or more below market. Note that as of today, Alumina has a market cap of approximately $44…

Thank you. [Operator Instructions] And our first question comes from the line of Rich Hill with Morgan Stanley. Your line is now open.

Hey, good morning guys. Bob, as always, thank you for the color and a lot of detail. I want to come back to La Jolla Commons, obviously, you're ramping it up, it's going to be stabilized faster than anticipated, don't think that really starts until 2020, but I'm thinking about sort of the ramp that you provided earlier this year to 2021 and given that it's going to be stabilized maybe a year before you anticipated, could you maybe help us quantify or maybe help us think about how incremental that a year additional stabilization will be to the bridge you previously provided?

Well, Rich, thanks for the question. We'll be issuing guidance on our Q3 '19 call, but from where we sit today and looking at our corporate operating model, the numbers that were in our bridge seem to be conservative.

Okay, helpful. And just to reiterate, or to clarify, did I hear you correctly that in 2020 you expect around 7% NOI from La Jolla Commons?

That was on a average. The NOI yield over the average term over the next decade will be 7%. So it's going to ramp up from 6.3%, increasing approximately 50 -- 25 to 50 basis points a year till exceeds 8%. And if you look at the average of that NOI yield over that term, it will be approximately 7%.

Okay. Thank you. That's it for me.

Thank you, Rich.

Thanks, Rich.

Thank you. [Operator Instructions] Our next question comes from the line of Craig Schmidt with Bank of America. Your line is now open.

Yes, thank you. Good morning. I was wondering the mix is starting to favor office. As you look forward to 2020 and beyond, what do you think the balance and the mix of your different components of -- the different mixed uses in office multifamily, retail could be going forward?

As I've said -- this is Ernest, Craig, as I've said on our investor presentation, our job is not to be a retail or office or an apartment REIT. Our job is to create wealth for stockholders. And as we go forward, we think we have significant opportunities within our portfolio, and we continue to look at opportunities outside of our portfolio, but in the same 3 asset classes and coastal West Coast focus. So I'd like to tell you exactly what it's going to be, but we're going to be, hopefully, where the bucks are, and we're going to enhance our shareholder value.

Craig, it's Bob. Let me just add to Ernest's comment on that. It's that I love the way he describes that we are -- we're really a wealth builder. But having said that, we understand that there is a cloud over retail, and so there is no current intention on acquiring more retail. And we think the growth in our NOI will really come from office and multifamily going forward.

Okay. Thank you.

Thank you.

Thank you. And our next question comes from the line of Mitch Germain with JMP Securities. Your line is now.

Thanks for taking my question. To that point, would you consider maybe selling one of your retail assets, maybe throwing a cap rate out there and using some of that as a means to delever?

Sure. If we saw a better opportunity to enhance shareholder wealth, that's what we get up every morning for and look forward to those opportunities. If we had an opportunity to sell a retail asset that made sense and acquire either another retail asset or another asset in the 2 types of properties we own, we'd look at it. Over the years, this portfolio got built by doing $2 billion worth of trades, and we're not out of the trade business yet.

Great. And just on the acquisition that you guys completed this quarter. Maybe just talk about the process? Was it a fully marketed transaction? What sort of capital could you possibly have been bidding against? Maybe just maybe describe how the process played out?

I don't know that I can really do that because we weren't involved until we had the opportunity presented to us, in effect, a take it or leave basis. We acted very quickly, and I think that you'd have to talk to the brokers and find out exactly what their process was. I didn't comment on it because I wasn't involved. All we were involved is when it was presented to us, we said we love it, we'd like to do it, we moved on it and we closed it.

Mitch, let me just add to that, that when we heard about it, it was not on the market and it was off market. And we moved quickly once we had a handshake.

Off market, sort of a euphemism. I don't know what that was.

Agreed. And then last question on the deleveraging. Obviously, a portion of that is the equity raise though a portion of that obviously is some of the income coming online from the leasing, right? Is that the way that we should think about how the deleveraging plays out over the course of the next 18 months?

Yes, yes, that deleveraging, nothing additional is needed. That's all organically going forward.

Thank you.

Thank you. And I'm showing no further questions at this time. So with that, I'll turn the call back over to Chairman and CEO, Ernest Rady, for closing remarks.

Thanks, again, for all our new shareholders joining us. We're extremely delighted about our position now. We think that our future over the next number of years is going to be a pleasant surprise for all of us, and we look forward to sharing that with you as it evolves. Thank you, again, for joining us.