American Assets Trust, Inc. (AAT) stock intrinsic value fair value estimate & owner earnings analysis

American Assets Trust owns and operates a portfolio of office, retail, multifamily and mixed-use properties (including a hotel) in San Diego and the San Francisco Bay Area in California, Bellevue in Washington, Portland in Oregon, San Antonio in Texas and Oahu in Hawaii. At the end of 2025 the portfolio produced about $267 million of net operating income, roughly half from office, about a quarter from retail, and the rest from multifamily and the mixed-use property. How we measure earnings. We start with cash from operations, remove the swings in working capital, deduct stock compensation as a real cost, and deduct the part of property spending (tenant improvements, leasing commissions, renovations) needed to keep the buildings competitive. Only spending tied to revenue growth is treated as discretionary. On that basis, owner earnings per share were about $0.93 in 2019, $0.84 in 2020, $0.57 in 2021, $0.90 in 2022, $1.33 in 2023, $1.71 in 2024 and $1.16 in 2025. Per-share figures use the diluted share count, which from 2019 on is about 76 million. We use a level of about $1.16 a share as the starting point, the median of 2019 and 2022 through 2025. We left out 2020 and 2021 because pandemic conditions and heavy property spending distorted them. 2024 was inflated: the company said its operating cash flow that year included a net settlement over building specifications at its University Town Center office project in San Diego and lease termination fees at Coastal Collection at Torrey Reserve. Using the median keeps that year from lifting the level. No trailing-quarter figure was used. Growth check. Owner earnings fell about 32% in 2025 (from $1.71 to $1.16) because the 2024 one-time items did not repeat, and because rental revenue declined after the February 2025 sale of Del Monte Center in Monterey, California. Our base case assumes 0% growth in year one, at the 2025 level, so we are not assuming a rebound. The company also sold Del Monte Center for about $118 million and bought Genesee Park (multifamily); we do not credit any benefit from that redeployment beyond what is already in 2025 results. Base case, about $16 a share. Owner earnings stay flat at about $1.16 a share for roughly 30 years and then nothing is assumed. We credit no growth. Scheduled rent steps and renewals on existing leases are real but were not enough on their own to show a clear upward trend in owner earnings over the past decade, and rent changes on new leases can be positive or negative, as the company itself says. The 30-year life reflects that the buildings need continuing reinvestment, which is already deducted in our earnings figure. We also did not credit the 158,000 square feet of signed leases not yet started, or the 780,000 square feet (11.5% of the portfolio) that is currently available, because we cannot size the net effect after leasing costs. Bear case, about $6.50 a share. Debt totals $1.7 billion, of which $425 million matures in 2027, and interest expense already rose 5% in 2025 to $78.1 million after the company issued 6.150% Senior Notes. Leases representing 18.5% of annualized base rent expire in 2028 and 27.0% in 2029, and office is about half of net operating income. The bear case has owner earnings falling to about $0.60 a share, close to the 2021 low of $0.57, and staying there for 20 years, then nothing. Debt is not deducted separately; its cost is already in cash flow, and higher refinancing costs and lost tenants are what drive this case. Bull case, about $19 a share. Owner earnings rise to about $1.40 a share, near the 2023 to 2025 average, as space now available and signed leases not yet started get occupied on similar terms, and stay there for 30 years. We do not assume rents on 2028 and 2029 expirations reset materially higher, because 2029 expiries already carry the highest average rent in the schedule ($58.52 per square foot versus $39.19 for the portfolio). What would make this estimate wrong. If leasing costs remain at the 2025 level of about $72 million a year while rents fall, owner earnings would sit nearer the bear case. If 2025 cash flow proves still lifted by items we could not fully isolate, the base case is too high. We could not separate the exact dollar amount of one-time items in 2024 cash flow from the filings, so we relied on the median rather than adjusting a single year. The margin-of-safety price of $10 reflects a cushion against the bear case because the company is leveraged, has heavy office exposure and faces a large 2027 debt maturity.