Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) for
The Rating Outlook is Stable. The rating and Outlook reflect Fitch's expectation that the company will return to metrics appropriate for the rating within the forecast period.
AAT's diversified portfolio is focused on high growth and high-quality assets in the
KEY RATING DRIVERS
Rent Collections Recovery to Continue: Total rent collections improved to 92% in 4Q20, from 87% in 2Q20, including 99% of office rents and 95% of multifamily. Retail collections were 82% in 4Q20, from 58% in 2Q20. As vaccinations continue to roll out and the economy opens back up, performance at retail assets, and the
Tenant & Industry Exposures: As of
Essential tenants account for 28.7% of retail ABR, including grocery/drug at 10.1%. Three of its top 10 retail tenants are grocers, including
AAT's two largest office tenants are
Asset Concentration: The company has high individual asset concentrations, with
Strong Markets: As of 4Q20, the company's core markets in terms of ABR include
West Coast Office Holding Up: The office segment saw robust re-leasing spreads of 19% on a cash basis in 2020 and 22% on a straight-line basis. Fitch expects same store NOI growth in 2022 in the low-single digits due in particular to strong office leasing activity and easier retail comps. AAT plans to grow NOI from the office segment with the development of
Solid Unencumbered Asset Coverage: As of
DERIVATION SUMMARY
AAT's diversified portfolio of office, retail and multifamily assets focused in
AAT's market exposure lends comparison to a number of property-sector-focused REITs, including shopping center owner
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Our Rating Case for the Issuer
--Occupancy loss of 200bps in fiscal 2021, with 350 bps of recovery from 2022-2024;
Expiring rents subject to flat to mid-single digit increases, as office strength offsets lingering retail weakness;
Recurring capex returns to normalized range consistent with guidance in fiscal 2022;
Development capex of
No acquisition or disposition activity in the forecast period;
No equity issuance in the forecast period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Fitch's expectation of leverage sustaining below 5.5x;
Fitch's expectation of fixed-charge coverage (FCC) sustaining above 3.0x;
Continued access to the unsecured debt markets, in particular execution of public unsecured debt offerings.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Fitch's expectation of leverage sustaining above 6.5x;
Fitch's expectation of FCC sustaining below 2.0x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch estimates AAT's base case liquidity coverage at 1.4x through YE22, pro forma for the
Fitch defines liquidity coverage as sources of liquidity divided by uses of liquidity. Sources include unrestricted cash, availability under unsecured revolving credit facilities and retained cash flow from operating activities after dividends. Uses include pro rata debt maturities, expected recurring capex and forecast (re)development costs.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONSENTITY/DEBT RATING PRIOR
American Assets Trust, Inc. LT IDR BBB Affirmed BBB
American Assets Trust, L.P. LT IDR BBB Affirmed BBB
senior unsecured
LT BBB Affirmed BBB
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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