American Assets Trust AAT recently enhanced its portfolio with the acquisition of La Jolla Commons in San Diego, CA. The company has used cash on hand and funds from its existing credit facility to pay the purchase price of $525 million, less a seller credit of around $11.5 million.
Positioned in the University Town Center submarket, the property includes two trophy office towers, an entitled development parcel as well as two parking structures. Built in 2008 and 2014, respectively, the two office towers comprise a total 724,000 square feet of space.
Out of the two towers, the 421,000-square foot tower is fully leased to LPL Financial. The other tower, having approximately 303,000 square feet of space, is around 72% leased and its tenant roster has names like U.S. Bank National Association, Thornton & Baird LLP, among others.
The above-mentioned acquisition seems a strategic fit. This is because La Jolla Commons has a variety of high-end destination dining, high-scale retail and entertainment destinations in its proximity. Moreover, it has ready access to San Diego’s main freeways, together with Mid-Coast Trolley line, which is anticipated to be completed soon. Therefore, demand for space at this property is likely to be high.
American Assets Trust has an experience of more than 50 years in acquisition, development and management of premier retail, office, and residential properties in the nation. Its diversified asset base help in mitigating the risks associated with a single property type.
Additionally, the company’s assets are located in high-barrier-to-entry markets, mainly in Southern California, Northern California, Oregon, Washington and Hawaii. The solid demographics-high population density and household income in its operating markets offer scope for decent growth. Nonetheless, strong competition and choppy retail real estate market are concerns for the company.
Currently, American Assets Trust carries a Zacks Rank #3 (Hold). Shares of American Assets Trust have outperformed its industry in the year-to-date period, gaining 18.2%, while the industry increased 13%.
Stocks to Consider
Some better-ranked stocks from the real-estate space include Duke Realty Corp. DRE, Lamar Advertising Co. LAMR and PS Business Parks, Inc. PSB, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duke Realty’s Zacks Consensus Estimate for 2019 funds from operations (FFO) per share moved marginally north to $1.41 in the past two months.
Lamar’s FFO per share estimates for the current year inched up 0.3% to $5.83 over the past month.
PS Business Parks’ Zacks Consensus Estimate for the ongoing year’s FFO per share moved up 1.5% to $6.71 in the past month.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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