SEGMENT REPORTING

12 Months Ended

Dec. 31, 2012

SEGMENT REPORTING

NOTE 17. SEGMENT REPORTING

Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We review operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. However, we have aggregated our properties into reportable segments as the properties share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies.

We operate in four business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room all-suite hotel.

We evaluate the performance of our segments based on segment profit which is defined as property revenue less property expenses. We do not use asset information as a measure to assess performance and make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, interest expense, depreciation and amortization expense and other income and expense are not included in segment profit as our internal reporting addresses these items on a corporate level.

Segment profit is not a measure of operating income or cash flows from operating activities as measured by GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate segment profit in the same manner. We consider segment profit to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our properties.

The following table represents operating activity within our reportable segments (in thousands):

	Year Ended December 31,
	2012			2011			2010
Total Retail
Property revenue	$	91,991		$	86,511		$	78,234
Property expense		(24,955	)		(24,512	)		(20,185	)
Segment profit		67,036			61,999			58,049
Total Office
Property revenue		78,101			57,319			25,374
Property expense		(23,780	)		(18,015	)		(7,300	)
Segment profit		54,321			39,304			18,074
Total Multifamily
Property revenue		14,852			14,321			14,140
Property expense		(5,914	)		(5,578	)		(4,723	)
Segment profit		8,938			8,743			9,417
Total Mixed-Use
Property revenue		50,522			44,634			—
Property expense		(31,465	)		(28,774	)		—
Segment profit		19,057			15,860			—
Total segments’ profit	$	149,352		$	125,906		$	85,540

The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands):

	Year Ended December 31,
	2012			2011			2010
Total segments’ profit	$	149,352		$	125,906		$	85,540
General and administrative		(15,593	)		(13,627	)		(8,699	)
Depreciation and amortization		(61,853	)		(55,936	)		(34,419	)
Interest expense		(57,328	)		(54,580	)		(43,251	)
Early extinguishment of debt		—			(25,867	)		—
Loan transfer and consent fees		—			(8,808	)		—
Gain on acquisition		—			46,371			4,297
Other income (expense), net		(629	)		212			(1,846	)
Income from continuing operations		13,949			13,671			1,622
Discontinued operations
Income from discontinued operations		932			1,672			552
Gain on sale of real estate property		36,720			3,981			—
Results from discontinued operations		37,652			5,653			552
Net income		51,601			19,324			2,174
Net income attributable to restricted shares		(529	)		(482	)		—
Net loss attributable to Predecessor’s noncontrolling interests in consolidated real estate entities		—			2,458			2,205
Net income attributable to Predecessor’s controlled owners’ equity		—			(16,995	)		(4,379	)
Net income attributable to unitholders in the Operating Partnership		(16,133	)		(1,388	)		—
Net income attributable to American Assets Trust, Inc. stockholders	$	34,939		$	2,917		$	—

The following table shows net real estate and secured note payable balances for each of the segments, along with their capital expenditures for each year (in thousands):

	December 31, 2012		December 31, 2011
Net real estate
Retail	$	669,177	$	655,450
Office		759,203		503,220
Multifamily		36,391		37,187
Mixed-Use		203,411		208,089
	$	1,668,182	$	1,403,946
Secured Notes Payable (1)
Retail	$	397,732	$	400,320
Office		428,194		295,919
Multifamily		101,444		101,444
Mixed-Use		130,310		130,310
	$	1,057,680	$	927,993
Capital Expenditures (2)
Retail	$	14,211	$	5,110
Office		22,136		6,004
Multifamily		964		615
Mixed-Use		727		1,492
	$	38,038	$	13,221

(1) Excludes unamortized fair market value adjustment of $13.0 million and $15.9 million as of December 31, 2012 and 2011, respectively.

(2) Capital expenditures represent cash paid for capital expenditures during the year and include leasing commissions paid.