EQUITY OF AMERICAN ASSETS TRUST, INC.

Stockholders' Equity

On May 6, 2013, we entered into an at-the-market (“ATM”) equity program with four sales agents in which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $150.0 million. The sales of shares of our common stock made through the ATM equity program are made in "at-the-market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended. During the three months ended March 31, 2015, the following shares of common stock and related proceeds were sold through the ATM equity program (in thousands, except per share data):



	Three Months Ended March 31, 2015
Number of shares of common stock issued through ATM program	53,800
Weighted average price per share	$42.54

Proceeds, gross	$	2,288
Sales agent compensation	(23		)
Offering costs	(101		)
Proceeds, net	$	2,164

We intend to use the net proceeds from the ATM equity program to fund our development or redevelopment activities, repay amounts outstanding from time to time under our revolving line of credit or other debt financing obligations, fund potential acquisition opportunities and/or for general corporate purposes. As of March 31, 2015, we had the capacity to issue up to an additional $30.1 million in shares of our common stock under our ATM equity program. Actual future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under the ATM equity program.

On March 9, 2015, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Explorer Insurance Company, a California corporation ("EIC"), an entity owned and controlled by Ernest Rady, the Executive Chairman of our board of directors. The Purchase Agreement provided for the sale by us to EIC, in a private placement, of 200,000 shares of our common stock at a purchase price of $40.54 per share, resulting in gross proceeds to us of approximately $8.1 million. The price per share paid by EIC was equal to the closing price of a share of our common stock on the New York Stock Exchange on the date of the Purchase Agreement. These shares were registered on March 27, 2015 by virtue of our filing of a prospectus supplement to our universal shelf registration statement on Form S-3 filed on February 6, 2015.

Dividends

The following table lists the dividends declared and paid on our shares of common stock and noncontrolling common units during the three months ended March 31, 2015:



Period	Amount per Share/Unit		Period Covered	Dividend Paid Date
First Quarter 2015	$	0.2325	January 1, 2015 to March 31, 2015	March 27, 2015

Taxability of Dividends

Earnings and profits, which determine the taxability of distributions to stockholders and holders of common units, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of revenue recognition and compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation.

Stock-Based Compensation

We follow the FASB guidance related to stock compensation which establishes financial accounting and reporting standards for stock-based employee compensation plans, including all arrangements by which employees receive shares of stock or other equity instruments of the employer, or the employer incurs liabilities to employees in amounts based on the price of the employer's stock. The guidance also defines a fair value-based method of accounting for an employee stock option or similar equity instrument.

For the performance-based stock awards, the fair value of the awards were estimated using a Monte Carlo Simulation model. Our stock price, along with the stock prices of a group of peer REITs, is assumed to follow the Multivariate Geometric Brownian Motion Process. Multivariate Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on the stock price of the Company and the group of REITs were estimated based on a three year look-back period. The expected growth rate of the stock prices over the “derived service period” of the employee is determined with consideration of the risk free rate as of the grant date.

The following table summarizes the activity of restricted stock awards during the three months ended March 31, 2015:



	Units		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2015	493,539		$	22.01
Granted	—		—
Vested	(308,587	)	15.36
Forfeited	—		—
Nonvested at March 31, 2015	184,952		$	33.10

We recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $0.9 million and $0.5 million, respectively, in noncash compensation expense for the three months ended March 31, 2015 and 2014, which is included in general and administrative expense on the consolidated statements of comprehensive income. Unrecognized compensation expense was $3.9 million at March 31, 2015.

Earnings Per Share

We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating security is calculated according to dividends declared and participation rights in undistributed earnings. The weighted average unvested shares outstanding, which are considered participating securities, were 246,672 and 406,856 for the three months ended March 31, 2015 and 2014. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares as these unvested shares have nonforfeitable dividend equivalent rights.

Diluted EPS is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method. For the three months ended March 31, 2015 and 2014, diluted shares exclude incentive restricted stock as these awards are considered contingently issuable. Additionally, the unvested restricted stock awards subject to time vesting are anti-dilutive for all periods presented, and accordingly, have been excluded from the weighted average common shares used to compute diluted EPS.

Earnings Per Unit of the Operating Partnership

Basic earnings (loss) per unit (“EPU”) of the Operating Partnership is computed by dividing income (loss) applicable to unitholders by the weighted average Operating Partnership units outstanding, as adjusted for the effect of participating securities. Operating Partnership units granted in equity-based payment transactions are considered participating securities prior to vesting. The impact of unvested Operating Partnership unit awards on EPU has been calculated using the two-class method whereby earnings are allocated to the unvested Operating Partnership unit awards based on distributions and the unvested Operating Partnership units’ participation rights in undistributed earnings (losses).

The calculation of diluted earnings per unit for the year ended March 31, 2015 and 2014 does not include the weighted average of 246,672, and 406,856 unvested Operating Partnership units, respectively, as these equity securities are either considered contingently issuable or the effect of including these equity securities was anti-dilutive to income from continuing operations and net income attributable to the unitholders.

The computation of basic and diluted EPS is presented below (dollars in thousands, except share and per share amounts):



	Three Months Ended March 31,
	2015			2014
NUMERATOR
Net income from operations	$	11,379		$	6,658
Less: Net income attributable to restricted shares	(43		)	(70		)
Less: Income from operations attributable to unitholders in the Operating Partnership	(3,309		)	(1,986		)
Net income attributable to common stockholders—basic	$	8,027		$	4,602
Income from operations attributable to American Assets Trust, Inc. common stockholders—basic	$	8,027		$	4,602
Plus: Income from operations attributable to unitholders in the Operating Partnership	3,309			1,986
Net income attributable to common stockholders—diluted	$	11,336		$	6,588
DENOMINATOR
Weighted average common shares outstanding—basic	43,419,762			40,582,792
Effect of dilutive securities—conversion of Operating Partnership units	17,901,685			17,909,681
Weighted average common shares outstanding—diluted	61,321,447			58,492,473

Earnings per common share, basic	$	0.18		$	0.11
Earnings per common share, diluted	$	0.18		$	0.11