DEBT

Debt of American Assets Trust, Inc.

American Assets Trust, Inc. does not hold any indebtedness. All debt is held directly or indirectly by the Operating Partnership; however, American Assets Trust, Inc. has guaranteed the Operating Partnership's amended and restated credit facility, term loan and carve-out guarantees on property-level debt.

Debt of American Assets Trust, L.P.

Secured notes payable

The following is a summary of the Operating Partnership's total secured notes payable outstanding as of December 31, 2014 and December 31, 2013 (in thousands):



Description of Debt	Principal Balance as of						Stated Interest Rate		Stated Maturity Date
Description of Debt	December 31, 2014			December 31, 2013			as of December 31, 2014		Stated Maturity Date
Waikele Center ⁽¹⁾⁽²⁾	—			140,700			—		November 1, 2014
The Shops at Kalakaua ⁽¹⁾⁽³⁾	19,000			19,000			5.45	%	May 1, 2015
The Landmark at One Market ⁽¹⁾⁽⁵⁾	133,000			133,000			5.61	%	July 5, 2015
Del Monte Center ⁽¹⁾⁽⁴⁾	82,300			82,300			4.93	%	July 8, 2015
First & Main ⁽¹⁾	84,500			84,500			3.97	%	July 1, 2016
Imperial Beach Gardens ⁽¹⁾	20,000			20,000			6.16	%	September 1, 2016
Mariner’s Point ⁽¹⁾	7,700			7,700			6.09	%	September 1, 2016
South Bay Marketplace ⁽¹⁾	23,000			23,000			5.48	%	February 10, 2017
Waikiki Beach Walk—Retail ⁽¹⁾	130,310			130,310			5.39	%	July 1, 2017
Solana Beach Corporate Centre III-IV ⁽⁶⁾	36,376			36,804			6.39	%	August 1, 2017
Loma Palisades ⁽¹⁾	73,744			73,744			6.09	%	July 1, 2018
One Beach Street ⁽¹⁾	21,900			21,900			3.94	%	April 1, 2019
Torrey Reserve—North Court ⁽⁶⁾	21,075			21,377			7.22	%	June 1, 2019
Torrey Reserve—VCI, VCII, VCIII ⁽⁶⁾	7,101			7,200			6.36	%	June 1, 2020
Solana Beach Corporate Centre I-II ⁽⁶⁾	11,302			11,475			5.91	%	June 1, 2020
Solana Beach Towne Centre ⁽⁶⁾	37,675			38,249			5.91	%	June 1, 2020
City Center Bellevue ⁽¹⁾	111,000			111,000			3.98	%	November 1, 2022
Total	819,983			962,259
Unamortized fair value adjustment	(7,172		)	(10,085		)
Total Secured Notes Payable	$	812,811		$	952,174


(1)	Interest only.


(2)	Loan repaid in full, without premium or penalty, on October 31, 2014


(3)	Loan repaid in full, without premium or penalty, on February 2, 2015.


(4)	Loan repaid in full, without premium or penalty, on February 6, 2015.


(5)	Maturity Date is the earlier of the loan maturity date under the loan agreement, or the “Anticipated Repayment Date” as specifically defined in the loan agreement, which is the date after which substantial economic penalties apply if the loan has not been paid off.


(6)	Principal payments based on a 30-year amortization schedule.

On October 10, 2012, the Operating Partnership entered into a ten-year non-recourse mortgage loan with PNC Bank, National Association with an original principal amount of $111.0 million. The loan is secured by a first-priority deed of trust on City Center Bellevue and an assignment of all leases, rents and security deposits relating to City Center Bellevue. The loan has a maturity date of November 1, 2022, bears interest at a fixed rate per annum of 3.98% and is interest only.

On March 29, 2012, the Operating Partnership entered into a seven-year non-recourse mortgage loan with PNC Bank, National Association with an original principal amount of $21.9 million. The loan is secured by a first-priority deed of trust on One Beach Street and an assignment of all leases, rents and security deposits relating to One Beach Street. The loan has a maturity date of April 1, 2019, bears interest at a fixed rate per annum of 3.94% and is interest only.

Unsecured notes payable

The following is a summary of the Operating Partnership's total unsecured notes payable outstanding as of December 31, 2014 and December 31, 2013 (in thousands):



Description of Debt	Principal Balance as of				Stated Interest Rate	Stated Maturity Date
Description of Debt	December 31, 2014		December 31, 2013		as of December 31, 2014	Stated Maturity Date
Term Loan	$	100,000	$	—	Variable ⁽¹⁾	January 9, 2019 ⁽²⁾
Senior Guaranteed Notes, Series A	150,000		—		4.04% ⁽³⁾	October 31, 2021
Total Unsecured Notes Payable	$	250,000	$	—


(1)	The company has entered into an interest rate swap agreement that is intended to fix the interest rate associated with the loan term at approximately 3.08% through its maturity date and extension options, subject to adjustments based on the Operating Partnership's consolidated leverage ratio.


(2)	The Operating Partnership has an option to extend the term loan up to three times, with each such extension for a 12-month period. The foregoing extension options are exercisable by the Operating Partnership subject to the satisfaction of certain conditions.


(3)	The company entered into a one-month forward-starting seven-year swap contract on August 19, 2014, which was settled on September 19, 2014 at a gain of approximately $1.6 million (see Note 9). The forward-starting seven-year swap contract was deemed to be a highly effective cash flow hedge, accordingly, the effective interest rate is approximately 3.88% per annum.

On October 31, 2014, the Operating Partnership entered into a note purchase agreement (the "Note Purchase Agreement") with a group of institutional purchasers that provided for the private placement of an aggregate of $350 million of senior guaranteed notes, of which (1) $150 million are designated as 4.04% Senior Guaranteed Notes, Series A, due October 31, 2021 (the “Series A Notes”), (2) $100 million are designated as 4.45% Senior Guaranteed Notes, Series B, due February 2, 2025 (the “Series B Notes”) and (3) $100 million are designated as 4.50% Senior Guaranteed Notes, Series C, due April 1, 2025 (the “Series C Notes”, and collectively with the Series A Notes and Series B Notes, are referred to herein as, the “Notes”). The Series A Notes were issued on October 31, 2014. The Series B Notes were issued on February 2, 2015 and the Series C Notes are expected to be issued on April 1, 2015, subject to customary closing conditions. Upon issuance, the Notes will pay interest quarterly on the last day of January, April, July and October until their respective maturities. As of December 31, 2014, $150 million of the Series A Notes were outstanding with an all in effective interest rate of approximately 3.88% (including interest rate swap costs).

The Operating Partnership may prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 5% of the aggregate principal amount of any series of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid plus a Make-Whole Amount (as defined in the Note Purchase Agreement).

The Note Purchase Agreement contains a number of customary financial covenants, including, without limitation, tangible net worth thresholds, secured and unsecured leverage ratios and fixed charge coverage ratios. Subject to the terms of the Note Purchase Agreement and the Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, Make-Whole Amount or interest under the Notes, and (ii) a default in the payment of certain other indebtedness by us or our subsidiaries, the principal, accrued and unpaid interest, and the Make-Whole Amount on the outstanding Notes will become due and payable at the option of the purchasers.

The Operating Partnership's obligations under the Notes are fully and unconditionally guaranteed by the Operating Partnership and certain of the Operating Partnership's subsidiaries.

Certain loans require the Operating Partnership to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2014, the Operating Partnership was in compliance with all loan covenants.

Scheduled principal payments on secured and unsecured notes payable as of December 31, 2014 are as follows (in thousands):



2015	$	235,980
2016	113,974
2017	190,139
2018	75,224
2019	142,662
Thereafter	312,004
	$	1,069,983

Credit Facility

On January 19, 2011, the company and the Operating Partnership entered into a revolving credit facility, or the credit facility. A group of lenders for which an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as administrative agent and joint arranger, and an affiliate of Wells Fargo Securities, LLC acts as syndication agent and joint arranger, provided commitments for a revolving credit facility allowing borrowings of up to $250.0 million. The credit facility also had an accordion feature that allowed the Operating Partnership to increase the availability thereunder up to a maximum of $400.0 million, subject to meeting specified requirements and obtaining additional commitments from lenders. The credit facility bore interest at the rate of either LIBOR or a base rate, in each case plus a margin that varied depending on our leverage ratio. The amount available for us to borrow under the credit facility was subject to the net operating income of our properties that form the borrowing base of the facility and a minimum implied debt yield of such properties.

On March 7, 2011, the credit facility was amended to allow the company or the Operating Partnership to purchase GNMA securities with maturities of up to 30 years. On January 10, 2012, the credit facility was amended a second time to (1) extend the maturity date to January 10, 2016 (with a one-year extension option), (2) decrease the applicable interest rates and (3) modify certain financial covenants contained therein. On September 7, 2012, the credit facility was amended a third time to allow our consolidated total secured indebtedness to be up to 55% of our secured total asset value for the period commencing upon the date that a material acquisition (generally, greater than $100 million) was consummated through and including the last day of the third fiscal quarter that followed such date.

On January 9, 2014, the company and the Operating Partnership entered into an amended and restated credit agreement, or the amended and restated credit facility, which amended and restated the then in-place credit facility. The amended and restated credit facility provides for aggregate, unsecured borrowing of $350 million, consisting of a revolving line of credit of $250 million, or the revolver loan, and a term loan of $100 million, or the term loan. The amended and restated credit facility has an accordion feature that may allow the Operating Partnership to increase the availability thereunder up to an additional $250 million, subject to meeting specified requirements and obtaining additional commitments from lenders.

On October 16, 2014, we entered into a first amendment to the amended and restated credit agreement that amends provisions of the amended and restated credit agreement to, among other things, (1) describe the treatment of our pari passu obligations under the amended and restated credit agreement and (2) remove the material acquisition provisions previously set forth in the amended and restated credit agreement.

Borrowings under the amended and restated credit facility initially bear interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from (a) 1.35%-1.95% (with respect to the revolver loan) and (b) 1.30% to 1.90% (with respect to the term loan), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) the Eurodollar rate plus 100 bps, plus a spread which ranges from (i) 0.35%-0.95% (with respect to the revolver loan) and (ii) 0.30% to 0.90% (with respect to the term loan), in each case based on our consolidated leverage ratio. The foregoing rates are more favorable than previously contained in the credit agreement in place as of December 31, 2013. If American Assets Trust, Inc. obtains an investment-grade debt rating, under the terms set forth in the amended and restated credit facility, the spreads will further improve.

The revolver loan initially matures on January 9, 2018, subject to the Operating Partnership's option to extend the revolver loan up to two times, with each such extension for a six-month period.

Concurrent with the closing of the amended and restated credit facility, the Operating Partnership drew down on the entirety of the $100 million term loan remains outstanding and is included in unsecured notes payable as discussed above.

Additionally, the amended and restated credit facility includes a number of financial covenants, including:


•	A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60%,


•	A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 45% at any time prior to December 31, 2015, and 40% thereafter,


•	A minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x,


•	A minimum unsecured interest coverage ratio of 1.75x,


•	A maximum unsecured leverage ratio of 60%,


•	A minimum tangible net worth of $721.16 million, and 75% of the net proceeds of any additional equity issuances (other than additional equity issuances in connection with any dividend reinvestment program), and


•	Recourse indebtedness at any time cannot exceed 15% of total asset value.

The amended and restated credit facility provides that American Assets Trust, Inc.'s annual distributions may not exceed the greater of (1) 95% of our funds from operations (“FFO”) or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.

American Assets Trust, Inc. and certain of its subsidiaries guaranteed the obligations under the amended and restated credit facility, and certain of its subsidiaries pledged specified equity interests in our subsidiaries as collateral for our obligations under the amended and restated credit facility.

As of December 31, 2014, the Operating Partnership was in compliance with all then in-place amended and restated credit facility covenants.