American Assets Trust Inc

NYSE:AAT

Earnings Call Analysis

American Assets Trust Q3 Earnings: Positive Outlook

In the midst of an unpredictable economy, American Assets Trust (AAT) demonstrates resilience and optimism, driven by its high-quality real estate portfolio, strategic property locations, and robust balance sheet. The company has adapted to the changing market, with a slight uptick in office utilization and strong retail leasing activity, resulting in an 8% cash basis increase in comparable retail leasing spreads for Q3. AAT's multifamily segment experienced decelerating rent growth but still achieved better-than-expected results, with San Diego showing an average rent increase of 6% year-over-year in Q3 2023. The company tackled the turbulent hospitality market where the U.S. mitigated a decline in Japanese travelers, who are expected to return in numbers by late summer 2024. AAT increased its full-year earnings guidance based on Q3 performance, promising diligent work and transparency towards its 2024 outlook. The Board expresses confidence with a $0.33 per share quarterly dividend for Q4, backed by strong financial results. With significant liquidity and thoughtful debt management, AAT is well-positioned to navigate future challenges.

Navigating Uncertainty with Prudent Management and Elevated Guidance

Amidst the unpredictable economic conditions, American Assets Trust has expressed confidence in its enduring high-quality real estate portfolio and robust operating platform. The company acknowledges the general skepticism surrounding the office sector but remains optimistic about the differentiation in performance and value between their modernized assets and less competitive commodity office space. Despite inflationary pressures and geopolitical instability, Q3 2023 operating fundamentals outperformed expectations, prompting yet another upward revision of the full-year guidance.

A Commitment to Shareholder Returns Through Dividends

Rewarding shareholders with consistent dividends, the company has declared a forthcoming payment in December, underscoring its commitment to returning value to its investors and appreciation for their continued support.

Strategic Focus on Long-term Financial Outperformance

American Assets Trust concentrates on factors that are likely to deliver long-term financial outperformance, including a diverse high-quality property portfolio, strategic locations, a strong balance sheet, and transparency in its stakeholder relationships. This approach is intended to mitigate the risks associated with economic changes and deliver consistent competitiveness in the market, even amidst the cyclical nature of the real estate industry.

Office Portfolio Sees Higher Rents and Uptick in Utilization

The company reports record-high average monthly base rents for its office and multifamily portfolios and a slight increase in office utilization. This uptick is supported by growing CEO recognition of the importance of in-office attendance for employee collaboration and productivity, along with more companies planning to reintroduce office policies, positioning American Assets Trust well for potential future demand.

Retail and Multifamily Segments Show Strength and Resilience

The retail front continues to demonstrate stability with nearly 95% of spaces leased. The significant leasing activity has led to favorable comparable leasing spreads, marking an impressive trajectory through Q3. Meanwhile, the multifamily segment, despite seeing slower rent growth due to changing applicant profiles and economic pressure, has still delivered solid results with higher net effective rents in San Diego and rebounding occupancy rates at certain properties.

Solid Q3 Financial Performance with an Upward FFO Guidance Adjustment

The third quarter financials topped projections, prompting the company to adjust its Funds From Operations (FFO) per share guidance range upward to $2.36 to $2.40, a notable increase from the previous guidance. Outperformance in the retail, office, and multifamily segments, along with contributions from the Embassy Suites Waikiki and lower G&A expenses, led to this positive revision. The company suggests it might even land at the higher end of the increased guidance range.

Sturdy Leasing Activity Amid Office Portfolio Attrition

Despite some move-outs, leasing activity remained robust, with new and renewal leases signed at increased rates and significant net absorption expected from pipeline deals. The office portfolio's strategic investments are anticipated to secure premium rents and offset the impact of current market headwinds, maintaining solid performance.

Liquidity and Capital Structure Optimally Positioned for Flexibility

With liquidity at approximately $490 million and leverage measured by net debt-to-EBITDA at 6.6x, the company aims to maintain it at or below 5.5x. The strong liquidity position and well-laddered debt maturity schedule offer multiple refinancing options and favorable capitalization with no immediate maturities. The company is cultivating plans to revisit the public debt markets in 2025.

Management's Outlook Indicates a Robust Financial Footing and Increased Guidance

Management concludes on a positive note, with an increased FFO per share guidance range and a strong liquidity position. The company emphasizes its commitment to transparency and outlines the basis for the revised guidance. Optimism is expressed for potentially achieving even higher results within the anticipated range.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and welcome to the American Assets Trust Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded.

I would now like to turn the conference over to Adam Wyll, President and Chief Operating Officer. Please go ahead.

[Adam Wyll, executive]

Thank you. Good morning, everyone. Welcome to American Assets Trust Third Quarter 2023 Earnings Call. Yesterday afternoon, our earnings release and supplemental information were furnished to the SEC on Form 8-K, both are now available on the Investors section of our website, americanassetstrust.com.

And with that quick intro, I'll turn the call over to Ernest Rady, our Chairman and CEO, to begin the discussion of our third quarter 2023 results. Ernest?

[Ernest Rady, executive]

Thanks, Adam, and good morning, everyone. During these times, when the economic and business landscapes are so unpredictable, it has become imperative for us to focus on what we can control, including how we can adapt to meeting the evolving market demands in such a turbulent economy.

Along these lines, we have a history of overcoming challenges with resilience, and we are confident that our high-quality operating platform and real estate portfolio will remain steadfast in spite of market adversity as we face persistent inflation, higher-for-longer federal funds rates, much tighter credit conditions and truly unfortunate geopolitical instability and war.

We are certainly not naive to the fact that the office sector, in particular, seems to be painted with a broad negative brush. It may take time for the office sector to see meaningful bifurcation of performance and value between the more modernized and amenitized office projects like ours versus that of commodity office.

But we are confident that we'll be on the right side of that equation. And not to mention, as we see replacement costs for high-quality property like our [ Sorin ] and likely to continue to climb over the years to come, I think that today's real estate prices for premier properties will be a bargain in the future.

Meanwhile, in Q3 2023, we are once again encouraged by our operating fundamentals, which were stronger than our projections against the negative backdrop for commercial real estate. Nevertheless, we remain optimistic that our earnings trajectory for the rest of the year as we have once again increased our full-year guidance based on our better-than-expected performance so far in 2023.

Candidly, the outlook beyond this year, at least in the short term, is less certain with the prevailing economic and global challenges. But as always, I promise you, we'll work hard, do our very best and look forward to presenting our 2024 guidance next February. Adam, Bob and Steve will go into more detail on our various asset segments, financial results and guidance.

But first, I want to mention that the Board of Directors has approved and [ obtained ] a quarterly dividend of $0.33 per share for the fourth quarter, which we believe is supported by our financial results and is an expression of the Board's confidence in our expected performance. The dividend will be paid under December 21 to shareholders of record December 7. Again, on behalf of all of us at American Assets Trust, we thank you for your confidence and continued support in allowing us to manage your company.

I'm now going to turn the call back to Adam.

[Adam Wyll, executive]

Thanks, Ernest. At American Assets Trust, we focus our strategy and decision-making on what we believe will create long-term financial outperformance, specifically our portfolio of high-quality properties in our asset class diversity, which provides more stability and protection from risks associated with changes and economic conditions of a particular market or industry, our property locations and demographics favoring cities with temperate climates, higher household incomes and education levels near world-renowned universities and transit centers, our fortress balance sheet and debt profile with a well-staggered debt maturity schedule, our integration of property technologies to provide operational cost savings and efficiencies, our economically prudent ESG initiatives and our integrity and transparency in our communications and business dealings with our stakeholders.

We certainly believe that these factors, together with consistently improving our properties, is critical to remaining best-in-class among our peers and being fiercely competitive in the marketplace, which will enable our continued long-term success, notwithstanding the inevitable cycles of the real estate industry, including the one we are currently mired in.

In fact, as of the end of Q3, we had our highest ever average monthly base rent per square foot for both our office portfolio and retail portfolio and also highest average monthly rent per unit for our multifamily portfolio since our IPO, pretty proud of that.

Briefly on the office utilization front, a recent study by [ ResumeBuilder ] showed that 90% of companies plan to implement return-to-office policies within the next 12 to 14 months, with a meaningful amount of those companies also stating that they would threaten to terminate employees that don't comply. This, of course, comes as more and more CEOs contend that employee collaboration, engagement, mentorship and productivity are clearly suffering without in-office presence. No surprise there.

As labor forces soften and recessionary concerns ease, we believe many more large companies will begin to solidify future space plans. From what we can see based on tenant card swipes, access control records and property manager estimates, we have seen an uptick in office utilization on average of a few percentage points at our properties since we last reported at the end of Q2, with Bellevue showing the most meaningful improvement.

On the retail front, where we stand just under 95% leased and comprises 27% of our portfolio NOI, we continue to see an improved leasing environment post-COVID as retail fundamentals have remained strong for the most part, despite sustained headwinds.

We had a significant retail renewal activity in Q3. Our comparable retail leasing spreads have maintained their favorable trajectory over the past year plus, with an 8% increase on a cash basis and 19% increase on a straight-line basis for Q3 deals, an 8% increase on a cash basis and 15% increase on a straight-line basis for the trailing 4 quarters.

No doubt, this is a testament to our best-in-class and well-managed retail properties that we are absolutely dominant in [ their ] trade areas, which reside in supply-constrained and densely populated markets with favorable demographics.

With respect to our multifamily communities, we continue to see positive, albeit decelerating rent growth as we posted better-than-expected results in Q3. In our view, the deceleration of rent growth is due in part to an increased amount of applicants not meeting our income and credit requirements, not to mention general economic stress on individuals and families.

Nevertheless, in San Diego, we saw leases on vacant units rent at an average rate of approximately 3% over prior rents, while rates on renewed units increased at an average of 11% over prior rents for a blended average of approximately a 6% increase. Additionally, in San Diego, net effective rents for our multifamily leases are now 9% higher year-over-year compared to the third quarter of 2022.

Meanwhile, as expected, our occupancy at Pacific Ridge Apartments rebounded from just below 70% as of the end of Q2 to approximately 90% as of the end of Q3, with the move-in of USD students this fall. This has ticked up a few more percentage points since the end of Q3 with additional occupancy of units in October.

In Q3 in Portland at our Hassalo on Eighth, we saw a blended increase of approximately 4% new move-ins and renewals, with concessions being offered on longer-term leases. Though net effective rents for our multifamily leases at Hassalo are approximately 3% higher year-over-year compared to the third quarter of 2022, the multifamily market in the Pacific Northwest has remained sluggish as our occupancy has softened.

With that, I'll turn the call over to Bob to discuss financial results and updated guidance in more detail.

[Robert Barton, executive]

Thanks, Adam, and good morning, everyone. Last night, we reported third quarter 2023 FFO per share of $0.59 and third quarter '23 net income attributable to common stockholders per share of $0.20. All in all, the third quarter was better than our expectations. Third quarter '23 FFO was flat compared to the second quarter of '23.

Same-store cash NOI ended at 1.8% growth year-over-year for the third quarter. Our same-store office portfolio was flat in Q3, largely due to nonrecurring rent deferral payments made in the comparable period. Excluding those payments received in Q3 of 2022, Q3 '23 office same-store would have been 2.1% and total same-store cash NOI would have been 3%.

On an individual office basis, we saw strong same-store growth in Q3 at Torrey Reserve of approximately 11%, Torrey Point of approximately 5%, Landmark at approximately 2.5% and La Jolla Commons at approximately 7%. Our same-store retail portfolio grew at 6.3% in Q3, primarily due to the commencement of new leases. Our same-store multifamily portfolio was flat in Q3, primarily due to higher vacancies at our Hassalo on Eighth at Portland.

And our mixed-use portfolio grew at 2.1% in Q3 because of higher revenue at our Embassy Suites Waikiki Beach Walk. Speaking of Embassy Suites Waikiki Beach Walk, our hotel continues to lead its competitive set in occupancy, ADR and RevPAR year-to-date through September '23. It is worth noting that demand this past summer of '23 ended sooner than expected as occupancy dropped in the third week of August.

This typically does not occur until after Labor Day weekend and was likely the result of the [ Maui ] buyers, Japanese yen and with the strengthening of the U.S. dollar, which makes them more attractive to travel internationally, with Europe and the Caribbean as competing destinations.

Our partners in Oahu now believe that our Japanese guests are slated to return more meaningfully late summer of 2024. The Japanese yen, which is now approximately 149 to the U.S. dollar, remains a major factor affecting the affordability of travel from Japan to Waikiki. Pre-COVID, it was approximately 105 to 108 to the U.S. dollar. While the U.S. Fed policy remains firm to keep inflation in check, pressure on the Japanese yen continues.

However, on the positive side, demand from Japan was strong, with further growth held back by the lack of air seats for the current period. The infrastructure is in place with Honolulu's nearly complete airport renovation that can handle more and much larger planes from Japan, like ANA's Dreamliner. Delta Airlines also recently announced that it will begin daily round trip service between Tokyo, [ Haneda ] and Honolulu this month.

ANA Airlines will also operate all 14 weekly round-trip flights on the Narita-Honolulu route beginning this December. This will bring the number of seats offered on the Honolulu route to a record high, including those before COVID. It's just a matter of time before we see the full return of our guests from Japan.

In the meantime, the U.S. market has filled a large part of the Japanese void in travel to Waikiki, as shown in the following geographic revenue allocation. In 2019, approximately 40% of our revenue came from the U.S. and 40% from Japan. In 2023, approximately 73% of our revenue has come from the U.S. and just 9% from Japan. So that puts it more in perspective.

Turning to liquidity. At the end of the third quarter, we had liquidity of approximately $490 million, comprised of approximately $90 million in cash and cash equivalents and $400 million of full availability on our revolving line of credit.

Additionally, as of the end of the third quarter, our leverage, which we measure in terms of net debt-to-EBITDA, was 6.6x. Our objective continues to be to achieve and maintain a net debt-to-EBITDA of 5.5x or below. Our interest coverage and fixed-charge coverage ratio ended the quarter at 3.5x. We are well capitalized with no near-term maturities.

We do have a $100 million unsecured debt maturity in July of 2024. We have several options for refinancing that debt maturity, including without limitation, another private placement using our untapped line of credit on a short-term basis or a new term loan, ultimately with an eye of potentially approaching the public debt markets again in 2025.

We believe that we have several options and a good debt maturity ladder to work with, along with a great banking syndicate. Overall, I believe we are in pretty good shape.

Let's take a moment and talk about 2023 guidance. We are increasing our 2023 FFO per share guidance range to $2.36 to $2.40 per FFO share, with a midpoint of $2.38 per FFO share, a 2.6% increase from our previously stated guidance issued on our Q2 '23 earnings call that had a range of $2.28 to $2.36 with a midpoint of $2.32.

Let's walk through the following items that make up this increase in our '23 FFO guidance that was not previously included in our original 2023 guidance.

First, our retail properties contributed approximately $0.02 per FFO share of outperformance in Q3, primarily as a result of lower operating expenses and collecting certain rents that we had previously [ reserved ].

Second, our office properties contributed approximately $0.01 per FFO share of outperformance in Q3. Third, our multifamily properties contributed approximately $0.01 per FFO share of outperformance in Q3.

And fourth, our Waikiki Beach Walk Embassy Suites contributed approximately $0.005 of FFO share. And fifth, lower G&A expenses were slightly lower. Six, we expect our multifamily properties to contribute an incremental $0.01 per FFO share in Q4 due to leasing that occurred in Q3.

These adjustments when added together approximately $0.06 per FFO share, represent the increase in the 2023 midpoint over our previous 2023 guidance midpoint. While we believe the 2023 updated guidance is our best estimate as of this earnings call, we do believe that it is also possible that we could perform to the high end of this increased guidance range.

As always, our guidance, our NOI bridge in these prepared remarks exclude any impact from future acquisitions, dispositions, equity issuances or repurchases, future debt refinancings or repayments other than what we've already discussed. We will continue to do our best to be as transparent as possible and share with you our analysis and interpretations of our quarterly numbers.

I also want to briefly note that any non-GAAP financial measures that we've discussed like NOI are reconciled to our GAAP financial results in our earnings release and supplemental information.

I'll now turn the call over to Steve Center, our Senior Vice President of Office Properties, for a brief update on our office segment. Steve?

[Steve Center, executive]

Thanks, Bob. At the end of the third quarter, our office portfolio was 86.8% leased, with our same-store portfolio dropping 50 basis points to 89.7% leased, primarily due to a few known move-outs.

In the third quarter, we executed 10 leases totaling approximately 87,000 rentable square feet, including 2 comparable new leases for approximately 27,000 rentable square feet, with rent increases of 10% on a cash basis and 13% on a straight-line basis, five comparable renewal leases totaling approximately 36,000 rentable square feet with rent increases of 5% on a cash basis and 14% on a straight-line basis and 3 noncomparable leases totaling approximately 24,000 rentable square feet, one of which was an approximately 14,000 rentable square foot medical tenant at Solana Crossing, yielding a $13 per rentable square foot annual triple net premium over a comparable office rent.

We are encouraged by significant new leasing proposal and tour activity across our portfolio, including 8 deals currently in lease documentation, totaling approximately 55,000 rentable square feet, which would result in approximately 52,000 rentable square feet of net absorption once signed; nine additional deals and proposals totaling 134,000 rentable square feet, which would result in approximately 93,000 rental square feet of net absorption, assuming those deals close.

Of these numbers at our new development La Jolla Commons III, we are currently in lease documentation for 14,000 rentable square feet and in proposals for an additional 61,000 rentable square feet, with expected rents generally consistent with our development underwriting. No news to report on One Beach at this time.

We continue to believe that strategic investments in our portfolio will position us to continue to capture more than our fair share of net absorption at premium rents despite current market headwinds. And while we are not immune to potential additional attrition due to current conditions, the attrition is waning and is expected to be more than offset by the new leasing activity just discussed.

We have approximately 7% of the portfolio rolling in 2024, with a median suite size of approximately 3,600 rentable square feet, and of which approximately 30% of rentable square feet rolling is already in various stages of negotiation. We believe that the [ flight ] to quality for new tenants and the stickiness of quality for our existing customers with leases expiring will continue to drive solid performance from our office portfolio.

I'll now turn the call back over to the operator for Q&A.

[Operator]

And before we get to the Q&A, I just want to give you brief reminder, the statements made on this call include forward-looking statements based on current expectations, which statements are subject to risks and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements as actual events could cause the company results to differ materially from those forward-looking statements.

[Operator Instructions] Today's first question comes from Haendel St. Juste with Mizuho.

[Ravi Vaidya, analyst]

This is Ravi Vaidya on the line for Haendel. Can we just dig into a bit, just -- can we just dig into like what are the various bad debt or tenant credit kind of risks that are there within your various different segments in the portfolio?

[Ernest Rady, executive]

The only significant one is an office. And Steve, why don't you handle that?

[Steve Center, executive]

Are you -- Ravi, are you looking for the reserves that we are kind of placing on certain tenants in our portfolio?

[Ravi Vaidya, analyst]

Yes, like watch list, reserves, things along that line.

[Steve Center, executive]

Yes. So I mean we're keeping an eye on folks like at home, on the retail side, Petco, UFC Gym, Rite Aid. On the office side, of course, we -- we work on the office side, we're keeping our eye on WeWork. And there's a few biotech tenants that we have in our portfolio that we're just making sure stay well capitalized.

As you know, we've been fairly conservative and having these reserves on those tenants. And for the most part, this year, we haven't needed most of those, but we'd rather underpromise and overdeliver on those.

[Ravi Vaidya, analyst]

That's helpful. Can you please quantify what that is on an ABR basis of these exposures?

[Ernest Rady, executive]

I don't know that that's possible because there's so many variables. But net-net, people are still paying rents.

[Robert Barton, executive]

Well, Ravi, Bob here. We can look at it from a different perspective. We started out with $0.06 of reserves. And we've used probably 60% of those through the year, whether it was a bad debt expense or whether an adjustment or rent abatement or reduction in the rent one way or the other.

So they were -- some of them have used -- have been used or applied in our financial statements. Right now, from a reserve standpoint, from the office, we have about $0.005 of office remaining, and we have about $0.005 of retail remaining.

[Adam Wyll, executive]

That's for Q4.

[Robert Barton, executive]

Yes, as we go into Q4.

[Ravi Vaidya, analyst]

Got it. That's helpful. And just wanted to touch on the Embassy Suites in Hawaii. It's nearly 90% occupied with a strong rate. But going forward, what do you have factored in, in terms of a recession or pullback of discussions then from American tourists? And what's your forecast for that, looking forward?

[Robert Barton, executive]

For just a hotel, Waikiki Beach Walk or...

[Ravi Vaidya, analyst]

Yes, primarily the hotel.

[Robert Barton, executive]

So going into Q4, the hotel has seasonality, right? And so in Q4, historically, we've been -- Q3 has been our strongest, and we're generally down about $0.02, $0.025 in Q3.

[Ernest Rady, executive]

It's very difficult to predict what the tourist is going to do, but that is a great property and a great location, and we'll do as well as anybody in the same set we are in. Reservations are no longer made a long timeout, they're made short term. So far, so good. Great property.

[Operator]

And our next question today comes from Todd Thomas of KeyBanc.

[Unknown Analyst]

This is Antara on for Todd Thomas. Just a quick one for me. Would you mind talking a little bit more about the office portfolio and just describe the leasing environment today? I know occupancy was down a bit further in the quarter compared to 2Q. So any sense on whether you're seeing any stabilization in the near term?

[Ernest Rady, executive]

Steve?

[Steve Center, executive]

We are. On the rollover side, we're down to 7% rolling through the end of 2024, and the average sweet suite size or median suite size is 3,600 feet. And 30% of that rollover is already in some form of discussion. We have really good new leasing activity. As I mentioned, we've got 8 deals after signature, one of which signed on Friday, totaling 55,000 feet, of which 52,000 feet is net absorption.

And then we've got another 9 deals in -- that we're close to letter-of-intent on, 2 of which went to leases yesterday and the remaining 7 -- the total of all that is 134,000 feet, with about 90,000 feet plus of net absorption.

So we think that the attrition due to work-from-home or rightsizing is waning. And we think the net absorption from the activity we've got right now will outpace any further attrition. So we think we've turned the corner.

[Ernest Rady, executive]

Net-net, our office is well located. Steve has done a great job managing it, and the amenitization is really working to our advantage. So we're hopeful. We're certainly not as bad as the public opinion of office goes.

[Unknown Analyst]

And specifically, could you touch on the assets in Portland and the Bellevue submarket that lost a little bit of outsized occupancy? What current leasing trends are there in those submarkets? And how do you feel about recovery for those assets?

[Steve Center, executive]

Starting with Bellevue, Suburban Bellevue, first of all, Eastgate is where we experienced most of it. And it's not unexpected. When we bought the asset, much of it was leases commodity office space. We're making good investments in that property. And the rent spreads that we've achieved thus far prove that theory up, and we're going to complete Phase 2 of that renovation mid-next year. So we think that asset will come on strong in 2024 and beyond.

City Center Bellevue is actually doing really well. We just went to letter-of-intent yesterday on the top 2 floors of that building. We've got another full floor in leases. So the CBD is recovering right now, and the suburbs follow.

So we think both our [ I-520 ] corridor assets and the I-90 corridor asset, which is Eastgate, will follow the recovery in the central business district. And in Portland -- go ahead.

[Ernest Rady, executive]

I'd say, Eastgate is one of the best opportunities I've ever run across in my career. It's just a fantastic piece of property. Go ahead, Steve, sorry for interrupting.

[Steve Center, executive]

No worries. And then in Portland, we're doing well. We had a couple of full force come back in the Lloyd District. But we've got some good current leasing activity. We have 3 deals pending at the 710 building, which we recently completed the renovation of. That will be 2/3 of that building if we close those leases. And then we've got some good new activity there.

We're just adding some additional amenities to Lloyd Center Tower. And we're actually pretty encouraged by our activity relative to that market. And then downtown, we don't -- we have limited vacancy. We got one space back that the U.S. Marine Corps recruiting station, they closed that office. But we've got space rolling in '25 that we've got multiple suitors for.

So we're encouraged by our activity. And that's really due to, again, investment in amenities at our first and main building downtown. It's one of the 3 top buildings in that marketplace, and the activity we're seeing is representative of that.

[Unknown Analyst]

Great. Just one quick one for me.

[Operator]

And our next question today comes from Ronald Kamdem with Morgan Stanley.

[Adam Kramer, analyst]

It's Adam Kramer on for Ron. Good to chat, as always. Just wanted to ask about the maturity schedule for your outstanding debt. It looks like 2024, pretty limited, I think, just 100 million senior notes in July.

But I think in early '25, it looks like a number of debt pieces that come due -- I think in totaling, it looks like around $500 million, a little bit over $500 million of maturities through kind of early 2025.

Wondering if you could just kind of walk through what you guys are thinking in terms of kind of the $500 million of maturities? Again, I know some of it is not for a little bit, but we are getting close to 2024 here, so it's not too far away. So maybe just walk through our plans for maturities here.

[Ernest Rady, executive]

That's the hardest question I've ever heard because interest rates are so uncertain and the economy is so uncertain, but we will have options available to us that are available to anybody in the marketplace. And so we'll just have to wait until we get there and see what the landscape looks like.

But we have a history of being able to take advantage of the opportunities when they're available, and we look upon that as an opportunity. So I don't know what that was going to happen, 3 years out.

[Robert Barton, executive]

This is Bob. I just want to add to Ernest's comments. So in the script, we also talked about it as well, I don't know if you were listening to that. But we have $100 million maturity in July of 2024, and we have a lot of options. We got $100 million plus on cash in the bank right now. We got a $400 million unsecured revolving line of credit that's untapped.

So there's a lot of ways we can go, including doing a short-term payoff on that $100 million maturity in July of '24 and take that out to the maturities at [ '25 ], roll that all into a public debt offering if all the stars are aligned on that. And we've already been to the public debt market. So we're -- people know who we are.

Additionally, part of '25 has a couple of extensions that -- options to extend if we want to, so for probably half of that. There's a lot of ways to go. And we could go term loan, private placement.

We could go -- I mean, the one thing that we know is that interest rates will -- interest expense will go up, and we're factoring that into our '24 guidance when we share that in February '24. But all in all, I think we're really in pretty good shape. We have a lot of ways to go, great banking syndicate. And I hope that answers your question.

[Adam Kramer, analyst]

Yes, it does. It does. That's helpful. Maybe just on occupancy, and I know you talked about this in the prepared remarks, too. But just looking at kind of sequentially, it looks like office occupancy lease percentage would move down a bit. I know multifamily was up. I know part of that is from the kind of the student housing element. And I think multifamily 89.5 is probably still below kind of industry averages.

Maybe just walk through, I guess, first on the office side, kind of where we can expect lease percentage to be. And then on multifamily kind of how do we get that maybe a little bit closer to industry averages in the low 90s?

[Steve Center, executive]

I guess we'll start with office. As I mentioned in our remarks, I think we turned the corner. So I would expect to climb above 90% in 2024. But as important, not more important, the rent spreads are good, and then they vary from quarter-to-quarter, but we've got some really positive things happening. So our NOI is actually up for the 3 quarters this year versus last year. .

So I'm encouraged by the performance in terms of rent spreads. I can't control rightsizing of companies. It's just -- we're not losing tenants to competitors. If we're losing it, we're losing it to work-from-home and rightsizing.

But again, we're down to just 7% rolling in 2024, and the median space is small at 3,600 feet. We're in play on 30% of that rollover. And we're -- our rents are good. So I think we'll cross back over to the 90-plus percent range in 2024, and we'll go from there.

[Ernest Rady, executive]

On multifamily, we're using this opportunity to really reposition and upgrade several of our properties in San Diego. Of course, the Pacific Ridge is dependent on USD, and Portland is a very special situation. So I don't know exactly what the numbers are going to be, but they'll be all they can be because we're improving the properties that we own. Abigail, do you want to add anything to that?

[Abigail Rex, executive]

Sure. In San Diego right now, we are operating at about 93% occupied, and our lease percentage right now is just right under 94%. So when look at it in terms of our competitors, there's approximately about 7% availability to rent.

So when we look at our portfolio, we're right on par with the lease percentages, the availability to rent, and our occupancy is where I believe it should be right now. Adam and Ernest have mentioned quality. Our communities are in great locations. We have great team members, who operate the properties really well.

Our pricing is right where they should be in terms of where we compare to the county averages, and we are trying to offer positive experience in customer service, in addition to great products. And I think we're faring well in comparison to our competitors in the market.

[Adam Wyll, executive]

And Adam, as we mentioned, Hassalo, Portland has been slow. Pacific Northwest in particular, absorption has eroded. There's been an oversupply. So occupancy is down there, and that's kind of drag in the overall numbers. But we're hopeful that we'll get those back up to be more in line with where we think it should be.

[Operator]

And this concludes our question-and-answer session. I'd like to turn the conference back over to Ernest Rady for any closing remarks.

[Ernest Rady, executive]

I'd just like to say thank you all for your interest. These are very turbulent times, and the fact that you still care is very important to us. I think that when all this is said and done, we will have differentiated ourselves from the pack.

The quality of the portfolio, the excellence of the management with all [ we ] do in modesty will say to the market that you know this is an above-average group with above-average performance, and we'll be grateful for your continued interest. So thank you, and have a good day. Thanks, everybody.

[Operator]

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.