American Assets Trust Inc (AAT) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 American Assets Trust, Inc. Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Adam Wyll, Executive Vice President and Chief Operating Officer. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to American Asset Trust Third Quarter 2020 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. A telephonic replay and on-demand webcast will also be available for this call over the next week.

During this call, we will discuss non-GAAP financial measures, which are reconciled to our GAAP financial results in our earnings release and supplemental information. We will also be making forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties discussed in our SEC filings. You are cautioned not to place undue reliance on these forward-looking statements. Actual events could cause our results to differ materially from these forward-looking statements for a number of reasons, including uncertainty related to the scope, severity and duration of the COVID-19 pandemic, the actions taken to contain the epidemic or mitigate its impact and the direct and indirect economic effect of the pandemic and containment measures on us and on our tenants.

And with that, I'll turn the call over to Ernest Rady, our Chairman and CEO, to begin the discussion of our third quarter 2020 results. Ernest?

Thank you, Adam. Good job. First and foremost, I would like to wish all of our stakeholders and their loved ones continued health and safety during these truly unprecedented times. We remain optimistic that a vaccine will be forthcoming over the next 6, 9 months. And trust me, I'm going to be one of the first in line.

But nevertheless, we are prepared to endure a prolonged pandemic with our solid balance sheet, world-class properties and tenants and incredibly dedicated and competent employees. Fortunately now, the second and third quarters are behind us, and I can tell you that our operations and financial results were nowhere as catastrophic as my worst-case projections that we modeled in April 2020.

As most of you know, for many years, many outsiders believed our asset diversification was perceived negatively relative to many of our best-in-class peers. However, we now know that our ownership of a combination of irreplaceable office, multifamily, retail and mixed-use properties as opposed to a single asset class, provided us with much-needed stability and protection from the risks associated with the changes in economic conditions of a particular market, industry or even economy, such as those changes created by COVID-19.

We have constantly defend our asset class diversity to stockholders and naysayers, but not anymore, and thank them large to our asset diversification. I wanted to mention that the Board of Directors has approved a quarterly dividend of $0.25 for the third quarter, which is supported by our rent collections in that third quarter. Would we have declared a larger dividend? Yes, probably. And I would have benefited more than anyone.

But as fiduciaries to our stockholders and its staunch defenders of our balance sheet, we felt it most prudent to remain conservative on our dividend until there is more visibility into a vaccine and economic recovery. In any case, for a year or so from now, once there is a vaccine, we expect to look back and hope that this will be nothing but a bad memory. Adam, Bob and Steve will go into more detail on our various asset segments and financial results, and I will be available for any questions you may have at the conclusion of the prepared remarks.

I'm now going to turn this call back over to Adam Wyll.

Thanks, Ernest. One of our primary focuses over the past quarter has been collections in our retail segment. We are pleased to have made meaningful progress on that front, where we began the pandemic initially collecting approximately 40% of retail rents in April to collecting approximately 80% of retail rents in the third quarter, a number that we expect to get better. No doubt this was in large part due to the tireless work of our in-house collection team, comprised of our property managers, lease administrators, legal staff and direct engagement by our executives with retailers.

And though we remain sensitive and at times accommodating to the financial challenges of certain impacted tenants, we have certainly taken a more aggressive position with better capitalized tenants, knowing the high quality of our underlying real estate and the clear rights we have embedded in our leases. We expect those tenants to adhere to their contractual obligations, and we continue to refuse to agree to deals that are not in the best interest of our company and our shareholders.

As such, we expect our third quarter collections to improve further as we continue our efforts. And in fact, we know more significant checks and wires are currently in transit from tenants on account of third quarter collections. Our most notable collection challenges in the retail segment remain with our movie theaters, gyms and apparel stores as well as many of our retailers at Waikiki Beach Walk, which until mid-October had no incoming tourism to sustain meaningful revenue for our tenants.

It's likely going to take several more months or quarters for us to have better visibility in recovery by these more challenged tenants. That said, our focus continues to prioritize long-term strategic growth over the short term. So we've entered into lease modifications that have provided certain tenants relief during the pandemic by way of deferrals or other monetary concessions where necessary, provided we obtained something in return, whether by lease extensions, waiver of certain tenant-friendly lease rights or an incremental percentage rent.

Otherwise, we intend to pursue all means to enforce our rights under leases, including litigation as necessary, particularly for those unilaterally withholding rents when we believe they have the funds to pay. Additionally, we are pleased to report that 100% of our properties continue to remain open and accessible by our tenants in each of our markets. And anecdotally, the majority of our employees are voluntarily working in person at our properties or at our corporate offices each week, while taking absolutely all prudent safety precautions despite having the flexibility to work from home. We continue to firmly believe that post-pandemic being together in person will promote much better productivity, collaboration and innovation, and we expect and have heard similar sentiment from the majority of our office tenants.

Finally, on the election front, we are closely following 2 propositions on the California ballot that take direct aim at commercial real estate. Of course, we are firmly against Prop. 15, which would eliminate Prop. 13 taxpayer protection. If it passes, we would not expect it to create an immediate meaningful impact to our company, but rather would place a significant pass-through financial burden on our tenants at a time when many are already struggling, not to mention the likely negative impact of those property taxes on future rent growth.

And also, we are against Prop. 21 which we believe is a flawed measure that would implement a significant amendment to existing rent control laws on the multifamily side, limiting landlords' rights and likely making the housing crisis in California even worse. We are contributing our resources to oppose those propositions. While the challenges we face today are complex, whether relating to the pandemic, racial justice, technology or legislative matters to name a few, we do believe that we are well-positioned to navigate through and manage these challenges with, as Ernest mentioned, our best-in-class assets, our 200 talented and dedicated employees and the strength of our balance sheet.

With that, I'll turn the call over to Bob to discuss Q3 results in more detail.

Good morning and thank you, Ernest and Adam. Last night, we reported third quarter 2020 FFO of $0.44 per share, and net income attributable to common stockholders of $0.08 per share for the third quarter.

Let me begin with my perspective that I am optimistic with the overall performance of this portfolio even in light of the pandemic, we are all going through. We too are feeling the bumps along the road, like everyone else in our sectors. What makes me optimistic about our portfolio and its future are the following: number one, our collections of monthly recurring billings continued to improve in Q3 over Q2, with total collections of approximately 89% in Q3 versus 83% in Q2.

Number two, we believe we have ample liquidity to weather the storm that we are going through. We prepared for the worst-case scenario by modeling a $50 million quarterly burn rate at the beginning of this pandemic, not knowing what we were going into. And in Q2, our actual burn rate was approximately $6 million. In Q3, we ended up with a cash surplus of approximately $9 million. And this is after the operating capital expenditures and the dividend.

We started Q3 with approximately $146 million of cash on the balance sheet and ended Q3 with approximately $155 million of cash on the balance sheet, primarily as a result of increased cash NOI quarter-over-quarter due to our successful collection efforts outlined earlier by Adam. Number three, we have additional liquidity of $250 million available on our line of credit, combined with an entire portfolio of unencumbered properties with the exception of our only mortgage, which is on City Center Bellevue.

Number four, we believe we have embedded growth in cash flow in our office portfolio with approximately $30 million-plus of growth in the office cash NOI between now and the end of 2022, as Steve will discuss later. And lastly, once we get a vaccine, we believe our high-quality West Coast portfolio will rebound. We believe our Embassy Suites which is currently at approximately a breakeven cash NOI will rebound based on its location and tourism.

On October 15, Hawaii allowed tourists to come back to the island as they can demonstrate that they have had a negative COVID test within the last 72 hours. On the first day, there were approximately 10,000 tourists that landed in Hawaii. We expect that tourism inflow to continue to increase each week and to start benefiting our Hawaiian properties over the coming quarters.

Let's take a moment and look at the results of the third quarter for each property segment. Our office property segment continues to perform well as expected during these uncertain times. Office properties, excluding One Beach Street in San Francisco, which is under redevelopment, was -- were at 96% occupancy at the end of the third quarter, an increase of approximately 2% from the prior year. More importantly, same-store cash NOI increased 13% in Q3 over the prior year, primarily from increases in base rent at La Jolla Commons, Torrey Reserve Campus, City Center Bellevue and the Lloyd District portfolio.

Our retail properties continue to be significantly impacted by the pandemic. Although the occupancy at our retail properties remained stable for the third quarter at 95% occupancy, which was a decrease of approximately 3% from the prior year, our retail collections have been challenging during the pandemic, as reflected in our negative same-store cash NOI. Our multifamily properties experienced a challenging quarter as same-store cash NOI decreased approximately 5.4%, due primarily from the increase in average occupancy -- or, I'm sorry, due primarily from the decrease in average occupancy at Hassalo on a -- in Portland offset by favorable master lease signed with a private university in San Diego area at the beginning of the quarter.

On a segment basis, occupancy was at 87.5% at the end of the third quarter, a decrease of approximately 3% from the prior year. We expect our occupancy to return to normal stabilized levels at Hassalo as we have recently adjusted pricing and concessions. With these adjustments, in the last 10 days, we have already seen leasing traffic increase from a weekly average of 4 to 6 tours per week to 10 to 12 tours per week. We have captured a total of 11 new leases in just the last week.

Our mixed-use property consisting of the Embassy Suites Hotel and the Waikiki Beach Walk retail is located on the island of Oahu. The state of Hawaii remained in a self-quarantine throughout most of the third quarter, which significantly impacted the operating results for the third quarter of 2020. The Embassy Suites' average occupancy for the third quarter of 2020 was 66% compared with the average occupancy in the second quarter of 2020 of 17%.

The average daily rate for the third quarter of 2020 was $209, which is approximately 40% of the prior year's ADR. Waikiki Beach Walk retail suffered considerably with virtually no tourists on the island till recently. We are working daily with our tenants at Waikiki Beach Walk to formalize a recovery plan that benefits both our tenants and the company, utilizing all resources necessary, including state and city grant programs and lobbying efforts.

Let's talk about bad debt expense reserves in the third quarter. As noted in our earnings release, in the third quarter we collected approximately 89% of what was billed in Q3 to our tenants. We had COVID-19 adjustments amounting to 2% of what was billed in Q3 to our tenants, and the balance of approximately 9% is the amount outstanding of what was billed in Q3. This is compared to the second quarter collections of 81%, COVID-19 adjustments of 5% and Q2 amounts that were billed and still outstanding of 14%. Also as noted in our earnings release, in the third quarter we incurred an additional bad debt expense of accounts receivable of approximately 21% of the outstanding uncollected amounts at the end of Q3, and we incurred an additional bad debt expense of straight-line rent receivables of approximately 11%. This is compared to a bad debt expense of accounts receivable of approximately 14% of the outstanding uncollected amounts at the end of Q2 and bad debt expense of straight-line rent receivables of approximately 7% at the end of Q2.

It's easy to get confused on all these percentages. However, from a big picture perspective, at the end of the third quarter, our total allowance for doubtful accounts, which reflects the cumulative bad debt expense charges recorded, totals approximately 39% of our gross accounts receivable and approximately 3% of our straight-line rent receivables.

Let's talk about liquidity. As we look at our balance sheet and liquidity at the end of the third quarter, we had approximately $405 million in liquidity, comprised of $155 million of cash and cash equivalents and $250 million of availability on our line of credit, and only one of our properties is encumbered by mortgage. Our leverage, which we measure in terms of net debt-to-EBITDA was 6.7x on a quarterly annualized basis. On a trailing 12-month basis, our EBITDA would be approximately 6.0x. Our focus is to maintain our net debt-to-EBITDA at 5.5x or below. Our interest coverage and fixed charge coverage ratio ended the quarter at 3.6x on a quarterly annualized basis and 3.9x on a trailing 12-month basis.

As it relates to guidance, as previously disclosed, we withdrew our 2020 guidance on April 3 due to the uncertainty that the pandemic would have on our existing guidance, particularly in our hotel and retail sectors. Until we have a clear view of the economic impact of the pandemic or more certainty as to when a vaccine becomes available, we will refrain from issuing further guidance.

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

Thanks, Bob. As Bob said earlier, at the end of the third quarter, net of One Beach, which is under redevelopment, our office portfolio stood at over 96% leased with just under 6% expiring through the end of 2021. Given the quality of our assets and the strength of the markets in which they are located, with technology and life science as key market drivers, we continue to execute new and renewal leases at favorable rental rates, delivering continued NOI growth in our office segment.

The weighted average base rent increase for our 9 renewals completed during the quarter was 6.7%. And also as Bob pointed out earlier, with leases already signed, we have locked in approximately $30 million of NOI growth in our office segment comprised of approximately $6 million in 2020, $14 million in 2021 and $10 million in 2022. We anticipate significant additional NOI growth in 2022 and 2023 through the redevelopment and leasing of 102,000 square feet at One Beach Street in San Francisco and 33,000 ratable square feet at 1110 Oregon Square in the Lloyd submarket of Portland.

In addition, we have the ability to organically grow our office portfolio by up to an additional 768,000 square feet or 22% on sites we already own by building Tower 3 of La Jolla Commons, a 213,000 square foot tower that is currently into the city for permits and Blocks 90 and 103 at Oregon Square with 2 configuration options, one at 392,000 square feet and the other at 555,000 square feet, which we recently received the entitlements on from the Portland design review commission. We continue evaluating market conditions, prospective tenant interest and hopefully decreasing construction costs on these development opportunities.

In summary, we have a stable office portfolio, little near-term rollover, significant built-in NOI growth and additional upside through repositioning and redevelopment within our existing portfolio plus substantial new development on sites we already own.

Operator, I'll now turn the call over to you for questions.

(Operator Instructions) Our first question comes from Richard Hill with Morgan Stanley.

You got Ron Kamdem on for Richard Hill. Couple of quick ones from me. The first is just on the bad debt. I just would like to dig into that one a little bit more. I think I heard correctly that bad debt is at 39% of accounts receivables and 3% of straight-line rent receivables. So I guess the question #1 is, is that -- has that been increasing from 2Q to 3Q? It sounds like it has, but I just want to confirm that. And maybe a little bit more color on what's driving that? And how are you guys thinking about it? And maybe are you being too conservative and so forth?

Go ahead.

Yes. So what we said in the script was it is 39% of total accounts receivable, the bad debt, and that's on our allowance for doubtful accounts. So from a dollar standpoint, that's about $7 million. We had about another $2.5 million in straight-line rent receivables or bad debt reserves against straight-line rent. So the total of the 2 of those is about $10 million, just slightly under that.

When we look at where we were at the end of Q2, that amount was approximately $3.3 million. So we -- so on the bad debt reserve, bad debt expense for accounts receivable, that increased from $3.3 million to approximately $7.7 million. And from -- and the reason why is that each quarter that until we get this vaccine in, it's difficult on the retail tenants. And so in each quarter, what we do is we go through and we evaluate whether -- what is the likelihood that we will receive what's billed. We'll take a look at if we can receive what's been deferred, and we'll make a decision at that point in time as to whether it's probable that -- whether it's probable that we'll receive 95% of the remaining cash flows.

Thanks, Bob. Ron, this is Ernest. As a matter of policy and strategy, we'd much sooner be on the conservative side than the optimistic side. So Bob has made as accurate assessment as possible, but our strategy has always been if we're going to err, err on the conservative side.

Got it. Got it. That's helpful. My other question, I guess, it sort of ties in to the bad debt, was just on the guidance. I think historically the team has provided sort of guidance for the next year at the time. And obviously, I can appreciate there's a lot of moving pieces. But just what was the thought behind even giving us some broad strokes for the retail portfolio, the office portfolio? It feels like you have pretty good visibility on the office portfolio with the presentation you've put out. So just curious why not sort of put a guidance number out there and help sort of the street get some broad signposts?

Ron, we'd love to give the guidance that you're asking for. There is just so much uncertainty out there from economic point of view and a health point of view that we thought that we have very little to gain and a lot to lose by saying something that doesn't turn out to be true. So we'd just as soon remain silent until we know exactly how this is all going to play out. But I understand your concern and our concern too, I mean we're monitoring where we are and where we're going, and we're doing the best we can. But I don't want to -- I wouldn't want to mislead anybody, including ourselves.

And Ron, from time to time in our investor presentations, we'll include some foresight as to what we know at that point in time. But we're not issuing guidance, as Ernest said.

And I think on the office side, we've given some indication of where our sentiment is, and that's because of the high quality of the assets and the high quality of the tenants, there's some -- we have some assurance to what we say will turn out to be true. In the rest of the portfolio, it's so COVID-affected we're just not certain.

Got it. And then my last one, if I may. I think interesting your opening comments about Prop. 15 and Prop. 21. And I know the governor of California came out in opposition of Prop. 21. Just in your mind, obviously the goal is for none of them to pass, but is one more likely or you're more concerned of than the other? So if you're thinking out loud, is Prop. 15 maybe a bigger risk of passing than Prop. 21? Or you guys just sort of see the same odds across the board?

I think Prop. 15 is a threat to the entire state, not just to us. As Adam pointed out in his presentation that there's going to be short-term discomfort for us, but long-term pain for the businesses that are involved and for the residents of California. I saw a survey recently that Prop. 15 was going to pass, and now they think it's unlikely to pass, somewhat unlikely to pass. So God only knows what's going to happen. But I hope for the sake of California that -- Californians and us as long-term residents that it fails to pass.

Yes. Prop. 15, our assessment is that it's not going to have a huge impact to us initially, but rather to the customers as a pass-through. And then in turn, potentially on rent growth in California looking forward. So we're definitely opposing Prop. 15.

Our next question comes from Craig Schmidt with Bank of America.

In terms of the reserve for bad debt primarily being at the foot of a couple of properties, I think I understand Waikiki and Del Monte, and I'm guessing Alamo and the Quarry is somewhat related to Regal [Centers]. But why was Carmel Mountain Plaza pushing that bad debt number?

Well, I think a lot of it that you're seeing at Del Monte, Alamo Quarry and Carmel Mountain Plaza. That's where the 3 theaters are located. So we've gone through and we put a reserve on those particular ones. And then we've just had a lot of in the apparel industry. Adam, maybe you want to talk to some of the -- not negotiations specifically, but in general…

Some of the collection efforts that he's been spearheading.

Yes. I mean, sure. Just based on our challenges with a lot of these retailers, not just the mom and pop, but some of the national guys. I mean, I think we're -- like Ernest and Bob have said, taking a more conservative view of our probability of collections on those guys. So we're still all over these guys and working with them as much as possible, but if you want that, be more conservative in our presentation and hope to surprise to the upside on these guys.

Would it be safe to say, Adam, that everybody is trying everybody on for size, see if there is an opportunity, and we're just going to have to speak up on our own behalf?

Yes.

And so far we're being successful.

That's right. I mean, all these guys are operating as if if you don't ask, you don't get. So virtually everyone is asking for some form of relief from us. Maybe we've given relief to 20% to 30% of these guys so far only when needed. But we're just trying to be smart about it and take our time and not rush into it. But like we also said, those that are unilaterally withholding rents that have the money, those are the ones we're going after.

We're not necessarily having to take reserves against those guys. It's the folks that are more challenged financially.

I think our stakeholders can be assured that we're doing everything we can on behalf of our stockholders to collect every rent -- dollar of rent that we're entitled. And if we don't collect it, as Adam said in his presentation, we're going to try and get something for what we have to give up. And it's a negotiation with a committee that looks at every opportunity to come up with a transaction that is the best for the company.

Okay. And then I see a somewhat lower rent collection in October versus September for retail. Again, it goes from 82.6% to 77.3%. Is that just a matter of timing?

It's probably just a matter of timing because that's only as of -- I think it's like October 16, October -- at a certain point during October. So a lot of it comes in at the end of the month because it's negotiating and some are slow paying, but we're getting it.

Yes, even those with recurring payments that are making them are starting to pay later in the cycle. So we do expect that number to increase. That's our expectation now anyway.

Great. And then just finally, it looks like you had 71,000 square feet of renewals. Could you categorize those if you were anchor, what type of tenants they were?

On the renewals, that would be in the back of the supplemental. I don't have the details on that in front of me, Craig.

At the office. Because I think Steve covered the office rents.

Yes.

No, I was talking -- sorry, talking retail, but okay, let me relook at the supplemental.

[Tommy], you want to comment?

Yes, it's 71,000. I have the sheet from the original.

Yes. It's just a mix of different tenants that have come through the system.

Yes. I don't have a breakout on it. It's just going to be a mix of tenants that come through.

That's a good question though, Craig. Thanks for asking.

(Operator Instructions) Our next question comes from Todd Thomas with KeyBanc.

Just a couple of questions on the office segment. Curious for an update. I think last quarter there were no changes to the build-out and floor plans for Google at Landmark. Just curious if you can provide an update there, if anything's changed? And then whether there are any other tenants in the portfolio that might be looking to either reconfigure or maybe shed some space?

Jerry has told me that Google is continuing as per their original plans. And Steve, are you aware of anything that we should make Todd -- known to Todd?

Well, I'd add to Google that Autodesk is reconfiguring and investing more into space. So we're fortunate in that regard. Yes, our bigger tenants are moving forward with plans past this pandemic.

Absolutely, yes.

Okay. Is there any sublease space in the office segment of the portfolio at all today?

So it's market by market. So I'll say starting in San Diego, sublease is really muted. Del Mar Heights is 0.6% vacancy for sublease space. UTC is 0.7%. Those are our 2 main markets. San Francisco, there is a lot of sublease space right now. There's been a big uptick there. Fortunately Autodesk and Google occupy the entire Landmark building and One Beach is under redevelopment. We won't deliver that till 2022. So hopefully, we're through the worst of this at that time.

Portland, again, sublease space is muted. The total sublease vacancy in Portland right now is 1.5%. Bellevue has significant sublease space, but it's really kind of not an indicator there in that just -- currently on the Eastside market, and Bellevue is part of the Eastside market, it's a 37 million square foot market. There's 4.3 million square feet of office space under construction on the Eastside and it's 96% pre-leased. So that's a big block market. Amazon, Google, Facebook, obviously Microsoft and T-Mobile has affirmed its commitment to that marketplace on the Eastside.

So it's just very, very strong. We've got one floor available for sublease that Cisco has up, and we just got an RFP yesterday for 52,000 feet with an engineering firm that's being displaced from a building that's being torn down to build a new building for Amazon. So Bellevue is just extremely robust, strong, and sublease space really isn't a big factor there. So hopefully that answers your question.

Fortunately, being in Bellevue is being in the right place at the right time. And I don't know that we're that smart, but we're certainly that lucky. So we're glad to be there. Thanks for the question, Todd.

Great. Yes, that's helpful. Do you have a sense for what employee occupancy looks like in your assets across the office portfolio?

It's low. It's probably sub-20% in most.

It's about 20% to 25%.

Yes.

But as I look at that circumstance, the associates want to come back to work, and we want them to come back to work. This working from a home is not the fun that everybody says. There will be some work from home going forward. But from an operational point of view and a mental health point of view and a company point of view and individual point of view, back to the office is the way to go is my view. And it will transpire to that or transform to that at some point over the future, depending on what happens to COVID-19.

To add to that, I've had conversations with tenant rep brokers that represent some of the biggest companies out there. And they said behind the scenes, CEOs are saying get the heck back to work.

That's what I say.

We feel the same way. So it's not a matter of if, it's a matter of when. And Google, again, is a good example, that they did not modify their plan due to the COVID in terms of configuration. So we will get there.

Okay. And then in terms of the Embassy Suites, Bob, I was wondering if you had any visibility there on occupancy and ADR heading into the fourth quarter? And maybe also an update on bookings as we think about '21?

Yes. The -- we ended at 66% occupancy for the -- on a weighted average basis for the quarter. We've seen -- during the third quarter, we've seen it tick up to like 75%. And we've been trending in the last probably month somewhere between 52% to 65%. As we go into the fourth quarter, we'll probably keep it in that range, somewhere between 50% to 65%. And right now, we do have bookings, and we're looking forward, but it's -- they have the ability to cancel them if -- depending on the -- if the quarantine -- openness of the quarantine in Hawaii remains open, then we'll see a difference.

Bob, is it safe to say that the ADR is affected by the nature of our tenants now who are mostly government employees and not tourists and that tourists will -- once this thing returns to normal, our ADR will return to normal?

Yes. I think that's been very helpful. We can always lean on the DoD. The DoD has been about 80% of our occupancy. And then the local Hawaiians have been the other 20%. And as a result, both of those are at a much lower ADR. The ADR is probably somewhere between $205 and $225 compared to, I think, we hit $360 last year, if not higher, on an average basis. Obviously, some rooms went much higher and some were a little bit lower.

But we're -- as I understand it, we are one of 2 hotels that are open on Waikiki. And we expect more to open as the tourism comes back. But that -- having that open, and being able to have a breakeven is I've been a win for us during this pandemic, whereas I think the other 8 hotels in Waikiki have been completely closed.

Not that I can guarantee you, but I think once people can travel, they're coming back to Hawaii. They're coming back to Waikiki. It's a great piece of property. And we've used this time to upgrade the property by painting, fixing the spalling, the salt air damage, upgrading the room furniture. So we're ready to go. And this economy people will be anxious to travel once this damn thing is over.

And I'm not showing any further questions at this time. I would now like to turn the call back over to Ernest Rady for any further remarks.

I want to thank you all for your patience during this difficult time. I can assure you that everybody at American Assets Trust is working hard to ensure that when things return to normal, the results that we present will be more than adequate. And during this time, we're doing the best we can. And it's not easy for anybody. It's not easy for us, but we're going to get there. And at some point, we'll look back on this as a terrible memory. Thank you all for attending.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.