GE Capital appears to be the winning bidder for Arden Realty Inc. in a deal valued at $5 billion, including the assumption of $1.5 billion in debt, according to a source who worked on an opposing bid.

Morgan Stanley Real Estate Funds, the sole competing bidder for Arden's 18.5-million-square-foot Southern California portfolio, was informed late Thursday that its bid had been rejected, according to a source working on the proposal.

That leaves the General Electric Co. subsidiary as the only remaining bidder. However, negotiations are expected to continue through the weekend and GE Capital's deal to buy Los Angeles-based Arden could still fall apart.

Left undetermined is whether GE Capital will sell a portion of the Arden portfolio to Maguire Properties Inc., the Los Angeles-based real estate investment trust that has been aggressively expanding its holdings throughout the year. Maguire Properties has agreed to put up $1.5 billion, company executives said.

Calls seeking comment from Arden Realty and Maguire Properties weren't returned. GE Capital spokesman Russell Wilkerson said the company doesn't comment on "market rumor or speculation."

An announcement is expected early next week after directors of GE Capital, and possibly Maguire Properties, have a chance to vote on the deal over the weekend, the source said.

GE is paying around $48 a share for Arden, whose stock was trading at $46.92 at the close of the market on Friday. GE's price is 80 cents higher than Arden's recent 52-week high of $47.20.

Arden's investment bankers at Wachovia Corp. and Lehman Bros. Holdings Inc. slimmed down the suitors to Morgan Stanley and General Electric. Secured Capital Corp. had also been retained to advise Arden on the sale.

Calls seeking comment from Scott Schaevitz, the Wachovia investment banker running the sale, and Steve Silk, a Secured Capital principal, weren't returned.

To strengthen their bids, the two Wall Street firms brought on real estate investment trusts earlier this month. GE teamed up with Maguire Properties and Morgan Stanley teamed up with New York-based Trizec Properties Inc.

Arden has a market capitalization of about $2.4 billion and 300 employees. The company had a net income of $34 million off $400 million in revenues. Arden's portfolio consists mostly of Westside properties, including several trophy office buildings in Beverly Hills, the Westwood Center at 1100 Glendon Ave. and the Howard Hughes Center.

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