Is Arden Realty Inc. up for grabs?
That was the question buzzing around the real estate industry last week after trade magazine Real Estate Alert reported that Los Angeles-based Secured Capital Corp. has been retained to evaluate Arden's 19.2 million-square-foot Southern California portfolio.
Previously, trade publication REIT Newshound reported that Arden hired New York investment banks Wachovia Corp. and Lehman Brothers Holdings Inc. to "run the books" on a possible sale.
Sources independently confirmed to the Business Journal that the three companies are acting as Arden's advisers. However, it's unclear if a decision is imminent or if there are even bids on the table.
It's also unclear whether Arden's management, led by Chairman and Chief Executive Richard S. Ziman, plans to take the company private, sell off its portfolio to several buyers or if the entire company could go to a large pension fund or institutional investor.
Arden isn't talking. Howard Stern, Arden's senior vice president and chief investment officer, said the company "doesn't comment on industry rumors."
Louis Taylor, an analyst at Deutsche Bank Securities, said he was aware of the rumors and that according to his information, Arden executives haven't ruled out selling.
"Arden management has been open to the idea for a long time," Taylor said. "They've said 'We report to shareholders and if someone makes an offer for the company, we have to evaluate that.' They have been good in that regard."
Some sources weren't convinced Ziman would sell the company, especially because Arden's predominantly Westside portfolio is poised to reap the rewards of the recent uptick in leasing activity and rents.
Still, with interest rates rising, share prices of real estate investment trusts have taken a beating in the last several months. Already, dealership owner Capital Automotive REIT, apartment-owner Gables Residential Trust and office-owner Crocker Realty Trust Inc. have announced plans to go private.
In those cases, shareholders received premiums ranging between 5 percent and 15 percent. With Arden trading at $39.43 a share at the market close on Thursday, the company had a market value of $2.65 billion.
Taylor said that factoring in a premium, the company could still be gobbled up by a pension fund or institutional investor. With investors finding it difficult to place capital and acquire assets, their advisers are turning to portfolios of entire companies.
One rationale for going private: Arden's market value is lower than the value of its portfolio. In a Sept. 8 report, Legg Mason analysts said Arden's market capitalization is 31 percent below the replacement cost of its portfolio. Arden's market cap works out to $223 per square foot of its buildings, while the replacement cost of the portfolio is $323 a foot.
Wall Street may be anticipating a sale. After rumors began to circulate in late September, Arden's stock jumped nearly 11.5 percent to $41.21, close to its 52-week high. At the close of market Thursday, the stock cooled slightly, to $39.43.
Retailers aren't shying away from at least one San Fernando Valley redevelopment project.
Grocer Hows Markets LLC has signed a lease for the 32,000-square-foot anchor in the second phase of J.H. Snyder Co.'s NoHo Commons, a mixed-use residential project.
Along with a Wells Fargo & Co. branch and a Coffee Bean & Tea Leaf caf & #233;, 80 percent of the retail space is pre-leased in NoHo Commons, a $200 million redevelopment project near the Red Line subway station and the Orange Line busway.
Hows' store in NoHo Commons, expected to open in 2006, will be one of six Southern California locations.
Thomas Properties Group Inc. exercised its option last week to buy a 46.5-acre El Segundo site from Federal Express Corp.
The site has entitlements for a 2.2 million-square-foot mixed-use, build-to-suit project that will contain commercial, retail and "community serving" components.
Thomas Properties spent close to five years getting the entitlements, fending off a lawsuit from South Bay landlord Kilroy Realty Corp. and battling a referendum on the project.
Chief Financial Officer Diana Laing said the company isn't concerned with the South Bay's abysmal market for office space. Thomas is interested in finding tenants for build-to-suit offices and users who could buy plots and develop the buildings themselves.
Wandering From Wilshire
Jamison Properties Inc. is buying two San Fernando Valley office buildings for $31 million from Westoaks Associates LP.
Dr. David Lee's company is buying the 93,000-square-foot Sherman Oaks Atrium and the 84,000-square-foot Westhills Plaza in Woodland Hills.
The Atrium, a four-story building at 15315 Magnolia Blvd., is mapped for office condominiums. Westhills Plaza, a three-story office building at 20700 Ventura Blvd., has two levels of underground parking water fountains.
Both buildings are 90 percent leased. The buyer and seller were represented by Madison Partners' Lynwood Fields.
*Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at email@example.com.
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