Arden Acts to Make Its Biggest Buy

The board of Arden Realty Inc. has approved its largest purchase ever, the $614.5-million acquisition of 50 office and industrial properties from AEW/LBA Acquisition Co., a partnership of Newport Beach-based Layton--Belling & Associates and Boston-based investment advisor Aldrich Eastman & Waltch.

The purchase would boost Arden’s current portfolio more than 34%, to 16.1 million square feet from 12 million, and give it a stronger presence in the San Diego and Orange County real estate markets, said Richard Ziman, Arden chairman and chief executive.

“These assets are very similar to our own. It just reinforces our dominance as the premier office landlord in Southern California,” he said.

Arden would pay for the 5.2-million-square-foot portfolio with an unspecified combination of cash and operating partnership units. In addition, warrants for 2.5 million shares of Arden stock will be issued to the AEW/LBA partnership.

Some analysts worry that the hefty purchase could strain the resources of the Beverly Hills-based real estate investment trust.

“I have some concern regarding the pressures this will put on management and the balance sheet,” said John Lutzius, an analyst with Green Street Advisors of Newport Beach.

Arden President Victor Coleman said the deal will give the REIT greater economies of scale by allowing it to share management, security and engineering staff between neighboring buildings.

Arden will finance the $614.5-million purchase with an unspecified combination of debt and equity. Besides a secondary offering, Ziman said the REIT might consider taking on a pension fund as a joint-venture partner to raise capital. The deal is expected to close at the end of the first quarter.

Arden shares, originally priced at $20 when the company went public last year, closed at $30.88, up 63 cents Wednesday on the New York Stock Exchange.