Arden Realty Inc., a Los Angeles real estate investment trust, said Tuesday that profit fell 28% in the first quarter as most of the nation’s office markets remained flat or soft.
Arden, the largest publicly owned office landlord in Southern California with 19.3 million square feet, said profit dropped to $15.4 million, or 24 cents a share, in the three months ended March 31. A year earlier, profit was $21.4 million, or 33 cents a share.
Revenue was $104.4 million, compared with $100.2 million.
Funds from operations, a key profitability measure for REITs, slipped to $46.1 million, or 71 cents a share, from $47.1 million, or 71 cents, a year earlier. That beat Wall Street analysts’ mean estimate of 68 cents, according to Thomson First Call.
A REIT allows individual investors to participate in large real estate ventures. Unlike other public companies, REITs must distribute 95% of their income to shareholders.
Average occupancy in Arden’s 222 buildings was 89.6%, down from 93.9% a year ago, Chief Financial Officer Rick Davis said.
The company leased half of a previously vacant new office building during the first quarter, Davis said. Arden developed the 12-story, 284,000-square-foot building at 6100 Center Dr. that opened last May in the Howard Hughes Center in Westchester. It had no tenants until this year.
Arden reduced its asking rents for the building from $3.55 per square foot per month in the fourth quarter of 2001 to $2.92 in the last quarter, according to CoStar Group, a real estate data provider.
Most office markets in Southern California and across the country have suffered for the past year as businesses have cut spending or put expansions on hold. Many landlords have had to reduce rents and increase the number of concessions they make to tenants, such as the amount of money the landlords spend on improving the space for occupancy.
Davis attributed much of Arden’s drop in net income to higher depreciation and amortization charges, which were $28.9 million last quarter compared with $25.5 million a year ago.
“We ended the quarter right where we expected to be,” Davis said. “Our expectation for the year was that during the first part of the year there would still be compressed demand.”
Occupancy in Arden properties should rise by the end of 2003 and early next year if the economy improves enough to create more jobs, Davis said.
Arden announced its results after the markets closed. Shares of Arden closed at $23.50, up 11 cents, on the New York Stock Exchange.