Office Rent Decline Hurts Arden Profit

Arden Realty Inc., a Los Angeles real estate investment trust, said Wednesday that fourth-quarter profit fell 26.5% as office rents continued to dip and concessions to tenants increased.

Arden, the largest office landlord in Southern California with more than 18.5 million square feet, earned $16.3 million, or 26 cents a share, in the three months ended Dec. 31. In the same period a year earlier it earned $22.2 million, or 35 cents a share. Revenue was flat at $106.9 million, compared with $106.2 million a year ago.

Funds from operations, a key measure of profitability for REITs, slipped 10% to $44.6 million, or 69 cents a share, from $49.5 million or 75 cents, a year earlier.

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.

For the year, Arden’s profit fell 28% to $70.2 million, or $1.09 a share, compared with $97.8 million, or $1.53, in 2001. Revenue slipped slightly to $414.6 million from $417.4 million. Funds from operations totaled $181.5 million, or $2.75 a share, compared with $198.2 million, or $3, in 2001.

Average occupancy in Arden’s more than 220 buildings increased to 90.1% in the fourth quarter from 89.7% in the third quarter, Chairman Richard Ziman said.

But those gains were offset by slipping rents and the need to offer greater concessions such as space improvements to attract tenants.

“We got hammered in the first two quarters and then things flattened out,” Ziman said. “Hopefully the two successive flat quarters indicate that [the market] is not going down any further.”

Arden announced its results after the market closed. Shares of Arden fell 12 cents to $20.62 on the New York Stock Exchange.