WEST LOS ANGELES-Arden Realty Inc., the owner of 220 office buildings comprising more than 13.3 million sf in western markets, plans a national expansion that will take the West Los Angeles-based company into the Central and Eastern US. Arden chief investment officer Michael Lynch tells GlobeSt.com that Arden, which will continue to be based here, will be looking primarily for value-add and core-plus office properties in Midwestern and East Coast markets.
Lynch notes that Arden already has acquisition directors in the Midwest and on the East Coast as part of the Direct Investments business unit of Arden’s parent, GE Real Estate. The office portion of the Direct Investments unit will be rolled into Arden as part of the national expansion.
“While the Arden name will be new in those places, we already have good people there who are experts, with good networks, so it should be a fairly seamless proposition to move into those markets,” Lynch tells GlobeSt.com. He says that Arden will focus on target markets, explaining, “We are not going to be in every market. We will probably be more bi-coastal with key interior markets.” Those markets will include, at minimum, Chicago, Denver and three Texas markets: Austin, Dallas and Houston.
Arden will be looking for buildings that present an opportunity to add value through leasing or physical repositioning, seeking “good product in good markets,” Lynch says. Despite the economy, there are still some places where there are below-market rents that can be raised to add value, the Arden CIO points out, and he notes that the West Los Angeles-based company has also added value to many properties through initiatives like its energy management group and other green building management practices.
How soon Arden closes deals in the East and the Midwest is difficult to say because of current market conditions, Lynch says. “We are going to be careful, but we are going to be consistently out in the market looking for deals that meet our return requirements,” he explains.
Although the company would hope to close a deal or two in the new markets before the end of the year, it all depends on what comes to market, Lynch points out. “I suspect that as we roll into 2009, there will be pressure on some owners to sell, so we should see some level of increase of activity in early 2009 to mid-2009, but we certainly are going to do our best to close deals before that,” he says.
The push toward the East is an extension of an expansion that Arden began under GE after GE merged with what was then a publicly traded REIT in May of 2006. Michael Rowan, president of GE Real Estate, Americas’ Equity, points out that since the merger Arden has grown from a leading Southern California-based office landlord into one of the premier West Coast owner operators throughout Southern and Northern California, Seattle, Portland, Phoenix and Salt Lake City.
In the last 24 months, Arden has closed approximately $6 billion in office transactions. According to Joaquin de Monetk, Arden president and CEO, the company has added value to approximately 18 million sf under the Americas’ Equity office operating platform. He notes that the EPA has recognized Arden numerous times as the landlord with the largest number of Energy Star-related office buildings in a single portfolio in the US. Arden is also currently achieving new benchmarks for LEED certification in its portfolio.