S&P notes that Arden's portfolio consists of well-located,mostly class B/B+ buildings in submarkets that have benefited frompositive economic and supply/demand conditions. Although thecompany has pursued a moderate financial course, its financialflexibility is limited by a portfolio with slightly under 50% ofits net operating income encumbered by mortgage debt. However,Arden appears to be committed to reducing its encumbrance levelthrough periodic repayment of secure debt and growth of its coreportfolio net operating income.
The stable rating is based, in part, on S&P's judgment thatthe company's portfolio will benefit from embedded internal growthresulting from below-market rents on expiring leases and improvedportfolio occupancy.
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