GlobeSt.com UPDATE: GE Buys Arden in $5B Deal

LOS ANGELES-As previously reported by GlobeSt.com, the GE Real Estate unit of GE Commercial Finance has agreed to acquire Arden Realty Inc. GE will pay $45.25 per share for Arden, and as part of the deal Trizec Properties Inc. has agreed to buy part of the locally based REIT’s portfolio for $1.63 billion. GE’s $4.8-billion deal will include $3.2 billion in cash and the assumption of approximately $1.6 billion of Arden debt. For prior coverage, click here.Stamford, CT-based GE’s acquisition of the office REIT is expected to close by the end of the first quarter of 2006, subject to shareholder approval and other customary closing conditions. Its purchase of Arden, which is the largest publicly trade office landlord in Southern California with 18.5 million sf of office buildings, will make the GE one of the largest owners of office space in the region.

Trizec’s part of the deal will include 13 Arden properties totaling 4.1 million sf, with 10 of the properties totaling 2.7 million sf in West Los Angeles and three totaling 1.4 million sf in San Diego. The Trizec portfolio, which is expected to be approximately 91% occupied at the close of the transaction, also includes land parcels at the Howard Hughes Center that can accommodate the development of up to 490,000 sf of office space and 600 housing units.

The properties Trizec is buying include Howard Hughes Center, Westwood Center and World Savings Center in West Los Angeles, along with Arden Towers at Sorrento and 701 B St. in San Diego. The transaction will nearly double Trizec’s portfolio in Southern California, which will become the company’s largest market, accounting for more than 28% of its total net operating income. Trizec has arranged a bridge loan that could fund up to $1.48 billion of the acquisition price, with the balance of the acquisition to be funded with a draw on Trizec’s credit line.

The deal with GE and Trizec ends months of speculation about a pending sale of Arden, which had been mentioned off and on for years as a good candidate for a buyout. A number of other firms were mentioned in press reports as possible buyers, and some industry sources had estimated that the sale could surpass $50 a share. Lehman Brothers Inc, Wachovia Securities, and Secured Capital LLC served as financial advisers to Arden, with Merrill Lynch acting as the financial adviser to GE Real Estate.