Arden Profit Rises as Office Market Stabilizes

Arden Realty Inc., a Los Angeles real estate investment trust, said second-quarter profit rose 8.6% as the Southern California office market began to stabilize.

Arden, the largest publicly owned office landlord in Southern California with 18.9 million square feet, said profit rose to $18.9 million, or 30 cents a share, compared with $17.4 million, or 27 cents a share, in the same period a year earlier.

Revenue in the quarter ended June 30 was $105.5 million compared with $100.4 million last year.

Funds from operations, a key profitability measure for REITs, slipped to $43.4 million, or 67 cents a share, from $46.6 million, or 70 cents, a year earlier. That matched Wall Street analysts’ mean estimate, according to Thomson First Call.

Average occupancy in Arden’s 217 buildings was nearly unchanged, at 89.5%.

Arden and other Southern California landlords are benefiting from a flattening of rents and occupancy after about two years of falling asking rates and rising vacancy as the nation wrestled with an economic slowdown.

The pace of office leasing is picking up, Arden Chairman Richard Ziman said in a conference call with analysts.

“We remain confident that Southern California’s diversity, limited new inventory and solid long-term demographic and economic trends are a definite balance to the shorter-term budget and unemployment issues,” he said.

The market continues to be highly competitive for office owners, Arden President Victor Coleman said, with vacancy rates in the low to mid-teens in most areas where Arden has property. The competition has forced Arden and other landlords to sometimes lower rents and offer tenants incentives such as free rent.

“Arden’s biggest challenge is to not spend too much” to entice new tenants, said Los Angeles money manager Craig Silvers of Bricks & Mortar Capital, who holds shares in Arden.

Shares of Arden closed at $28, up 39 cents, on the New York Stock Exchange.