UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) October 27, 1997
ARDEN REALTY, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-12193 95-4578533
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
9100 Wilshire Boulevard,
East Tower, Suite 700
Beverly Hills, California 90212
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 271-8600
Item 7. Financial Statements and Exhibits
(a) Financial statements of properties acquired
Northpoint
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the Year
Ended December 31, 1996
Notes to Statements of Revenue and Certain Expenses
145 South Fairfax
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the Year
Ended December 31, 1996
Notes to Statement of Revenue and Certain Expenses
Bernardo Regency
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the Year
Ended December 31, 1996
Notes to Statement of Revenue and Certain Expenses
Thousand Oaks Portfolio
Combined Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Combined Statement of Revenue and Certain Expenses for the
Year Ended December 31, 1996
Notes to Combined Statement of Revenue and Certain Expenses
(b) Pro forma financial information.
Pro Forma Condensed Consolidated Statements of Operations for
the nine months ended September 30, 1997 (Unaudited)
Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1996 (Unaudited)
Notes to the Pro Forma Condensed Consolidated Financial
Statements (Unaudited)
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of Northpoint for the year ended December 31, 1996. This
statement of revenue and certain expenses is the responsibility
of the management of Northpoint. Our responsibility is to express
an opinion on the statement of revenue and certain expenses based
on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Northpoint for the year
ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
October 21, 1997
NORTHPOINT
STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue
Rental $ 2,809
Tenant recoveries 229
Parking - net of expenses 172
Total revenue 3,210
Certain Expenses
Property operating and maintenance 893
Real estate taxes 165
Insurance 15
Total certain expenses 1,073
Excess of revenue over certain expenses $ 2,137
See accompanying notes to statement of revenue and certain expenses.
NORTHPOINT
NOTES TO STATEMENT OF REVENUES AND EXPENSES
For the year ended December 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
include the operations of Northpoint (the "Property") located in
Southern California which was acquired by Arden Realty, Inc. (the
"Company"), from a nonaffiliated third party. The Property was
acquired on October 21, 1997 for $21,800,000 and has
approximately 104,235 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with the
rules and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Use of Estimates
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
NORTHPOINT
NOTES TO STATEMENT OF REVENUES AND EXPENSES
For the year ended December 31, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996 are as follows:
1997 $3,096,000
1998 2,764,000
1999 2,462,000
2000 2,462,000
2001 2,256,000
Thereafter --
$13,040,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts. At December
31, 1996, one of the Property's tenants accounted for
approximately 80% of the Property's aggregate annualized base rent.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of 145 South Fairfax for the year ended December 31,
1996. This statement of revenue and certain expenses is the
responsibility of the management of 145 South Fairfax. Our
responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of 145 South Fairfax for the
year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
November 19, 1997
145 SOUTH FAIRFAX
STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue
Rental $ 1,012
Tenant recoveries 45
Parking income 51
Total revenue 1,108
Certain Expenses
Property operating and maintenance 313
Real estate taxes 70
Insurance 17
Total certain expenses 400
Excess of revenue over certain expenses $ 708
See accompanying notes to statement of revenue and certain expenses.
145 SOUTH FAIRFAX
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
include the operations of 145 South Fairfax (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company"), from a nonaffiliated third party.
The Property was acquired on October 29, 1997 for $7,400,000 and
has approximately 54,429 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with the
rules and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Use of Estimates
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
145 SOUTH FAIRFAX
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996 are as follows:
1997 $ 852,000
1998 812,000
1999 727,000
2000 196,000
2001 459,000
Thereafter 1,002,000
$4,048,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts. At
December 31, 1996, five of the Property's tenants accounted for
approximately 54% of the Property's aggregate annualized base rent.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of Bernardo Regency for the year ended December 31,
1996. This statement of revenue and certain expenses is the
responsibility of the management of Bernardo Regency. Our
responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Bernardo Regency Centre
for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
October 14, 1997
BERNARDO REGENCY
STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue:
Rental $ 666
Tenant recoveries 12
Total revenue 678
Certain Expenses:
Property operating and maintenance 123
Real estate taxes 39
Insurance 29
Total certain expenses 191
Excess of revenue over certain expenses $ 487
See accompanying notes to statement of revenue and certain expenses.
BERNARDO REGENCY
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
include the operations of Bernardo Regency (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company"), from a nonaffiliated third party.
The Property was acquired on October 29, 1997 for $6,550,000 and
has approximately 47,916 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with the
rules and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Use of Estimates
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
BERNARDO REGENCY
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996 are as follows:
1997 $ 566,000
1998 630,000
1999 483,000
2000 342,000
2001 74,000
Thereafter 26,000
$2,121,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts. At
December 31, 1996, one of the Property's tenants accounted for
approximately 19% of the Property's aggregate annualized base
rent.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying combined statement of revenue
and certain expenses of the Thousand Oaks Portfolio for the year
ended December 31, 1996. This combined statement of revenue and
certain expenses is the responsibility of the management of the
Thousand Oaks Portfolio. Our responsibility is to express an
opinion on the combined statement of revenue and certain expenses
based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the combined statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statement. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
The accompanying combined statement of revenue and certain
expenses was prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission.
Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations
of the property are excluded and the statement is not intended to
be a complete presentation of the combined revenue and expenses
of the properties.
In our opinion, the combined statement of revenue and certain
expenses presents fairly, in all material respects, the revenue
and certain expenses, as defined above, of the Thousand Oaks
Portfolio for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
October 3, 1997
THOUSAND OAKS PORTFOLIO
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue
Rental $ 3,165
Other income 4
Total revenue 3,169
Certain Expenses
Property operating and maintenance 485
Real estate taxes 194
Insurance 41
Total certain expenses 720
Excess of revenue over certain expenses $ 2,449
See accompanying notes to combined statement of revenue and certain expenses.
THOUSAND OAKS PORTFOLIO
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying combined statement of revenue and certain
expenses include the combined operations of six Commercial Office
Properties located in Southern California (the "Properties")
which were acquired by Arden Realty, Inc., a Maryland corporation
(the "Company"), from the same nonaffiliated third party
("Silagi"). The Properties were acquired on October 28, 1997 for
$35,100,000 and have approximately 254,792 rentable square feet.
The properties are as follows:
Property Square feet
Rancho Plaza 24,057
Thousand Oaks Plaza 13,434
Pennsfield Plaza 21,202
Conejo Business Center 69,017
Marin Corporate Center 51,360
Evergreen Plaza (Acquired by
Silagi and is included in ths 75,722
statement as of July 18, 1996)
Basis of Presentation
The accompanying combined statement has been prepared to comply
with the rules and regulations of the Securities and Exchange
Commission.
The accompanying combined statement is not representative of the
actual operations for the period presented as certain expenses
that may not be comparable to the expenses expected to be
incurred by the Company in the future operations of the
Properties have been excluded. Excluded expenses consist of
interest, depreciation and amortization and property general and
administrative costs not directly comparable to the future
operation of the Properties.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
THOUSAND OAKS PORTFOLIO
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
1. Organization and Summary of Significant Accounting Policies
(Continued)
Use of Estimates
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996 are as follows:
1997 $3,452,000
1998 3,476,000
1999 2,919,000
2000 2,315,000
2001 1,837,000
Thereafter 3,473,000
$17,472,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Properties are generally leased to tenants
under lease terms which provide for the tenants to pay increases
in operating expenses in excess of specified amounts.
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed consolidated balance
sheet as of September 30, 1997 is presented as if the acquisitions
of properties acquired subsequent to September 30, 1997,
including the properties described in Item 2 of the related form 8-K
filed on November 12, 1997 (the "1997 Fourth Quarter Acquisitions")
had been consummated on September 30, 1997.
The following unaudited pro forma condensed consolidated
statements of operations for the nine months ended September 30, 1997
and for the year ended December 31, 1996 are presented as if: (i) the
consummation of the IPO and related formation transactions in
connection with the IPO; (ii) the acquisition of properties acquired
during 1996 (the "1996 Acquisitions"); and (iii) the acquisition of
the 1997 Fourth Quarter Acquisitions had occurred at January 1, 1996.
The pro forma condensed consolidated financial statements are not
necessarily indicative of what the actual financial position or
results of operations would have been had the Company completed the
transactions described above, nor do they purport to represent the
future financial position of the Company.
<TABLE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 1997
(Unaudited)
(in thousands)
<S> <C> <C> <C>
Arden 1997 Fourth Arden
Realty, Inc. Quarter Realty, Inc.
Acquisitions(A) Pro Forma
ASSETS
Commercial office
properties - net $925,539 $70,950 $996,489
Cash and cash
equivalents 6,945 (1,900) 5,045
Restricted cash 4,000 -- 4,000
Rents and other
receivables 3,932 -- 3,932
Mortgage notes
receivable - net 14,392 -- 14,392
Deferred rent 8,033 -- 8,033
Prepaid financing and
leasing costs - net 10,996 -- 10,996
Prepaid expenses and
other assets 4,264 (650) 3,614
Total assets $978,101 $68,400 $1,046,501
LIABILTIES AND STOCKHOLDERS' EQUITY
Mortgage loans payable $180,000 $12,200 192,200
Unsecured lines of
credit 45,900 56,200 102,100
Accounts payable and
accrued expenses 17,013 -- 17,013
Security deposits 5,986 -- 5,986
Dividends and
distributions payable 14,177 -- 14,177
Total liabilities 263,076 68,400 331,476
Minority interests in
Operating Partnership 47,178 -- 47,178
Stockholders' equity:
Common stock 354 -- 354
Additional paid-in
capital 667,493 -- 667,493
Retained earnings -- -- --
Total stockholders'
equity 667,847 -- 667,847
Total liabilities
and stocholders'
equity $978,101 $68,400 $1,046,501
</TABLE>
<TABLE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(Unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Pro Forma Adjustments
Pre-Acquisition
Period for
the 1997
Fourth
Arden Quarter Other Arden Realty,
Realty, Inc. Acquisitions(C) Adjustments Inc. Pro Forma
Revenues
Rental $80,740 6,788 $ 40(D) $87,568
Tenant reimbursements 3,593 299 -- 3,892
Parking-net 5,267 194 -- 5,461
Other 1,451 7 -- 1,458
91,051 7,288 40 98,379
Other income 563 -- -- 563
Total revenue 91,614 7,288 40 98,942
Expenses
Property expenses 29,175 1,986 121(F) 31,282
REIT general
and administrative 2,828 -- 172(G) 3,000
Interest 13,723 -- 3,505(H) 17,228
Loss on valuation
of derivative 3,111 -- -- 3,111
Depreciation and
amortization 13,261 -- 1,067(I) 14,328
Total expenses 62,098 1,986 4,865 68,949
Income before
minority interests 29,516 5,302 (4,825) 29,993
Minority interests (3,105) -- (50)(J) (3,155)
Net income $26,411 $5,302 $(4,875) $26,838
Weighted average
common shares 25,440 25,440
outstanding before
the conversion of
OP Units
Net income per
common share $1.04 $1.05
</TABLE>
See accompanying notes
<TABLE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(in thousands, except per share data)
Pro Forma Adjustments
<S> <C> <C> <C> <C>
Arden Arden Equity in
Realty, Inc. Predecessors Net Loss of
Consolidated Combined Noncombined Pre-acquisition
Oct. 9, 1996 to Jan. 1, 1996 to Entites Jan. 1, 1996 Period for the 1996
Dec. 31, 1996 Oct. 8, 1996 to Oct. 8, 1996 Acquisitions(B)
Revenues
Rental $17,041 $32,287 $12,828 $23,095
Tenant reimbursements 803 2,031 243 733
Parking-net 1,215 3,692 846 1,161
Other 375 1,125 357 606
19,434 39,135 14,274 25,595
Other income 138 1,330 -- --
Total revenues 19,572 40,465 14,274 25,595
Expenses
Property expenses 6,005 14,224 6,053 11,449
General and administrative 753 1,758 -- --
Interest 1,280 24,521 7,356 --
Depreciation and
amortization 3,108 5,264 2,705 --
Total expenses 11,146 45,767 16,114 11,449
Equity in net (loss) of -- (336) 336 --
noncombined entities
Income (loss) before 8,426 (5,638) (1,504) 14,146
minority interests and
extraordinary items
Minority interests (993) 721 (721) --
Income (loss) before 7,433 (4,917) (2,225) 14,146
extraordinary items
Extraordinary (loss) (13,105) 1,877 -- --
gain on early
extinguishment
of debt, net of
minority interests
share
Net (loss) income $ (5,672) $(3,040) $(2,225) $14,146
Weighted average 21,680
common shares
outstanding
before
conversion of
OP Units
Net (loss) income $(0.26)
per common share
</TABLE>
<TABLE>
<S> <C> <C> <C>
1997 Fourth
Quarter Other Arden Realty,
Acquisitions(C) Adjustments Inc. Pro Forma
Revenues
Rental $7,652 $ 376(D) $93,279
Tenant reimbursements 286 -- 4,096
Parking-net 223 -- 7,137
Other 4 -- 2,467
8,165 376 106,979
Other income -- (1,253)(E) 215
Total revenues 8,165 (877) 107,194
Expenses
Property expenses 2,384 269(F) 40,384
General and
administrative -- 1,489(G) 4,000
Interest -- (17,393)(H) 15,764
Depreciation and -- 4,115(I) 15,192
amortization
Total expenses 2,384 (11,520) 75,340
Equity in net -- -- --
(loss) of
noncombined entities
Income (loss) 5,781 10,643 31,854
before minority
interests and
extraordinary items
Minority interests -- (2,817)(J) (3,810)
Income (loss) before 5,781 7,826 28,044
extraordinary items
Extraordinary (loss) gain -- 11,228(K) --
on early extinguishment
of debt, net of minority
interests share
Net (loss) income $5,781 $19,054 $28,044
Weighted average 21,680
common shares
outstanding before
conversion of OP Units
Net (loss) income $1.29
per common share
</TABLE>
See accompanying notes.
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(in thousands)
1. Adjustments to the Pro Forma Condensed Consolidated Balance Sheet
The adjustments to the Pro Forma Condensed Consolidated
Balance Sheet as of September 30, 1997 are as follows:
A. Acquisition of the 1997 Fourth Quarter Acquisitions with
$2,550,000 of cash and deposits and with proceeds of $12,200,000
of mortgage loans payable and $56,200,000 on the unsecured line
of credit.
Purchase price and actual and estimated additional closing
costs of the 1997 Fourth Quarter Acquisitions are as follows:
1997 Fourth Quarter Acquisitions Purchase Price
Northpoint $ 21,900
145 South Fairfax 7,400
Bernardo Regency 6,550
Thousand Oaks Portfolio 35,100
Total $ 70,950
2. Adjustments to the Pro Forma Condensed Consolidated Statements
of Operations
The pro forma adjustments reflected in the Pro Forma
Condensed Consolidated Statements of Operations for the nine
months ended September 30, 1997 and the year ended December 31,
1996 are set forth below:
B. Represents the preacquisition period for the 17 properties acquired
in 1996.
<TABLE>
1996 Acquisitions
For the Year Ended December 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
400 Imperial 10351
Corporate 5832 9665 Bank 100 303 Santa 2730 Grand
Pointe Bolsa Wilshire Tower Broadway Norwalk Glenoaks Monica Wilshire Avenue
Revenue
Rental $390 $80 $548 $1,351 $1,554 $1,387 $1,980 $1,134 $ 960 $--
Tenant reimbursements 103 -- 19 29 107 40 48 11 -- --
Parking, net 28 10 58 124 88 66 129 99 43 --
Other 23 -- 32 15 74 4 138 7 12 --
Total revenues 544 90 657 1,519 1,823 1,497 2,295 1,251 1,015 --
Property expenses 123 8 203 574 581 578 956 551 451 --
Excess of revenue $421 $82 $454 $945 $1,242 $ 919 $1,339 $ 700 $ 564 $--
over certain
expenses
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Burbank
Executive
Plaza and Los
California Angeles Sumitomo 10350
Federal Center Corporate 5200 W. Bank Santa
Building Promenade Center Century Building Monica Total
Revenue
Rental $2,156 $2,097 $5,882 $1,021 $1,926 $629 $23,095
Tenant reimbursements -- 51 128 115 79 3 733
Parking, net 164 -- -- 40 254 58 1,161
Other -- -- 288 2 9 2 606
Total revenues 2,320 2,148 6,298 1,178 2,268 692 25,595
Property expenses 976 982 2,881 1,188 1,070 327 11,449
Excess of $1,344 $1,166 $3,417 $ (10) $1,198 $365 $14,146
revenue over
certain expenses
</TABLE>
C. Represents the actual preacquisition results for
the 1997 Fourth Quarter Acquisitions:
<TABLE>
The 1997 Fourth Quarter Acquisitions
For the Year Ended December 31, 1996
<S> <C> <C> <C> <C> <C>
145 South Bernardo Thousand Oaks
Northpoint Fairfax Regency Portfolio(1) Total
Revenue
Rental $2,809 $1,012 $666 $3,165 $7,652
Tenant reimbursements 229 45 12 -- 286
Parking, net 172 51 -- -- 223
Other -- -- -- 4 4
Total revenues 3,210 1,108 678 3,169 8,165
Property expenses 1,073 400 191 720 2,384
Excess of revenue $2,137 $ 708 $487 $2,449 $5,781
over certain expenses
(1) One of the six properties in the portfolio is included only as of
July 18, 1996.
</TABLE>
<TABLE>
The 1997 Fourth Quarter Acquisitions
For the Nine Months Ended September 30, 1997
<S> <C> <C> <C> <C> <C>
145
South Bernardo Thousand
Northpoint Fairfax Regency Oaks Portfolio Total
Revenue
Rental $2,301 $748 $518 $3,221 $6,788
Tenant reimbursements 235 58 6 -- 299
Parking, net 159 35 -- -- 194
Other 1 1 -- 5 7
Total revenues 2,696 842 524 3,226 7,288
Property expenses 833 302 159 692 1,986
Excess of revenue $1,863 $540 $365 $2,534 $5,302
over certain expenses
</TABLE>
D. Increase in rental revenue to adjust the 1996
Acquisitions and the 1997 Fourth Quarter Acquisitions to
straightline rental revenue calculated as though the
properties were purchased at January 1, 1996
E. Decrease in other income to eliminate nonrecurring
construction fees which would not have been realized by the
Company and certain management fees that will not be earned.
F. Increase in property general and administrative
expenses related to additional property payroll costs
relating to the 1997 Fourth Quarter Acquisitions for the
period ended September 30, 1997 and to the 1996
Acquisitions and 1997 Fourth Quarter Acquisitions for the
period ended December 31, 1996.
G. Increase in general and administrative expenses related to
expected level of operations as a public real estate
investment trust and the incremental increase relating to the
management of additional properties.
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
H. Increase (decrease) in interest expense:
Decrease in interest expense $ -- $ (31,877)
due to repayment of mortgage
loans and lines of credit
Increase in interest 2,703 13,218
expense related to the new
mortgage loan and line of
credit with an interest rate
of LIBOR plus 1.5% and LIBOR
plus 1.45%, respectively,
for the period ended
December 31, 1996, and the
increase in interest expense
related to the increase to
the line of credit with an
interest rate ranging from
LIBOR plus 1.45% to LIBOR
plus 1.75% for the period
ended September 30, 1997.
Increase in interest 802 1,071
expense related to the
mortgage notes payable
assumed in connection with
the 1997 Fourth Quarter
Acquisitions with interest
rates ranging from 7.875% to 9%
Increase in amortization of -- 195
finance costs related to the
line of credit
Net increase (decrease) in $ 3,505 $ (17,393)
interest expense
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
I. Increase in depreciation expense:
Increase in depreciation $1,067 $3,985
expense to reflect a full
nine months of depreciation
for the 1997 Fourth Quarter
Acquisitions for the nine
months ended September 30,
1997 and a full year of
depreciation for the 1996
Acquisitions and 1997 Fourth
Quarter Acquisitions for the
year ended December 31,
1996, utilizing a 40 year
useful life for buildings
and a 10 year useful life
for improvements
Increase in depreciation -- 130
due to the fair value of
consideration paid in excess
of book value of interests
in properties acquired from
nonaffiliates in connection
with the completion of the IPO
Net increase in $1,067 $4,115
depreciation expense
J. To reflect adjustment for minority interest of 10.5% and 12%
for the nine months ended September 30, 1997 and year ended
December 31, 1996, respectively, in the Operating
Partnership.
K. To eliminate net extraordinary loss related to early extinguishment
of debt.
(c) Exhibits.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
ARDEN REALTY, INC.
Date: November 24, 1997 By: /s/ Diana M. Laing
Diana M. Laing
Chief Financial Officer
