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) December 5, 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 90212
Beverly Hills, California
(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
City Centre
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
Glendale Corporate Center and Wilshire Pacific Plaza
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
World Savings Center
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
(b) Pro forma financial information.
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 (Unaudited)
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 City Centre for the year ended
December 31, 1996. This statement of revenue and certain
expenses is the responsibility of the management of City
Centre. 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 City
Centre for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young
Ernst & Young LLP
Los Angeles, California
October 7, 1997
CITY CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue
Rental $ 3,366
Tenant recoveries 409
Other income 160
Total revenue 3,935
Certain Expenses
Property operating and maintenance 1,058
Real estate taxes 281
Insurance 239
Total certain expenses 1,578
Excess of revenue over certain expenses $ 2,357
See accompanying notes to statement of revenue and certain expenses.
CITY CENTRE
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
includes the operations of City Centre (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 December 5, 1997 for
$33,300,000 and has approximately 287,000 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.
CITY CENTRE
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(Continued)
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 $ 923,000
1998 820,000
1999 647,000
2000 493,000
2001 442,000
Thereafter 454,000
$3,779,000
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, four of the Property's
tenants accounted for approximately 80% of the Property's
aggregate annualized base rent.
Included in total revenue at December 31, 1996 are
approximately $891,000 and $337,000 in rent and tenant
recoveries respectively, received from an affiliate of the
seller of City Centre.
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 Glendale Corporate Center
and Wilshire Pacific Plaza for the year ended December 31,
1996. This combined statement of revenue and certain
expenses is the responsibility of the management of Glendale
Corporate Center and Wilshire Pacific Plaza. 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 revenue and expenses of the property.
In our opinion, the statement of revenue and certain
expenses presents fairly, in all material respects, the
combined revenue and certain expenses, as defined above, of
Glendale Corporate Center and Wilshire Pacific Plaza for the
year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
December 19, 1997
GLENDALE CORPORATE CENTER AND WILSHIRE PACIFIC PLAZA
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue
Rental $ 2,895
Tenant recoveries 134
Parking-net 302
Other income 63
Total revenue 3,394
Certain Expenses
Property operating and maintenance 1,170
Real estate taxes 265
Insurance 69
Total certain expenses 1,504
Excess of revenue over certain expenses $ 1,890
See accompanying notes to statement of revenue and certain expenses.
GLENDALE CORPORATE CENTER AND WILSHIRE PACIFIC PLAZA
NOTES TO COMBINED 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 includes the operations of Glendale Corporate
Center and Wilshire Pacific Plaza (the "Properties") located
in Southern California which were acquired by Arden Realty,
Inc. (the "Company"), from the same nonaffiliated third
party. The Properties were acquired on December 5, 1997 for
$ 30,825,000 and have approximately 208,331 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 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.
Use of Estimates
The preparation of combined 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 combined financial statements and the reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
GLENDALE CORPORATE CENTER AND WILSHIRE PACIFIC PLAZA
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(Continued)
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 $2,184,000
1998 2,595,000
1999 1,995,000
2000 1,304,000
2001 582,000
Thereafter 699,000
$9,359,000
The above future minimum lease payments do not include
specified payments for tenant reimbursements of operating expenses.
Office space in the Properties 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 Properties'
tenants accounted for approximately 42% of the Properties'
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 World Savings Center for the year ended
December 31, 1996. This statement of revenue and certain
expenses is the responsibility of the owners of World
Savings Center. 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 World
Savings Center for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
December 5, 1997
WORLD SAVINGS CENTER
STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(In Thousands)
Revenue
Rental $11,497
Tenant recoveries 484
Parking-net 978
Total revenue 12,959
Certain Expenses
Property operating and maintenance 2,700
Real estate taxes 673
Insurance 139
Ground rent 599
Total certain expenses 4,111
Excess of revenue over certain expenses $ 8,848
See accompanying notes to statement of revenue and certain expenses.
WORLD SAVINGS CENTER
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 World Savings Center (the "Property")
located in Southern California. Arden Realty, Inc. (the
"Company") acquired a 75% interest in the Property from a
nonaffiliated third party. The Property Company's interest was
acquired on December 9, 1997 for $83,200,000 and has
approximately 469,115 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.
WORLD SAVINGS CENTER
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
For the year ended December 31, 1996
(Continued)
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 $10,318,000
1998 9,978,000
1999 9,836,000
2000 9,140,000
2001 8,794,000
Thereafter 31,437,000
$79,503,000
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, two of the Property's tenants accounted for
approximately 38% of the Property's aggregate annualized base rent.
The Company leases the land underlying the building under a lease
expiring in 2056. As of December 31, 1996 the minimum annual
ground rent for the next five years and thereafter is as follows:
1997 $ 425,000
1998 425,000
1999 425,000
2000 425,000
2001 456,000
Thereafter 40,304,000
$42,460,000
The Company pays additional ground rent of 20% of the net income
(as defined in the lease agreement with specified deductions for
debt service requirements) of the project. This amount is
calculated on a calendar-year basis. Additional ground rent for
1996 was approximately $203,000.
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 as described in Item 2 of the related form 8-K filed on
December 18, 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 transaction
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 Quarter Arden Realty, Inc.
Realty, Inc. Acquisitions(A) Pro Forma
ASSETS
Commercial office
properties - net $925,539 $174,825 $1,100,364
Cash and cash equivalents 6,945 (2,802) 4,143
Restricted cash 4,000 -- 4,000
Rents and other receivables 3,932 4,000 7,932
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 -- 4,264
Total assets $978,101 $176,023 $1,154,124
LIABILTIES AND STOCKHOLDERS' EQUITY
Mortgage loans payable $180,000 $ 45,000 $ 225,000
Unsecured lines of credit 45,900 78,800 124,700
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 263,076 123,800 386,876
Minority interests 47,178 52,223 99,401
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
stockholders' equity $978,101 $176,023 $1,154,124
</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
Arden Fourth Quarter Other Arden Realty,
Realty,Inc. Acquisitions(C) Adjustments Inc. Pro Forma
Revenue
Rental $80,740 $13,242 $ 496(D) $ 94,478
Tenant reimbursements 3,593 774 -- 4,367
Parking-net 5,267 963 -- 6,230
Other 1,451 145 -- 1,596
91,051 15,124 496 106,671
Other income 563 -- 97 660
Total revenue 91,614 15,124 593 107,331
Expenses
Property expenses 29,175 5,332 257(F) 34,764
REIT general and
administrative 2,828 -- 172(G) 3,000
Interest 13,723 -- 5,251(H) 18,974
Loss on valuation of
derivative 3,111 -- -- 3,111
Depreciation and
amortization 13,261 -- 2,857(I) 16,118
Total expenses 62,098 5,332 8,537 75,967
Income before minority
interests 29,516 9,792 (7,944) 31,364
Minority interests (3,105) -- (1,763)(J) (4,868)
Net income $26,411 $9,792 $(9,707) $26,496
Weighted average common
shares outstanding
before the conversion
of OP Units 25,440 25,440
Net income per
common share $1.04 $1.04
See accompanying notes
</TABLE>
<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)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Adjustments
Equity in
Arden Arden Net Loss of
Realty, Inc. Predecessors Noncombined Pre-acquisition 1997
Oct. 9, 1996 to Jan. 1, 1996 to Jan. 1, 1996 for the 1996 Fourth Quarter Other Arden Realty,
Dec. 31, 1996 Oct. 8, 1996 Oct. 8, 1996 Acquisitions(B) Acquisitions(C) Adjustments Inc. Pro Forma
Revenue
Rental $17,041 $32,287 $12,828 $23,095 $17,758 $695(D) $103,704
Tenant reimbursements 803 2,031 243 733 1,027 -- 4,837
Parking-net 1,215 3,692 846 1,161 1,280 -- 8,194
Other 375 1,125 357 606 223 -- 2,686
19,434 39,135 14,274 25,595 20,288 695 119,421
Other income 138 1,330 -- -- -- (1,156)(E) 312
Total revenue 19,572 40,465 14,274 25,595 20,288 (461) 119,733
Expenses
Property expenses 6,005 14,224 6,053 11,449 7,193 451(F) 45,375
General and
administrative 753 1,758 -- -- -- 1,489(G) 4,000
Interest 1,280 24,521 7,356 -- -- (15,409)(H) 17,748
Depreciation and
amortization 3,108 5,264 2,705 -- -- 6,502(I) 17,579
Total expenses 11,146 45,767 16,114 11,449 7,193 (6,967) 84,702
Equity in net (loss) of
noncombined entities -- (336) 336 -- -- -- --
Income (loss) before
minority and
extraordinary items 8,426 (5,638) (1,504) 14,146 13,095 6,506 35,031
Minority interests (993) 721 (721) -- -- (4,958)(J) (5,951)
Income (loss) before
extraordinary items 7,433 (4,917) (2,225) 14,146 13,095 1,548 29,080
Extraordinary (loss)
gain on early
extinguishment of
debt, net of
minority interests
share (13,105) 1,877 -- -- -- 11,228(K) --
Net (loss) income $(5,672) $(3,040) $(2,225) $14,146 $13,095 $12,775 $29,080
Weighted average common
shares outstanding
before conversion of
OP Units 21,680 21,680
Net (loss) income per
common share $(0.26) $1.34
</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
To reflect the acquisition of the 1997 Fourth Quarter
Acquisitions with $2,802,000 of cash, a $4,000,000 receivable,
proceeds of $45,000,000 from a mortgage loan payable and
$78,800,000 on the unsecured lines of credit, and the issuance of
822,400 operating partnership units with an approximate value of
$24,723,000. The Company purchased a 75 percent interest in
World Savings Center and has an option to purchase the remaining
25 percent interest beginning on March 15, 1998.
Purchase price and actual and estimated additional closing
costs of the 1997 Fourth Quarter Acquisitions are as follows:
1997 Fourth Quarter Acquisitions Purchase Price
City Centre $ 33,300,000
Wilshire Pacific Plaza 15,500,000
Glendale Corporate Center 15,325,000
World Savings Center * 83,200,000
Total $147,325,000
* Represents the Company's 75 percent interest plus additional
acquisition costs.
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:
<TABLE>
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(in thousands)
B. Represents the preacquisition period for the 17 properties acquired
in 1996.
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
over certain expenses $421 $82 $454 $ 945 $1,242 $ 919 $1,339 $ 700 $564 $--
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Los
Executive Plaza Angeles Sumitomo 10350
and California Center Corporate 5200 W Bank Santa
Federal 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 revenue
over certain expenses $1,344 $1,166 $3,417 $ (10) $1,198 $365 $14,146
</TABLE>
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(in thousands)
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>
Glendale
Corporate
Center and
City Wilshire World Savings
Centre Pacific Plaza Center Total
Revenue
Rental $3,366 $2,895 $11,497 17,758
Tenant reimbursements 409 134 484 1,027
Parking-net -- 302 978 1,280
Other 160 63 -- 223
Total revenues 3,935 3,394 12,959 20,288
Property expenses 1,578 1,504 4,111 7,193
Excess of revenue
over certain expenses $2,357 $1,890 $ 8,848 $13,095
</TABLE>
<TABLE>
The 1997 Fourth Quarter Acquisitions
For the Nine Months Ended September 30, 1997
<S> <C> <C> <C> <C>
Glendale
Corporate
Center and
Wilshire World Savings
City Centre Pacific Plaza Center Total
Revenue
Rental $2,709 $1,813 $8,720 $13,242
Tenant reimbursements 272 160 342 774
Parking-net -- 211 752 963
Other 144 1 -- 145
Total revenues 3,125 2,185 9,814 15,124
Property expenses 1,110 894 3,328 5,332
Excess of revenue over
certain expenses $2,015 $1,291 $6,486 $ 9,792
</TABLE>
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
D. Decrease in rental revenue:
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 496 695
E. Increase (decrease) in other income:
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. -- (1,253)
Increase in interest income related to
the note receivable from Forest
City maturing in four months 97 97
Net increase (decrease) in other income 97 (1,156)
F. Increase in property general and administrative
expenses related to additional property payroll costs
relating to the 1997 Fourth Quarter Acquisitions for the
nine months 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 Encded Year Ended
September 30, 1997 December 31, 1996
H. Increase (decrease) in
interest expense:
Decrease in interest expense
due to repayment of mortgage
loans and lines of credit $ -- $ (31,877)
Increase in interest
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. 3,892 14,905
Increase in interest expense
related to the increase in
City National Bank line of
credit with an interest rate
of City National Bank Prime
Rate less 0.875% 29 38
Increase in interest
expense related to the
mortgage note payable
borrowed in connection with
the 1997 Fourth Quarter
Acquisitions with interest
rates ranging from LIBOR +
1.25% to 9.21% maturing in
four months. 1,330 1,330
Increase in amortization of
finance costs related to the
line of credit -- 195
Net increase (decrease) in
interest expense $ 5,251 $ (15,409)
I. Increase in depreciation expense:
Increase in depreciation
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 $2,857 $6,372
Increase in depreciation
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 -- 130
Net increase in depreciation expense $2,857 $6,502
J. To reflect adjustment for
minority interest of 13.1%
and 14.8% for the nine
months ended September 30,
1997 and year ended December
31, 1996, respectively, in
the Operating Partnership. (988) (4,192)
To reflect Forest City's
25 percent interest in the
gross rental income from
World Savings Center. (775) (766)
Adjustment to minority interest (1,763) (4,958)
K. To eliminate net extraordinary loss related to early extinguishment
of debt.
(c) Exhibits.
23.1 Consent of Indpendent Auditors
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: January 22, 1998 By: /s/ Diana M. Laing
Diana M. Laing
Chief Financial Officer
Consent of Independent Auditors
We consent to the incorporation by reference in the
Registration Statement (Form S-3 No. 333-44141) of Arden Realty,
Inc. and in the related Prospectus of our report dated October 7,
1997 with respect to the statement of revenue and certain
expenses of City Centre for the year ended December 31, 1996, and
the incorporation by reference therein of our report dated
December 19, 1997 with respect to the statement of revenue and
certain expenses of Glendale Corporate Center and Wilshire
Pacific Plaza for the year ended December 31, 1996, and the
incorporation by reference therein of our report dated December
5, 1997 with respect to the statement of revenue and certain
expenses of World Savings Center for the year ended December 31,
1996 all of which were included in the Form 8-K/A of Arden
Realty, Inc., dated January 23, 1998.
/s/ Ernst & Young LLP
Los Angeles, California
January 21, 1998
