<PAGE> 1
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) JANUARY 7, 1998
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
<PAGE> 2
ITEM 5. OTHER EVENTS
On January 12, 1998, the Company filed a Form S-3 Registration Statement (the
"Registration Statement") with the Securities Exchange Commission to offer in
one or more series, shares of its $.01 par value common stock with an aggregate
public offering price of up to $1,000,000,000. The Registration Statement was
declared effective on January 21, 1998 and on February 2, 1998, the Company
filed a supplement to this Registration Statement, offering 17,000,000 shares of
its common stock (the "Offering"). On February 13, 1998, the Company amended
this supplement to increase the number of shares of common stock offered
to 20,000,000. In addition, on February 13, 1998, the Company filed an
additional supplement to the Registration Statement, offering 881,950 shares of
its common stock to an institutional buyer (the "Concurrent Offering").
The Company has entered into a contract to acquire a portfolio of 50 primarily
office and R&D/industrial properties (the "LBA Portfolio"), aggregating
approximately 5.2 million rentable square feet for a purchase price of
approximately $614.5 million, which was based on arm's-length negotiations. In
connection with the acquisition of the LBA Portfolio, the Company will also
issue warrants to purchase 2.5 million shares of the Company's common stock, at
a price of $29.59 per share, subject to adjustment. The LBA Portfolio consists
of 34 office properties containing approximately 3.6 million rentable square
feet, 15 R&D/industrial properties containing approximately 1.5 million rentable
square feet, and one retail property containing 144,225 rentable square feet,
all located in Southern California. The Company intends to fund this acquisition
in part with the proceeds from the Offering and the Concurrent Offering.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION.
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 (Unaudited)
Pro Forma Condensed Consolidated Statement 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)
<PAGE> 3
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 following transactions had been
consummated on September 30, 1997: (i) the acquisition of properties acquired
subsequent to September 30, 1997 and prior to December 30, 1997 (the "Fourth
Quarter 1997 Acquired Properties") (ii) the acquisition of the Acquired
Properties and the LBA Portfolio; (iii) the closing of a 12-month, $270 million
bridge loan facility (the "Bridge Facility") (iv) the completion of the
Company's public offering of common stock (the "Offering"); and (v) the
completion of the Company's offering of common stock to an institutional buyer
(the "Concurrent Offering") 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 each of the following transactions had
occurred on January 1, 1997 and January 1, 1996, respectively: (i) the
consummation of the initial public offering (the "IPO") and related formation
transactions in connection with the IPO, the prior offering of 13,750,000 shares
of Common Stock (the "Prior Offering"), the Offering and the Concurrent
Offering;(ii) the acquisition of properties acquired during 1996 (the "1996
Acquisitions"); (iii) the acquisition of properties acquired between
January 1, 1997 and December 30, 1997 (the "1997 Acquisitions"); (iv) the
acquisition of the Acquired Properties and the LBA Portfolio; and (v) the
closing of the Bridge Facility.
The pro forma condensed consolidated financial statements assume
(i) no exercise of the underwriters option to acquire an additional 3,000,000
shares of common stock in the Offering, (ii) that the sellers of the LBA
Portfolio do not exercise their right to receive up to $35 million of the
purchase price in the form of OP Units and (iii) no refinancing of the
Bridge Facility, which the Company expects will be refinanced within 12 months.
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.
<PAGE> 4
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------------------------------------------
FOURTH ARDEN
QUARTER REALTY
1997 INC.
ARDEN ACQUIRED ACQUIRED OFFERING CONCURRENT BRIDGE LBA PRO
REALTY, INC. PROPERTIES(A) PROPERTIES(B) (C) OFFERING(D) FACILITY(E) PORTFOLIO(F) OTHER(G) FORMA
------------ ------------- ------------- -------- ---------- ---------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Commercial office
properties - net $925,539 $245,775 $154,213 -- -- -- $619,600 -- $1,945,127
Cash and cash
equivalents 6,945 (4,702) (8,781) $538,050 $ 23,622 $270,000 (596,000) $(227,134) 2,000
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 (650) -- -- -- -- -- -- 3,614
-------- -------- -------- -------- -------- -------- ------- --------- ----------
Total assets $978,101 $244,423 $145,432 $538,050 $ 23,622 $270,000 $23,600 $(227,134) $1,996,094
======== ======== ======== ======== ======== ======== ======= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage loans
payable $180,000 57,200 83,670 -- -- 270,000 -- -- $590,870
Unsecured lines
of credit 45,900 135,000 61,024 -- -- -- 20,000 (227,134) 34,790
Accounts payable and
accrued expenses 17,013 -- -- -- -- -- -- -- 17,013
Security deposits 5,986 -- -- -- -- -- -- -- 5,986
Dividends payable 14,177 -- -- -- -- -- -- -- 14,177
-------- -------- -------- -------- -------- -------- ------- --------- ---------
Total liabilities 263,076 192,200 144,694 -- -- 270,000 20,000 (227,134) 662,836
-------- -------- -------- -------- -------- -------- ------- --------- --------
Minority interest 47,178 52,223 738 -- -- -- -- -- 100,139
Stockholders' equity:
Common stock 354 -- -- 200 9 -- -- -- 563
Additional paid-in
capital 667,493 -- -- 537,850 $ 23,613 -- 3,600 -- 1,232,556
Retained earnings -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- --------- ---------
Total stockholders'
equity 667,847 -- -- 538,050 $ 23,622 -- 3,600 -- 1,233,119
-------- -------- -------- -------- -------- -------- ------- --------- ----------
Total liabilities
and stockholders'
equity $978,101 $244,423 $145,432 $538,050 $ 23,622 $270,000 $23,600 $(227,134)$1,996,094
======== ======== ======== ======== ======== ======== ======= ========= ==========
</TABLE>
<PAGE> 5
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)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------------
Pre-Acquisition Acquired
Period Properties
Arden for the 1997 and LBA Other Arden Realty,
Realty, Inc. Acquisitions(I) Portfolio(J) Adjustments Inc. Pro Forma
------------ --------------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
REVENUE
Rental $ 80,740 $40,756 $52,000 $ 1,518(K) $ 175,014
Tenant reimbursements 3,593 2,269 2,930 -- 8,792
Parking, net of expenses 5,267 1,681 1,585 -- 8,533
Other 1,451 300 461 -- 2,212
-------- ------- ------- --------- ---------
91,051 45,006 56,976 1,518 194,551
Other income 563 -- -- 1,685(L) 2,248
-------- ------- ------- --------- ---------
Total revenue 91,614 45,006 56,976 3,203 196,799
-------- ------- ------- --------- ---------
EXPENSES
Property expenses 29,175 14,403 20,528 2,676(M) 66,782
REIT general and
administrative 2,828 -- -- 922(N) 3,750
Interest 13,723 -- -- 16,730(O) 30,453
Loss on valuation of
derivative 3,111 -- -- -- 3,111
Depreciation and
amortization 13,261 -- -- 19,232(P) 32,493
-------- ------- ------- --------- ---------
Total expenses 62,098 14,403 20,528 39,560 136,589
-------- ------- ------- --------- ---------
Income before
minority interest 29,516 30,603 36,448 (36,357) 60,210
Minority interest (3,105) (1,308)(R) -- (606)(Q) (5,019)
-------- ------- ------- --------- ---------
Net income $ 26,411 $29,295 $36,448 $ (36,963) $ 55,191
======== ======= ======= ========= =========
Weighted average common shares
outstanding 25,440 56,325
======== =========
Net income per
common share $1.04 $0.98
======== =========
Supplemental net income
per share reflecting the
pro forma effects solely of
the Offering, the
Concurrent Offering and the
acquisition of the LBA
Portfolio(T) $1.05
=========
</TABLE>
See accompanying notes
<PAGE> 6
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------------------------------------
EQUITY IN
ARDEN ARDEN NET LOSS OF
REALTY, INC. PREDECESSORS NONCOMBINED
CONSOLIDATED COMBINED ENTITIES PRE-ACQUISITION ACQUIRED
OCT. 9, 1996 JAN. 1, 1996 JAN. 1, 1996 PERIOD FOR PROPERTIES ARDEN
TO TO TO THE 1996 1997 AND LBA OTHER REALTY, INC.
DEC. 31, 1996 OCT. 8, 1996 OCT. 8, 1996 ACQUISITIONS(H) ACQUISITIONS(I) PORTFOLIO(J) ADJUSTMENTS PRO FORMA
------------- ------------ ------------ -------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Rental $ 17,041 $ 32,287 $ 12,828 $23,095 $72,422 $60,492 $ 4,837(K) $ 223,002
Tenant
reimbursements 803 2,031 243 733 3,400 4,343 -- 11,553
Parking, net of
expenses 1,215 3,692 846 1,161 2,961 2,026 -- 11,901
Other 375 1,125 357 606 562 662 -- 3,687
-------- -------- -------- ------- ------- ------- --------- ---------
19,434 39,135 14,274 25,595 79,345 67,523 4,837 250,143
Other income 138 1,330 -- -- -- -- 1,002(L) 2,470
-------- -------- -------- ------- ------- ------- --------- ---------
Total revenue 19,572 40,465 14,274 25,595 79,345 67,523 5,839 252,613
-------- -------- -------- ------- ------- ------- --------- ---------
EXPENSES
Property expenses 6,005 14,224 6,053 11,449 26,569 24,581 3,961(M) 92,842
General and
administrative 753 1,758 -- -- -- -- 2,489(N) 5,000
Interest 1,280 24,521 7,356 -- -- -- 8,166(O) 41,323
Depreciation and
amortization 3,108 5,264 2,705 -- -- -- 31,161(P) 42,238
-------- -------- -------- ------- ------- ------- --------- ---------
Total expenses 11,146 45,767 16,114 11,449 26,569 24,581 45,777 181,403
-------- -------- -------- ------- ------- ------- --------- ---------
Equity in net (loss)
of noncombined
entities -- (336) 336 -- -- -- -- --
-------- -------- -------- ------- ------- ------- --------- ---------
Income (loss) before
minority interest
and extraordinary
items 8,426 (5,638) (1,504) 14,146 52,776 42,942 (39,938) 71,210
-------- -------- -------- ------- ------- ------- --------- ---------
Minority interest (993) 721 (721) -- (1,725)(R) -- (3,385)(Q) (6,103)
-------- -------- -------- ------- ------- ------- --------- ---------
Income (loss) before
extraordinary items 7,433 (4,917) (2,225) 14,146 51,051 42,942 (43,323) 65,107
Extraordinary (loss)
gain on early
extinguishment
of debt, net
of minority
interests share (13,105) 1,877 -- -- -- -- 11,228(S) --
-------- -------- -------- ------- ------- ------- --------- ---------
Net (loss) income $ (5,672) $ (3,040) $ (2,225) $14,146 $51,051 $42,942 $ (32,095) $ 65,107
======== ======== ======== ======= ======= ======= ========= =========
Weighted average
common shares
outstanding 21,680 56,311
======== =========
Net (loss) income per
common share $(0.26) $1.16
======== =========
Supplemental net
income per share
reflecting the
pro forma effects
solely of the
Offering, the Unit
Trust and the
acquisition of the
LBA Portfolio(T) $ .15
=========
</TABLE>
See accompanying notes.
<PAGE> 7
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 Fourth Quarter 1997 Acquired Properties with $5,352,000 of
cash and deposits, a $4,000,000 receivable, proceeds of $57,200,000 from
mortgage loans payable and $135,000,000 from 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% interest in World Savings Center and
has an option to purchase the remaining 25% interest beginning on March 15,
1998.
Purchase price and actual and estimated additional closing costs of the
Fourth Quarter 1997 Acquired Properties are as follows:
<TABLE>
<CAPTION>
Fourth Quarter 1997 Acquired Properties Purchase Price
- --------------------------------------- --------------
<S> <C>
Northpoint $ 21,900,000
145 South Fairfax 7,400,000
Bernardo Regency 6,550,000
Thousand Oaks Portfolio 35,100,000
City Centre 33,300,000
Wilshire Pacific Plaza 15,500,000
Glendale Corporate Center 15,325,000
World Savings Center* 83,200,000
------------
Total** $218,275,000
============
</TABLE>
* Represents the Company's 75% interest plus additional acquisition costs.
** Including the consolidated 25% minority interest in the World Savings
Center, additions to Commercial Office Properties-net totaled $245,775,000
B. Acquisition of the Acquired Properties with $8,781,000 of cash, proceeds of
$83,670,000 from mortgage loans payable and $61,024,000 from the unsecured lines
of credit.
<PAGE> 8
Purchase price and actual and estimated additional closing costs of the
Acquired Properties are as follows:
<TABLE>
<CAPTION>
Acquired Properties Purchase Price
- ------------------- --------------
<S> <C>
9201 Sunset $ 28,800,000
Activity Business Center 14,900,000
Sunset Pointe Plaza 8,475,000
9100 Wilshire 65,100,000
Westlake Gardens 7,300,000
1100 Glendon* 28,900,000
------------
Total** $153,475,000
============
</TABLE>
* Represents the Company's 97.5% interest plus additional closing costs.
** Including the consolidated 2.5% minority interest in 1100 Glendon,
additions to Commercial Office Properties - net totaled $154,213,000.
C. Sale of 20,000,000 shares of common stock at $28.3125 per share in the
Offering.
<TABLE>
<S> <C>
Gross proceeds from Offering $566,250,000
Costs associated with the Offering (28,200,000)
------------
$538,050,000
============
Par value of common stock $ 200,000
Additional paid in capital from
proceeds from sale of common stock 537,850,000
------------
$538,050,000
============
</TABLE>
D. Sale of 881,950 shares of common stock at $28.3125 per share in the
Concurrent Offering.
<TABLE>
<S> <C>
Gross proceeds from the Concurrent Offering $24,970,000
Costs associated with the Concurrent
Offering 1,348,000
-----------
$23,622,000
===========
Par value of common stock $ 9,000
Additional paid in capital from proceeds
from sale of common stock $23,613,000
-----------
$23,622,000
===========
</TABLE>
E. Closing of a planned $270,000,000 Bridge Facility in connection with
acquisition of the LBA Portfolio.
F. Acquisition of the LBA Portfolio for approximately $619.6 million, including
estimated closing costs of $1.5 million and the issuance of warrants to
purchase 2.5 million shares of the Company's Common Stock for an
approximate value of $3.6 million, with proceeds from the Offering,
the Concurrent Offering and the planned Bridge Facility.
G. Partial repayment of the unsecured lines of credit with proceeds from the
Offering and the Concurrent Offering.
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:
<PAGE> 9
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands)
H. Represents the pre-acquisition period for the 17 properties acquired in
1996.
1996 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
12501
400 Imperial 100 East 10351 Grand
Corporate 5832 9665 Bank West Imperial 303 Santa 2730 Avenue
Pointe Bolsa Wilshire Tower Broadway Highway Glenoaks Monica Wilshire Plaza
------ ----- -------- ----- -------- ------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 of expenses 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>
<CAPTION>
Burbank
Executive
Plaza and Los
California Angeles 5200 Sumitomo 10350
Federal Center Corporate West Bank Santa
Building Promenade Center Century Building Monica Total
-------- --------- ------ ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
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 of expenses 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>
<PAGE> 10
I. Represents the actual pre-acquisition result for the 1997 Acquisitions:
The 1997 Acquisitions
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Whittier
Financial
Clarendon
10780 Crest, and Noble South
535 Santa California 6800 Professional Bay 8383 Parkway
Brand Monica Twin Centre Owensmouth Center Centre Wilshire Center
----- ------- ----------- ---------- ------------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 707 $ 1,455 $ 5,580 $ 532 $ 794 $ 2,691 $ 6,628 $ 911
Tenant reimbursements 74 57 225 26 5 143 -- 92
Parking, net of expenses 90 136 228 -- 51 -- 832 --
Other -- 2 15 5 -- 26 31 --
----- ------- ------- ---- ----- ------- ------- -----
Total revenues 871 1,650 6,048 563 850 2,860 7,491 1,003
Property expenses 459 417 1,757 485 347 1,270 2,867 276
----- ------- ------- ---- ----- ------- ------- -----
Excess of revenue
over certain expenses $ 412 $ 1,233 $ 4,291 $ 78 $ 503 $ 1,590 $ 4,624 $ 727
===== ======= ======= ==== ===== ======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
1000
Town Center
Centerpointe and
La Palma Mariner Court
------------ -------------
<S> <C> <C>
Revenue
Rental $ 9,222 $ 3,798
Tenant reimbursements 797 93
Parking, net of expenses 9 --
Other 38 --
------- -------
Total revenues 10,066 3,891
Property expenses 2,834 1,350
------- -------
Excess of revenue
over certain expenses $ 7,232 $ 2,541
======= =======
</TABLE>
<TABLE>
<CAPTION>
Harbor Carlsberg South Bay
Pacific Crown 299 Corporate 1821 Corporate 120 Technology
Gateway II Cabot Euclid Center Dyer Center Spalding Center
---------- ----- ------ --------- ---- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 3,355 $ 3,002 $ -- $ 776 $ 593 $ 1,679 $ 693 $ 985
Tenant reimbursements 87 71 -- -- 133 30 55 25
Parking, net of expenses -- -- -- -- -- 61 46 --
Other 144 41 -- 5 -- 19 8 1
------- ------- ---- ----- ----- ------- ----- -----
Total revenues 3,586 3,114 -- 781 726 1,789 802 1,011
Property expenses 1,205 897 -- 246 92 713 429 371
------- ------- ---- ----- ----- ------- ----- -----
Excess of revenue
over certain expenses $ 2,381 $ 2,217 $ -- $ 535 $ 634 $ 1,076 $ 373 $ 640
======= ======= ==== ===== ===== ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
1370 Foremost
Valley Renaissance Professional 145 South Bernardo
Vista Court Center Northpoint Fairfax Regency
------ ----------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 1,333 $ 1,422 $ 856 $ 2,809 $ 1,012 $ 666
Tenant reimbursements 116 46 12 229 45 12
Parking, net of expenses -- -- 5 172 51 --
Other -- -- -- -- -- --
----- ------- ----- ------- ----- -----
Total revenues 1,449 1,468 873 3,210 1,108 678
Property expenses 537 296 144 1,073 400 191
----- ------- ----- ------- ----- -----
Excess of revenue
over certain expenses $ 912 $ 1,172 $ 729 $ 2,137 $ 708 $ 487
===== ======= ===== ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
Glendale
Corporate
Thousand Center and World
Oaks City Wilshire Savings
Portfolio(1) Centre Pacific Plaza Center Total
------------ ------ ------------- ------ -----
<S> <C> <C> <C> <C> <C>
Revenue
Rental $ 3,165 $ 3,366 $ 2,895 $ 11,497 $ 72,422
Tenant reimbursements -- 409 134 484 3,400
Parking, net of expenses -- -- 302 978 2,961
Other 4 160 63 -- 562
------- ------- ------- ------- --------
Total revenues 3,169 3,935 3,394 12,959 79,345
Property expenses 720 1,578 1,504 4,111 26,569
------- ------- ------- ------- --------
Excess of revenue
over certain expenses $ 2,449 $ 2,357 $ 1,890 $ 8,848 $ 52,776
======= ======= ======= ======= ========
</TABLE>
(1) One of the six properties in the portfolio is included only as of July 18,
1996.
<PAGE> 11
Pre-Acquisition Period of the 1997 Acquisitions
For the Nine Months Ended September 30, 1997
<TABLE>
<CAPTION>
Whittier
Financial
Clarendon
10780 Crest, and Noble South
535 Santa California 6800 Professional Bay 8383 Parkway
Brand Monica Twin Centre Owensmouth Center Centre Wilshire Center
----- ------ ----------- ---------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 147 $ 402 $ 1,265 $ 153 $ 266 $ 764 $ 2,459 $ 410
Tenant reimbursements 3 4 51 1 1 32 -- 22
Parking, net of expenses 14 38 58 -- -- -- 344 --
Other rental operations -- -- 3 -- -- 3 32 --
---- ----- ----- ---- ----- ----- ------- -----
Total revenues 164 444 1,377 154 267 799 2,835 432
Property expenses 98 120 395 121 129 304 1,127 88
---- ----- ----- ---- ----- ----- ------- -----
Excess of revenue over
certain expenses $ 66 $ 324 $ 982 $ 33 $ 138 $ 495 $ 1,708 $ 344
==== ===== ===== ==== ===== ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
1000
Town Center
Centerpointe and
La Palma Mariner Court
-------- -------------
<S> <C> <C>
Revenue
Rental $ 3,712 $ 2,196
Tenant reimbursements 356 59
Parking, net of expenses 4 5
Other rental operations 69 2
------- -------
Total revenues 4,141 2,262
Property expenses 1,020 759
------- -------
Excess of revenue
over certain expenses $ 3,121 $ 1,503
======= =======
</TABLE>
<TABLE>
<CAPTION> South
Harbor Carlsberg Bay
Pacific Crown 299 Corporate 1821 Corporate 120 Technology
Gateway II Cabot Euclid Center Dyer Center Spalding Center
---------- ------- ------ --------- ----- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 1,973 $ 1,871 $ -- $ 419 $ 371 $ 958 $ 435 $ 784
Tenant reimbursements 117 58 -- -- 77 28 26 22
Parking, net of expenses -- -- -- -- -- 32 29 --
Other 10 5 -- -- -- 10 7 1
------- ------- ---- ----- ----- ----- ----- -----
Total revenues 2,100 1,934 -- 419 448 1,028 497 807
Property expenses 692 507 -- 153 59 322 209 219
------- ------- ---- ----- ----- ----- ----- -----
Excess of revenue
over certain expenses $ 1,408 $ 1,427 $ -- $ 266 $ 389 $ 706 $ 288 $ 588
======= ======= ==== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1370 Foremost
Valley Renaissance Professional 145 South Bernardo
Vista Court Center Northpoint Fairfax Regency
------ ----------- ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 736 $ 644 $ 761 $ 2,301 $ 748 $ 518
Tenant reimbursements 308 26 5 235 58 6
Parking, net of expenses -- -- -- 159 35 --
Other 2 1 3 1 1 --
----- ----- ----- ------- ----- -----
Total revenues 1,046 671 769 2,696 842 524
Property expenses 359 261 143 833 302 159
----- ----- ----- ------- ----- -----
Excess of revenue
over certain expenses $ 687 $ 410 $ 626 $ 1,863 $ 540 $ 365
===== ===== ===== ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
Glendale
Corporate
Thousand Center and World
Oaks City Wilshire Savings
Portfolio Centre Pacific Plaza Center Total
--------- -------- ------------- ------ --------
<S> <C> <C> <C> <C> <C>
Revenue
Rental $ 3,221 $ 2,709 $ 1,813 $ 8,720 $ 40,756
Tenant reimbursements -- 272 160 342 2,269
Parking, net of expenses -- -- 211 752 1,681
Other 5 144 1 -- 300
------- ------- ------- ------- --------
Total revenues 3,226 3,125 2,185 9,814 45,006
Property expenses 692 1,110 894 3,328 14,403
------- ------- ------- ------- --------
Excess of revenue
over certain expenses $ 2,534 $ 2,015 $ 1,291 $ 6,486 $ 30,603
======= ======= ======= ======= ========
</TABLE>
<PAGE> 12
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands)
J. Represents the actual results for the Acquired Properties and LBA
Portfolio.
Acquired Properties and LBA Portfolio
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Activity Sunset
9201 Business Pointe 9100 Westlake 1100 LBA
Sunset Center Plaza Wilshire Gardens Glendon Portfolio Total
------- -------- ------ -------- -------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental $3,357 $1,489 $870 $4,690 -- $3,421 $46,665 $60,492
Tenant reimbursements 20 59 6 112 -- 308 3,838 4,343
Parking, net of expenses 661 -- -- 813 -- 342 210 2,026
Other 5 -- 7 -- -- 42 608 662
------ ------ ---- ------ -- ------ ------- -------
Total revenues 4,043 1,548 883 5,615 -- 4,113 51,321 67,523
Property expenses 1,332 253 324 2,666 -- 1,608 18,398 24,581
------ ------ ---- ------ -- ------ ------- -------
Excess of revenue over
certain expenses $2,711 $1,295 $559 $2,949 -- $2,505 $32,923 $42,942
====== ====== ==== ====== == ====== ======= =======
</TABLE>
Acquired Properties and LBA Portfolio
For the Nine Months Ended September 30, 1997
<TABLE>
<CAPTION>
Activity Sunset
9201 Business Pointe 9100 Westlake 1100 LBA
Sunset Center Plaza Wilshire Gardens Glendon Portfolio Total
------ -------- ------ -------- -------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental $2,790 $1,205 $796 $3,846 -- $2,835 $40,528 $52,000
Tenant reimbursements 27 48 4 64 -- -- 2,787 2,930
Parking, net of expenses 554 -- -- 744 -- -- 287 1,585
Other 12 6 4 13 -- 16 410 461
------ ------ ---- ------ -- ------ ------- -------
Total revenues 3,383 1,259 804 4,667 -- 2,851 44,012 56,976
Property expenses 1,142 196 253 1,822 -- 1,278 15,837 20,528
------ ------ ---- ------ -- ------ ------- -------
Excess of revenue over
certain expenses $2,241 $1,063 $551 $2,845 -- $1,573 $28,175 $36,448
====== ====== ==== ====== == ====== ======= =======
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
K. Increase in rental revenue:
Increase in rental revenue to adjust the 1996
Acquisitions and the 1997
Acquisitions to straightline rental revenue
calculated as though the properties were
purchased at January 1, 1996 $1,073 $ 2,792
Increase in rental revenue to adjust the
Acquired Properties and LBA Portfolio to
straightline rental revenue calculated
as though the properties were acquired at
January 1, 1996. 445 2,045
------ -------
Net increase in rental revenue $1,518 $ 4,837
====== =======
L. Increase 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 other income relating to interest
income from the mortgage notes receivable. $1,123 1,506
Increase in other income relating to the
amortization of the discount on
the mortgage notes receivable. 344 459
Increase in interest income related to
the note receivable from Forest City 218 290
------ -------
Net increase in other income $1,685 $ 1,002
====== =======
M. Increase in property general and administrative expenses
Increase in property general and administrative
expenses related to additional property payroll
costs relating to the 1997 Acquisitions for
the nine months ended September 30, 1997 and the
1996 Acquisitions, and 1997 Acquisitions for
the year ended December 31, 1996. $1,027 $ 1,762
Increase in property general and administrative
expenses related to additional property payroll
costs relating to Acquired Properties and the
LBA Portfolio for the nine months ended
September 30, 1997 and year ended
December 31, 1996. 1,649 2,199
------ -------
Net increase in property general and
administrative expenses. $2,676 $ 3,961
====== =======
</TABLE>
<PAGE> 14
N. 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.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
O. Increase in interest expense:
Decrease in interest expense due to
repayment of mortgage loans and
lines of credit $(13,723) $(33,157)
Increase in interest expense related
to the line of credit with an interest
rate of LIBOR plus 1.45% 1,853 2,470
Increase in interest expense related
to increases in secured mortgage
loans and the closing of the Bridge
Facility with fixed and variable
interest rates ranging from 7% to 9.21% 28,150 37,600
Increase in amortization of finance
costs related to the line of credit
and mortgage loans payable 450 1,253
-------- --------
Net increase in interest expense $ 16,730 $ 8,166
======== ========
P. Increase in depreciation expense:
Increase in depreciation expense to reflect
a full nine months of depreciation for the
1997 Acquisitions for the nine months ended
September 30, 1997 and a full year of depreciation
for the 1996 Acquisitions and 1997 Acquisitions
for the year ended December 31, 1996, utilizing a
40 year useful life for buildings and a 10 year
useful life for improvements $ 7,919 $ 15,947
Increase in depreciation expense to reflect a full
nine months of depreciation for the Acquired
Properties and LBA Portfolio for the nine months
ended September 30, 1997 and year ended December 31,
1996 utilizing a 40 year useful life for buildings
and a 10 year useful life for improvements. 11,313 15,084
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 $ 19,232 $ 31,161
======== ========
</TABLE>
Q. To reflect adjustment for minority interest of 6.3% for the nine
months ended September 30, 1997 and year ended December 31, 1996,
in the Operating Partnership.
R. To reflect Forest City's 25% interest in World Savings Center.
S. To eliminate net extraordinary loss related to early extinguishment of debt.
T. Additional pro forma net income per share information is included below.
The following table sets forth the pro forma effects of solely the Offering
and the Concurrent Offering and the purchase of the LBA Portfolio
(in thousands, except per share data):
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Historical net income (loss) $26,411 $(5,672)
Arden Predecessors combined net loss -- (3,040)
Pro forma net income of the LBA Portfolio, net
of interest expense from the Bridge Facility 13,899 13,888
-------- --------
40,310 5,176
======== ========
Common Stock outstanding, on a historical basis 25,440 21,680
Common Stock issued in the Offering and the
Concurrent Offering to purchase the LBA Portfolio 12,864 12,864
-------- --------
38,304 34,544
======== ========
Net income per share reflecting the proforma effects
of the Offering, the Concurrent Offering and
purchase of the LBA Portfolio $ 1.05 $ .15
======== ========
</TABLE>
<PAGE> 15
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: February 13, 1998 By: /s/ DIANA M. LAING
----------------------------
Diana M. Laing
Chief Financial Officer
