S&P notes that Arden's portfolio consists of well-located, mostly class B/B+ buildings in submarkets that have benefited from positive economic and supply/demand conditions. Although the company has pursued a moderate financial course, its financial flexibility is limited by a portfolio with slightly under 50% of its net operating income encumbered by mortgage debt. However, Arden appears to be committed to reducing its encumbrance level through periodic repayment of secure debt and growth of its core portfolio net operating income.
The stable rating is based, in part, on S&P's judgment that the company's portfolio will benefit from embedded internal growth resulting from below-market rents on expiring leases and improved portfolio occupancy.
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