The transaction, which is Arden's largest acquisition since it was acquired by GE, will give the company title to new assets in San Diego, Orange County, San Francisco, Seattle, Portland, OR and Salt Lake City in a deal expected to close in early August. Arden president and CEO Joaquin de Monet tells GlobeSt.com that when the Blackstone transaction and other deals that Arden has in the works are closed, the company will own 2.2 million sf more space than it did when GE took over and will oversee holdings that are "very broad in terms of our footprint" compared with what previously was strictly a Southern California portfolio.
The Arden chief adds that the deal reflects two important components of the company's strategy: its commitment to its core markets and the blueprint for new target markets throughout the West Coast. "It reinforces our commitment to our local core markets where we've been and operated for years, and it's an opportunity for us to gain critical mass and scale in our new markets," de Monet tells GlobeSt.com.
In addition, de Monet cites the value-added potential in the CarrAmerica properties that Arden is acquiring. The 82%-leased portfolio offers upside through lease-up and also plays into Arden's strategy, which favors value-added investments, he says.
Chris Peatross, chief executive of CarrAmerica and the West Coast point man for Blackstone Group, declined to comment on the sale price, but he did explain the rationale behind the transaction. Blackstone, which acquired not only CarrAmerica, but also Trizec Holdings and Equity Office Properties over the past year, is now focusing the respective portfolios in advance of merging all three operations.
The portfolio acquired by Arden is CarrAmerica's suburban office portfolio minus those properties in Northern California (outside of San Francisco), Austin, Dallas, Denver and Chicago. The properties sold to Arden are all in markets where Blackstone also sold its Equity Office Properties assets.
"Our strongholds are in four markets: Northern California, West L.A., New York and Boston," Peatross tells GlobeSt.com. "At some point you need to take some profit and focus on the markets where you have compelling market share.
With regard to potential new strongholds, Peatross says the company still thinks there's growth to be had in the middle of the country. There's a convenience factor as well; Blackstone has concentrated the asset management groups for its portfolio in Chicago and Dallas.
When asked if he thinks Blackstone maximized the value of the CarrAmerica portfolio before selling it, Peatross said, "We've done a great job taking care of it (but) it's impossible to maximize all of the value in a year. Arden and GE are well positioned to add value."
Arden has acquired approximately $800 million of new properties in the past eight months leading up to the CarrAmerica transaction, including an expansion into the Arizona market. Once its deal with Blackstone and other pending acquisitions close, Arden will own approximately 17.2 million sf of commercial office properties, with another 4.6 million sf under leasing and management.
De Monet says that ownership of this latest portfolio gives Arden "immediate critical mass of institutional, quality suburban properties in six key West Coast regions that are the company's primary target markets." The location and concentration of these properties will serve as a springboard for Arden's continued growth in these markets, he points out.
Arden has been buying and selling assets lately as part of a capital recycling and expansion strategy. In late May the company announced the sale of 33 of its non-core assets for $1.5 billion to Cabi Developers, a subsidiary of GICSA, a Mexico-based, international development firm.
Last week Arden closed on the acquisition of a portfolio of six Northern California assets in Santa Clara and Sunnyvale, a mix of flex office and R&D properties that expanded the company's Northern California holdings. The company expects to close on additional assets in Northern California and Scottsdale, AZ later this month. Combined, the three deals total $415 million.
De Monet notes that with the closing of its latest deals, the broader Arden footprint will include substantial holdings in markets where the company formerly had no presence. In Northern California, for example, it will have grown from zero to more than two million sf as a result of its expansion and capital recycling strategies.
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