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Arden to Buy 70-Acre Parcel

Hughes Center Deal Would Give REIT Development Rights


After years of focusing primarily on acquisitions, Arden Realty Inc. has decided it's time to enter the development fray and build new properties from the ground up.

The Beverly Hills-based real estate investment trust has agreed to purchase a 70-acre parcel in the Howard Hughes Center adjacent to the San Diego Freeway in Westchester, real estate sources report. The purchase price could exceed $50 million, but would give Arden rights to develop more than 1 million square feet of office buildings, as well as retail shops and a hotel.

Arden executives acknowledged they were in negotiations to purchase the Hughes property, but declined to discuss the sale further, citing a confidentiality agreement.

While it is unusual for a public REIT to carry so much undeveloped land on its books, the purchase may mark the beginning of an industry trend.

"In general now, investors are looking for REITs that have a development story of some sort," said John Lutzius, an analyst with Green Street Advisors in Newport Beach. "If the numbers make sense on this deal, investors will applaud this."

Already standing at Howard Hughes Center are the Arden-owned Northpoint office building, the 6701 Tower occupied by tenant Blue Shield, and the Spectrum Club, an executive gym. Industry observers speculate that Arden is trying to corner the tiny Westchester market and exert control over rents.

Arden might also be able to purchase the 313,000-square-foot Blue Shield building in a separate transaction. Arden President Victor J. Coleman said his company has had discussions with Fort Worth-based Crescent Real Estate Equities, which is reportedly buying the building, about taking it over. However, no deals have been struck, he said.

Plans for a splashy new retail center at the Howard Hughes site are already in place. Developer J.H. Snyder & Co. is expected to break ground in coming months on a center anchored by an IMAX 3-D theater, a Nordstrom Rack and a Borders bookstore.

Snyder's partner Clifford Goldstein said the pending sale won't endanger those plans.

"They are just assuming the role that the Howard Hughes company currently plays as owner," said Cliff Goldstein, a partner in Snyder's Los Angeles firm. He said his company will simply buy the land from Arden instead.

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