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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 29, 1997
CRESCENT OPERATING, INC.
(Exact name of Registrant as specified in its Charter)
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<S> <C> <C>
Delaware 333-25223 75-2701931
(state of organization) (Commission File Number) (IRS Employer Identification
Number)
306 West 7th Street
Suite 1025
Fort Worth, Texas
(Address of Principal Executive 76102
offices) (Zip code)
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(817) 877-0477
(Registrant's telephone number, including area code)
777 Main Street
Fort Worth, Texas
(Former Name or Former Address, if changed since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a purchase agreement dated as of September 29, 1997,
Crescent Operating, Inc. (the "Company") acquired 100% (50 shares) of the
voting common stock (the "Voting Stock") of Desert Mountain Development
Corporation ("Desert Mountain Development"), a Delaware corporation which is
the sole general partner of Desert Mountain Properties Limited Partnership
("Desert Mountain Partnership"), a Delaware limited partnership which owns
Desert Mountain, a master-planned, luxury residential and recreational
community in northern Scottsdale, Arizona. The Voting Stock comprises five
percent of the total outstanding common stock of, and represents a five percent
economic interest in, Desert Mountain Development. The Voting Stock was
purchased from Crescent Real Estate Equities Limited Partnership ("Crescent
Real Estate"), a Delaware limited partnership, for a cash purchase price of
approximately $3.24 million. The Company also will reimburse Crescent Real
Estate the total amount of the expenses, legal fees and transaction costs
(including carrying costs at eight percent per annum) incurred by Crescent Real
Estate in connection with Crescent Real Estate's previous investment in the
Voting Stock (which amount has not yet been determined). Crescent Real Estate
currently owns 100% (950 shares) of the non-voting common stock of Desert
Mountain Development.
Desert Mountain Development currently holds a 93% interest in Desert
Mountain Partnership. The sole limited partner of Desert Mountain Partnership,
with a current 7% economic interest, is Sonora Partners Limited Partnership,
whose principal owner is Lyle Anderson, the original developer of Desert
Mountain. Desert Mountain Partnership has entered into an advisory agreement
with the Lyle Anderson Company pursuant to which Mr. Anderson provides advisory
services in connection with the operation and development of Desert Mountain.
Desert Mountain is an 8,300-acre property that is zoned for the development of
approximately 4,500 lots, approximately 1,500 of which have been sold. The
current plans for Desert Mountain, however, contemplate limiting development in
order to maintain the exclusive nature of the community. Desert Mountain also
includes The Desert Mountain Club, a private golf, tennis and fitness club which
serves over 1,600 members and offers four Jack Nicklaus signature 18-hole golf
courses. One of these courses is Cochise, the site of the Senior PGA Tour's The
Tradition golf tournament.
The Company funded the purchase of the Voting Stock with proceeds from
the $20.4 million line of credit (the "Line of Credit") provided by Crescent
Real Estate. The Line of Credit bears interest at the rate of 12% per annum and
is payable on an interest-only basis during its term, which expires on the
later of (i) May 21, 2002 or (ii) five years after the last draw under the Line
of Credit. Draws may be made under the Line of Credit until June 22, 2002. The
Line of Credit is a recourse obligation and amounts outstanding thereunder are
or will be secured, to the extent not prohibited by preexisting arrangements, by
a first lien on the assets owned by the Company now or in the future (other
than assets acquired after June 30, 1997, which may be pledged in the future to
secure nonrecourse loans).
The Voting Stock was offered by Crescent Real Estate to the Company in
accordance with an intercompany agreement, dated as of June 3, 1997, by and
between the Company and Crescent Real Estate (the "Intercompany Agreement"),
pursuant to which the Company and Crescent Real Estate agreed to provide each
other with rights to participate in certain transactions. The Intercompany
Agreement provides that Crescent Real Estate must give the Company written
notice of certain lessee opportunities as to which Crescent Real Estate
determines that the Company is qualified to be the lessee which become
available, and during the 30-day period following such notice, the Company has
the right of first refusal and has the right to negotiate on an exclusive basis
with Crescent Real Estate with respect to such opportunities. In connection
with the purchase of the Voting Stock, the Company has agreed to waive its
rights under the Intercompany Agreement with respect to the 30-day period.
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The financial statements required to be filed with this Form 8-K, pursuant
to Item 7 of Form 8-K, will be filed by the Company in a form 8-K/A within 60
days after the filing of this Form 8-K, in accordance with Item 7(a)(4) and Item
7(b)(2)) of Form 8-K.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 10, 1997 CRESCENT OPERATING, INC.
By: /s/ JEFFREY L. STEVENS
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Jeffrey L. Stevens
Treasurer, Chief Financial
Officer and Secretary
