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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NO 1-13038
CRESCENT REAL ESTATE EQUITIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 52-1862813
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
900 Third Avenue, Suite 1800, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code (212) 836-4216
Number of shares outstanding of each of the registrant's classes of common
stock, as of August 9, 1996.
Common Stock, par value $.01 per share: 23,596,586
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such report) and (2) has been subject to
such filing requirements for the past ninety (90) days.
YES X NO
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CRESCENT REAL ESTATE EQUITIES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 (Audited) ........................................ 3
Consolidated Statements of Operations for the three
and six months ended June 30, 1996 and 1995 ........................ 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 ....................................... 5
Notes to Financial Statements ...................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Historical Results of Operations ..................... 10
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.................................................... 18
Item 2. Changes in Securities................................................ 18
Item 3. Defaults Upon Senior Securities...................................... 18
Item 4. Submission of Matters to a Vote of Security Holders.................. 18
Item 5. Other Information.................................................... 19
Item 6. Exhibits and Reports on Form 8-K..................................... 19
</TABLE>
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CRESCENT REAL ESTATE EQUITIES, INC.
CONSOLIDATED BALANCE SHEETS
(NOTE 1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(unaudited) (audited)
<S> <C> <C>
ASSETS:
Land $ 61,146 $ 57,566
Building, improvements and equipment 1,037,755 949,140
Less - Accumulated depreciation (188,812) (172,267)
------------ ------------
910,089 834,439
Cash and cash equivalents 11,681 16,931
Restricted cash and cash equivalents 14,547 22,187
Accounts receivable, net 9,602 7,005
Deferred rent receivable 11,612 10,007
Investments in real estate mortgages and common
stock of residential development corporations (Note 3) 30,947 20,090
Notes receivable 20,465 17,972
Other assets, net 44,423 35,540
------------ ------------
Total assets $ 1,053,366 $ 964,171
============ ============
LIABILITIES:
Borrowings under Credit Facility (Note 4) $ 58,355 $ 20,000
Notes payable (Note 4) 476,053 424,528
Accounts payable, accrued expenses and other liabilities 22,103 31,706
------------ ------------
Total liabilities 556,511 476,234
------------ ------------
MINORITY INTERESTS:
Operating partnership, 5,292,729 and 5,296,734 units,
respectively (Note 5) 69,887 71,925
Investment Joint Ventures 31,820 9,481
------------ ------------
Total minority interests 101,707 81,406
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized 250,000,000
shares, 23,588,040 and 23,523,547 shares issued
and outstanding at June 30, 1996 and December 31,
1995, respectively 236 236
Additional paid-in capital 424,652 423,530
Deferred compensation on restricted shares (364) (455)
Retained deficit (29,376) (16,780)
------------ ------------
Total stockholders' equity 395,148 406,531
------------ ------------
Total liabilities and stockholders' equity $ 1,053,366 $ 964,171
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CRESCENT REAL ESTATE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(NOTE 1)
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
(unaudited) (unaudited)
REVENUES: 1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Rental property $ 43,552 $ 26,077 $ 85,549 $ 51,285
Interest and other income 1,447 3,151 2,510 3,898
------------ ------------ ------------ ------------
Total revenues 44,999 29,228 88,059 55,183
------------ ------------ ------------ ------------
EXPENSES:
Real estate taxes 4,344 2,636 8,377 5,300
Repairs and maintenance 2,679 1,498 4,879 2,893
Other rental property operating 9,121 5,576 17,842 11,223
Corporate general and administrative 1,141 947 2,299 1,745
Interest expense 9,859 1,803 19,018 6,273
Amortization of deferred financing costs 337 565 1,320 1,092
Depreciation and amortization 9,227 6,193 18,281 12,264
------------ ------------ ------------ ------------
Total expenses 36,708 19,218 72,016 40,790
------------ ------------ ------------ ------------
Operating income 8,291 10,010 16,043 14,393
OTHER INCOME:
Equity in net income of residential
development corporations (Note 3) 1,364 1,002 2,175 1,939
------------ ------------ ------------ ------------
INCOME BEFORE MINORITY INTERESTS AND
EXTRAORDINARY ITEM 9,655 11,012 18,218 16,332
Minority interests (2,036) (2,846) (3,619) (4,375)
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 7,619 8,166 14,599 11,957
Extraordinary item (Note 4) (1,306) -- (1,306) --
------------ ------------ ------------ ------------
NET INCOME $ 6,313 $ 8,166 $ 13,293 $ 11,957
============ ============ ============ ============
PER SHARE DATA:
Income before extraordinary item $ 0.33 $ 0.39 $ 0.62 $ 0.65
Extraordinary item (0.06) -- (0.06) --
------------ ------------ ------------ ------------
Net income $ 0.27 $ 0.39 $ 0.56 $ 0.65
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING 23,560,219 20,918,116 23,547,627 18,509,814
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CRESCENT REAL ESTATE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 1 and 2)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------
1996 1995
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,293 $ 11,957
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 19,601 13,356
Equity in net income of residential development
corporations (2,175) (1,939)
Extraordinary item 1,306 --
Minority interests 3,619 4,375
Non-cash compensation 91 --
Increase in accounts receivable (2,792) (2,441)
Increase in deferred rent receivable (1,605) (226)
Increase in other assets (4,933) (9,045)
Decrease in restricted cash and cash equivalents -
property tax payments 12,874 10,930
Decrease in accounts payable, accrued expenses
and other liabilities (9,603) (500)
---------- ----------
Net cash provided by operating activities 29,676 26,467
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investment properties (64,017) (206,526)
Capital expenditures - rental properties (5,202) (3,223)
Increase in restricted cash and cash equivalents (5,234) (4,256)
Investment in residential development corporations (10,857) 1,939
Increase in notes receivable (2,306) (17,657)
Escrow deposits - acquisition of investment properties (2,950) 40,736
---------- ----------
Net cash used in investing activities (90,566) (188,987)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs (4,066) (592)
Borrowings under Credit Facility 58,355 180,200
Payments under Credit Facility (20,000) (175,842)
Debt proceeds 108,638 --
Debt payments (57,113) --
Deposit on long-term debt financing -- (6,000)
Net proceeds from offering -- 166,926
Issuance of partnership units 1,574 --
Dividends and unitholders distributions (31,748) (22,522)
---------- ----------
Net cash provided by financing activities 55,640 142,170
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (5,250) (20,350)
CASH AND CASH EQUIVALENTS,
Beginning of period 16,931 30,247
---------- ----------
CASH AND CASH EQUIVALENTS,
End of period $ 11,681 $ 9,897
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CRESCENT REAL ESTATE EQUITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION:
ORGANIZATION
Crescent Real Estate Equities, Inc. ("Crescent"), which was incorporated
under the General Corporation Law of Maryland on February 9, 1994, is a fully
integrated real estate company organized as a real estate investment trust
("REIT"), which owns, directly or indirectly, a portfolio of properties (the
"Properties") located primarily in 16 metropolitan submarkets in Texas,
Colorado and Arizona. As of June 30, 1996, the Properties include 33 office
properties and two retail properties comprising an aggregate of approximately
9.8 million net rentable square feet (primarily Class A), three full-service
hotel properties with a total of 1,303 rooms, the real estate mortgages and
non-voting common stock of three Residential Development Corporations that own
all or a portion of six single-family residential land developments and three
prospective multi-family developments, and one mortgage note secured by an
office property.
Crescent's direct and indirect subsidiary entities include Crescent Real
Estate Equities, Ltd. ("CREE, Ltd."), which is the general partner of Crescent
Real Estate Equities Limited Partnership (the "Operating Partnership"); CRE
Limited Partner, Inc. ("CRELP, Inc.") which is a limited partner of the
Operating Partnership; the Operating Partnership; Crescent Real Estate Funding
I, L.P. ("Funding I") and Crescent Real Estate Funding II, L.P. ("Funding II"),
limited partnerships in which the Operating Partnership owns substantially all
of the economic interests directly, or indirectly through Waterside Commons
Limited Partnership ("WCLP"), and the remaining interests which are owned
indirectly by Crescent through CRE Management I Corp. ("CREMI") and CRE
Management II Corp. ("CREMII") which are the general partners of Funding I and
Funding II, respectively, and are both wholly owned subsidiaries of CREE, Ltd.,
and Crescent/301 L.L.C., which is a wholly owned subsidiary of the Operating
Partnership and its general partner (Crescent and all the foregoing are
collectively referred to as the "Company"). As of June 30, 1996, Funding I
owned nine properties located in Texas and Colorado consisting of eight office
properties and one retail property and Funding II owned 12 properties located
in Texas, Colorado, Arizona and New Mexico consisting of nine office
properties, two hotel properties and one retail property. As of June 30, 1996,
the Operating Partnership owned directly or indirectly through partnership
interests 17 properties located in Texas, Colorado, Arizona and Nebraska
consisting of 16 office properties, one hotel property, a mortgage note secured
by an office property and the real estate mortgages and non-voting common stock
of three Residential Development Corporations. The following table sets forth
by subsidiary, the properties owned by such subsidiary:
<TABLE>
<CAPTION>
OPERATING
FUNDING I FUNDING II PARTNERSHIP
- --------- ---------- -----------
<S> <C> <C>
The Crescent Office Towers Albuquerque Plaza Central Park Plaza
The Crescent Atrium Barton Oaks Plaza One Denver Marriott City Center
The Avallon Briargate Office and Research Center MCI Tower
The Citadel Hyatt Regency Albuquerque Spectrum Center
The Aberdeen Hyatt Regency Beaver Creek The Woodlands Office
Continental Plaza Las Colinas Plaza Properties (through WOE,
Caltex House Liberty Plaza I & II see Note 8)
Regency Plaza One MacArthur Center I & II 301 Congress Avenue (see Note 7)
Waterside Commons Ptarmigan Place 3333 Lee Parkway
Stanford Corporate Centre 6225 North 24th Street
Two Renaissance Square
12404 Park Central
</TABLE>
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BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In management's opinion, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
unaudited interim financial statements have been included. Operating results
for interim periods reflected are not necessarily indicative of the results
that may be expected for a full fiscal year. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-K.
Certain reclassifications have been made to previously reported amounts to
conform with current presentation.
2. SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid (net of capitalized interest) $18,952 $ 6,294
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Minority interest - joint venture capital $22,976 $ --
Conversion of operating partnership units to common
stock with resulting reduction in minority interest and
increases in additional paid-in capital $ 825 $10,944
</TABLE>
3. INVESTMENTS IN REAL ESTATE MORTGAGES AND COMMON STOCK OF RESIDENTIAL
DEVELOPMENT CORPORATIONS:
The Company accounts for its investments in real estate mortgages and
non-voting common stock of Mira Vista Development Corp. ("MVDC"), Houston Area
Development Corp. ("HADC") and Crescent Development Management Corp. ("CDMC")
(collectively, the "Residential Development Corporations"), under the equity
method of accounting. The following summarizes the combined financial
information for the Residential Development Corporations for the three and six
months ended June 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Summary Operations
Lot Sale Revenue $2,346 $5,542 $3,596 $7,339
Other Revenue 438 146 1,033 353
====== ====== ====== ======
Total Revenue $2,784 $5,688 $4,629 $7,692
====== ====== ====== ======
Net Income $1,456 $3,530 $2,323 $4,510
====== ====== ====== ======
</TABLE>
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4. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY:
NOTES PAYABLE
<TABLE>
<CAPTION>
June 30,
1996
--------
<S> <C>
Note payable to Asset Securitization Corporation,
Commercial Mortgage Pass-Through Certificates,
Series 1995-MD IV ("Nomura Note I") bears interest
at an average rate of 7.83% with an initial
seven-year interest-only period, followed by
principal amortization based on a 25-year
amortization schedule through maturity in August
2027 (1), secured by Funding I properties ............... $239,000
Note payable to Nomura Asset Securities
Corporation, Commercial Mortgage Pass-Through
Certificates, Series 1996-MD V ("Nomura Note II")
bears interest at an average rate of 7.79% with an
initial seven-year interest-only period, followed
by principal amortization based on a 25-year
amortization schedule through maturity in March
2028(2), secured by Funding II properties ............... 161,000
Note payable to Connecticut General Life Insurance
Company due December 2002, bearing interest at
7.47% with a seven-year interest-only term,
secured by MCI Tower and Denver Marriott City Center .... 63,500
Note payable to Metropolitan Life Insurance
Company due September 2001, bearing interest at
8.875% with monthly principal and interest
payments, secured by five of The Woodlands Office
Properties .............................................. 12,553
--------
Total Notes Payable ..................................... $476,053
========
</TABLE>
(1) In August 2007, the borrower is required to remit, in addition to the
monthly debt service payment, excess property cash flow, as defined, to be
applied first against principal until the note is paid in full and
thereafter, against accrued excess interest, as defined. It is the
Company's intention to repay the note in full at such time (August 2007)
by making a final payment of approximately $220,000.
(2) In March 2006, the borrower is required to remit, in addition to the
monthly debt service payment, excess property cash flow, as defined, to be
applied first against principal until the note is paid in full and
thereafter, against accrued excess interest, as defined. It is the
Company's intention to repay the note in full at such time (March 2006) by
making a final payment of approximately $154,000.
CREDIT FACILITY
In April 1996, the Company canceled its $150,000 credit facility led by The
First National Bank of Boston ("FNBB"). At that time the Company had no
outstanding borrowings under the credit facility. In connection with the
cancellation of the credit facility, the Company recognized an extraordinary
loss of $1,306, net of minority interests, resulting from the write-off of
unamortized deferred financing fees.
In June 1996, the Company executed a new $150,000 credit facility (the "Credit
Facility") with FNBB which has subsequently been increased to $175,000.
Initially, the Credit Facility has a 9 month term and will bear interest at
LIBOR +240 basis points. Upon the occurrence of certain qualifying events,
including the raising of additional equity, the term will be extended by 24
months and interest rate will be reduced to
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LIBOR +185 basis points. The Credit Facility requires the Company to maintain
compliance with a number of customary financial and other covenants on an
ongoing basis, including loan-to-value and debt service coverage ratios,
limitations on additional indebtedness and stockholders' distributions, and a
minimum net worth requirement. As of June 30, 1996, the Company was in
compliance with all covenants of the Credit Facility.
5. MINORITY INTERESTS:
Minority interests represents (i) limited partnership interests in the
Operating Partnership ("units") and (ii) joint venture interests held by
outside interests. Each unit may be exchanged for either one share of common
stock or, at the election of the Company, cash equal to the fair market value
of the share of common stock at the time of the exchange. When a unitholder
exchanges a unit, minority interest will be reduced and the Company's
investment in the Operating Partnership will be increased. During the six
months ended June 30, 1996, 52,743 units were exchanged for shares of common
stock of the Company.
6. STOCKHOLDERS' EQUITY:
On April 4, 1996, the Company declared a cash dividend and unitholder
distribution of $15,897 or $.55 per share and equivalent unit, to stockholders
and unitholders of record on April 17, 1996 for the quarter ended March 31,
1996. The cash dividend and unitholder distribution were paid on May 1, 1996,
and represented an annualized distribution of $2.20 per share and equivalent
unit.
7. ACQUISITIONS:
On April 18, 1996, the Company together with Aetna Life Insurance Company
("Aetna") formed 301 Congress Avenue, L.P., a Delaware limited partnership in
which the Company and Aetna, each own a 50% interest. Crescent/301, L.L.C., a
limited liability company that is wholly owned by the Company's operating
partnership and its general partner, serves as the general partner of 301
Congress Avenue, L.P. (the "Partnership"). On April 18, 1996, the Partnership
acquired from Aetna 301 Congress Avenue, a 22-story Class A office property
consisting of 418,000 square feet of net rentable space located in downtown
Austin, Texas. The Company contributed to the Partnership approximately $21,635
which was funded through a short-term note payable to FNBB. Beginning in April
1996, the operations of the Partnership were consolidated into the operations
of the Company.
On June 13, 1996, the Company acquired Central Park Plaza, a Class A office
property consisting of two 15-story twin towers and 410,000 square feet of net
rentable space located in downtown Omaha, Nebraska. The purchase price of
Central Park Plaza was approximately $25,200, which was funded through a draw
under the Credit Facility.
8. SUBSEQUENT EVENTS (through August 9, 1996):
On July 3, 1996, the Company declared a cash dividend and unitholder
distribution of $15,884 or $.55 per share and equivalent unit for the quarter
ended June 30, 1996. The dividend is equivalent to an annualized dividend of
$2.20 per share. The dividend is payable August 6, 1996, to shareholders of
record on July 17, 1996.
On July 26, 1996, the Company acquired Canyon Ranch-Tucson, a destination
health and fitness resort located at the base of the Catalina mountains
near Tucson, Arizona. Canyon Ranch-Tucson encompasses 50 acres, including 179
rooms, which can accommodate 240 guests on a daily basis, a 62,000 square
foot spa complex, a life enhancement center offering structured therapy and
counseling, a health and healing center with a complete staff of physicians,
dietitians, psychologists and therapists, four pools and eight tennis courts.
The Tucson resort was acquired for approximately $57,000 through the issuance
of $27,000 of operating partnership units and assumption of debt which the
Company subsequently retired for $30,000, through a draw under the Credit
Facility.
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On July 31, 1996, the Woodland Office Equities - `95 Limited ("WOE"), in which
the Company owns a 75% limited partnership interest, acquired two office
properties developed by The Woodlands Corporation consisting of a combined
109,000 square feet of net rentable space located in The Woodlands, a community
25 miles north of Houston, Texas. The purchase price for the two office
properties was approximately $10,915, in which the Company contributed $8,186 to
WOE through a draw under the Credit Facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
HISTORICAL RESULTS OF OPERATIONS
The changes in operating results from period to period are primarily the result
of increases in the total square feet of the portfolio due to significant
acquisitions made by Crescent Real Estate Equities, Inc. through its direct and
indirect subsidiaries (collectively, the "Company"). The weighted average
square feet of consolidated properties for the three and six months ended June
30, 1996 were approximately 9.4 and 9.1 million, respectively, compared to 5.6
and 5.3 million for the same periods in 1995. These increases in consolidated
properties square feet represent a 67.9% and 71.7% increase in square feet for
the three and six months ended June 30, 1996, respectively, compared to the
same periods in 1995.
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1993 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include the following: real estate investment
considerations, such as the effect of economic, demographic, competitive and
other conditions in the market area on cash flows and values, the ability to
renew leases or relet space on a timely basis upon the expiration of current
leases, and the ability of a property to generate revenues sufficient to meet
debt service payments and other operating expenses; and financing risks, such
as the availability of equity and debt financing, the Company's ability to
service existing debt, the possibility that the Company's outstanding debt
(which requires so-called balloon payments of principal) may be refinanced at
higher interest rates or otherwise on terms less favorable to the Company and
the fact that interest rates under the Credit Facility may increase.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These financial statements
include all adjustments which are, in the opinion of management, necessary to
reflect a fair statement of the results for the interim periods presented, and
all such adjustments are of a normal and recurring nature.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues from rental properties increased approximately $17.5 million, or
67.0%, to $43.6 million for the three months ended June 30, 1996, as compared
to $26.1 million for the three months ended June 30, 1995. This increase is
primarily attributable to the acquisition of: a) three office properties and
one hotel in the second quarter of 1995 which resulted in $4.7 million of
incremental revenues; b) 16 office properties and one hotel in the third and
fourth quarters of 1995 which resulted in $10.6 million of incremental
revenues; and c) three office properties in 1996 which resulted in $2.4 million
of incremental revenues.
The decrease in interest and other income of $1.7 million is primarily due to
the sale of the co-investment rights in the Ritz-Carlton Hotel in the second
quarter of 1995 resulting in a $2.3 million gain, compared to the sale of
marketable securities in the second quarter of 1996, resulting in a $.7 million
gain.
Total expenses increased $17.5 million, or 91.1%, to $36.7 million for the
three months ended June 30, 1996, as compared to $19.2 million for the three
months ended June 30, 1995. The increase in rental property operating expenses
of $6.4 million, is primarily attributable to the acquisition of: a) three
office properties in the second quarter of 1995 which resulted in $1.2 million
of incremental expenses; b) 16 office properties in the third and fourth
quarters of 1995 which resulted in $4.0 million of incremental
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expenses; and c) three office properties in 1996 which resulted in $1.3 million
of incremental expenses. Depreciation and amortization increased $3.0 million
primarily due to the property acquisitions subsequent to June 30, 1995. The
increase in interest expense of $8.1 million is primarily attributable to
interest payable under the terms of the three long-term financing arrangements
entered into between August 1995 and March 1996, proceeds of which were used to
fund property acquisitions in 1995 and 1996. The increase in corporate general
and administrative of $.2 million was attributable to incremental costs
associated with the corporate operations of the Company as a direct result of
recent property additions to the Company's portfolio.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues from rental properties increased approximately $34.2 million, or
66.7%, to $85.5 million for the six months ended June 30, 1996, as compared to
$51.3 million for the six months ended June 30, 1995. This increase is
primarily attributable to the acquisition of: a) three office properties and
one hotel in the second quarter of 1995 which resulted in $9.8 million of
incremental revenues; b) 16 office properties and one hotel in the third and
fourth quarters of 1995 which resulted in $21.3 million of incremental
revenues; and c) three office properties in 1996 which resulted in $3.0 million
of incremental revenues.
The decrease in interest and other income of $1.4 million is primarily due to
the sale of the co-investment rights in the Ritz-Carlton Hotel in the second
quarter of 1995 resulting in a $2.3 million gain, compared to the sale of
marketable securities in the second quarter of 1996, resulting in a $.7 million
gain.
Total expenses increased $31.2 million, or 76.5%, to $72.0 million for the six
months ended June 30, 1996, as compared to $40.8 million for the six months
ended June 30, 1995. The increase in rental property operating expenses of $11.7
million, is primarily attributable to the acquisition of: a) three office
properties in the second quarter of 1995 which resulted in $2.6 million of
incremental expenses; b) 16 office properties in the third and fourth quarters
of 1995 which resulted in $7.7 million of incremental expenses; and c) three
office properties in 1996 which resulted in $1.6 million of incremental
expenses. Depreciation and amortization increased $6.0 million primarily due to
the property acquisitions subsequent to June 30, 1995. The increase in interest
expense of $12.7 million is primarily attributable to interest payable under the
terms of the three long-term financing arrangements entered into between August
1995 and March 1996, proceeds of which were used to fund property acquisitions
in 1995 and 1996. The increase in corporate general and administrative of $.6
million was attributable to incremental costs associated with the corporate
operations of the Company as a direct result of recent property additions to the
Company's portfolio.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $11.7 million and $16.9 million at June 30, 1996
and December 31, 1995, respectively. The decrease is attributable to $90.6
million used in investing activities, offset by $55.6 million and $29.7 million
of cash provided by financing and operating activities, respectively. The
Company utilized $90.6 million of cash flow primarily in the following
investing activities: (i) the acquisition of three office properties ($64.0
million); (ii) additional investments in Residential Development Corporations
($10.9 million); (iii) tenant and building improvements ($5.2 million) and (iv)
restricted cash escrows for capital expenditures, real estate taxes and
insurance ($5.2 million). The cash inflow from operating activities is
primarily attributable to property operations and a decrease in restricted cash
reserves for the payment of real estate taxes partially offset by the increase
in accounts receivable due to recent property acquisitions and the hotel
lessee's percentage rent lease payments which are remitted quarterly and
decrease in accounts payable due to payment of property taxes. The Company's
inflow of cash provided by financing activities is primarily attributable to
proceeds received from the long-term financing arrangements with Nomura Asset
Capital Corporation ("Nomura"), Connecticut General Life Insurance Company
("CIGNA"), the Credit Facility and short-term note payable ($167.0 million),
which amounts were partially offset by the repayment of the short-term note
payable ($57.1 million) and the pay-off and cancellation of the prior credit
facility ($20.0 million) and the distributions paid to stockholders and
unitholders ($31.7 million).
11
<PAGE> 12
On February 16, 1996, the Company's S-3 shelf registration with the Securities
and Exchange Commission ("SEC") for an aggregate of $500 million of common
stock, preferred stock and warrants to purchase common stock was declared
effective by the SEC. Any securities issued under the registration statement
may be offered from time to time in amounts, at prices, and on terms to be
determined at the time of the offering. Management believes this shelf
registration will provide the Company with more efficient and immediate access
to the capital markets at such time as it is considered appropriate. Net
proceeds from any offering of these securities are expected to be used for
general business purposes, including the acquisition and development of
additional properties and other acquisition transactions, the payment of
certain outstanding debt and improvements to certain properties in the
Company's portfolio.
The significant terms of the Company's debt financing arrangements are shown
below (dollars in thousands):
<TABLE>
<CAPTION>
BALANCE
MAXIMUM INTEREST EXPIRATION OUTSTANDING AT
DESCRIPTION BORROWINGS RATE DATE JUNE 30, 1996
----------- ---------- ---- ---- -------------
<S> <C> <C> <C> <C>
Line of Credit(a) $ 175,000 8.25% February 1997 $ 58,355
Nomura Note I(b) 239,000 7.83% August 2027 239,000
Nomura Note II(c) 161,000 7.79% March 2028 161,000
CIGNA Note 63,500 7.47% December 2002 63,500
Metropolitan Life Note 12,553 8.88% September 2001 12,553
---------- -----------
Total $ 651,053 $ 534,408
========== ===========
</TABLE>
(a) The Company executed a new $150 million credit facility with The First
National Bank of Boston which has subsequently been increased to $175
million. Initially, the term is 9 months and will bear interest at LIBOR
+240 basis points. Upon the occurrence of certain qualifying events,
including the raising of additional equity, the term will be extended 24
months and interest rate will be reduced to LIBOR +185 basis points.
(b) The note has a seven year period during which only interest is payable,
followed by principal amortization based on a 25-year amortization
schedule through maturity. At the end of 12 years (August 2007) , the
borrower is required to remit, in addition to the monthly debt service
payment, excess property cash flow, as defined, to be applied first
against principal until the note is paid in full and thereafter, against
accrued excess interest, as defined. It is the Company's intention to
repay the note in full at such time (August 2007) by making a final
payment of approximately $220 million.
(c) The note has a seven year period during which only interest is payable,
followed by principal amortization based on a 25-year amortization
schedule through maturity. At the end of 10 years (March 2006), the
borrower is required to remit, in addition to the monthly debt service
payment, excess property cash flow, as defined, to be applied first against
principal until the note is paid in full and thereafter, against accrued
excess interest, as defined. It is the Company's intention to repay the
note in full at such time (March 2006) by making a final payment of
approximately $154 million.
The Company expects to meet its short-term liquidity requirements primarily
through cash flow provided by operating activities, which the Company believes
will be adequate to fund normal recurring operating expenses, debt service
requirements, non-incremental revenue generating capital expenditures and
distributions to stockholders and unitholders. To the extent the Company's cash
flow from operating activities is not sufficient to finance incremental
revenue-generating capital expenditures (including additions to or replacements
of residential lots), or investment property acquisition costs, the Company
expects to finance such activities with proceeds available under the new Credit
Facility, available cash reserves and other debt and equity financing.
The Company expects to meet its long-term liquidity requirements, consisting
primarily of maturities under the Credit Facility, CIGNA Note and Nomura Notes,
through long-term secured and unsecured borrowings and the issuance of debt
securities and/or additional equity securities of the Company.
Based on the Company's total market capitalization of $1.6 billion at June 30,
1996 (at a $36.75 stock price, which was the closing price of the stock on the
NYSE on June 30, 1996, and including the full conversion of all units of
minority interest in the Operating Partnership plus total indebtedness), the
12
<PAGE> 13
Company's debt represented 33% of its total market capitalization. The Company
intends to maintain a conservative capital structure with total debt targeted
at 40% of total market capitalization.
The Company intends to maintain its qualification as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"). As a REIT, the Company will generally not be subject to corporate
federal income taxes as long as it satisfies certain technical requirements of
the Code, including the requirement to distribute 95% of its taxable income to
its shareholders.
FUNDS FROM OPERATIONS
Funds from Operations ("FFO"), based on the revised definition adopted by the
Board of Governors of the National Association of Real Estate Investment Trusts
("NAREIT") and as used herein, means net income (loss) (determined in
accordance with generally accepted accounting principles or "GAAP"), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization of real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. FFO was developed by NAREIT as
a relative measure of performance and liquidity of an equity REIT in order to
recognize that income-producing real estate historically has not depreciated on
the basis determined under GAAP. The Company considers FFO an appropriate
measure of performance of an equity REIT. However, FFO (i) does not represent
cash generated from operating activities determined in accordance with GAAP
(which, unlike FFO, generally reflects all cash effects of transactions and
other events that enter into the determination of net income), (ii) is not
necessarily indicative of cash flow available to fund cash needs and (iii)
should not be considered as an alternative to net income determined in
accordance with GAAP as an indication of the Company's operating performance,
or to cash flow from operating activities determined in accordance with GAAP as
a measure of either liquidity or the Company's ability to make distributions.
The Company has historically distributed an amount less than FFO, primarily due
to reserves required for capital expenditures, including leasing costs. The
aggregate distributions paid to stockholders and unitholders for the six months
ended June 30, 1996 and 1995 were $31.8 and $25.7 million, respectively. An
increase in FFO does not necessarily result in an increase in aggregate
distributions because the Company's board of directors is not required to
increase distributions on a quarterly basis unless necessary in order to enable
the Company to maintain REIT status. However, the Company must distribute 95%
of its real estate investment trust taxable income (as defined in the Code),
therefore, a significant increase in FFO will generally require an increase in
distributions to stockholders and unitholders although not necessarily on a
proportionate basis. Accordingly, the Company believes that in order to
facilitate a clear understanding of the consolidated historical operating
results of the Company, FFO should be considered in conjunction with the
Company's net income (loss) and cash flows as reported in the consolidated
financial statements and notes thereto. Management believes that FFO is a
useful indicator of operations and ability to generate cash and, therefore, is
useful to investors both in understanding the Company's performance and
liquidity and because industry analysts generally report FFO of REITs, in
comparing these factors to those of other REITs. However, the Company's measure
of FFO may not be comparable to similarly titled measures of other REITs
because these REITs may not apply to the revised definition of FFO in the same
manner as the Company.
13
<PAGE> 14
STATEMENTS OF FUNDS FORM OPERATIONS
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME BEFORE MINORITY INTERESTS
AND EXTRAORDINARY ITEM $ 9,655 $ 11,012 $ 18,218 $ 16,332
ADJUSTMENTS:
Depreciation and amortization of real
estate assets 8,929 6,055 17,818 11,984
Adjustment for unconsolidated
investments in real estate
mortgages and common stock of
residential development corporations 690 3,219 1,012 3,868
Joint Ventures minority interest (320) -- (320) --
Other (1) -- (2,300) -- (2,300)
------------ ------------ ------------ ------------
FUNDS FROM OPERATIONS $ 18,954 $ 17,986 $ 36,728 $ 29,884
============ ============ ============ ============
WEIGHTED-AVERAGE SHARES/UNITS
OUTSTANDING 28,892,874 28,112,580 28,876,941 25,348,191
DIVIDEND PAID PER SHARE $ 0.55 $ 0.50 $ 1.10 $ 1.00
SUPPLEMENTAL INFORMATION:
Rental income from straight-line rents $ (723) $ (130) $ (1,605) $ (226)
Residential development capital expenditures (791) (404) (1,267) (774)
Non-incremental revenue generating exp.:
Rental property capital expenditures (620) (309) (759) (582)
Tenant leasing costs (2,589) (861) (3,366) (1,683)
Depreciation and amortization of non-real
estate assets 180 138 345 280
Amortization of deferred financing costs 337 565 1,320 1,092
</TABLE>
(1) Represents non-recurring gain on sale of investment
14
<PAGE> 15
PORTFOLIO INFORMATION
The following tables set forth certain information about the properties as
of June 30, 1996.
OFFICE AND RETAIL PROPERTIES
<TABLE>
<CAPTION>
Average
Base
Net Rent
Rentable Per
Acq. Year Area Percent Leased
Property Location Date Completed (Sq. Ft.) Leased Sq. Ft.(1)
-------- -------- ---- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES
The Crescent Office Towers Dallas, TX (2) 1986 1,205,212 93% $21.87 (3)
Continental Plaza Fort Worth, TX (2) 1982 954,895 84 14.68 (3)
MacArthur Center I & II Irving, TX (2) 1982/1986 294,069 100 15.89
The Citadel Denver, CO (2) 1987 130,652 96 15.81
Caltex House Irving, TX 5/5/94 1982 445,993 94 18.95 (3)
Liberty Plaza I & II Dallas, TX 7/15/94 1981/1986 218,813 95 11.46 (3)
Regency Plaza One Denver, CO 8/2/94 1985 309,862 98 17.08
Waterside Commons Irving, TX 10/1/94 1986 458,739 98 9.18 (6)
Two Renaissance Square Phoenix, AZ 11/3/94 1990 476,373 74 21.30
The Avallon Austin, TX 11/8/94 1993 125,959 100 16.20
Stanford Corporate Centre Dallas, TX 1/4/95 1985 265,507 100 13.39
The Aberdeen Dallas, TX 3/13/95 1986 320,629 100 15.75
12404 Park Central Dallas, TX 5/9/95 1987 239,103 100 13.12
Barton Oaks Plaza One Austin, TX 6/5/95 1986 99,792 89 17.59
MCI Tower Denver, CO 6/30/95 1982 550,807 97 16.03
The Woodlands Office
Properties(4) Woodlands, TX 7/12/95 1980-1993 702,959 88 12.09 (3)
Spectrum Center(5) Dallas, TX 8/31/95 1983 598,250 91 14.39
Ptarmigan Place Denver, CO 10/6/95 1984 418,565 66 13.26
6225 North 24th Street Phoenix, AZ 11/7/95 1981 84,460 100 12.00 (8)
Briargate Office and
Research Center CO Springs, CO 11/21/95 1988 252,857 100 8.48 (8)
Albuquerque Plaza Albuq., NM 12/19/95 1990 365,952 87 17.03
3333 Lee Parkway Dallas, TX 1/5/96 1983 233,484 62 14.46
301 Congress Avenue (7) Austin, TX 4/18/96 1986 418,443 86 12.49 (8)
Central Park Plaza Omaha, NE 6/13/96 1982 409,850 98 11.77 (8)
--------- -- ------
Total Office Properties/Weighted Average 9,581,225 90% $15.34
========= == ======
RETAIL PROPERTIES
Las Colinas Plaza Irving, TX (2) 1989 135,449 98% $10.70 (8)
The Crescent Atrium Dallas, TX (2) 1986 94,852 86 14.39 (8)
--------- -- ------
Total Retail Properties/Weighted Average 230,301 92% $12.12
========= == ======
</TABLE>
- -------------
(1) Calculated based on base rent payable as of June 30, 1996, without giving
effect to free rent or scheduled rent increases that would be taken into
account under generally accepted accounting principles ("GAAP").
(2) Property was contributed to the Operating Partnership on May 5, 1994.
(3) Excludes electricity costs, which (with the exception of the major tenant
of Caltex House, Liberty Plaza I and five of The Woodlands Office
Properties) are paid in full by the tenants.
(4) The Company has a 75% limited partner interest in the partnership that
owns the 10 office properties that comprise The Woodlands Office
Properties. The Woodlands community is located 25 miles north of Houston,
Texas.
(5) The Company owns the principal economic interest in Spectrum Center
through an interest in the Spectrum Partnership, which owns both the
Spectrum note and the ground lessor's interest in the land underlying the
office building.
(6) Sprint Communications Company L.P. ("Sprint") leases 76% of the property's
net rentable area (approximately 356,000 square feet) pursuant to a
triple-net lease, which means that the tenant is responsible for paying
all operating costs of the property, including utilities, real estate
taxes and insurance. The listed rate excludes such items. On January 1,
1996, Sprint renewed its lease subject to the following terms: a term of
9.5 years, approximately eight months of free rent in 1996, with a current
rate of $7.80 per leased square foot increasing to $8.00 per leased square
foot in June 1998 and $8.20 per leased square foot in June 2002, where it
remains for the duration of the lease.
(7) The Company has a 1% general partner and a 49% limited partner interest in
the partnership that owns 301 Congress Avenue.
(8) Lease(s) are triple-net, with the tenant(s) responsible for the payment of
all operating costs of the property, including real estate taxes and
insurance (with the exception of 75% of leased square feet in Central Park
Plaza). The listed rate excludes such items.
15
<PAGE> 16
HOTEL PROPERTIES
<TABLE>
<CAPTION>
For the six months
ended June
30,
--------------------------------------------
Revenue
Average Average Per
Acq. Year Occupancy Daily Available
Property Location Date Completed Rooms Rate Rate Room
-------- -------- ---- --------- ----- ---- ---- ----
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOTEL PROPERTIES
Hyatt Regency Beaver Creek Avon, CO 1/3/95 1989 295 68% 70% $241 $220 $173 $160
Denver Marriott City Denver, CO 6/30/95 1982 613 81 78 104 97 84 76
Center
Hyatt Regency Albuquerque Albuquerque,NM 12/19/95 1990 395 78 77 93 85 72 66
----- ---- ---- ---- ---- ---- ----
Total Hotel Properties/Weighted Average 1,303 77% 76% $132 $121 $101 $ 92
===== ==== ==== ==== ==== ==== ====
</TABLE>
RESIDENTIAL DEVELOPMENT PROPERTIES
<TABLE>
<CAPTION>
Residential Total Total Average
Residential Development Lots/Units Lots/Units Closed
Residential Development Corporation's Total Developed Closed Sale Price
Development Properties Type of Effective Lots/Units Since Since Per Lot/
Corporation(1) (RDP) RDP(2) Location Ownership % Planned Inception Inception Unit
-------------- ----- ------ -------- ----------- ------- --------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mira Vista Mira Vista SF Fort Worth, TX 100.00% 691 521 431 $ 94,000
Development The Highlands SF Breckenridge, CO 12.25% 750 165 93 $146,000
Corporation Whitehawk Ranch SF Graeagle, CA 20.00% 223 14 8 $ 95,000
----- ---- ----
Total Mira Vista Development Corporation 1,664 700 532
----- ---- ----
Houston Area Falcon Point SF Houston, TX 100.0% 1,205 288 99 $ 36,000
Development Spring Lakes SF Houston, TX 100.0% 536(4) - - N/A
Corporation ----- ---- ----
Total Houston Area Development Corporation 1,741 288 99
----- ---- ----
Crescent One Beaver
Development Creek CO Avon, CO 60.0% 18(5) - - $ -
Management Market Square CO Avon, CO 60.0% 26(5) - - -
Corporation Cresta TH Edwards, CO 60.0% 25 - - -
The Reserve at
Frisco SF Frisco, CO 60.0% 131 - - -
----- ---- ----
Total Crescent Development Management Corporation 200 - -
----- ---- ----
Total Residential Development Properties 3,605 988 631
===== ==== ====
<CAPTION>
Residential Range of
Development Proposed
Properties Sale Prices
(RDP) Per Lot(3)
----- ----------
<S> <C> <C>
Mira Vista Mira Vista $ 50,000 - 265,000
Development The Highlands $ 55,999 - 225,000
Corporation Whitehawk Ranch $ 65,000 - 150,000
Houston Area Falcon Point $ 20,000 - 60,000
Development Spring Lakes $ 25,000 - 45,000
Corporation
Crescent One Beaver Creek $1,330,000 - 3,420,000
Development Market Square $ 356,000 - 2,161,000
Management Cresta $1,278,000 - 1,725,000
Corporation The Reserve at
Frisco $ 86,000 - 110,000
</TABLE>
- ---------------
(1) The Company has a 94%, 94% and 90% effective ownership interest in Mira
Vista Development Corp., Houston Area Development Corp. and Crescent
Development Management Corp., respectively, through ownership of
non-voting common stock.
(2) SF (Single-Family); CO (Condominium); TH (Townhome).
(3) Based on existing inventory of developed lots and lots to be developed.
(4) The initial 93 lot phase of this project is currently under development
and is expected to be completed in early 1997.
(5) 10 and 19 units have been pre-sold for One Beaver Creek and Market Square,
respectively, and are expected to close beginning in the fourth quarter of
1997 upon completion of construction.
16
<PAGE> 17
AGGREGATE LEASE EXPIRATIONS OF OFFICE AND RETAIL PROPERTIES
The following table sets out a schedule of the lease expirations for
leases in place as of June 30, 1996, for each of the 10 years beginning with
the remainder of 1996, for the office and retail properties, on an aggregate
basis, assuming that none of the tenants exercises renewal options.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF ANNUAL
NET RENTABLE OF LEASED TOTAL ANNUAL BASE RENT
NUMBER OF AREA SUBJECT TO NET RENTABLE ANNUAL BASE BASE RENT PER NET
TENANTS WITH EXPIRING AREA SUBJECT RENT UNDER REPRESENTED RENTABLE
EXPIRING LEASES TO EXPIRING EXPIRING BY EXPIRING AREA
YEAR OF LEASE EXPIRATION LEASES (SQUARE FEET)(1) LEASES LEASES(2) LEASES EXPIRING
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 121 803,853 9.1% $11,714,573 8.2% $14.57
1997 125 1,095,903 12.4 15,310,034 10.7 13.97
1998 141 865,301 9.8 14,342,849 10.1 16.58
1999 92 994,795 11.3 14,621,790 10.3 14.70
2000 63 1,026,770 11.7 16,194,062 11.4 15.77
2001 52 894,807 10.2 16,831,054 11.8 18.81
2002 25 1,287,697 14.6 22,471,197 15.8 17.45
2003 12 413,893 4.7 7,402,500 5.2 17.89
2004 10 403,706 4.6 8,857,129 6.2 21.94
2005 8 956,490 10.9 13,436,831 9.4 14.05
2006 and thereafter 3 61,675 0.7 1,286,117 0.9 20.85
</TABLE>
- ----------------------
(1) Excludes an aggregate of 967,561 square feet of unleased space as of June
30, 1996.
(2) Annual base rent (excluding increases in rent and free rent that would be
taken into account under generally accepted accounting principles) for net
rentable area expiring.
17
<PAGE> 18
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on June 17, 1996, the
following proposals were approved:
<TABLE>
<CAPTION>
AFFIRMATIVE NEGATIVE VOTES BROKER
VOTES VOTES ABSTAIN NON-VOTE
----- ----- ------- --------
<S> <C> <C> <C> <C>
1. To consider and vote upon the proposal to
authorize the Company, in connection with any
issuance of securities pursuant to its
existing registration statement, to issue to
the Chairman of the Board of Directors the
same type of securities or, in lieu of such
securities, to issue units of ownership
interest in the Company's operating
partnership that are exchangeable on a
one-for-one basis for shares of the Company's
common stock, par value $.01 per share (the
"Common Stock"), with any such issuance to be
made on terms equivalent to the terms of
issuance to other purchasers. 16,409,608 1,766,665 83,355 3,281,730
2. To approve the appointment of Arthur Andersen
LLP as the independent auditors of the
Company for the fiscal year ending
December 31, 1996. 21,512,835 13,238 15,285 --
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
AFFIRMATIVE NEGATIVE VOTES BROKER
VOTES VOTES ABSTAIN NON-VOTE
----- ----- ------- --------
<S> <C> <C> <C> <C>
3. To consider and vote upon the proposal to
ratify an amendment of the Company's 1995
Stock Incentive Plan. 13,678,981 4,519,380 61,317 3,281,730
4. To consider and vote upon the proposal to
reorganize the Company, currently a Maryland
corporation, as a Texas real estate
investment trust by means of a merger of the
Company into a wholly owned, newly formed
Texas subsidiary organized as a real estate
investment trust. 17,923,166 258,357 78,105 3,281,730
</TABLE>
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K dated April 18, 1996 and filed June 5, 1996.
19
<PAGE> 20
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 thereunto duly authorized.
CRESCENT REAL ESTATE EQUITIES, INC.
/s/ Gerald W. Haddock
---------------------------------------
Date: August 12, 1996 Gerald W. Haddock, President and Chief
Operating Officer
/s/ Dallas E. Lucas
---------------------------------------
Date: August 12, 1996 Dallas E. Lucas, Senior Vice President,
Chief Financial Officer and Chief
Accounting Officer
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of operations found on pages 3 and 4
of the Company's Form 10-Q for the year to-date, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,681
<SECURITIES> 0
<RECEIVABLES> 24,149
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 143,277
<PP&E> 1,098,901
<DEPRECIATION> (188,812)
<TOTAL-ASSETS> 1,053,366
<CURRENT-LIABILITIES> 22,103
<BONDS> 534,408
<COMMON> 236
0
0
<OTHER-SE> 394,912
<TOTAL-LIABILITY-AND-EQUITY> 1,053,366
<SALES> 0
<TOTAL-REVENUES> 88,059
<CGS> 0
<TOTAL-COSTS> 52,998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,018
<INCOME-PRETAX> 14,599
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,599
<DISCONTINUED> 0
<EXTRAORDINARY> 1,306
<CHANGES> 0
<NET-INCOME> 13,293
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
