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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 MARCH 31, 1997
COMMISSION FILE NO 1-13038
CRESCENT REAL ESTATE EQUITIES COMPANY
(formerly known as Crescent Real Estate Equities, Inc.)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 52-1862813
- --------------------------------------------- --------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization)
777 Main Street, Suite 2100, Fort Worth, Texas 76102
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(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code (817) 877-0477
Number of shares outstanding of each of the registrant's classes of common
shares, as of May 14, 1997.
Common Shares, par value $.01 per share: 96,988,489
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 COMPANY
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
PART I: FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1997 and December
31, 1996 (Audited)............................................... 3
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996.......................................... 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996.......................................... 5
Notes to Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Historical Results of Operations................... 12
PART II: OTHER INFORMATION
Item 1. Legal Proceedings................................................ 21
Item 2. Changes in Securities............................................ 21
Item 3. Defaults Upon Senior Securities.................................. 21
Item 4. Submission of Matters to a Vote of Security Holders.............. 21
Item 5. Other Information................................................ 21
Item 6. Exhibits and Reports on Form 8-K................................. 21
</TABLE>
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CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(NOTE 1)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS:
Investments in Real Estate:
Land $ 182,971 $ 146,036
Building and improvements 1,756,745 1,561,639
Furniture, fixtures and equipment 26,096 24,951
Less - Accumulated depreciation (221,730) (208,808)
---------- ----------
Net Investment in Real Estate 1,744,082 1,523,818
Cash and cash equivalents 42,692 25,592
Restricted cash and cash equivalents 25,051 36,882
Accounts receivable, net 19,842 15,329
Deferred rent receivable 19,493 16,217
Investments in real estate mortgages and common
stock of residential development corporations 38,091 37,069
Notes receivable, net 40,532 28,890
Other assets, net 56,821 47,125
---------- ----------
Total assets $1,986,604 $1,730,922
========== ==========
LIABILITIES:
Borrowings under Credit Facility $ 156,000 $ 40,000
Notes payable 778,767 627,808
Accounts payable, accrued expenses and other liabilities 43,356 48,462
---------- ----------
Total liabilities 978,123 716,270
---------- ----------
MINORITY INTERESTS:
Operating partnership, 6,640,336 and 6,640,336 units,
respectively 119,255 120,227
Investment joint ventures 28,944 29,265
---------- ----------
Total minority interests 148,199 149,492
---------- ----------
SHAREHOLDERS' EQUITY:
Common shares, $.01 par value, authorized 250,000,000 shares,
72,324,190 and 36,146,380 shares issued and outstanding
at March 31, 1997 and December 31, 1996, respectively 723 361
Additional paid-in capital 905,792 905,724
Deferred compensation on restricted shares (374) (364)
Retained deficit (45,859) (40,561)
---------- ----------
Total shareholders' equity 860,282 865,160
---------- ----------
Total liabilities and shareholders' equity $1,986,604 $1,730,922
========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
(NOTE 1)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
(UNAUDITED)
1997 1996
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<S> <C> <C>
REVENUES:
Office and retail properties $ 70,415 $ 37,465
Hotel properties 8,985 4,532
Interest and other income 4,674 1,063
----------- -----------
Total revenues 84,074 43,060
----------- -----------
EXPENSES:
Real estate taxes 7,925 4,033
Repairs and maintenance 5,151 2,200
Other rental property operating 17,520 8,721
Corporate general and administrative 4,845 1,158
Interest expense 14,744 9,159
Amortization of deferred financing costs 649 983
Depreciation and amortization 13,952 9,054
----------- -----------
Total expenses 64,786 35,308
----------- -----------
Operating income 19,288 7,752
OTHER INCOME:
Equity in net income of residential
development corporations 957 811
----------- -----------
INCOME BEFORE MINORITY INTERESTS 20,245 8,563
Minority interests (3,494) (1,583)
----------- -----------
NET INCOME $ 16,751 $ 6,980
=========== ===========
PER SHARE DATA:
Net income $ 0.23 $ 0.15
=========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 72,305,184 47,070,628
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF CASHFLOWS
(DOLLARS IN THOUSANDS)
(NOTE 1 AND 2)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------
(UNAUDITED)
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,751 $ 6,980
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 14,601 10,037
Minority interest 3,494 1,583
Non-cash compensation 20 -
Equity in earnings in excess of distributions
received from residential development
corporations (182) (148)
Increase in accounts receivable (4,513) (2,960)
Increase in deferred rent receivable (3,276) (887)
Increase in other assets (3,458) (904)
Decrease in restricted cash and cash equivalents 12,112 9,943
Decrease in accounts payable, accrued
expenses and other liabilities (5,106) (11,961)
--------- --------
Net cash provided by operating activities 30,443 11,683
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investment properties (225,959) (16,423)
Capital expenditures - rental properties (2,638) (139)
Tenant improvement and leasing costs
- rental properties (6,925) (1,349)
Increase in restricted cash and cash equivalents (281) (2,168)
Investment in residential development corporations (840) (11,109)
Investment in unconsolidated companies (90) -
Escrow deposits - acquisition of investment properties (4,890) 100
Increase in notes receivable (11,642) (736)
--------- --------
Net cash used in investing activities (253,265) (31,824)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs (564) (2,668)
Borrowings under Credit Facility 116,000 -
Payments under Credit Facility - (20,000)
Debt proceeds 151,039 108,638
Debt payments (80) (49,045)
Capital distributions - Joint Venture (728) -
Proceeds from exercise of stock options 355 -
Issuance of partnership units - 2,501
Dividends and unitholder distributions (26,100) (15,851)
--------- --------
Net cash provided by financing activities 239,922 23,575
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 17,100 3,434
CASH AND CASH EQUIVALENTS,
Beginning of period 25,592 16,931
--------- --------
CASH AND CASH EQUIVALENTS,
End of period $ 42,692 $ 20,365
========= ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
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CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION:
ORGANIZATION
Crescent Real Estate Equities Company ("Crescent Equities" and, together
with its subsidiaries, the "Company") is a fully integrated real estate company
operating as a real estate investment trust for federal income tax purposes (a
"REIT"). The Company provides management, leasing, and development services
with respect to certain of its properties. Crescent Equities is a Texas real
estate investment trust which became the successor to Crescent Real Estate
Equities, Inc., a Maryland corporation (the "Predecessor Corporation"), on
December 31, 1996, through the merger (the "Merger") of the Predecessor
Corporation and CRE Limited Partner, Inc., a Delaware corporation, into
Crescent Equities. The direct and indirect subsidiaries of Crescent Equities
include Crescent Real Estate Equities Limited Partnership (the "Operating
Partnership"); Crescent Real Estate Equities, Ltd. (the "General Partner"),
which is the sole general partner of the Operating Partnership; six limited
partnerships in which the Operating Partnership owns substantially all of the
economic interests directly or indirectly, with the remaining interests owned
indirectly by the Company through six separate corporations, each of which is a
wholly owned subsidiary of the General Partner and a general partner of one of
the six limited partnerships. The term "Company" includes, unless the context
otherwise requires, Crescent Equities, the Predecessor Corporation, the
Operating Partnership, and the other subsidiaries of the Company.
As of March 31, 1997, the Company directly or indirectly owned a portfolio
of real estate assets (the "Properties") located primarily in 17 metropolitan
submarkets in Texas and Colorado. The Properties include 58 office properties
(the "Office Properties") with an aggregate of approximately 18.0 million net
rentable square feet, four full-service hotels with a total of 1,471 rooms and
two destination health and fitness resorts (the "Hotel Properties"), six retail
properties (the "Retail Properties") with an aggregate of approximately .6
million net rentable square feet and real estate mortgages and non-voting
common stock in three residential development corporations (the "Residential
Development Corporations").
The Company owns its assets and carries on its operations and other
activities through the Operating Partnership and its other subsidiaries. The
Company also has an economic interest in the development activities of the
Residential Development Corporations.
The following table sets forth, by subsidiary, the Properties owned by
such subsidiary:
Operating Partnership: AT&T building, Bank One Tower, Canyon Ranch-Tucson,
Chancellor Park, Central Park Plaza, Denver Marriott
City Center, Frost Bank Plaza, Greenway I and IA,
Greenway II, MCI Tower, Sonoma Mission Inn & Spa,
Spectrum Center(1), Three Westlake Park(2), Trammell
Crow Center(3), The Woodlands Office Properties(4), The
Woodlands Retail Properties(4), 44 Cook, 55 Madison,
160 Spear Street, 1615 Poydras, 301 Congress Avenue(5),
3333 Lee Parkway, and 6225 North 24th Street.
Crescent Real Estate The Aberdeen, The Avallon, Caltex House, The Citadel,
Funding I, L.P.: Continental Plaza, The Crescent Atrium,
("Funding I") The Crescent Office Towers, Regency Plaza One, and
Waterside Commons
Crescent Real Estate Albuquerque Plaza, Barton Oaks Plaza One, Briargate
Funding II, L.P.: Office and Research Center, Hyatt Regency
("Funding II") Albuquerque, Hyatt Regency Beaver Creek, Las Colinas
Plaza, Liberty Plaza I & II, MacArthur Center I & II,
Ptarmigan Place, Stanford Corporate Centre, Two
Renaissance Square, and 12404 Park Central
Crescent Real Estate Greenway Plaza Portfolio(6)
Funding III, IV, and
V, L.P.:
("Funding III, IV
and V")
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Crescent Real Estate Canyon Ranch-Lenox
Funding VI, L.P.:
("Funding VI")
- ---------------------------------
(1) The Operating Partnership owns the principal economic interest in
Spectrum Center through an interest in the partnership which owns both
a mortgage note secured by the building and the ground lessor's
interest in the land underlying the building.
(2) The Operating Partnership owns the principal economic interest in
Three Westlake Park through its ownership of a mortgage note secured by
the building.
(3) The Operating Partnership owns the principal economic interest in
Trammell Crow Center through its ownership of fee simple title to the
property (subject to a ground lease and a leasehold estate regarding
the building) and two mortgage notes encumbering the leasehold
interests in the land and building.
(4) The Operating Partnership owns a 75% limited partner interest in the
partnerships that own The Woodlands Office and Retail Properties.
(5) The Operating Partnership owns a 49% limited partner interest and
Crescent/301 L.L.C., a wholly owned subsidiary of the General Partner
and the Operating Partnership, owns a 1% general partner interest in
301 Congress Avenue, L.P., the partnership that owns 301 Congress
Avenue.
(6) Funding III owns the Greenway Plaza Portfolio, except for the central
heated and chilled water plant building and Coastal Tower Office
property, both located within Greenway Plaza, which are owned by
Funding IV and Funding V, respectively.
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>
Three months ended
March 31,
------------------
1997 1996
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<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $13,108 $8,770
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Two-for-one stock split $ 361 $ -
Conversion of operating partnership units to common
shares with resulting reduction in minority interest
and increases in common share and additional paid-in
capital $ - $ 282
</TABLE>
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4. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY:
<TABLE>
Following is a summary of the Company's debt financing: March 31,
1997
---------
<C> <C>
Note payable to LaSalle National Bank, as Trustee for
Commercial Mortgage Pass-Through Certificates, Series 1995-MD
IV ("LaSalle Note I") bears interest at 7.83% with an initial
seven-year interest-only period (through August 2002), followed
by principal amortization based on a 25-year amortization
schedule through maturity in August 2027 (1), secured by the
Funding I properties............................................ $239,000
Note payable to LaSalle National Bank, as Trustee for
Commercial Mortgage Pass-Through Certificates, Series 1996-MD V
("LaSalle Note II") bears interest at 7.79% with an initial
seven-year interest-only period (through March 2003), followed
by principal amortization based on a 25-year amortization
schedule through maturity in March 2028(2), secured by the
Funding II properties........................................... 161,000
Note payable to LaSalle National Bank, Trustee of Commercial
Mortgage Pass-Through Certificates, Series 1994-MD II ("LaSalle
Note III") due July 1999, bears interest at 30-day LIBOR plus a
weighted average rate of 2.135% (at March 31, 1997 the rate was
7.57% subject to a rate cap of 10%) with a five-year
interest-only term, secured by the Funding III, IV and V
properties...................................................... 115,000
Note payable to Connecticut General Life Insurance Company
("CIGNA") due December 2002, bears interest at 7.47% with a
seven-year interest-only term, secured by the MCI Tower and
Denver Marriott City Center properties.......................... 63,500
Note payable to Northwestern Mutual Life Insurance Company due
January 2004, bears interest at 7.66% with a seven-year
interest-only term, secured by the 301 Congress Avenue
property........................................................ 26,000
Note payable to Metropolitan Life Insurance Company due
September 2001, bears interest at 8.875% with monthly principal
and interest payments, secured by five of The Woodlands Office
Properties...................................................... 12,338
Note payable to Nomura Asset Capital Corporation ("Nomura
Funding VI Note") bears interest at 10.07% with monthly
principal and interest payments based on a 25-year amortization
schedule through July 2020(3), secured by the Funding VI
property........................................................ 8,772
Short-term unsecured note payable to The First National Bank of
Boston ("FNBB") due July 1997, bears interest at Eurodollar
rate plus 185 (at March 31, 1997, the rate was
7.29%).......................................................... 150,000(4)
Short-term construction loan payable to Texas Commerce Bank due
September 1997, bears interest at 30-day LIBOR plus 1.7% (at
March 31, 1997 the rate was 7.14%) secured by land and
improvements that relate to the construction of an additional
office building that will be part of The Avallon................ 3,157
--------
Total Notes Payable $778,767
========
</TABLE>
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(1) In August 2007, the interest rate increases, and the Company 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 interest rate increases, and the Company 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.
(3) In July 1998, the Company may defease the loan by purchasing Treasury
obligations to pay the note without penalty. In July 2010, the interest
rate due under the note will change to a 10-year treasury yield plus 500
basis points or if the Company so elects, it may repay the note without
penalty.
(4) On April 28, 1997, the note was repaid in full with proceeds from the
Company's Offering.
The Company obtained a $175,000 credit facility (the "Credit Facility") in
June 1996 led by FNBB, to enhance the Company's financial flexibility in making
new real estate investments. Advances under the Credit Facility bear interest
at the Eurodollar rate plus 185 basis points. The Credit Facility is unsecured
and expires in March 1999. The Credit Facility requires the Company to
maintain compliance with a number of customary financial and other covenants on
an ongoing basis, including leverage ratios based on book value and debt
service coverage ratios, limitations on additional secured and total
indebtedness and distributions, and a minimum net worth requirement. As of
March 31, 1997, the Company was in compliance with all covenants except for one
financial covenant for which the Company had obtained a bank waiver. As of
March 31, 1997, the interest rate was 7.29% and the outstanding balance was
$156,000.
The Company has entered into a commitment letter with the lender under the
Credit Facility to increase the amount of the Credit Facility to $350,000,
decrease the interest rate to the Eurodollar rate plus 138 basis points and
extend the term until April 2000. Management believes that the modification of
the Credit Facility will be completed in June 1997.
5. MINORITY INTERESTS:
Minority interests represents (i) the limited partnership interests owned
by unitholders in the Operating Partnership ("units") and (ii) joint venture
interests held by outside interests. Due to the March 26, 1997 two-for-one
stock split, the exchange factor has been adjusted in accordance with the
Operating Partnership's limited partnership agreement and each unit may be
exchanged for either two common shares or, at the election of the Company, cash
equal to the fair market value of two common shares at the time of the exchange.
When a unitholder exchanges a unit, the Company's investment in the Operating
Partnership is increased. During the three months ended March 31, 1997, there
were no units exchanged for common shares of the Company.
6. SHAREHOLDERS' EQUITY:
On February 4, 1997, the Company paid a cash dividend and unitholder
distribution of $26,100 or $.61 per share and equivalent unit, to shareholders
and equivalent unitholders of record on January 21, 1997. The dividend
represented an annualized dividend of $2.44 per share and equivalent unit.
On March 2, 1997, the Company declared a two-for-one stock split in the
form of a 100% share dividend. The share dividend was paid on March 26, 1997
to shareholders of record on March 20, 1997.
7. ACQUISITIONS:
Greenway II. On January 17, 1997, the Company acquired Greenway II, a
seven-story Class A office building containing approximately 154,000 net
rentable square feet and located in the
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Richardson/Plano submarket of Dallas, Texas. The purchase price of Greenway II
was approximately $18,200 which was funded through a draw under the Credit
Facility.
Trammell Crow Center. On February 28, 1997, the Company acquired
substantially all of the economic interest in Trammell Crow Center, a 50-story
Class A office building, which contains approximately 1,128,000 net rentable
square feet. The property is located in the cultural and financial district of
the CBD submarket of Dallas, Texas. The Company acquired its interest in
Trammell Crow Center through the purchase of fee simple title to the property
(subject to a ground lease and a leasehold estate regarding the building) and
two mortgage notes encumbering the leasehold interests in the land and building.
The purchase price was approximately $162,000, of which $150,000 was funded
through proceeds from an unsecured, short-term loan with FNBB and the remaining
balance of $12,000 through a draw under the Credit Facility.
Denver Properties. On February 28, 1997, the Company acquired three
office buildings in Denver, Colorado, in a single transaction: 44 Cook, 55
Madison and the AT&T building. 44 Cook, a 10-story Class A office building
containing approximately 122,000 net rentable square feet, and 55 Madison, an
eight-story Class A office building containing approximately 125,000 net
rentable square feet, are both located in the Cherry Creek submarket of Denver,
Colorado. The AT&T building, a 15-story office building, contains approximately
170,000 net rentable square feet and is located in the Denver CBD submarket.
The three office properties were acquired for an aggregate purchase price of
approximately $42,675, which was funded through a draw under the Credit
Facility.
8. SUBSEQUENT EVENTS (through May 14, 1997):
On April 8, 1997, the Company declared a cash dividend and unitholder
distribution of $.305 per share and equivalent unit, to shareholders and
unitholders of record on April 30, 1997. The cash dividend and unitholder
distributions were paid on May 14, 1997, and represented an annualized dividend
of $1.22 per share and equivalent unit.
On April 28, 1997, the Company completed an offering (the "Offering") of
24,150,000 common shares (including the underwriters' overallotment option) at
$25.375 per share. Net proceeds from the Offering to the Company after
underwriting discount of $29,200 and other offering costs of $3,000 were
approximately $580,600. The Company used these net proceeds to fund
approximately $306,300 of the purchase price of the portion of the
Carter-Crowley Portfolio (as defined below) acquired by the Company on May 9,
1997 and to initially fund approximately $26,000 in connection with the
formation and capitalization of Crescent Operating, Inc. ("Crescent Affiliate")
(described in Footnote 9). The Company plans to use and the remaining proceeds
of approximately $248,300 ultimately to fund a portion of the commitments of the
Company and Crescent Affiliate primarily related to the Magellan transaction
which is expected to close in June 1997 (described in Footnote 9).
On May 14, 1997, the Company completed an additional offering of 500,000
common shares to several underwriters who participated in the Offering. The
common shares were sold at $25.875 per share. The gross proceeds of $12,938
from the additional offering will be used to fund a portion of the purchase
price for the Magellan transaction.
On February 10, 1997, the Company entered into a contract to acquire for
approximately $383,300, substantially all of the assets (the "Carter-Crowley
Portfolio") of Carter-Crowley Properties, Inc. ("Carter-Crowley"), an
unaffiliated company controlled by the family of Donald J. Carter. At the time
the contract was executed, the Carter-Crowley Portfolio included 14 office
properties (the "Carter-Crowley Office Portfolio"), with an aggregate of
approximately 3.0 million net rentable square feet, approximately 1,216 acres of
commercially zoned, undeveloped land located in the Dallas/Fort Worth
metropolitan area, two multifamily residential properties located in the
Dallas/Fort Worth metropolitan area, marketable securities, an approximately 12%
limited partner interest in the limited partnership that owns the Dallas
Mavericks NBA basketball franchise, secured and unsecured promissory notes,
certain direct non-operating working interests in various oil and gas wells, an
approximately 35% limited partner interest in two oil and gas limited
partnerships and certain other assets (including operating businesses).
Pursuant to an agreement between Carter-Crowley and the Company, Carter-Crowley
liquidated approximately $51,000 of such
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assets originally included in the Carter-Crowley Portfolio, consisting primarily
of the marketable securities and the oil and gas investments, resulting in a
reduction in the total purchase price by a corresponding amount to
approximately $332,300. On May 9, 1997, the Company and Crescent Affiliate
acquired the Carter-Crowley Portfolio.
The Company acquired certain assets from the Carter-Crowley Portfolio,
with an aggregate purchase price of approximately $306,300, consisting
primarily of the Carter-Crowley Office Portfolio, the two multifamily
residential properties, the approximately 1,216 acres of undeveloped land and
the secured and unsecured promissory notes relating primarily to the Dallas
Mavericks. In addition to the promissory notes relating to the Dallas
Mavericks, the Company obtained rights from the current holders of the majority
interest in the Dallas Mavericks to a contingent $10,000 payment if a new arena
is built within a 75-mile radius of Dallas.
The remainder of the Carter-Crowley Portfolio was purchased by Crescent
Affiliate utilizing cash contributions and loan proceeds that were provided to
Crescent Affiliate by the Company. These assets, which have an allocated cost
of approximately $26,000, consist primarily of the approximately 12% limited
partner interest in the limited partnership that owns the Dallas Mavericks, an
approximately 1% interest in a private venture capital fund and a 100% interest
in a construction equipment sale, leasing and services company.
9. PENDING TRANSACTIONS:
Spin-Off. In April 1997, the Company established Crescent Affiliate.
It is anticipated the shares of Crescent Affiliate will be distributed to the
partners of the Operating Partnership and the shareholders of Crescent Equities
in a spin-off which is expected to occur in June 1997 prior to the closing of
the Magellan transaction.
Prior to the spin-off, the Company will have provided to Crescent
Affiliate a total of approximately $42,500 in the form of cash contributions
and loans. Of this amount, approximately $26,000 was provided to Crescent
Affiliate on May 9, 1997, and was used by Crescent Affiliate to acquire certain
assets from the Carter-Crowley Portfolio. The remaining approximately $16,500
will be provided to Crescent Affiliate prior to the spin-off, and Crescent
Affiliate will use such funds to primarily acquire an interest in the entity
that will operate the approximately 90 behavioral healthcare facilities that the
Company will acquire in the Magellan transaction and to acquire certain warrants
to purchase common stock of Magellan Health Services, Inc. The Company will
also make available to Crescent Affiliate a line of credit in the amount of
approximately $20,000 to be used by Crescent Affiliate to fulfill certain
ongoing obligations associated with the Carter-Crowley and Magellan assets. In
addition, Crescent Affiliate will obtain certain rights pursuant to the terms of
an intercompany agreement to be entered into with the Company in connection with
the spin-off. A more detailed description of the spin-off is contained in the
Company's current report on Form 8-K/A dated January 29, 1997 and filed April
24, 1997 and Crescent Affiliate's Form S-1 filed on April 15, 1997.
Magellan Transaction. On January 29, 1997, the Company entered into an
agreement with Magellan Health Services, Inc. ("Magellan") to acquire
substantially all of the real estate assets of Magellan's domestic hospital
provider business as currently owned and operated by a wholly owned subsidiary
of Magellan. The Magellan transaction involves various components, certain of
which will relate to the Company and certain of which will relate to Crescent
Affiliate. Closing of the transaction, which is subject to various closing
conditions and to approval of the transaction by the stockholders of Magellan
at their annual meeting to be held on May 30, 1997, is expected to occur in
June 1997. The total purchase price for the assets to be acquired in the
Magellan transaction is $400,000. A more detailed description of the Magellan
transaction is contained in the Company's current report on Form 8-K/A dated
January 29, 1997 and filed April 24, 1997.
11
<PAGE> 12
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 and number of hotel/resort
rooms/guest nights contained in the portfolio due to significant acquisitions
made by the Company. The weighted average square feet of consolidated office
and retail properties for the three months ended March 31, 1997 and 1996, were
approximately 17.5 and 9.0 million, respectively, which represents a 94%
increase in net rentable square feet. The weighted average number of
rooms/guest nights for consolidated hotel properties for the three months ended
March 31, 1997 and 1996, were approximately 1,913 and 1,303, respectively,
which represents a 36% increase.
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. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, 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: changes in real estate conditions
(including rental rates and competing properties) or in industries in which the
Company's principal tenants compete, the failure to consummate anticipated
transactions, the ability to identify acquisitions opportunities meeting the
Company's investment strategy, timely leasing of unoccupied square footage,
timely releasing of occupied square footage upon expiration, and the Company's
ability 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 and certain other loans 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 MARCH 31, 1997 AND 1996
Total revenues increased approximately $41.0 million, or 95.1%, to $84.1
million for the three months ended March 31, 1997, as compared to $43.1 million
for the three months ended March 31, 1996. An increase in office and retail
property revenues of $32.9 million is primarily attributable to the acquisition
of 27 office properties and four retail properties subsequent to March 31,
1996, which resulted in $32.3 million of incremental revenues. An increase in
hotel property revenues of $4.5 million is primarily attributable to the
acquisition of two destination health and fitness resorts and one full-service
hotel property subsequent to March 31, 1996, which resulted in $4.2 million of
incremental revenues. The increase in interest and other income of $3.6
million for the three months ended March 31, 1997, is primarily attributable to
a $3.1 million profit distribution related to the Company's investment in
HBCLP, Inc., whose primary asset is its investment in Hudson Bay Partners,
L.P., an investment partnership in which the Company holds an effective 95%
economic interest.
Total expenses increased $29.5 million, or 84%, to $64.8 million for the
three months ended March 31, 1997, as compared to $35.3 million for the three
months ended March 31, 1996. An increase in rental property operating expenses
of $15.6 million is primarily attributable to the acquisition of 27 office
properties and four retail properties subsequent to March 31, 1996, which
resulted in $14.9 million of incremental expenses. Depreciation and
amortization increased $4.9 million primarily due to the property acquisitions.
Amortization of deferred financing costs decreased $.3 million is due to
write-off of unamortized deferred financing costs in April 1996. An increase in
interest expense of $5.6 million is primarily attributable to: (i) $.5 million
of interest payable under the financing arrangement with Northwestern Mutual
Life Insurance Company, which was in place as of December 1996, (ii) $1.0
million of interest payable under the $150 million short-term note
12
<PAGE> 13
with the First National Bank of Boston ("FNBB"), which was in place as of
February 1997, (iii) $2.2 million of interest payable under LaSalle Note III,
which was assumed in the Greenway Plaza Portfolio transaction in October 1996,
(iv) $1.9 million of incremental interest payable due to draws under the Credit
Facility (average balance outstanding for first quarter 1997 and 1996 was
$156,000 and $0, respectively), all of which financing arrangements were used to
fund property acquisitions. An increase in corporate general and administrative
of $3.7 million was primarily attributable to incentive compensation awarded to
the Company's executive officers and also 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 $42.7 million and $25.6 million at March
31, 1997 and December 31, 1996, respectively. The increase is attributable to
$239.9 million and $30.4 million of cash provided by financing and operating
activities, respectively, offset by $253.3 million used in investing activities.
The Company's inflow of cash provided by financing activities is primarily
attributable to proceeds received from the Credit Facility ($116.0 million) and
short term FNBB note ($150.0 million) which were partially offset by the
distributions paid to shareholders and unitholders ($26.1 million). The cash
inflow from operating activities is primarily attributable to property
operations and a decrease in restricted cash reserves for payment of real estate
taxes, partially offset by the decrease in accounts payable due to the payment
of real estate taxes and the increase in accounts receivable, which is due to
(i) recent property acquisitions and (ii) the hotel lessees' percentage rent
lease payments which are remitted quarterly, and deferred rent receivable. The
Company utilized $253.3 million of cash flow primarily in the following
investing activities: (i) the acquisition of five office properties, ($226.0
million); (ii) notes receivable ($11.6 million) primarily attributable to the
acquisition of a note receivable secured by a hotel property ($6.5 million) and
a loan to Houston Area Development Corporation ($1.9 million); (iii) capital
expenditures for rental properties ($2.6 million) primarily attributable to
non-recoverable building improvements for the office and retail properties, and
replacement of furniture, fixtures and equipment for the hotel properties; and
(iv) recurring and non-recurring tenant improvement and leasing costs for the
office and retail properties ($6.9 million).
On February 14, 1997, the Company filed a shelf registration with the
Securities and Exchange Commission ("SEC") for an aggregate of $1.2 billion of
common shares, preferred shares and warrants exercisable for common shares. 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.
On April 28, 1997, the Company completed the Offering of 24,150,000 common
shares (including the underwriters' overallotment option) at $25.375 per share.
Net proceeds from the Offering to the Company, after an underwriting discount of
$29.2 million and other offering costs of $3.0 million were approximately $580.6
million. The Company used these net proceeds to fund approximately $306.3
million of the purchase price of the portion of the Carter-Crowley Portfolio
acquired by the Company in May 9, 1997 and to initially fund approximately $26.0
million in connection with the formation and capitalization of Crescent
Affiliate. The Company plans to use the remaining proceeds of approximately
$248.3 million ultimately to fund a portion of the commitments of the Company
and Crescent Affiliate primarily related to the Magellan transaction which is
expected to close in June 1997.
On May 14, 1997, the Company completed an additional offering of 500,000
common shares to several underwriters who participated in the Offering. The
common shares were sold at $25.875 per share. The gross proceeds of $12.9
million from the additional offering will be used to fund a portion of the
purchase price for the Magellan transaction.
13
<PAGE> 14
The significant terms of the Company's debt financing arrangements are
shown below (dollars in thousands):
<TABLE>
<CAPTION>
BALANCE
MAXIMUM INTEREST RATE AT EXPIRATION OUTSTANDING AT
DESCRIPTION BORROWINGS MARCH 31, 1997 DATE MARCH 31, 1997
- --------------------------- ---------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Fixed Rate Debt:
LaSalle Note I(a) $239,000 7.83% August 2027 $239,000
LaSalle Note II(b) 161,000 7.79% March 2028 161,000
CIGNA Note (c) 63,500 7.47% December 2002 63,500
Northwestern Life Note(d) 26,000 7.66% January 2004 26,000
Metropolitan Life Note(e) 12,338 8.88% September 2001 12,338
Nomura Funding VI Note(f) 8,772 10.07% July 2020 8,772
---------- ------------- --------------
Total/Weighted Average $510,610 7.83% $510,610
========== ============= ==============
Variable Rate Debt:
Line of Credit(g) $175,000 7.29% March 1999 $156,000
FNBB Note(h) 150,000 7.29% July 1997 150,000
LaSalle Note III(i) 115,000 7.57% July 1999 115,000
Texas Commerce Bank Note(j) 11,700 7.14% September 1997 3,157
---------- ------------- --------------
Total/Weighted Average $451,700 7.36% $424,157
========== ============= ==============
</TABLE>
NOTES:
(a) The note provides for the payment of interest only through August 2002,
followed by principal amortization based on a 25-year amortization
schedule through maturity. In August 2007, the interest rate increases,
and the Company 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. LaSalle Note I is secured by
Funding I properties (see Note 1 to Item 1. Financial Statements).
(b) The note provides for the payment of interest only through March 2003,
followed by principal amortization based on a 25-year amortization
schedule through maturity. In March 2006, the interest rate increases,
and the Company 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. LaSalle Note II is secured by
Funding II properties (see Note 1 to Item 1. Financial Statements).
(c) The note requires payments of interest only during its term. The CIGNA
Note is secured by the MCI Tower and Denver Marriott City Center
properties.
(d) The note requires payments of interest only during its term. The
Northwestern Life note is secured by the 301 Congress Avenue property.
(e) The note requires monthly payments of principal and interest and is
secured by five of The Woodlands Office Properties.
(f) Under the terms of the note, principal and interest are payable based on
a 25-year amortization schedule. In July 1998, the Company may defease
the note by purchasing Treasury obligations to pay the note without
penalty. The Nomura Funding VI Note is secured by the property owned by
Funding VI (see Note 1 to Item 1. Financial Statements). In July 2010,
the interest rate due under the note will change to a 10-year treasury
yield plus 500 basis points or if the Company so elects, it may repay the
note without penalty.
(g) The Credit Facility is unsecured with an interest rate of Eurodollar plus
185 basis points.
(h) The note is unsecured with an interest rate of the Eurodollar rate plus
185 basis points. The note requires payments of interest only during its
term. The note was repaid in full on April 28, 1997 with proceeds from
the Company's Offering.
(i) The note bears interest at 30-day LIBOR plus a weighted average rate of
2.135% (subject to a rate cap of 10%) and requires payments of interest
only during its term. LaSalle Note III is secured by Funding III, IV and
V properties (See Note 1 to Item 1. Financial Statements).
(j) The note bears interest at 30-day LIBOR plus 1.7% and requires payments
of interest only during its term. The Texas Commerce Bank Note is secured
by land and improvements that relate to the construction of an additional
office building that will be part of The Avallon.
Based on the Company's total market capitalization of $3.2 billion at
March 31, 1997 (at a $26.750 share price, which was the closing price of the
common shares on the NYSE on March 31, 1997, and including the full conversion
of all units of minority interest in the Operating Partnership plus total
indebtedness), the Company's debt represented 28.9% of its total market
capitalization. After the completion of the Offering, the Company's total
market capitalization was $3.7 billion (at a $25.625 share price, which was the
closing price of the common shares on the NYSE on April 28, 1997, and
including the full conversion of all units of minority interest in the
Operating Partnership plus total indebtedness) and debt
14
<PAGE> 15
represented 24.9% of its total market capitalization. The Company currently
intends to maintain a conservative capital structure with total debt targeted
at 40% of total market capitalization.
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, recurring capital expenditures, and distributions to
shareholders and unitholders. To the extent the Company's cash flow from
operating activities is not sufficient to finance non-recurring capital
expenditures, such as tenant improvement and leasing costs related to previously
unoccupied space, or investment property acquisition costs, the Company expects
to finance such activities with proceeds available under the 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 Company's fixed and variable rate
debt through long-term secured and unsecured borrowings and the issuance of
debt securities and/or additional equity securities of the Company.
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 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 shareholders and unitholders for the three
months ended March 31, 1997 and 1996 were $33.5 and $15.9 million,
respectively. An increase in FFO does not necessarily result in an increase in
aggregate distributions because the Company's board of trustees is not required
to increase distributions on a quarterly basis unless necessary in order to
enable the Company to maintain REIT status. Because the Company must
distribute 95% of its real estate investment trust taxable income (as defined
in the Code), however, a significant increase in FFO will generally require an
increase in distributions to shareholders 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. However, the Company's measure of FFO
may not be comparable to similarly titled measures of other REIT's because
these REIT's may not apply the definition of FFO in the same manner as the
Company.
15
<PAGE> 16
STATEMENTS OF FUNDS FROM OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
------- --------
<S> <C> <C>
Income Before Minority Interests $20,245 $ 8,563
Adjustments:
Depreciation and amortization of real estate assets 13,496 8,889
Adjustment for unconsolidated investments in real estate
mortgages and common stock of residential development corporations 266 322
Minority interest in Joint Ventures (416) -
------- -------
Funds From Operations $33,591 $17,774
======= =======
</TABLE>
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
------- -------
<S> <C> <C>
Funds From Operations $33,591 $17,774
Adjustments:
Depreciation and amortization of non-real estate assets 293 165
Amortization of deferred financing costs 649 983
Minority interest in Joint Ventures profit and depreciation
and amortization of real estate assets 579 -
Adjustment in unconsolidated investments in real estate mortgages
and common stock of residential development corporations (266) (322)
Change in deferred rent receivable (3,276) (887)
Change in current assets and liabilities (965) (5,882)
Other (162) (148)
------- -------
Net Cash Provided by Operating Activities $30,443 $11,683
======= =======
</TABLE>
16
<PAGE> 17
The following table sets forth certain information about the Office Properties
as of March 31, 1997.
OFFICE PROPERTIES
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NET FULL-SERVICE
RENTABLE RENTAL RATE
YEAR AREA PERCENT PER LEASED
STATE, CITY, PROPERTY SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT.(1)
- --------------------- ------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Texas
DALLAS
The Crescent Office
Towers............... Uptown/Turtle Creek 1985 1,210,899 97% $25.80
Trammell Crow
Center(2)............ CBD 1984 1,128,331 80 24.55
Spectrum Center(3)... Far North Dallas 1983 598,250 92 16.64
Waterside Commons.... Las Colinas 1986 458,739 100 16.32
Caltex House......... Las Colinas 1982 445,993 97 25.00
The Aberdeen......... Far North Dallas 1986 320,629 100 17.31
MacArthur Center I &
II................... Las Colinas 1982/1986 294,069 98 17.06
Stanford Corporate
Centre............... Far North Dallas 1985 265,507 100 14.77
12404 Park Central... LBJ Freeway 1987 239,103 98(4) 16.11
3333 Lee Parkway..... Uptown/Turtle Creek 1983 233,484 23(4) 15.99
Liberty Plaza I &
II................... Far North Dallas 1981/1986 218,813 100 12.92
Greenway II.......... Richardson/Plano 1985 154,329 100 18.09
Greenway IA.......... Richardson/Plano 1983 94,784 100 12.31
Greenway I........... Richardson/Plano 1983 51,920 100 12.31
----------- --------- -----------
Subtotal/Weighted
Average.............. 5,714,850 91% $20.45
----------- --------- -----------
FORT WORTH
Continental Plaza.... CBD 1982 954,895 63%(4) $15.85
----------- --------- -----------
HOUSTON
Greenway Plaza
Office Portfolio(5).. Richmond-Buffalo 1969-1982 4,256,885 76% $14.63
Speedway
The Woodlands Office
Properties(6)....... The Woodlands 1980-1996 812,359 97 14.00
Three Westlake
Park(7).............. Katy Freeway 1983 414,251 100 13.18
----------- --------- -----------
Subtotal/Weighted
Average.............. 5,483,495 81% $14.39
----------- --------- -----------
AUSTIN
Frost Bank Plaza..... CBD 1984 433,024 70% $17.81
301 Congress
Avenue(8)............ CBD 1986 418,338 95 24.01
Bank One Tower....... CBD 1974 389,503 95 14.88
The Avallon.......... Northwest 1993 125,959 100 17.72
Barton Oaks Plaza
One.................. Southwest 1986 99,792 92 19.16
----------- --------- -----------
Subtotal/Weighted
Average.............. 1,466,616 88% $18.97
----------- --------- -----------
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NET FULL-SERVICE
RENTABLE RENTAL RATE
YEAR AREA PERCENT PER LEASED
STATE, CITY, PROPERTY SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT.(1)
- --------------------- ------------------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
COLORADO
DENVER
MCI Tower............ CBD 1982 550,807 98% $17.18
Ptarmigan Place...... Cherry Creek 1984 418,565 66(4) 14.42
Regency Plaza One.... DTC 1985 309,862 94 19.15
AT&T................. CBD 1982 169,610 99 13.87
The Citadel.......... Cherry Creek 1987 130,652 93 17.76
55 Madison........... Cherry Creek 1982 124,519 91 15.39
44 Cook.............. Cherry Creek 1984 122,070 69 16.47
---------- --------- ------------
Subtotal/Weighted
Average.............. 1,826,085 87% $16.59
---------- --------- ------------
COLORADO SPRINGS
Briargate Office and
Research Center...... Colorado Springs 1988 252,857 100% $13.90
---------- --------- ------------
ARIZONA
PHOENIX
Two Renaissance
Square............... CBD 1990 476,373 76%(4) $24.17
6225 North 24th
Street............... Camelback Corridor 1981 86,451 0(4) -
---------- --------- ------------
Subtotal/Weighted
Average.............. 562,824 65% $24.17
---------- --------- ------------
LOUISIANA
NEW ORLEANS
1615 Poydras......... CBD 1984 508,741 74% $14.58
---------- --------- ------------
NEBRASKA
OMAHA
Central Park Plaza... CBD 1982 409,850 98% $12.85
---------- --------- ------------
NEW MEXICO
ALBUQUERQUE
Albuquerque Plaza.... CBD 1990 365,952 92% $18.11
---------- --------- ------------
CALIFORNIA
SAN FRANCISCO
160 Spear Street..... South of Market-CBD 1984 276,420 42%(4) $22.94
---------- --------- ------------
SAN DIEGO
Chancellor Park...... UTC 1988 195,733 84% $20.66
---------- --------- ------------
TOTAL/WEIGHTED
AVERAGE.............. 18,018,318 84%(4) $17.56
========== ========= ============
</TABLE>
18
<PAGE> 19
Notes:
(1) Calculated based on base rent payable as of March 31, 1997, without
giving effect to free rent or scheduled rent increases that would be taken
into account under generally accepted accounting principles, and including
adjustments for expenses payable by tenants.
(2) The Company owns the principal economic interest in Trammell Crow Center
through its ownership of fee simple title to the property (subject to a
ground lease and a leasehold estate regarding the building) and two
mortgage notes encumbering the leasehold interests in the land and
building.
(3) The Company owns the principal economic interest in Spectrum Center
through an interest in Spectrum Mortgage Associates, L.P., which owns both
a mortgage note secured by Spectrum Center and the ground lessor's
interest in the land underlying the office buildings.
(4) The Company has executed leases at certain properties that had not
commenced as of March 31, 1997. If such leases had commenced as of March
31, 1997, the percent leased for all Office Properties would have been
88%. The total percent leased for such Properties would have been as
follows: 12404 Park Central -- 100%; 3333 Lee Parkway -- 75%; Continental
Plaza -- 100%; Ptarmigan Place -- 93%; Two Renaissance Square -- 85%; 6225
North 24th Street -- 51% and 160 Spear Street -- 81%.
(5) Consists of 10 Office Properties.
(6) The Company has a 75% limited partner interest in the partnership that
owns the 12 Office Properties that comprise The Woodlands Office
Properties.
(7) The Company owns the principal economic interest in Three Westlake Park
through its ownership of a mortgage note secured by Three Westlake Park.
(8) The Company has a 1% general partner and a 49% limited partner interest
in the partnership that owns 301 Congress Avenue.
HOTEL PROPERTIES
The following table sets forth certain information about the Hotel
Properties for the three months ended March 31, 1997 and 1996. The information
for the Hotel Properties is based on available rooms, except for Canyon
Ranch-Tucson and Canyon Ranch-Lenox, which are destination health and fitness
resorts that measure performance based on available guest nights.
<TABLE>
<CAPTION>
For the three months ended
March 31,
Revenue
Average Average Per
Year Occupancy Daily Available
Completed/ Rate Rate Room
------------------ ---------------- ----------------
Property Location Renovated Rooms 1997 1996 1997 1996 1997 1996
- -------- ------------------ ------------ ---------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FULL-SERVICE HOTELS
Hyatt Regency Beaver Creek Avon, CO 1989 295 83% 81% $357 $331 $296 $267
Denver Marriott City Center Denver, CO 1982/1994 613 79 80 104 94 82 75
Hyatt Regency Albuquerque Albuquerque,NM 1990 395 72 77 96 90 69 69
Sonoma Mission Inn & Spa Sonoma, CA 1927/1987 168 84 91 157 139 131 126
------- ---- ---- ---- ---- ---- ----
Total / Weighted Average 1,471 78% 80% $162 $146 $127 $117
======= ==== ==== ==== ==== ==== ====
DESTINATION HEALTH & FITNESS RESORTS
Canyon Ranch - Tucson Tucson, AZ 1980 240(1) 89%(2) 89%(2) $561(3) $533(3) $485(4) $461(4)
Canyon Ranch - Lenox Lenox, MA 1989 202(1) 75(2) 78(2) 379(3) 351(3) 276(4) 268(4)
------- ---- ---- ---- ---- ---- ----
Total / Weighted Average 442 82% 84% $486 $455 $389 $373
======= ==== ==== ==== ==== ==== ====
</TABLE>
Notes:
(1) Represents available guest nights, which is the maximum number of guests
that the resort can accommodate per night.
(2) Represents the number of paying and complimentary guests for the period,
divided by the maximum number of available guest nights for the period.
19
<PAGE> 20
(3) Represents the average daily "all-inclusive" guest package charges for
the period, divided by the average daily number of paying guests for the
period.
(4) Represents the total "all-inclusive" guest package charges for the
period, divided by the maximum number of available guest nights for the
period.
AGGREGATE LEASE EXPIRATIONS OF OFFICE PROPERTIES
The following table sets forth a schedule of the lease expirations for
leases in place as of March 31, 1997, for each of the 10 years beginning with
the remainder of 1997, for the Office Properties, on an aggregate basis,
assuming that none of the tenants exercises renewal options and excluding an
aggregate of 2,917,327 square feet of unleased space. For the three months
ended March 31, 1997, the annualized weighted average amount of excess expenses
paid by tenants for all leases was $.93 per square foot.
<TABLE>
<CAPTION>
NET RENTABLE PERCENTAGE PERCENTAGE OF ANNUAL
AREA OF LEASED TOTAL ANNUAL BASE RENT
NUMBER OF REPRESENTED NET RENTABLE ANNUAL BASE BASE RENT PER NET
TENANTS WITH BY EXPIRING AREA REPRESENTED RENT UNDER REPRESENTED RENTABLE
EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING AREA
YEAR OF LEASE EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) LEASES EXPIRING(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 236 1,550,835 10.4% $20,862,399 8.3% $13.45
1998 227 1,357,891 9.1 21,651,176 8.6 15.94
1999 181 1,646,423 11.0 26,843,306 10.6 16.30
2000 128 1,779,364 11.9 24,622,225 9.8 13.84
2001 134 1,614,405 10.8 29,004,491 11.5 17.97
2002 76 1,925,917 12.9 33,911,901 13.4 17.61
2003 33 617,055 4.1 10,582,991 4.2 17.15
2004 28 1,584,528 10.6 29,604,328 11.7 18.68
2005 22 1,439,685 9.6 21,651,412 8.6 15.04
2006 13 366,191 2.4 7,500,650 2.9 20.48
2007 and thereafter 7 1,076,979 7.2 26,163,830 10.4 24.29
</TABLE>
(1) Calculated based on base rent payable as of the expiration day of the
lease for net rentable square feet expiring, without giving effect to free
rent or scheduled rent increases that would be taken into account under
generally accepted accounting principles and excluding expenses payable by
tenants.
20
<PAGE> 21
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
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits Description
3.03 Restated Declaration of Trust of Crescent Real
Estate Equities Company (filed as Exhibit No. 4.01
to the Registrant's Registration Statement on Form
S-3 (File No. 333-21905) (the "1997 S-3") and
incorporated herein by reference)
3.04 Amended and Restated Bylaws of Crescent Real Estate
Equities Company (filed as Exhibit No. 4.02 to the
Registrant's Registration Statement on Form S-3
(File No. 333-23005) and incorporated herein by
reference)
4.02 Registration Rights Agreement, dated February 16,
1996, by and among the Registrant, Crescent Real
Estate Equities Limited Partnership and certain of
the limited partners of Crescent Real Estate
Equities Limited Partnership named therein (filed
as Exhibit 4.02 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31,
1996 (the "1996 10-K") and incorporated herein by
reference)
4.03 Registration Rights Agreement dated January
20, 1997, by and among the Registrant, Crescent
Real Estate Equities Limited Partnership and
certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein
(filed as Exhibit 4.03 to the 1996 10-K and
incorporated herein by reference)
4.04 Form of Registration Agreement relating to the
acquisition of the Greenway Plaza Portfolio (filed
as Exhibit 4.01 to the Registrant's Current Report
on Form 8-K dated and filed September 27,1996 (the
"1996 Form 8-K") and incorporated herein by
reference)
4.05 Registration Rights Agreement, dated as of June 26,
1996, relating to Canyon Ranch-Tucson (filed as
Exhibit No. 4.02 to the 1996 Form 8-K and
incorporated herein by reference)
4.06 Form of Common Share Certificate (filed as Exhibit
No. 4.03 to the 1997 S-3 and incorporated herein by
reference
10.01 First Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited
Partnership, dated May 5, 1994 (filed as Exhibit No.
10.01 to the Registrant's Registration Statement on
Form S-11 (File No. 33-75188) (the "1994 S-11") and
incorporated herein by reference)
10.03 Form of Noncompetition Agreement (Goff) (filed as
Exhibit No. 10.03 to the Registrant's Registration
Statement on Form S-11 (File No. 33-90226) (the
"1995 S-11") and incorporated herein by reference)
10.04 Form of Noncompetition Agreement (Haddock) (filed
as Exhibit No. 10.04 to the 1995 S-11 and
incorporated herein by reference)
10.05 Form of Employment Agreement (Goff) (filed as
Exhibit No. 10.05 to the 1995 S-11 and incorporated
herein by reference)
10.06 Form of Employment Agreement (Haddock) (filed as
Exhibit No. 10.10 to the 1995 S-11 and incorporated
herein by reference)
10.07 Form of Registration Rights, Lock-Up and Pledge
Agreement (filed as Exhibit No. 10.05 to the 1994
S-11 and incorporated herein by reference)
10.08 Form of Officers' and Trust Managers'
Indemnification Agreement as entered into between
the Registrant and each of its executive officers
and trust managers (filed as Exhibit No. 10.08 to
the 1995 S-11 and incorporated herein by reference)
10.09 Crescent Real Estate Equities Company 1994 Stock
Incentive Plan (filed as Exhibit No. 10.07 to the
1994 S-11 and incorporated herein by reference)
10.10 Crescent Real Estate Equities, Ltd. 401(k) Plan
(filed as Exhibit No. 10.10 to the 1995 S-11 and
incorporated herein by reference)
10.11 Agreement, dated as of August 15, 1996, relating
to the acquisition of the Greenway Plaza
Portfolio (filed as Exhibit No. 10.02 to the 1996
Form 8-K and incorporated herein by reference)
10.12 Form of Amended and Restated Lease Agreement, dated
January 1, 1996, among Crescent Real Estate Equities
Limited Partnership, Mogul Management, LLC and
RoseStar Management, LLC, relating to the Hyatt
Regency Beaver Creek (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 (the "1995
10-K") and incorporated herein by reference)
10.13 Real Estate Purchase and Sale Agreement, dated as
of January 29, 1997, between Crescent Real
Estate Equities Limited Partnership, as purchaser,
and Magellan Health Services, Inc., as seller,
relating to the acquisition of approximately 90
behavioral healthcare facilities, as amended
effective February 28, 1997 (filed as Exhibit 10.13
to the 1996 10-K and incorporated herein by
reference)
10.15 First Amended and Restated 1995 Crescent Real
Estate Equities Company Stock Incentive Plan
(filed as Exhibit 10.15 to the 1996 10-K and
incorporated herein by reference)
10.16 Lease Agreement, dated December 19, 1995 between
Crescent Real Estate Equities Limited Partnership
and RoseStar Management, LLC, relating to the Hyatt
Regency Albuquerque (filed as Exhibit 10.16 to the
1995 10-K and incorporated herein by reference)
10.17 Amended and Restated Lease Agreement, dated June
30, 1995 between Crescent Real Estate Equities
Limited Partnership and RoseStar Management, LLC,
relating to the Denver Marriott (filed as Exhibit
10.17 to the 1995 10-K and incorporated herein by
reference)
10.18 Loan Agreement, dated August 24, 1995, including
Form of Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing, and Amendment
to Loan Agreement, dated October 19, 1995, between
Crescent Real Estate Funding I, L.P. and Nomura
Asset Capital Corporation (filed as Exhibit 10.15
to the 1995 10-K and incorporated herein by
reference)
10.19 Loan Agreement, dated August 24, 1995, including
Form of Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing, between
Crescent Real Estate Funding II, L.P. and Nomura
Asset Capital Corporation (filed as Exhibit 10.19
to the 1995 10-K and incorporated herein by
reference)
10.20 Mortgage Loan Application and Agreement, dated
October 3, 1995, as amended by letter agreements
dated October 10, 1995 and October 30, 1995, between
Crescent Real Estate Equities Limited Partnership
and CIGNA Investments, Inc. and Secured Promissory
Note dated December 11, 1995 (filed as Exhibit
10.20 to the 1995 10-K and incorporated herein by
reference)
10.22 1995 Crescent Real Estate Equities Limited
Partnership Unit Incentive Plan (filed as Exhibit
No. 99.01 to the Registrant's Registration Statement
on Form S-8 (File No. 333-3452) and incorporated
herein by reference)
10.23 1996 Crescent Real Estate Equities Limited
Partnership Unit Incentive Plan (filed as Exhibit
No. 10.01 to the 1996 Form 8-K and incorporated
herein by reference)
10.24 Lease Agreement, dated July 26, 1996, between
Canyon Ranch, Inc. and Canyon Ranch Leasing, L.L.C.
(filed as Exhibit 10.24 to the 1996 10-K and
incorporated herein by reference)
10.25 Lease Agreement, dated November 18, 1996, between
Crescent Real Estate Equities Limited Partnership
and Wine Country Hotel, LLC. (filed as Exhibit
10.25 to the 1996 10-K and incorporated herein
by reference)
10.26 Lease Agreement, dated December 11, 1996, between
Canyon Ranch-Bellefontaine Associates, L.P. and
Vintage Resorts, LLC. (filed as Exhibit 10.26 to
the 1996 10-K and incorporated herein by reference)
27.01 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K.
The Company's Current Report on Form 8-K dated February 28,
1997 and filed March 17, 1997, as amended on March 21, 1997,
describing the acquisition of Trammell Crow Center and
including certain financial information relating to the
property.
The Company's Current Report on Form 8-K dated January 29, 1997
and filed March 24, 1997, as subsequently amended, describing
the proposed Carter-Crowley transaction, the proposed Magellan
transaction, and the proposed spin-off of Crescent Affiliate,
and including certain preliminary financial information
relating to certain properties included in the Carter-Crowley
transaction.
21
<PAGE> 22
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 COMPANY
/s/ Gerald W. Haddock
--------------------------------------------
Date: May 14, 1997 Gerald W. Haddock, President and Chief
Executive Officer
/s/ Dallas E. Lucas
--------------------------------------------
Date: May 14, 1997 Dallas E. Lucas, Senior Vice President,
Chief Financial Officer and Chief
Accounting Officer
22
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
3.03 Restated Declaration of Trust of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.01 to the Registrant's
Registration Statement on Form S-3 (File No. 333-21905) (the
"1997 S-3") and incorporated herein by reference)
3.04 Amended and Restated Bylaws of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.02 to the Registrant's
Registration Statement on Form S-3 (File No. 333-23005) and
incorporated herein by reference)
4.02 Registration Rights Agreement, dated February 16, 1996, by and
among the Registrant, Crescent Real Estate Equities Limited
Partnership and certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein (filed as
Exhibit 4.02 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "1996 10-K") and
incorporated herein by reference)
4.03 Registration Rights Agreement dated January 20, 1997, by and
among the Registrant, Crescent Real Estate Equities Limited
Partnership and certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein (filed as
Exhibit 4.03 to the 1996 10-K and incorporated herein by
reference)
4.04 Form of Registration Agreement relating to the acquisition of
the Greenway Plaza Portfolio (filed as Exhibit 4.01 to the
Registrant's Current Report on Form 8-K dated and filed
September 27,1996 (the "1996 Form 8-K") and incorporated herein
by reference)
4.05 Registration Rights Agreement, dated as of June 26, 1996,
relating to Canyon Ranch-Tucson (filed as Exhibit No. 4.02 to
the 1996 Form 8-K and incorporated herein by reference)
4.06 Form of Common Share Certificate (filed as Exhibit No. 4.03 to
the 1997 S-3 and incorporated herein by reference
10.01 First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated May 5,
1994 (filed as Exhibit No. 10.01 to the Registrant's
Registration Statement on Form S-11 (File No. 33-75188) (the
"1994 S-11") and incorporated herein by reference)
10.03 Form of Noncompetition Agreement (Goff) (filed as Exhibit No.
10.03 to the Registrant's Registration Statement on Form S-11
(File No. 33-90226) (the "1995 S-11") and incorporated herein by
reference)
10.04 Form of Noncompetition Agreement (Haddock) (filed as Exhibit No.
10.04 to the 1995 S-11 and incorporated herein by reference)
10.05 Form of Employment Agreement (Goff) (filed as Exhibit No. 10.05
to the 1995 S-11 and incorporated herein by reference)
10.06 Form of Employment Agreement (Haddock) (filed as Exhibit No.
10.06 to the 1995 S-11 and incorporated herein by reference)
10.07 Form of Registration Rights, Lock-Up and Pledge Agreement (filed
as Exhibit No. 10.05 to the 1994 S-11 and incorporated herein by
reference)
10.08 Form of Officers' and Trust Managers' Indemnification Agreement
as entered into between the Registrant and each of its executive
officers and trust managers (filed as Exhibit No. 10.08 to the
1995 S-11 and incorporated herein by reference)
10.09 Crescent Real Estate Equities Company 1994 Stock Incentive Plan
(filed as Exhibit No. 10.07 to the 1994 S-11 and incorporated
herein by reference)
10.10 Crescent Real Estate Equities, Ltd. 401(k) Plan (filed as
Exhibit No. 10.10 to the 1995 S-11 and incorporated herein by
reference)
10.11 Agreement, dated as of August 15, 1996, relating to the
acquisition of the Greenway Plaza Portfolio (filed as Exhibit
No. 10.02 to the 1996 Form 8-K and incorporated herein by
reference)
10.12 Form of Amended and Restated Lease Agreement, dated January 1,
1996, among Crescent Real Estate Equities Limited Partnership,
Mogul Management, LLC and RoseStar Management, LLC, relating to
the Hyatt Regency Beaver Creek (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 10-K") and incorporated
herein by reference)
10.13 Real Estate Purchase and Sale Agreement, dated as of January 29,
1997, between Crescent Real Estate Equities Limited Partnership,
as purchaser, and Magellan Health Services, Inc., as seller,
relating to the acquisition of approximately 90 behavioral
healthcare facilities, as amended effective February 28, 1997
(filed as Exhibit 10.13 to the 1996 10-K and incorporated herein
by reference)
10.15 First Amended and Restated 1995 Crescent Real Estate Equities
Company Stock Incentive Plan (filed as Exhibit 10.15 to the 1996
10-K and incorporated herein by reference)
10.16 Lease Agreement, dated December 19, 1995 between Crescent Real
Estate Equities Limited Partnership and RoseStar Management,
LLC, relating to the Hyatt Regency Albuquerque (filed as Exhibit
10.16 to the 1995 10-K and incorporated herein by reference)
10.17 Amended and Restated Lease Agreement, dated June 30, 1995
between Crescent Real Estate Equities Limited Partnership and
RoseStar Management, LLC, relating to the Denver Marriott (filed
as Exhibit 10.17 to the 1995 10-K and incorporated herein by
reference)
10.18 Loan Agreement, dated August 24, 1995, including Form of Deed of
Trust, Assignment of Rents, Security Agreement and Fixture
Filing, and Amendment to Loan Agreement, dated October 19, 1995,
between Crescent Real Estate Funding I, L.P. and Nomura Asset
Capital Corporation (filed as Exhibit 10.15 to the 1995 10-K and
incorporated herein by reference)
10.19 Loan Agreement, dated August 24, 1995, including Form of Deed of
Trust, Assignment of Rents, Security Agreement and Fixture
Filing, between Crescent Real Estate Funding II, L.P. and Nomura
Asset Capital Corporation (filed as Exhibit 10.19 to the 1995
10-K and incorporated herein by reference)
10.20 Mortgage Loan Application and Agreement, dated October 3, 1995,
as amended by letter agreements dated October 10, 1995 and
October 30, 1995, between Crescent Real Estate Equities Limited
Partnership and CIGNA Investments, Inc. and Secured Promissory
Note dated December 11, 1995 (filed as Exhibit 10.20 to the 1995
10-K and incorporated herein by reference)
10.22 1995 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (filed as Exhibit No. 99.01 to the Registrant's
Registration Statement on Form S-8 (File No. 333-3452) and
incorporated herein by reference)
10.23 1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (filed as Exhibit No. 10.01 to the 1996 Form 8-K
and incorporated herein by reference)
10.24 Lease Agreement, dated July 26, 1996, between Canyon Ranch, Inc.
and Canyon Ranch Leasing, L.L.C. (filed as Exhibit 10.24 to the
1996 10-K and incorporated herein by reference)
10.25 Lease Agreement, dated November 18, 1996, between Crescent Real
Estate Equities Limited Partnership and Wine Country Hotel, LLC.
(filed as Exhibit 10.25 to the 1996 10-K and incorporated herein
by reference)
10.26 Lease Agreement, dated December 11, 1996, between Canyon
Ranch-Bellefontaine Associates, L.P. and Vintage Resorts, LLC.
(filed as Exhibit 10.26 to the 1996 10-K and incorporated herein
by reference)
27.01 Financial Data Schedule (filed herewith)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENT 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 42,692
<SECURITIES> 0
<RECEIVABLES> 39,335
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 160,495
<PP&E> 1,965,812
<DEPRECIATION> (221,730)
<TOTAL-ASSETS> 1,986,604
<CURRENT-LIABILITIES> 43,356
<BONDS> 934,767
0
0
<COMMON> 723
<OTHER-SE> 859,559
<TOTAL-LIABILITY-AND-EQUITY> 1,986,604
<SALES> 0
<TOTAL-REVENUES> 84,074
<CGS> 0
<TOTAL-COSTS> 50,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,744
<INCOME-PRETAX> 20,245
<INCOME-TAX> 0
<INCOME-CONTINUING> 20,245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,751
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
