<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 30, 1997
CRESCENT REAL ESTATE EQUITIES COMPANY
(formerly known as Crescent Real Estate Equities, Inc.)
(Exact name of Registrant as specified in its Charter)
Texas 1-13038 52-1862813
(State of Organization) (Commission File Number) (IRS Employer Identification
Number)
777 Main Street, Suite 2100
Fort Worth, Texas 76102
( Address of Principal Executive (Zip Code)
Offices)
(817) 877-0477
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
This Current Report on Form 8-K is filed by Crescent Real Estate Equities
Company (the "Company") in connectin with its registration statement (the
"Registration Statement") on Form S-3 (Registration No. 333-21905). Pursuant to
the prospectus dated March 26, 1997 (the "Prospectus") contained in the
Registration Statement and the preliminary prospectus supplement dated
September 30, 1997 (the "Prospectus Supplement") to the Prospectus, the Company
is offering for sale to the public, in an underwritten offering, 8,500,000 of
its Common Shares (the "Offering"). Certain pro forma financial information
regarding the Company, assuming, among other things, the completion of the
Offering and the application of the net proceeds therefrom, is included in Item
7 of this report and incorporated by reference into the Prospectus Supplement.
Capitalized terms used but not defined herein have the meaning set forth in the
Prospectus Supplement.
1
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
None
(b) Pro Forma Financial Information
Pro Forma Consolidated Balance Sheet as of June 30,
1997 (unaudited) and notes thereto.
Pro Forma Consolidated Statements of Operations for
the Six Months Ended June 30, 1997 and the Year
Ended December 31, 1996 (unaudited) and notes
thereto.
(c) Exhibits
None
2
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 1, 1997 CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ DALLAS E. LUCAS
------------------------------------------
Dallas E. Lucas
Senior Vice President and
Chief Financial and Accounting Officer
3
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Pro Forma Financial Statements (unaudited)
Pro Forma Consolidated Balance Sheet as of June 30, 1997
and notes thereto . . . . . . . . . . . . . . . . . . . . . . . . F-2
Pro Forma Consolidated Statements of Operations for the
Six Months Ended June 30, 1997 and the Year Ended December 31,
1996 and notes thereto. . . . . . . . . . . . . . . . . . . . . . F-5
</TABLE>
<PAGE> 6
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The pro forma information for the year ended December 31, 1996 assumes
completion, in each case as of January 1, 1996 in determining operating and
other data, of (i) Crescent Real Estate Equities Company's (the "Company")
public offering of its common shares in October 1996 (the "October 1996
Offering") and the additional public offering of 450,000 common shares that
closed on October 9, 1996 and the use of the net proceeds therefrom to repay
approximately $168,000 of indebtedness and to fund approximately $289,000 of
Property acquisitions in the fourth quarter of 1996 and the first quarter of
1997, (ii) the Company's public offering of its common shares in April 1997
(the "April 1997 Offering") and the additional public offering of 500,000
common shares that closed on May 14, 1997 and the use of the net proceeds
therefrom to fund approximately $593,500 of Property acquisitions and other
investments in the second quarter of 1997, (iii) the Company's offering of
4,700,000 common shares to an affiliate of Union Bank of Switzerland (the "UBS
Offering") and the use of the net proceeds therefrom to repay approximately
$145,000 of indebtedness under the Credit Facility, (iv) Crescent Real Estate
Equities Limited Partnership's, the Company's operating partnership, issuance
of $400,000 of senior unsecured debt issued in a private placement on September
22, 1997 ("Note Offering") and the use of the net proceeds therefrom to fund
approximately $327,600 of the acquisition of the Houston Center mixed-use
property complex including the Four Seasons Hotel ("Houston Center"), to repay
approximately $50,000 of indebtedness incurred under the Credit Facility, to
fund approximately $10,000 of the purchase price of Miami Center office
property and to repay approximately $7,200 of short-term indebtedness, (v) the
Company's issuance of 307,831 common shares on September 22, 1997 in connection
with the acquisition of Houston Center ("Private Placement") and the use of the
net proceeds therefrom to repay approximately $10,000 of indebtedness under the
Credit Facility, (vi) the Company's public offering of 8,500,000 common shares
in October 1997 (the "Offering") and the use of the net proceeds therefrom to
fund approximately $61,900 of Pending Investments and to repay approximately
$259,780 of short-term indebtedness and indebtedness incurred under the Credit
Facility, (vii) assumed indebtedness of $97,100 in connection with the purchase
of one of the Pending Investments, and (viii) Pending Investments and Property
acquisitions and other investments made during 1996 and 1997. The pro forma
information for the year ended December 31, 1996 does not include the Company's
proposed investment in Vornado Realty Trust ("VNO").
The pro forma information for the six months ended June 30, 1997 assumes
completion, in each case as of January 1, 1997 in determining operating and
other data, and, in each case as of June 30, 1997 in determining balance sheet
data, of (i) the April 1997 Offering and the additional public offering of
500,000 common shares that closed on May 14, 1997 and the use of the net
proceeds therefrom to fund approximately $593,500 of Property acquisitions and
other investments in the second quarter of 1997, (ii) the UBS Offering and the
use of the net proceeds therefrom to repay approximately $145,000 of
indebtedness under the Credit Facility, (iii) the Note Offering and the use of
the net proceeds therefrom to fund approximately $327,600 of the acquisition of
Houston Center, to repay approximately $50,000 of indebtedness incurred under
the Credit Facility, to fund approximately $10,000 of the purchase price of
Miami Center office property and to repay approximately $7,200 of short-term
indebtedness, (iv) the Private Placement and the use of the net proceeds
therefrom to repay approximately $10,000 of indebtedness under the Credit
Facility, (v) the Offering and the use of the net proceeds therefrom to fund
approximately $61,900 of Pending Investments and to repay approximately
$259,780 of short-term indebtedness and indebtedness incurred under the Credit
Facility, and (vi) assumed indebtedness of $97,100 in connection with the
purchase of one of the Pending Investments, (vii) Pending Investments and the
Property acquisitions and other investments made during 1997. The Pro forma
information for the six months ended June 30, 1997 does not include the
Company's proposed investment in VNO.
The unaudited pro forma Consolidated Balance Sheet and Statements of
Operations should be read in conjunction with the historical audited financial
statements of the Company included in its Annual Report on Form 10-K for the
year ended December 31, 1996. In management's opinion, all adjustments necessary
to reflect the above discussed transactions have been made. The unaudited pro
forma Consolidated Balance Sheet and Statements of Operations are not
necessarily indicative of what actual results of operations of the Company would
have been for the period, nor does it purport to represent the Company's results
of operations for future periods.
F-1
<PAGE> 7
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
CRESCENT REAL
ESTATE EQUITIES
COMPANY PRO FORMA PRO FORMA
HISTORICAL(A) ADJUSTMENTS CONSOLIDATED
--------------- ----------- ------------
<S> <C> <C> <C>
Investments in real estate.......................... $2,628,792 $ 618,100(B) $3,246,892
Less -- accumulated depreciation.................... (236,967) -- (236,967)
---------- --------- ----------
Net investment in real estate............. 2,391,825 618,100 3,009,925
Cash and cash equivalents........................... 55,589 22,737(C) 78,326
Restricted cash and cash equivalents................ 28,429 -- 28,429
Accounts receivable, net............................ 17,324 -- 17,324
Deferred rent receivable............................ 23,266 -- 23,266
Investments in real estate mortgages and common
stock of unconsolidated subsidiaries.............. 41,993 309,741(D) 351,734
Notes receivable, net............................... 122,992 23,700(E) 146,692
Other assets, net................................... 98,362 5,231(F) 103,593
---------- --------- ----------
Total assets.............................. $2,779,780 $ 979,509 $3,759,289
========== ========= ==========
LIABILITIES
Borrowings under Credit Facility.................... $ 339,700 $ (47,980)(G) $ 291,720
Notes payable....................................... 792,796 32,709(H) 1,322,605
497,100(I)
Accounts payable, accrued expenses and other
liabilities....................................... 62,206 21,000(J) 83,206
---------- --------- ----------
Total liabilities......................... 1,194,702 502,829 1,697,531
---------- --------- ----------
MINORITY INTERESTS:
Operating partnership............................. 118,645 -- 118,645
Investment joint ventures......................... 28,369 -- 28,369
---------- --------- ----------
Total minority interests.................. 147,014 -- 147,014
---------- --------- ----------
SHAREHOLDERS' EQUITY:
Common shares..................................... 970 135 1,105
Additional paid-in capital........................ 1,499,477 476,545 1,976,022
Deferred compensation on restricted shares........ (283) -- (283)
Retained deficit.................................. (62,100) -- (62,100)
---------- --------- ----------
Total shareholders' equity................ 1,438,064 476,680(K) 1,914,744
---------- --------- ----------
Total liabilities and shareholders'
equity.................................. $2,779,780 $ 979,509 $3,759,289
========== ========= ==========
</TABLE>
See accompanying notes to Pro Forma Consolidated Balance Sheet.
F-2
<PAGE> 8
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
ADJUSTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
(A) Reflects Crescent Real Estate Equities Company unaudited
consolidated historical balance sheet as of June 30,
1997...................................................... --
(B) Increase reflects the following:
Acquisition of Houston Center mixed-use property.......... $ 327,600
Acquisition of Miami Center office property............... 131,500
Pending acquisition of Fountain Place office property..... 114,000
Pending acquisition of U.S. Home Building office
property............................................... 45,000
---------
$ 618,100
=========
(C) Net increase reflects the following:
Equity investment in The Woodlands........................ $ (5,000)
Draw on the Credit Facility for working capital........... 22,700
Proceeds from Crescent Operating, Inc., ("COI") as a
result of COI's acquisition of the voting common stock
in The Woodlands and Desert Mountain................... 5,159
Proceeds from the Note Offering........................... 394,769
Acquisition of Houston Center mixed-use property.......... (327,600)
Acquisition of Miami Center office property............... (10,000)
Repayment of Texas Commerce Bank Note using proceeds from
the Note Offering and excess cash...................... (7,291)
Partial repayment under the Credit Facility using proceeds
from the Note Offering................................. (50,000)
Net proceeds from the Offering............................ 321,680
Pending Acquisition of Fountain Place..................... (16,900)
Pending Acquisition of U.S. Home Building................. (45,000)
Partial repayment under the Credit Facility using net
proceeds from the
Offering............................................... (259,780)
---------
$ 22,737
=========
(D) Net increase reflects the following:
42.5% equity investment in The Woodlands.................. $ 80,000
Sale of 100% of voting common stock to COI representing 5%
equity interest in The Woodlands....................... (1,915)
93% equity investment in Desert Mountain.................. 234,900
Sale of 100% of voting common stock to COI representing 5%
equity interest in Desert Mountain..................... (3,244)
---------
$ 309,741
=========
(E) Increase reflects the following:
Note Receivable from Desert Mountain...................... $ 23,700
=========
(F) Increase reflects the following:
Capitalized Note Offering costs........................... $ 5,231
=========
</TABLE>
F-3
<PAGE> 9
<TABLE>
<S> <C> <C>
(G) Net decrease in borrowings under the Credit Facility as a
result of:
Partial repayment using the UBS Offering proceeds......... $(145,000)
Working capital draws..................................... 22,700
Equity investment in Desert Mountain...................... 13,900
Note Receivable from Desert Mountain...................... 23,700
Partial repayment using the net proceeds of the Note
Offering............................................... (50,000)
Partial repayment using the proceeds from the Private
Placement.............................................. (10,000)
Acquisition of Miami Center office property............... 121,500
Partial repayment using the net proceeds from the
Offering............................................... (259,780)
Draw to repay the BankBoston Note I....................... 235,000
---------
$ (47,980)
=========
(H) Net increase in short-term borrowings as a result of:
Equity investment in The Woodlands........................ $ 75,000
Equity investment in Desert Mountain...................... 200,000
Repayment of Texas Commerce Bank Note using proceeds from
the Note Offering and excess cash...................... (7,291)
---------
Repayment of BankBoston Note I through a draw on the
Credit Facility........................................ (235,000)
$ 32,709
=========
(I) Increase in notes payable reflects the following:
Note Offering............................................. $ 400,000
Assumption of Note relating to a Pending Investment....... 97,100
---------
$ 497,100
=========
(J) Increase reflects the following:
Equity investment in Desert Mountain...................... $ 21,000
=========
(K) Increase reflects the following:
Proceeds of the UBS Offering.............................. $ 145,000
Net proceeds from the Private Placement................... 10,000
Proceeds of the Offering (8.5 million shares of common
stock
at $40 per share)...................................... 340,000
Estimated costs of the Offering........................... (1,000)
Underwriters' discount for the Offering................... (17,320)
---------
$ 476,680
=========
</TABLE>
F-4
<PAGE> 10
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CRESCENT REAL
ESTATE EQUITIES 1997 ACQUIRED
COMPANY AND PENDING OTHER PRO FORMA
HISTORICAL(A) INVESTMENTS(B) ADJUSTMENTS CONSOLIDATED
--------------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental property....................... $174,882 $87,924 $ -- $262,806
Interest and other income............. 8,321 -- 4,821(C) 13,142
-------- ------- -------- --------
Total revenues................ 183,203 87,924 4,821 275,948
-------- ------- -------- --------
EXPENSES:
Real estate taxes..................... 17,622 7,489 -- 25,111
Repairs and maintenance............... 10,943 8,901 -- 19,844
Other rental property operating....... 36,600 14,190 (283)(D) 49,999
(508)(E)
Corporate general and
administrative..................... 7,483 -- -- 7,483
Interest expense...................... 31,612 -- 26,801(F) 58,413
Depreciation and amortization......... 30,291 16,063 -- 46,354
Amortization of deferred financing
costs.............................. 1,220 -- 360(G) 1,580
-------- ------- -------- --------
Total expenses................ 135,771 46,643 26,370 208,784
-------- ------- -------- --------
Operating income (loss)....... 47,432 41,281 (21,549) 67,164
-------- ------- -------- --------
OTHER INCOME:
Equity in net income of unconsolidated
subsidiaries.......................... 1,999 13,367 -- 15,366
-------- ------- -------- --------
INCOME (LOSS) BEFORE MINORITY
INTERESTS............................. 49,431 54,648 (21,549) 82,530
Minority interests...................... (7,586) -- (1,953)(H) (9,539)
-------- ------- -------- --------
NET INCOME (LOSS)....................... $ 41,845 $54,648 $(23,502) $ 72,991
======== ======= ======== ========
NET INCOME PER COMMON SHARE(I).......... $ 0.66
========
</TABLE>
See accompanying notes to Pro Forma Consolidated Statement of Operations.
F-5
<PAGE> 11
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
(A) Reflects Crescent Real Estate Equities Company unaudited consolidated
historical statement of operations for the six months ended June 30,
1997..................................................................... --
(B) Reflects the historical incremental rental income and operating expenses,
including an adjustment for depreciation based on acquisition price
associated with acquired investments and pending investments, all
investments acquired or proposed to be acquired in 1997, assuming the
investments were acquired at the beginning of the period................. --
ACQUISITION
PROPERTY DATE
Greenway II office property............................ 1/17/97
Trammell Crow Center office property................... 2/28/97
Three Denver office properties......................... 2/28/97
Carter-Crowley Real Estate Assets...................... 5/09/97
Magellan Real Estate Assets (i)........................ 6/17/97
The Woodlands (ii)(iii)................................ 7/31/97
Desert Mountain (iv)................................... 8/29/97
Houston Center mixed-use property complex.............. 9/22/97
Four Seasons Hotel (v)................................. 9/22/97
Miami Center office property........................... 9/30/97
Fountain Place office property......................... pending
U.S. Home Building office property..................... pending
--------------------
(i) Calculated to reflect the lease payment from the behavioral
healthcare facilities' lessee to the Company by applying the rent
provisions (as set forth in the facilities' lease agreement).
(ii) The Company has a 40.375% (after sale of voting common stock
to COI) non-voting equity investment in the limited partnership whose
primary holding consists of The Woodlands land assets.
(iii) The Company has a 42.5% equity investment in the limited
partnership whose primary holding consists of The Woodlands commercial
property assets.
(iv) The Company has a 88.350% (after sale of voting common stock to
COI) non-voting equity investment in the limited partnership that owns
Desert Mountain.
(v) Historical operations of the hotel were adjusted to reflect the
lease payment from the hotel lessee to the Company calculated on a pro
forma basis.
(C) Increase reflects the incremental interest income associated with the
following, assuming all had occurred at the beginning of the period.
Carter-Crowley Notes ($55,500 @ 10%) =$5,550
COI Note ($25,697 @ 12%) = $3,084
Desert Mountain Note ($23,700 @ 12%) = $2,844
Total.................................................. $11,478
Prorated for six months................................ 5,739
Less: Historical interest income....................... (918)
-----------
Total.................................................. $4,821
======
</TABLE>
F-6
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C> <C>
(D) Reflects the elimination of historical ground lessee's expense, as a
result of the Company acquiring the land underlying Trammell Crow Center,
assuming Trammell Crow Center was acquired at the beginning of the
period................................................................... $ (283)
======
(E) Decrease as a result of the elimination of third party property
management fees which terminated subsequent to acquisition of certain of
the properties........................................................... $ (508)
======
Net increase as a result of interest costs for long and short-term
(F) financing, as follows, net of repayment with proceeds of the Offering,
the Private Placement, the Note Offering, Equity Offering to UBS in
August 1997 and April and May 1997 Equity Offerings, assuming the
borrowings to finance investment acquisitions and the assumption of debt
and repayment, had all occurred at the beginning of the period.
Credit Facility.................... $ 291,720 @ 6.89% $ 20,100
Note Offering --
6.625% Notes due 2002............ 150,000 @ 6.625% 9,938
Note Offering --
7.125% Notes due 2007............ 250,000 @ 7.125% 17,813
Pending Investment Note
Assumption....................... 97,100 @ 7.46% 7,244
BankBoston Note II................. 200,000 @ 6.89% 13,780
LaSalle Note I..................... 239,000 @ 7.83% 18,714
LaSalle Note II.................... 161,000 @ 7.79% 12,542
Cigna Note......................... 63,500 @ 7.47% 4,743
Metropolitan Life Note............. 12,264 @ 8.88% 1,089
LaSalle Note III................... 115,000 @ 7.82% 8,993
Nomura Funding VI Note............. 8,741 @ 10.07% 880
Northwestern Life Note............. 26,000 @ 7.66% 1,992
---------- --------
Total annual amount................ $1,614,325 $117,828
Prorated for six months............ 58,914
Less: Capitalized interest......... (501)
Historical interest expense........ (31,612)
--------
$ 26,801
========
(G) Amortization of capitalized costs associated with the Note Offering for
initial purchasers' discounts ($4,731) and other costs ($500).
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION
OF FEES
NOTE ------------
<S> <C> <C> <C>
Note Offering -- 6.625% Notes due 2002................. $392
Note Offering -- 7.125% Notes due 2007................. 327
----
Total.................................................. $719
Prorated for six months................................ $ 360
=======
(H) Reflects adjustment needed to reflect minority partners' weighted average
10.69% interest in the net income of the Operating Partnership less joint
venture minority interests assuming completion of the Equity Offerings at
the beginning of the period............................................... $(1,953)
=======
(I) Reflects net income per share based on 110,836,027 weighted average common
shares assumed to be outstanding during the six months ended June 30,
1997...................................................................... --
</TABLE>
F-7
<PAGE> 13
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CRESCENT REAL
ESTATE EQUITIES 1997 ACQUIRED
COMPANY 1996 ACQUIRED AND PENDING OTHER PRO FORMA
HISTORICAL(A) PROPERTIES(B) INVESTMENTS(C) ADJUSTMENTS CONSOLIDATED
--------------- ------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental property................ $202,003 $89,185 $212,344 $ -- $503,532
Interest and other income...... 6,858 -- -- 11,478(D) 18,336
-------- ------- -------- -------- --------
Total revenues......... 208,861 89,185 212,344 11,478 521,868
-------- ------- -------- -------- --------
EXPENSES:
Real estate taxes.............. 20,606 8,176 18,140 -- 46,922
Repairs and maintenance........ 12,292 8,403 22,588 -- 43,283
Other rental property
operating................... 40,915 21,346 37,246 (1,700)(E) 96,374
(1,433)(F)
Corporate general and
administrative.............. 4,674 -- -- 5,326(G) 10,000
Interest expense............... 42,926 -- -- 74,199(H) 117,125
Depreciation and
amortization................ 40,535 12,727 38,743 -- 92,005
Amortization of deferred
financing costs............. 2,812 -- -- 719(I) 3,531
-------- ------- -------- -------- --------
Total expenses......... 164,760 50,652 116,717 77,111 409,240
-------- ------- -------- -------- --------
Operating income
(loss)............... 44,101 38,533 95,627 (65,633) 112,628
OTHER INCOME:
Equity in net income of
unconsolidated
subsidiaries................ 3,850 -- 17,270 -- 21,120
-------- ------- -------- -------- --------
INCOME (LOSS) BEFORE MINORITY
INTERESTS AND EXTRAORDINARY
ITEM........................... 47,951 38,533 112,897 (65,633) 133,748
Minority interests............... (9,510) (533) -- (5,165)(J) (15,208)
-------- ------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY
ITEM........................... 38,441 38,000 112,897 (70,798) 118,540
Extraordinary item............... (1,306) -- -- -- (1,306)
-------- ------- -------- -------- --------
NET INCOME (LOSS)................ $ 37,135 $38,000 $112,897 $(70,798) $117,234
======== ======= ======== ======== ========
PER SHARE DATA(K):
Income before extraordinary
item........................... $ 1.07
Extraordinary item............... (0.01)
--------
Net income....................... $ 1.06
========
</TABLE>
See accompanying notes to Pro Forma Consolidated Statement of Operations.
F-8
<PAGE> 14
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
(A) Reflects Crescent Real Estate Equities Company consolidated historical
statement of operations for the year ended December 31, 1996............. --
(B) Reflects the historical incremental rental income and operating expenses,
including an adjustment for depreciation based on acquisition price
associated with all properties acquired in 1996, assuming the properties
were acquired at the beginning of the period............................. --
ACQUISITION
PROPERTY DATE
3333 Lee Parkway office property....................... 1/05/96
301 Congress Avenue office property(i)................. 4/18/96
Central Park Plaza office property..................... 6/13/96
Canyon Ranch -- Tucson resort(ii)...................... 7/26/96
The Woodlands office properties(iii)................... 7/31/96
Three Westlake Park office property.................... 8/16/96
1615 Poydras office property........................... 8/23/96
Greenway Plaza Portfolio............................... 10/07/96
Chancellor Park office property........................ 10/24/96
The Woodlands retail properties(iii)................... 10/31/96
Sonoma Mission Inn & Spa(ii)........................... 11/18/96
Canyon Ranch -- Lenox resort(ii)....................... 12/11/96
160 Spear Street office property....................... 12/13/96
Greenway I and IA office properties.................... 12/18/96
Bank One Tower office property......................... 12/23/96
Frost Bank Plaza office property....................... 12/27/96
--------------------
(i) The Company has a 1% general partner and a 49% limited partner
interest in the partnership that owns 301 Congress Avenue.
(ii) Historical operations of the hotel or/resort property were
adjusted to reflect the lease payments from the hotel lessee to the
Company calculated on a pro forma basis by applying the rent
provisions (as defined in the lease agreements).
(iii) The Company has a 75% interest in the partnership that owns
these properties.
</TABLE>
F-9
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
(C) Reflects the historical incremental rental income and operating expenses,
including an adjustment for depreciation based on acquisition price
associated with acquired investments in 1997, assuming the investments
were acquired at the beginning of the period............................. --
Greenway II office property............................ 1/17/97
Trammell Crow Center office property................... 2/28/97
Three Denver office properties......................... 2/28/97
Carter-Crowley Real Estate Assets...................... 5/09/97
Magellan Real Estate Assets (i)........................ 6/17/97
The Woodlands (ii)(iii)................................ 7/31/97
Desert Mountain (iv)................................... 8/29/97
Houston Center mixed-use property complex.............. 9/22/97
Four Seasons Hotel (v)................................. 9/22/97
Miami Center office property........................... 9/30/97
Fountain Place office property......................... pending
U.S. Home Building office property..................... pending
--------------------
(i) Calculated to reflect the lease payment from the behavioral
healthcare facilities' lessee to the Company by applying the rent
provisions (as set forth in the facilities' lease agreement).
(ii) The Company has a 40.75% (after sale of voting common stock to
COI) non-voting equity investment in the limited partnership whose
primary holding consists of The Woodlands land assets.
(iii) The Company has a 42.5% equity investment in the limited
partnership whose primary holding consists of The Woodlands commercial
property assets.
(iv) The Company has a 88.50% (after sale of voting common stock to
COI) non-voting equity investment in the limited partnership that owns
Desert Mountain.
(v) Historical operations of the hotel were adjusted to reflect the
lease payment from the hotel lessee to the Company calculated on a pro
forma basis.
(D) Increase reflects the incremental interest income associated with the
following, assuming all had occurred at the beginning of the period.
Carter-Crowley Notes ($55,500 @ 10%) = $5,550
COI Note ($25,697 @ 12%) = $3,084
Desert Mountain Note ($23,700 @ 12%) = $2,844
Total............................................................... $11,478
=======
(E) Reflects the elimination of historical ground lessee's expense, as a
result of the Company acquiring the land underlying Trammell Crow Center,
assuming Trammell Crow Center was acquired at the beginning of the
period................................................................... $(1,700)
=======
(F) Decrease as a result of the elimination of third party property
management fees which terminated subsequent to acquisition of certain of
the properties........................................................... $(1,433)
=======
(G) Increase reflects the estimated incremental general and administrative
costs associated with the increase in personnel due to numerous
acquisitions in 1996 and 1997 and pending investments in 1997............ $ 5,326
=======
</TABLE>
F-10
<PAGE> 16
<TABLE>
<S> <C>
Net increase as a result of interest costs for long and short-term
(H) financing, as follows, net of repayment with proceeds of the Offering,
the Private Placement, the Note Offering, Equity Offering to UBS in
August 1997, April and May 1997 Equity Offerings and the October 1996
Equity Offerings, assuming the borrowings to finance investment
acquisitions and the assumption of debt and repayment, had all occurred
at the beginning of the period.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Credit Facility.......................... $291,720 @ 6.89% $20,100
Note Offering --
6.625% Notes due 2002.................. 150,000 @ 6.625% 9,938
Note Offering --
7.125% Notes due 2007.................. 250,000 @ 7.125% 17,813
Pending Investment Note Assumption....... 97,100 @ 7.46% 7,244
BankBoston Note II....................... 200,000 @ 6.89% 13,780
LaSalle Note I........................... 239,000 @ 7.83% 18,714
LaSalle Note II.......................... 161,000 @ 7.79% 12,542
Cigna Note............................... 63,500 @ 7.47% 4,743
Metropolitan Life Note................... 12,264 @ 8.88% 1,089
LaSalle Note III......................... 115,000 @ 7.82% 8,993
Nomura Funding VI Note................... 8,741 @ 10.07% 880
Northwestern Life Note................... 26,000 @ 7.66% 1,992
Total annual amount...................... 1,614,325 $117,828
Less: Capitalized interest............... (703)
Historical interest expense.............. (42,926)
--------
$74,199
=======
(I) Amortization of capitalized costs associated with the Note Offering for
initial purchasers' discounts ($4,731) and other costs ($500).
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION
NOTE OF FEES
---- ------------
<S> <C> <C> <C>
Note Offering -- 6.625% Notes due 2002................. $392
Note Offering -- 7.125% Notes due 2007................. 327
-----------
Total.................................................. $ 719
=======
</TABLE>
<TABLE>
<S> <C> <C>
(J) Reflects adjustment needed to reflect minority partners' weighted average
10.69% interest in the net income of the Operating Partnership less joint
venture minority interests assuming completion of the Equity Offerings at
the beginning of the period............................................... $(5,165)
=======
(K) Reflects net income per share based on 110,836,027 weighted average common
shares assumed to be outstanding during the year ended December 31,
1996......................................................................
</TABLE>
F-11
