<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 28, 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
The Form 8-K of Crescent Real Estate Company (the "Company") dated February 28,
1997 and filed March 17, 1997, is being amended to include the financial
statements and pro forma financial information, as well as the accountants'
consent required by Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS UNDER RULE 3-14 OF REGULATION S-X
TRAMMELL CROW CENTER
Report of Independent Public Accountants.
Statement of Excess of Revenues Over Specific Operating Expenses for
the Year Ended December 31, 1996
Notes to Statement.
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Balance Sheet as of December 31, 1996
(unaudited) and notes thereto.
Pro Forma Consolidated Statement of Operations for the Year ended
December 31, 1996 (unaudited) and notes thereto.
(c) EXHIBITS
The following is a list of all exhibits filed as a part of this Form
8-K.
<TABLE>
<S> <C>
Exhibit No. Description of Exhibit
----------- ----------------------
23.01 Consent of Arthur Andersen LLP, Independent Public
Accountants, dated March 20, 1997 (filed herewith).
</TABLE>
1
<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: March 20, 1997 CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ Dallas. E Lucas
-------------------------
Dallas E. Lucas
Senior Vice President and
Chief Financial Officer
2
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
TRAMMELL CROW CENTER
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . F-2
Statement of Excess of Revenues Over Specific Operating Expenses for
the Year Ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Notes to Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Consolidated Balance Sheet as of December 31, 1996 and notes thereto . . F-7
Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1996 and notes thereto . . . . . . . . . . . . . . . . . . . . . . . F-9
</TABLE>
<PAGE> 6
TRAMMELL CROW CENTER
STATEMENT OF EXCESS OF REVENUES OVER
SPECIFIC OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
F-1
<PAGE> 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Crescent Real Estate Equities Limited Partnership:
We have audited the accompanying statement of excess of revenues over specific
operating expenses (as defined in Note 2) of Trammell Crow Center for the year
ended December 31, 1996. This statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement referred to above presents fairly, in all
material respects, the excess of revenues over specific operating expenses of
Trammell Crow Center for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 14, 1997
F-2
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TRAMMELL CROW CENTER
STATEMENT OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUES:
Office rent $19,616,793
Parking 1,143,927
Recoveries 2,223,219
Other 20,751
-----------
23,004,690
SPECIFIC OPERATING EXPENSES:
Real estate taxes 2,207,946
Utilities 1,924,197
Repairs, maintenance, and contract services 1,916,371
Ground lease 1,700,000
Salaries 1,088,448
General and administrative 821,717
Management fees 454,099
Insurance 151,982
-----------
10,264,760
-----------
EXCESS OF REVENUES OVER SPECIFIC
OPERATING EXPENSES $12,739,930
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 9
TRAMMELL CROW CENTER
NOTES TO STATEMENT OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Description of Property
Trammell Crow Center (the "Property") is a 50-story office tower located in the
central business district of Dallas, Texas. The Property contains approximately
1,133,000 rentable square feet as well as an underground parking garage. C-W
#11 Limited Partnership ("C-W #11") is the lessee of the land under a ground
lease, as amended February 28, 1997, which expires December 2037. The fee owner
of the land is one of the Property's lenders.
Use of Estimates
The preparation of statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Rental Income and Deferred Rent Concessions
In connection with obtaining certain tenants under long-term leases, property
management grants rent concessions. The aggregate rental payments due over the
terms of the leases are recognized as rental income on a straight-line basis
over the full term of the leases, including the periods of rent concessions.
Recoveries
A portion of the operating expenses is charged back to tenants on a monthly
basis based upon estimated expenses. These charges are adjusted at period-end,
based upon actual expenses.
2. BASIS OF ACCOUNTING:
The accompanying statement of excess of revenues over specific operating
expenses is presented on the accrual basis of accounting. This statement is
not intended to be a complete presentation of revenues and operating expenses
for the year ended December 31, 1996, as certain items such as depreciation,
amortization, interest, and partnership administrative expenses have been
excluded since they are not comparable to the proposed future operations of the
Property.
3. PROPERTY MANAGEMENT:
C-W #11 entered into a management agreement with Trammell Crow Dallas/Fort
Worth, Inc. (the "Manager") on June 1, 1993. The agreement with the Manager
requires a management fee of 2% of gross rental receipts, as defined.
Effective January 1, 1997, the monthly management fee decreases to 1.75% of
gross rental receipts. Total management fees for the year ended December 31,
1996, were approximately $454,000. The agreement may be terminated at any time
by either party in accordance with the
F-4
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management agreement. If terminated, the management fees must be paid through
the month in which the Manager's service will extend.
4. SIGNIFICANT TENANTS:
The largest tenant of the Property occupies approximately 173,000 square feet,
or 15%, of the total leasable square footage. This lease expires in December
1999. The second largest tenant of the Property occupies approximately 132,000
square feet, or 12%, of the total leasable square footage. This lease expires
in June 2005.
5. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
Ground lease expense for the year ended December 31, 1996 was approximately
$1.7 million. Future minimum lease payments due under the ground lease as of
December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997 $ 2,500,000
1998 2,500,000
1999 2,500,000
2000 2,500,000
2001 2,500,000
Thereafter 90,000,000
------------
$102,500,000
============
</TABLE>
Contingencies
The accompanying statement of excess of revenues over specific operating
expenses includes bad debt expense of approximately $675,000 relating to a
legal dispute which is in the settlement process.
6. INTENT TO SELL:
On January 14, 1997, the fee owner of the Property and both of the Property's
mortgage note lenders approved a nonbinding letter of intent to sell their
interest (including equity, debt, and accrued interest) in the Property to an
unaffiliated third party. The expected sales price is approximately $162
million.
F-5
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CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma Consolidated Balance Sheet of
Crescent Real Estate Equities Company (the "Company") as of December 31, 1996,
assumes completion of (i) the acquisition of Trammell Crow Center office
property ("TCC") acquired subsequent to December 31, 1996 and the associated
financing, in each case as of December 31, 1996. The pro forma Consolidated
Statement of Operations for the year ended December 31, 1996 assumes the
completion, as of January 1, 1996, of (i) the October 1996 Offering of the
Company's common stock and the use of the net proceeds therefrom to repay
approximately $168 million of indebtedness and to fund approximately $289
million of subsequent acquisitions and (ii) the acquisition of the Properties
acquired during 1996 and TCC acquired during 1997.
The unaudited pro forma Consolidated Balance Sheet and Statement of
Operations should be read in conjunction with the historical financial
statements of the Company. In management's opinion, all adjustments necessary
to reflect the above discussed transactions have been made. The unaudited pro
forma Consolidated Balance Sheet and Statement 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-6
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CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1996
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Crescent
Real Estate
Equities Company Pro Forma Pro Forma
Historical (A) Adjustments Consolidated
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment properties, at cost $ 1,732,626 $ 162,000(B) $ 1,894,626
Less - Accumulated depreciation (208,808) -- (208,808)
----------- ----------- -----------
1,523,818 162,000 1,685,818
Cash and cash equivalents 25,592 -- 25,592
Restricted cash and cash equivalents 36,882 -- 36,882
Accounts receivable, net 15,329 -- 15,329
Deferred rent receivable 16,217 -- 16,217
Investments in real estate mortgages and common
stock of residential development corporations 37,069 -- 37,069
Notes receivable 28,890 -- 28,890
Other assets, net 47,125 -- 47,125
----------- ----------- -----------
Total assets $ 1,730,922 $ 162,000 $ 1,892,922
=========== =========== ===========
LIABILITIES:
Borrowings under Credit Facility $ 40,000 $ 12,000(C) $ 52,000
Notes payable 627,808 150,000(D) 777,808
Accounts payable, accrued expenses and other
liabilities 48,462 -- 48,462
----------- ----------- -----------
Total liabilities 716,270 162,000 878,270
----------- ----------- -----------
MINORITY INTERESTS:
Operating Partnership 120,227 -- 120,227
Investment Joint Ventures 29,265 -- 29,265
----------- ----------- -----------
Total minority interests 149,492 -- 149,492
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 361 -- 361
Additional paid-in capital 905,724 -- 905,724
Deferred compensation on restricted shares (364) -- (364)
Retained deficit (40,561) -- (40,561)
----------- ----------- -----------
Total stockholders' equity 865,160 -- 865,160
----------- ----------- -----------
Total liabilities and stockholders'
equity $ 1,730,922 $ 162,000 $ 1,892,922
=========== =========== ===========
</TABLE>
See accompanying notes to Pro Forma Consolidated Balance Sheet.
F-7
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CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ADJUSTMENTS
(Dollars in Thousands)
<CAPTION>
<S> <C> <C>
(A) Reflects Crescent Real Estate Equities Company audited consolidated historical
balance sheet at December 31, 1996. ---
(B) Increase reflects the acquisition of TCC $ 162,000
==============
(C) Increase in borrowings under the Credit Facility as a result of the acquisition of TCC $ 12,000
==============
(D) Increase in short-term borrowings for the acquisition of TCC $ 150,000
==============
</TABLE>
F-8
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CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Crescent Real
Estate
Equities Company 1996 Acquired Other Pro Forma
Historical (A) TCC (B) Properties (C) Adjustments Consolidated
-------------- -------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental property $ 202,003 $ 23,005 $ 89,185 $ -- $ 314,193
Interest and other income 6,858 -- -- -- 6,858
--------- --------- --------- --------- ---------
Total revenues 208,861 23,005 89,185 -- 321,051
--------- --------- --------- --------- ---------
EXPENSES:
Real estate taxes 20,606 2,208 8,176 -- 30,990
Repairs and maintenance 12,292 1,916 8,403 -- 22,611
Other rental property operating 40,915 6,141 21,346 (1,700)(D) 66,702
Corporate general and administrative 4,674 -- -- -- 4,674
Interest expense 42,926 -- -- 20,393 (E) 63,319
Depreciation and amortization 40,535 4,050 12,727 -- 57,312
Amortization of deferred financing costs 2,812 -- -- -- 2,812
--------- --------- --------- --------- ---------
Total expenses 164,760 14,315 50,652 18,693 248,420
--------- --------- --------- --------- ---------
Operating income (loss) 44,101 8,690 38,533 (18,693) 72,631
OTHER INCOME:
Equity in net income of residential
development corporations 3,850 -- -- -- 3,850
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTERESTS
AND EXTRAORDINARY ITEM 47,951 8,690 38,533 (18,693) 76,481
Minority interests (9,510) -- (533) (2,718) (F) (12,761)
--------- --------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 38,441 8,690 38,000 (21,411) 63,720
Extraordinary item (1,306) -- -- -- (1,306)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 37,135 $ 8,690 $ 38,000 $ (21,411) $ 62,414
========= ========= ========= ========= =========
PER SHARE DATA (G):
Income before extraordinary item $ 1.76
Extraordinary item (0.04)
---------
Net income $ 1.73
=========
</TABLE>
See adjustments to Pro Forma Consolidated Statement
of Operations on following page.
F-9
<PAGE> 15
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
ADJUSTMENTS
(Dollars in Thousands)
(A) Reflects Crescent Real Estate Equities Company audited
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
TCC acquired on February 28, 1997, assuming the property was
acquired at the beginning of the period. ---
(C) 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. ---
<TABLE>
<CAPTION>
PROPERTY ACQUISITION DATE
-------- ----------------
<S> <C>
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
Canon 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
</TABLE>
(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.
(D) Reflects the elimination of historical ground lessee's
expense, assuming TCC was acquired at the beginning of
the period. $(1,700)
=======
F-10
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(E) Net increase as a result of interest costs for long and
short-term financing, as follows, assuming the borrowings
to finance property acquisitions and assumption of debt had
all occurred at the beginning of the period.
<TABLE>
<S> <C> <C>
Credit Facility - $ 52,000 @ 7.75% = $ 4,030
LaSalle Note I - $ 239,000 @ 7.83% = 18,714
LaSalle Note II - $ 161,000 @ 7.79% = 12,542
Cigna - $ 63,500 @ 7.47% = 4,743
LaSalle Note III - $ 115,000 @ 7.51% = 8,637
Nomura Funding VI Note - $ 8,780 @ 10.07% = 884
Northwestern Loan - $ 26,000 @ 7.65% = 1,989
Woodlands Note - $ 12,411 @ 8.875% = 1,101
TCB Construction Loan- $ 2,117 @ 7.39% = 156
FNBB Short-term Loan - $ 150,000 @ 7.75% = 11,625
-------
Total Annual Amount $64,421
Less: Capitalized interest (1,102)
Historical interest expense (42,926)
-------
</TABLE>
$20,393
=======
(F) Reflects adjustment needed to reflect minority
partners' weighted average 15.56% interest in the net
income of the Operating Partnership less joint venture
minority interests assuming completion of the October 1996
Offering at the beginning of the period. $(2,718)
=======
(G) Reflects net income per share based on 36,121,355
weighted average shares of Common Stock assumed to be
outstanding during the year ended December 31, 1996. ---
F-11
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
23.01 Consent of Arthur Andersen LLP, Independent Public
Accountants, dated March 20, 1997
</TABLE>
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 14, 1997 included in this Form 8-K
into Crescent Real Estate Equities Company's previously filed Registration
Statements File No. 33-91438, No. 33-92548, No. 333-3450, No. 333-3452,
No. 333-3454, No. 333-13521, No. 333-21905 and No. 333-23005.
ARTHUR ANDERSEN LLP
Dallas, Texas
March 20, 1997
