<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): April 9, 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 Offices) (Zip Code)
(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 connection 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 April 9,
1997 (the "Prospectus Supplement") to the Prospectus, the Company is offering
for sale to the public, in an underwritten offering, 17,500,000 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 December 31, 1996
(unaudited) and notes thereto.
Pro Forma Consolidated Statements of Operations for the Years
Ended December 31, 1996 and 1995 (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: April 9, 1997 CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ Dallas E. Lucas
------------------------------------
Dallas E. Lucas
Senior Vice President and
Chief Financial Officer
3
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Pro Forma Financial Statements (unaudited)
Pro Forma Consolidated Balance Sheet as of December 31, 1996
and notes thereto ................................................. F-2
Pro Forma Consolidated Statements of Operations for the Years
Ended December 31, 1996 and 1995 and notes thereto ................ F-5
</TABLE>
4
<PAGE> 6
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
The following unaudited pro forma information for the year ended
December 31, 1995 assumes completion, in each case as of January 1, 1995 in
determining operating data, of (i) the April 1995 Offering and Mr. Rainwater's
concurrent $31 million investment in the Operating Partnership and the use of
the net proceeds therefrom to repay approximately $167 million of indebtedness
secured by certain of the Properties, (ii) 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
million of indebtedness and to fund approximately $289 million of Property
acquisitions completed in the fourth quarter of 1996 and the first quarter of
1997, (iii) the Offering and the use of the net proceeds therefrom to fund the
approximately $308.0 million purchase price of the portion of the Carter-Crowley
Portfolio to be acquired by the Company, to fund approximately $40.8 million in
connection with the formation and capitalization of Crescent Affiliate and to
fund approximately $111.0 million of the purchase price of the assets to be
acquired in the Magellan transaction, (iv) additional borrowings of
approximately $279.0 million at an assumed interest rate of 7.0% to fund the
remaining portion of the purchase price of the assets to be acquired in the
Magellan transaction and (v) the acquisition of the Properties acquired during
1995, 1996 and 1997.
The pro forma information for the year ended 1996 assumes completion, in
each case as of January 1, 1996 in determining operating data and, in each case
as of December 31, 1996 in determining balance sheet data, of (i) 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 million of indebtedness and to fund approximately $289
million of Property acquisitions completed in the fourth quarter of 1996 and the
first quarter of 1997, (ii) the Offering and the use of the net proceeds
therefrom to fund approximately $308.0 million purchase price of the portion of
the Carter-Crowley Portfolio to be acquired by the Company, to fund
approximately $40.8 million in connection with the formation and capitalization
of Crescent Affiliate and to fund approximately $111.0 million of the purchase
price of the assets to be acquired in the Magellan transaction (iii) additional
borrowings of approximately $279.0 million at an assumed interest rate of 7.0%
to fund the remaining portion of the purchase price of the assets to be
acquired in the Magellan transaction and (iv) the acquisition of the Properties
acquired during 1996 and 1997.
The unaudited pro forma Consolidated Balance Sheet and Statements of
Operations should be read in conjunction with the historical financial
statements of the Company, included in its Annual Report on Form 10-K for the
year ended December 31, 1996, and the Prospectus Supplement. In management's
opinion, all adjustments necessary to reflect the above-referenced 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
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 $866,900 (B) $2,599,526
Less - Accumulated depreciation (208,808) -- (208,808)
---------- -------- ----------
1,523,818 866,900 2,390,718
Cash and cash equivalents 25,592 36,600 (C) 62,192
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 87,140 (D) 116,030
Other assets, net 47,125 2,000 (E) 49,125
---------- -------- ----------
Total assets $1,730,922 $992,640 $2,723,562
========== ======== ==========
LIABILITIES:
Borrowings under Credit Facility $ 40,000 $310,000 (F) $ 350,000
Notes payable 627,808 234,978 (G) 862,786
Accounts payable, accrued expenses
and other liabilities 48,462 -- 48,462
---------- -------- ----------
Total liabilities 716,270 544,978 1,261,248
---------- -------- ----------
MINORITY INTERESTS:
Operating Partnership 120,227 -- 120,227
Investment Joint Ventures 29,265 -- 29,265
---------- -------- ----------
Total minority interest 149,492 -- 149,492
---------- -------- ----------
STOCKHOLDERS' EQUITY:
Common stock 361 536 897
Additional paid-in-capital 905,724 447,126 1,352,850
Deferred compensation on
restricted shares (364) -- (364)
Retained deficit (40,561) -- (40,561)
Total stockholders' ---------- -------- ----------
equity 865,160 447,662 (H) 1,312,822
---------- -------- ----------
Total liabilities and
stockholders' equity $1,730,922 $992,640 $2,723,562
========== ======== ==========
</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>
<CAPTION>
<S> <C>
(A) Reflects Crescent Real Estate Equities Company audited consolidated
historical balance sheet at December 31, 1996 --
(B) Increase reflects the following:
Acquisition of the Greenway II office property $ 18,225
Acquisition of the Trammell Crow Center office property ("TCC") 162,000
Acquisition of the three Denver office properties 42,675
Pending acquisition of the Carter-Crowley Real Estate Assets
("CC Real Estate Assets") 254,000
Pending acquisition of Magellan real estate assets and warrants 390,000
---------
$ 866,900
=========
(C) Net increase reflects the following:
Net proceeds of the Offering $ 459,822
Pending acquisition of the Carter-Crowley Portfolio (308,000)
Proposed cash contribution and note to Crescent Affiliate, in
connection with its formation, in order to acquire certain
assets in the pending Carter-Crowley Portfolio and Magellan
transactions (40,800)
Pending acquisition of Magellan real estate assets and warrants (111,022)
Proceeds from working capital draws 36,600
---------
$ 36,600
=========
(D) Increase reflects the following:
Proposed note receivable to Crescent Affiliate $ 28,640
Pending acquisition of Carter-Crowley notes receivable ("CC Notes") 52,000
Other note receivable 6,500
---------
$ 87,140
=========
(E) Increase reflects the following:
Pending acquisition of Carter-Crowley Other Assets ("CC Other Assets") $ 2,000
=========
(F) Increase in borrowings under the Credit Facility as a result of:
Acquisition of the Greenway II office property $ 18,225
Acquisition of the TCC 12,000
Acquisition of the three Denver office properties 42,675
Working capital draws 36,600
Other note receivable 6,500
Pending acquisition of the Magellan real estate assets and warrants 194,000
---------
$ 310,000
=========
</TABLE>
F-3
<PAGE> 9
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
ADJUSTMENTS
(Dollars In Thousands)
<TABLE>
<S> <C>
(G) Increase in short-term borrowings for the following:
Acquisition of the TCC $ 150,000
Pending acquisition of the Magellan real estate assets
and warrants 84,978
---------
$ 234,978
=========
(H) Net increase reflects the following:
Proceeds of the Offering (17.5 million shares of common stock $ 487,813
at $27.875 per share)
Estimated costs of the Offering (3,600)
Underwriter's discount for the Offering (24,391)
Proposed stock dividend in conjunction with cash contribution to Crescent Affiliate (12,160)
Two-for-one stock split on March 26, 1997 361
Two-for-one stock split on March 26, 1997 (361)
---------
$ 447,662
=========
</TABLE>
F-4
<PAGE> 10
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 1997 Acquired
Equities Company 1996 Acquired and Pending Other Pro Forma
Historical (A) Properties(B) Properties(C) Adjustments Consolidated
-------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental property $ 202,003 $ 89,185 $ 116,700 $ - $ 407,888
Interest and other income 6,858 - -- 12,159 (D) 19,017
----------- ---------- ------------ ----------- ---------
Total revenues 208,861 89,185 116,700 12,159 426,905
----------- ---------- ------------ ----------- ---------
EXPENSES:
Real estate taxes 20,606 8,176 7,773 - 36,555
Repairs and maintenance 12,292 8,403 7,751 - 28,446
Other rental property operating 40,915 21,346 16,972 (1,700) (E) 77,081
(452) (F)
Corporate general and administrative 4,674 - - 2,326 (G) 7,000
Interest expense 42,926 - - 45,686 (H) 88,612
Depreciation and amortization 40,535 12,727 20,546 - 73,808
Amortization of deferred financing costs 2,812 - - - 2,812
----------- ---------- ------------ ----------- ---------
Total expenses 164,760 50,652 53,042 45,860 314,314
----------- ---------- ------------ ----------- ---------
Operating income (loss) 44,101 38,533 63,658 (33,701) 112,591
OTHER INCOME:
Equity in net income of residential
development corporations 3,850 - - - 3,850
----------- ---------- ------------ ----------- ---------
INCOME (LOSS) BEFORE MINORITY INTERESTS
AND EXTRAORDINARY ITEM 47,951 38,533 63,658 (33,701) 116,441
Minority interests (9,510) (533) - (5,889) (I) (15,932)
----------- ---------- ------------ ----------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 38,441 38,000 63,658 (39,590) 100,509
Extraordinary item (1,306) - - - (1,306)
----------- ---------- ------------ ----------- ---------
NET INCOME (LOSS) $ 37,135 $ 38,000 $ 63,658 $ (39,590) $ 99,203
=========== ========== ============ =========== =========
PER SHARE DATA (J):
Income before extraordinary item $ 1.12
Extraordinary item (0.01)
---------
Net Income $ 1.11
=========
</TABLE>
See adjustments to Pro Forma Consolidated Statement
of Operations on following page.
F-5
<PAGE> 11
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 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
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
</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 set forth in the lease
agreements).
(iii) The Company has a 75% interest in the partnership
that owns these properties.
F-6
<PAGE> 12
(C) Reflects the historical incremental rental income and operating
expenses, including an adjustment for depreciation based on
acquisition price associated with acquired properties and
pending investments, all assets acquired or proposed to
be acquired in 1997, assuming the assets were acquired at
the beginning of the period. ---
<TABLE>
<CAPTION>
PROPERTY ACQUISITION DATE
-------- ----------------
<S> <C>
Greenway II office property 1/17/97
TCC 2/28/97
Three Denver office properties 2/28/97
CC Real Estate Assets pending
Magellan real estate assets(i) 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).
</TABLE>
(D) Increase reflects the incremental interest income associated with
the following, assuming all had occurred at the beginning of the
period.
<TABLE>
<S> <C> <C>
Working capital draw on Credit Facility (36,600 @ 6%) = $2,196
CC Notes ($52,000 @ 11.3%) = $5,876
Other Note receivable ($6,500 @ 10%) = $650
Crescent Affiliate Note receivable ($28,640 @ 12%) = 3,437 $ 12,159
========
(E) Reflects the elimination of historical ground lessee's
expense, as a result of the Company acquiring the land
underlying TCC, assuming TCC 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 after the
acquisition of certain of the properties. $ (452)
========
(G) Increase reflects the estimated incremental general and
administrative costs associated with the increase in
personnel due to numerous acquisitions in 1996 and
pending investments in 1997. $ 2,326
========
(H) Net increase as a result of incremental interest costs for
long and short-term financing, net of repayment
with proceeds of the October 1996 Offering, assuming the
borrowings to finance property acquisitions and the
assumption of debt and repayment had all occurred at the
beginning of the period.
Credit Facility and Short
Term Borrowing - $ 584,978 @ 7.00% = $ 40,948
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
---------- --------
Total $1,212,786 $ 89,714
Less: Capitalized interest (1,102)
Historical interest expense (42,926)
--------
$ 45,686
========
(I) Reflects adjustment needed to reflect minority partners' weighted
average 12.92% interest in the net income of the Operating
Partnership less joint venture minority interests assuming completion
of the October 1996 Offering and this Offering at the beginning of
the period. $ (5,889)
========
(J) Reflects net income per share based on 89,742,709 weighted
average shares of Common Stock assumed to be outstanding
during the year ended December 31, 1996. ---
</TABLE>
F-7
<PAGE> 13
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Crescent Real
Estate 1997 Acquired
Equities Company 1995 Acquired 1996 Acquired and Pending
Historical (A) Properties (B) Properties (C) Properties (D)
---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Rental property $ 123,489 $ 38,283 $ 119,733 $ 112,886
Interest and other income 6,471 212 -- --
-------------- ---------- ----------- ---------
Total revenues 129,960 38,495 119,733 112,886
-------------- ---------- ----------- ---------
EXPENSES:
Real estate taxes 12,494 2,912 10,956 6,793
Repairs and maintenance 7,787 2,964 11,141 7,895
Other rental property operating 25,668 7,257 27,218 15,830
Corporate general and administrative 3,812 -- -- --
Interest expense 18,781 -- -- --
Depreciation and amortization 28,060 5,571 17,104 20,546
Amortization of deferred financing costs 2,500 -- -- --
-------------- ---------- ----------- ---------
Total expenses 99,102 18,704 66,419 51,064
-------------- ---------- ----------- ---------
Operating income (loss) 30,858 19,791 53,314 61,822
OTHER INCOME:
Equity in net income of residential
development corporations 5,500 -- -- --
--------------- ---------- ----------- ---------
INCOME (LOSS) BEFORE MINORITY INTERESTS 36,358 19,791 53,314 61,822
Minority interests (8,963) (564) (1,808) --
-------------- ---------- ----------- ---------
NET INCOME (LOSS) $ 27,395 $ 19,227 $ 51,506 $ 61,822
============== ========== =========== =========
NET INCOME PER COMMON SHARE (M)
<CAPTION>
Other Pro Forma
Adjustments Consolidated
----------- ------------
<S> <C> <C>
REVENUES:
Rental property $ 674 (E) $ 395,065
Interest and other income (326)(E) 18,516
12,159 (F)
----------- -----------
Total revenues 12,507 413,581
----------- -----------
EXPENSES:
Real estate taxes 85 (E) 33,240
Repairs and maintenance 99 (E) 29,886
Other rental property operating (701)(G) 73,723
151 (E)
(1,700)(H)
Corporate general and administrative 3,188 (I) 7,000
Interest expense 68,214 (J) 86,995
Depreciation and amortization 89 (E) 71,370
Amortization of deferred financing costs 563 (K) 3,063
----------- -----------
Total expenses 69,988 305,277
----------- -----------
Operating income (loss) (57,481) 108,304
OTHER INCOME:
Equity in net income of residential
development corporations -- 5,500
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTERESTS (57,481) 113,804
Minority interests (5,162)(L) (16,497)
----------- -----------
NET INCOME (LOSS) $ (62,643) $ 97,307
=========== ===========
NET INCOME PER COMMON SHARE (M) $ 1.08
===========
</TABLE>
See adjustments to Pro Forma Consolidated Statement
of Operations on following page.
F-8
<PAGE> 14
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, 1995. ---
(B) Reflects the historical incremental rental income and
operating expenses, including an adjustment for
depreciation based on acquisition price associated with
acquired properties and interest income associated with
the mortgage note, all acquired in 1995, assuming the
assets were acquired at the beginning of the period. ---
<TABLE>
<CAPTION>
PROPERTY ACQUISITION DATE
-------- ----------------
<S> <C>
Hyatt Regency Beaver Creek hotel 1/03/95
Stanford Corporate Centre office property 1/04/95
Mortgage note secured by the Biltmore
Commerce Center office property 2/28/95
The Aberdeen office property (i) 3/13/95
12404 Park Central office property 5/09/95
Barton Oak Plaza One office property 6/05/95
MCI Tower office property 6/30/95
Denver Marriott City Center hotel (ii) 6/30/95
The Woodlands office properties (iii) 7/12/95
Spectrum Center office property 8/31/95
Ptarmigan Place office property 10/06/95
6225 N. 24th Street office property 11/07/95
Briargate office building and research center 11/21/95
Albuquerque Plaza office property 12/19/95
Hyatt Regency Albuquerque hotel (ii) 12/19/95
</TABLE>
(i) The building was vacant from January 1995 through
July 1995, therefore no historical information is
presented prior to July.
(ii) Historical operations of the hotel 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 set forth in the
lease agreements).
(iii) The Company has a 75% interest in the
partnership that owns these 10 office properties.
(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. ---
F-9
<PAGE> 15
<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
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 set forth in the lease
agreements).
(iii) The Company has a 75% interest in the partnership
that owns these properties.
(D) Reflects the historical incremental rental income and operating
expenses, including an adjustment for depreciation based on acquisition
price associated with acquired properties and pending investments, all
assets acquired or proposed to be acquired in 1997, assuming the assets
were acquired at the beginning of the period. ---
PROPERTY ACQUISITION DATE
-------- ----------------
<S> <C>
Greenway II office property 1/17/97
TCC 2/28/97
Three Denver office properties 2/28/97
CC Real Estate Assets pending
Magellan real estate assets (i) 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).
(E) Decrease as a result of the elimination of interest income for the
Spectrum Note in September 1995 and recording historical incremental
rental income and operating expenses associated with the property.
Based upon an agreement with the borrower and its partners, the Company
transferred the ground lessor's interest in the land underlying
the building and the Spectrum Note to a partnership in return for a
general partner interest. As a result, the Company began
consolidating the operations of the property due to its economic
control of the property's cash flows. $ (76)
======
</TABLE>
F-10
<PAGE> 16
<TABLE>
<S> <C> <C>
(F) Increase reflects the incremental interest income associated with the
following, assuming all had occurred at the beginning of the period.
Working capital draw on Credit Facility ($36,600 @ 6.0%) = $2,196
CC Notes ($52,000 @ 11.3%) = $5,876
Other Note receivable ($6,500 @ 10%) = $650
Crescent Affiliate Note receivable ($28,640 @ 12%) = $3,437 $12,159
=======
(G) Decrease as a result of the elimination of third party property
management fees which terminated after the acquisition of certain of
the properties. $ (701)
=======
(H) Reflects the elimination of historical ground lessee's expense,
as a result of the Company acquiring the land underlying TCC,
assuming TCC was acquired at the beginning of the period. $(1,700)
=======
(I) Increase reflects the estimated incremental general and administrative
costs associated with the increase in personnel due to numerous
acquisitions in 1995 and 1996 and pending investments in 1997. $ 3,188
=======
(J) Net increase as a result of interest costs for long and short-term
financing, net of repayment with proceeds of the April 1995 Offering and
Mr. Rainwater's concurrent $31,000 investment and the October 1996
Offering, assuming the borrowings to finance property acquisitions and
the assumption of debt and repayment had all occurred at the beginning
of the period.
Credit Facility and short term
borrowings - $ 584,978 @ 7.00% = $ 40,948
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
---------- --------
Total $1,212,786 $ 89,714
Less: Capitalized interest (2,719)
Historical interest expense (18,781)
--------
$ 68,214
========
(K) Increase reflects the incremental amortization expense from costs
of obtaining the LaSalle Note I and II and CIGNA Loan.
Loan Closing Costs on LaSalle Note I and II $ 6,000
Average term of LaSalle Note I and II 11 years
--------
545
Prorate for eight months $ 363
Loan Closing Costs on CIGNA Loan $ 1,400
Term of CIGNA Loan 7 years
--------
200
Prorated for twelve months $ 200 $ 563
-------- ========
(L) Reflects adjustment needed to reflect minority partners' weighted
average 12.92% interest in the net income of the Operating Partnership
less joint venture minority interests assuming completion of the 1995
April Offering, the October 1996 Offering and this Offering at the
beginning of the period. $ (5,162)
========
(M) Reflects net income per share based on 89,742,709 weighted average
shares of Common Stock assumed to be outstanding during the year ended
December 31, 1995. ---
</TABLE>
F-11
