<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 3
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 16, 1998
CRESCENT REAL ESTATE EQUITIES COMPANY
(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
On January 27, 1998, Crescent Real Estate Equities Company (the "Company")
filed a Form 8-K dated January 16, 1998 (the "Original 8-K") containing a
description of certain proposed transactions in Item 5 thereof. The Company
filed a Form 8-K/A on February 13, 1998 to revise and restate the disclosure
contained in Item 5 of the Original 8-K and to provide certain related financial
information in Item 7. The Company a form 8-K/A on April 27,1998 to further
amend the Original 8-K to revise and restate the disclosure contained in Item 5
and to provide updated pro forma financial statements in Item 7(b). This Form
8-K/A further amends the Original 8-K to provide updated pro forma financial
statements in Item 7(b).
-2-
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS UNDER RULE 3-05 OF REGULATION S-X
Previously filed.
(b) PRO FORMA FINANCIAL INFORMATION
Crescent Real Estate Equities Company
Pro Forma Consolidated Balance Sheet as of March 31, 1998 (unaudited)
and notes thereto.
Pro Forma Consolidated Statements of Operations for the three months
ended March 31, 1998 (unaudited) and notes thereto.
Pro Forma Consolidated Statements of Operations for the year ended
December 31, 1997 (unaudited) and notes thereto.
(c) EXHIBITS
None.
3
<PAGE> 4
SIGNATURES
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: June 10, 1998 CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ DALLAS E. LUCAS
-----------------------
Dallas E. Lucas
Senior Vice President and
Chief Financial Officer
4
<PAGE> 5
INDEX TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
<S> <C>
Pro Forma Consolidated Balance Sheet as of March 31, 1998 (unaudited)
and notes thereto........................................................... F-3
Pro Forma Consolidated Statements of Operations for the three months ended
March 31, 1998 (unaudited) and notes thereto................................ F-5
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997 (unaudited) and notes thereto.......................................... F-8
</TABLE>
F-1
<PAGE> 6
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The pro forma information for the three months ending March 31, 1998 and
year ended December 31, 1997 assumes completion, as of January 1, 1997 in
determining balance sheet, operating and other data, of (i) the Crescent Real
Estate Equities Company's (the "Company") 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 net proceeds therefrom
to fund approximately $593,500 of Property acquisitions and other investments in
the second quarter of 1997, (ii) the Company's offering of 4,700,000 Common
Shares to an affiliate of Union Bank of Switzerland (the "UBS Offering") and the
net proceeds therefrom to repay approximately $145,000 of indebtedness under the
Credit Facility, (iii) the Operating Partnership's offering of an aggregate
principal amount of $400 million of senior notes (the "September 1997 Note
Offering") and the use of the net proceeds therefrom to fund approximately
$337,600 of the purchase price of two Properties and to repay approximately
$57,200 of indebtedness incurred under the Credit Facility and other short-term
indebtedness, (iv) the Company's public offering of its Common Shares in October
1997 (the "October 1997 Offering") and the net proceeds therefrom to fund
approximately $45,000 of the purchase price of one Property and to repay
approximately $325,100 of short-term indebtedness and indebtedness incurred
under the Credit Facility, (v) the Company's offering of 5,375,000 Common Shares
to Merrill Lynch (the "Merrill Offering") and the net proceeds therefrom to
repay approximately $199,900 of indebtedness under the Credit Facility, (vi) the
Company's public offering of 8,000,000 Preferred Shares in February 1998
("February 1998 Preferred Offering") and the net proceeds therefrom to repay
approximately $191,250 of indebtedness under the Credit Facility, (vii) the
Company's public offering of 1,365,138 Common Shares to Merrill Lynch & Co. in
April 1998 which Merrill Lynch & Co. deposited with the trustee of a unit
investment trust ("Unit Investment Trust Offering") and the net proceeds
therefrom to repay approximately $43,960 of indebtedness under the Credit
Facility, (viii) Property acquisitions, other investments and related financing
and share issuances during 1997 and 1998, and (ix) proposed acquisition of a
corporation that owns primarily four full-service casino/hotels and two
riverboat casinos and related financing, including $1,035,200 for refinancing
and/or assumption of indebtedness, and associated refinancing and transaction
costs, in connection with the merger with Station (the "Pending Investment").
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 for the year ended December 31, 1997, filed herein.
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-2
<PAGE> 7
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(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.................... $3,877,013 $1,801,510(B) $5,678,523
Less -- accumulated depreciation.............. (302,826) -- (302,826)
---------- ---------- ----------
Net investment in real estate....... 3,574,187 1,801,510 5,375,697
Cash and cash equivalents..................... 68,548 8,360(C) 76,908
Restricted cash and cash equivalents.......... 26,519 -- 26,519
Accounts receivable, net...................... 24,047 -- 24,047
Deferred rent receivable...................... 48,397 -- 48,397
Investments in real estate mortgages and
equity of unconsolidated companies.......... 583,262 27,750(D) 611,012
Notes receivable, net......................... 148,482 148,482
Other assets, net............................. 118,286 -- 118,286
---------- ---------- ----------
Total assets........................ $4,591,728 $1,837,620 $6,429,348
========== ========== ==========
LIABILITIES
Borrowings under Credit Facility.............. $ 457,000 $ 15,650(E) $ 472,650
Notes payable................................. 1,517,927 1,082,200(F) 2,600,127
Accounts payable, accrued expenses and other
liabilities................................. 79,222 79,222
---------- ---------- ----------
Total liabilities................... 2,054,149 1,097,850 3,151,999
---------- ---------- ----------
MINORITY INTERESTS............................
Operating partnership....................... 121,806 -- 121,806
Investment joint ventures................... 27,815 -- 27,815
---------- ---------- ----------
Total minority interests............ 149,621 -- 149,621
---------- ---------- ----------
SHAREHOLDER'S EQUITY..........................
7% Series B convertible preferred shares.... -- 103,500 103,500
6.75% Series A convertible cumulative
preferred shares
$.01 par value, authorized 100,000,000
shares, 8,000,000 shares issued and
outstanding............................... 200,000 -- 200,000
Common shares, $.01 par value, authorized
250,000,000 shares........................ 1,186 179 1,365
Additional paid-in capital.................. 2,248,628 636,091 2,884,719
Deferred compensation on restricted shares.. (281) -- (281)
Retained deficit............................ (61,575) -- (61,575)
---------- ---------- ----------
Total shareholder's equity.......... 2,387,958 739,770(G) 3,127,728
---------- ---------- ----------
Total liabilities and shareholders'
equity............................ $4,591,728 $1,837,620 $6,429,348
========== ========== ==========
</TABLE>
See accompanying notes to Pro Forma Consolidated Balance Sheet.
F-3
<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
audited consolidated historical balance sheet as of
March 31, 1998............................................ --
(B) Increase reflects the following:
Acquisition of Datran office property....................... $ 70,500
Pending acquisition of Station's casino/hotel properties.... 1,731,010
----------
$1,801,510
==========
(C) Net increase reflects the following:
Net proceeds from the April 1998 Unit Investment Trust
Offering................................................. $ 43,960
Partial repayment of Credit Facility........................ (44,100)
Borrowings under the Credit Facility for working capital.... 8,500
----------
$ 8,360
==========
(D) Increase reflects the following:
Additional investment in Refrigerated Warehouse
partnerships.............................................. $ 27,750
----------
$ 27,750
==========
(E) Net increase in borrowings under the Credit Facility as a
result of:
Additional investment in Refrigerated Warehouse
partnerships.............................................. $ 27,750
Partial repayment of Credit Facility........................ (44,100)
Borrowings for the acquisition of Datran office property and
working capital........................................... 32,000
----------
$ 15,650
==========
(F) Increase in notes payable as a result of:
Debt relating to the pending acquisition of Station's
casino/hotel properties................................... $1,035,200
Assumption of notes as a part of the acquisition of Datran
office property........................................... 47,000
----------
$1,082,200
==========
(G) Increase reflects the following:
The Company's issuance of preferred shares in conjunction
with the pending acquisition of Station's
casino/hotel properties................................... $ 103,500
The Company's issuance of common shares in conjunction with
the pending acquisition of Stations's casino/hotel
properties................................................ 592,310
Net proceeds from the April 1998 Unit Investment Trust
Offering................................................. 43,960
----------
$ 739,770
==========
</TABLE>
F-4
<PAGE> 9
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CRESCENT REAL
ESTATE EQUITIES
COMPANY 1998 ACQUIRED 1998 PENDING OTHER PRO FORMA
HISTORICAL(A) INVESTMENTS(B) INVESTMENT(B) ADJUSTMENTS CONSOLIDATED
--------------- ------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental property............................. $153,125 $ 7,473 $ 45,831 $ -- $206,429
Interest and other income................... 8,024 -- -- -- 8,024
-------- -------- ---------- --------- --------
Total revenues...................... 161,149 7,473 45,831 -- 214,453
-------- -------- ---------- --------- --------
EXPENSES:
Real estate taxes........................... 16,097 751 -- -- 16,848
Repairs and maintenance..................... 8,700 821 -- -- 9,521
Other rental property operating............. 29,891 1,578 -- (132)(C) 31,337
Corporate general and administrative........ 3,147 -- -- -- 3,147
Interest expense............................ 34,283 -- -- 21,386(D) 55,669
Depreciation and amortization............... 26,582 1,731 18,568 -- 46,881
Amortization of deferred financing
costs.................................... 1,140 -- -- -- 1,140
-------- -------- ---------- --------- --------
Total expenses...................... 119,840 4,881 18,568 21,254 164,543
-------- -------- ---------- --------- --------
Operating income (loss)............. 41,309 2,592 27,263 (21,254) 49,910
OTHER INCOME:
Equity in net income of unconsolidated
companies................................ 5,845 486 -- -- 6,331
-------- -------- ---------- --------- --------
INCOME (LOSS) BEFORE MINORITY INTERESTS....... 47,154 3,078 27,263 (21,254) 56,241
Minority interests............................ (4,746) -- (456)(E) (5,202)
-------- -------- ---------- --------- --------
NET INCOME (LOSS)............................. 42,408 $ 3,078 27,263 $ (21,710) $ 51,039
Preferred dividend(F)......................... (1,575) -- -- (3,611) (5,186)
-------- -------- ---------- --------- --------
Net income applicable to common shareholders.. $ 40,833 $ 3,078 $ 27,263 $ (25,321) $ 45,853
======== ======== ========== ========= ========
PER COMMON SHARES DATA: (G)
Net Income -- Basic........................... $ .34
========
Net Income -- Dilutive........................ $ .32
========
</TABLE>
See adjustments to Pro Forma Consolidated Statement of Operations on following
page.
F-5
<PAGE> 10
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTMENTS
(DOLLARS IN THOUSANDS)
(A) Reflects Crescent Real Estate Equities Company's unaudited consolidated
historical statement of operations for the three months ended March 31,
1998.
(B) Reflects the historical incremental rental income and operating expenses,
including an adjustment for depreciation based on acquisition price
associated with the 1998 acquired and pending investment, assuming the
investments were acquired at the beginning of the period.
<TABLE>
<S> <C> <C> <C>
Austin Centre office property............................... 1/23/98
Omni Austin Hotel property(i)............................... 1/23/98
Post Oak Central office property complex.................... 2/13/98
Washington Harbour office properties........................ 2/25/98
Datran office property...................................... 5/01/98
Station's casino/hotel properties(ii)....................... pending
(i) Historical operations of the hotel property were adjusted to
reflect the lease payment (base rent and percentage rent)
from the hotel lessee to the Company calculated by applying
the rent provisions (as defined in the lease agreement) to
the historical revenues of the hotel property.
(ii) Calculated estimated lease payment using the historical
operating results of the casino/hotel properties for the
quarter ended March 31, 1998. Current negotiations provide
for a lease payment equal to 98% of Station's operating
income for the three months ended March 31, 1998, plus
depreciation, amortization and preopening expenses for the
three month period, and less an historical equipment rental
lease payment which will be eliminated upon consummation of
the Company's Merger with Station ("Adjusted Operating
Income"). The definitive terms of the lease agreement have
not yet been finalized. The following reflects the
components of the calculation of Adjusted Operating Income.
Operating income............................................ $ 27,684
Adjusted for depreciation and amortization.................. 17,019
Elimination of historical equipment rental lease payment, as
a result of the Company's Merger with Stations.............. 2,063
--------
Adjusted Operating Income................................... $ 46,766
98% of Adjusted Operating Income............................ $ 45,831
========
(C) Decrease as a result of the elimination of third party property management
fees which terminated subsequent to acquisition of certain of the
properties................................................................... $ (132)
========
</TABLE>
F-6
<PAGE> 11
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
(D) Net increase as a result of interest costs for long and short-term
financing, as follows, net of repayment with proceeds of the April 1998
Unit Investment Trust Offering and the February 1998 Preferred Offering,
assuming the borrowings to finance investment acquisitions and the
assumption of debt and repayment, had all occurred at the beginning of the
period.
<TABLE>
<S> <C> <C> <C> <C> <C>
Credit Facility......................... $ 472,650 @ 6.89% $ 32,566
Bridge Loan............................. 250,000 @ 6.89% 17,225
BankBoston Note II...................... 100,000 @ 6.89% 6,890
Note Offering -- 7.125% Notes due
2007.................................. 250,000 @ 7.125% 17,813
Note Offering -- 6.625% Notes due
2002.................................. 150,000 @ 6.625% 9,938
Station's Refinanced Debt............... 1,035,200 @ 7.50% 77,640
LaSalle Note I.......................... 239,000 @ 7.83% 18,714
LaSalle Note II......................... 161,000 @ 7.79% 12,542
LaSalle Note III........................ 115,000 @ 7.81% 8,982
Chase Manhattan Note.................... 97,123 @ 7.44% 7,226
Cigna Note.............................. 63,500 @ 7.47% 4,743
Metropolitan Life Note II............... 44,831 @ 6.93% 3,107
Metropolitan Life Note III.............. 40,000 @ 7.74% 3,096
Metropolitan Life Note IV............... 7,000 @ 7.11% 498
Northwestern Life Note.................. 26,000 @ 7.66% 1,992
Metropolitan Life Note I................ 12,030 @ 8.88% 1,068
Nomura Funding VI Note.................. 8,666 @ 10.07% 873
Rigney Note............................. 777 @ 8.50% 66
---------- ------------
Total annual amount..................... $3,072,777 $ 224,979
Prorated for three months............... 56,244
Less: Capitalized interest.............. (575)
Historical interest expense............. (34,283)
------------
$ 21,386
========
</TABLE>
<TABLE>
<S> <C>
(E) Reflects adjustment needed to reflect minority partners' weighted average
8.6% 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................................................ $ (456)
========
</TABLE>
(F) Reflects the following:
<TABLE>
<S> <C>
7% preferred dividend for the $103.5 million of preferred
shares issued in connection with the Station
transaction............................................... $ 7,245
6.75% preferred dividend for the February 1998 Preferred
Offering.................................................. 13,500
-------
$20,745
=======
Prorated for three months................................... $ 5,186
=======
</TABLE>
(G) Reflects net income per share based on 136,519,512 weighted average Common
Shares -- basic and 141,670,829 weighted average Common shares -- diluted
assumed to be outstanding during the three months ended March 31, 1998.
F-7
<PAGE> 12
CRESCENT REAL ESTATE EQUITIES COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CRESCENT REAL
ESTATE EQUITIES
COMPANY 1997 ACQUIRED 1998 ACQUIRED 1998 PENDING OTHER PRO FORMA
HISTORICAL(A) INVESTMENTS(B) INVESTMENTS(C) INVESTMENT(C) ADJUSTMENTS CONSOLIDATED
--------------- -------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Rental property............... $430,383 $125,295 $ 51,094 $159,364 $ -- $766,136
Interest and other income..... 16,990 -- -- -- 6,363(D) 23,353
-------- -------- -------- -------- --------- --------
Total revenues........ 447,373 125,295 51,094 159,364 6,363 789,489
-------- -------- -------- -------- --------- --------
EXPENSES:
Real estate taxes............. 44,154 11,277 5,224 -- -- 60,655
Repairs and maintenance....... 27,783 13,317 5,777 -- -- 46,877
Other rental property
operating.................. 86,931 21,974 10,179 -- (283)(E) 117,223
-- (1,578)(F)
Corporate general and
administrative............. 12,858 -- -- -- -- 12,858
Interest expense.............. 86,441 -- -- -- 136,505(G) 222,946
Depreciation and
amortization............... 74,426 22,554 12,092 74,274 -- 183,346
Amortization of deferred
financing costs............ 3,499 -- -- -- 539(H) 4,038
-------- -------- -------- -------- --------- --------
Total expenses........ 336,092 69,122 33,272 74,274 135,183 647,943
-------- -------- -------- -------- --------- --------
Operating income
(loss).............. 111,281 56,173 17,822 85,090 (128,820) 141,546
OTHER INCOME:
Equity in net income of
unconsolidated companies... 23,743 10,590 1,943 -- -- 36,276
-------- -------- -------- -------- --------- --------
INCOME (LOSS) BEFORE MINORITY
INTERESTS..................... 135,024 66,763 19,765 85,090 (128,820) 177,822
Minority interests.............. (17,683) -- -- -- 1,080 (I) (16,603)
-------- -------- -------- -------- --------- --------
NET INCOME (LOSS)............... $117,341 $ 66,763 $ 19,765 $ 85,090 $(127,740) $161,219
======== ======== ======== ======== ========= ========
Preferred dividend(J)........... (20,745)
--------
Net income applicable to
common shareholders........... $140,474
========
PER COMMON SHARE DATA(K):
Net income -- Basic............. $ 1.03
========
Net income -- Dilutive.......... $ 1.00
========
</TABLE>
See adjustments to Pro Forma Consolidated Statement of Operations on following
page.
F-8
<PAGE> 13
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTMENTS
(DOLLARS IN THOUSANDS)
(A) Reflects Crescent Real Estate Equities Company's audited consolidated
historical statement of operations for the year ended December 31, 1997.
(B) Reflects the historical incremental rental income and operating expenses,
including an adjustment for depreciation based on acquisition price
associated with all investments acquired in 1997, assuming the investments
were acquired at the beginning of the period.
<TABLE>
<CAPTION>
ACQUISITION
INVESTMENT DATE
---------- -----------
<S> <C>
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 -- Houston hotel property(v)............. 9/22/97
Miami Center office property................................ 9/30/97
U.S. Home Building office property.......................... 10/15/97
Bank One Center office property(vi)......................... 10/22/97
Refrigerated Warehouse Investment(vii)...................... 10/31/97
Fountain Place office property.............................. 11/07/97
Ventana Country Inn hotel property(v)....................... 12/19/97
Energy Centre office property............................... 12/22/97
</TABLE>
(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). Rent provisions include no percentage rent
component.
(ii) The Company has an indirect 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 an indirect 88.35% (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 property were adjusted to
reflect the lease payment (base rent and percentage rent) from
the hotel lessee to the Company calculated by applying the rent
provisions (as defined in the lease agreement) to the
historical revenues of the hotel property.
(vi) The Company has a 50% equity investment in the partnership that
owns Bank One Center office property.
(vii) The Company has an indirect 38% (after the sale of voting
common stock to COI) non-voting equity investment in two
corporations that own the refrigerated warehouse properties.
F-9
<PAGE> 14
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
(C) Reflects the historical incremental rental income and operating expenses,
including an adjustment for depreciation based on acquisition price
associated with the 1998 acquired and pending investment, assuming the
investments were acquired at the beginning of the period.
<TABLE>
<S> <C> <C> <C>
Austin Centre office property............................... 1/23/98
Omni Austin Hotel property(i)............................... 1/23/98
Post Oak Central office property complex.................... 2/13/98
Washington Harbour office properties........................ 2/25/98
Datran office property...................................... 5/01/98
Station's casino/hotel properties(ii)....................... pending
(i) Historical operations of the hotel property were adjusted to
reflect the lease payment (base rent and percentage rent)
from the hotel lessee to the Company calculated by applying
the rent provisions (as defined in the lease agreement) to
the historical revenues of the hotel property.
(ii) Calculated estimated lease payment using the historical
operating results of the casino/hotel properties for the
twelve months ended December 31, 1997. Current negotia-
tions provide for a lease payment equal to 100% of Station's
operating income for the twelve months ended December 31,
1997, plus depreciation, amortization, preopening expenses
and a one-time restructuring charge for the twelve-month
period, and less an historical equipment rental lease
payment which will be eliminated upon consummation of the
Company's Merger with Station ("Adjusted Operating Income").
The definitive terms of the lease agreement have not yet
been finalized. The following reflects the components
of the calculation of Adjusted Operating Income.
Operating income............................................ $ 46,467
Adjusted for depreciation, amortization, preopening expenses
and a one-time restructuring charge....................... 108,719
Elimination of historical equipment rental lease payment, as
a result of the Company's Merger with Station............. 4,178
--------
Adjusted Operating Income................................... $159,364
========
</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> <C> <C>
Carter Crowley Notes............................... ($53,365 @ 10%) $ 5,336
Ritz Note.......................................... ($ 8,850 @ 18%) 1,593
COI Note........................................... ($33,924 @ 12%) 4,070
Residential Development Corp Note.................. ($ 7,800 @ 10%) 780
Desert Mountain Note............................... ($23,251 @ 12%) 2,790
-------
Total.............................................. $14,569
Less: Historical interest income................... (8,206)
-------
Total.............................................. $ 6,363
========
(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............. $ (283)
========
(F) Decrease as a result of the elimination of third party property management
fees which terminated subsequent to acquisition of certain of the
properties................................................................... $ (1,578)
========
</TABLE>
F-10
<PAGE> 15
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
(G) Net increase as a result of interest costs for long and short-term
financing, as follows, net of repayment with proceeds of the April 1998
Unit Investment Trust Offering, the February 1998 Preferred Offering, the
Equity Offering to Merrill Lynch in December 1997, the October 1997 Equity
Offering, the September 1997 Note Offering, the Equity Offering to UBS in
August 1997 and the 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.
<TABLE>
<S> <C> <C> <C> <C> <C>
Credit Facility......................... $ 472,650 @ 6.89% $ 32,566
Bridge Loan............................. 250,000 @ 6.89% 17,225
BankBoston Note II...................... 100,000 @ 6.89% 6,890
Note Offering -- 7.125% Notes due
2007.................................. 250,000 @ 7.125% 17,813
Note Offering -- 6.625% Notes due
2002.................................. 150,000 @ 6.625% 9,938
Station's Refinanced Debt............... 1,035,200 @ 7.50% 77,640
LaSalle Note I.......................... 239,000 @ 7.83% 18,714
LaSalle Note II......................... 161,000 @ 7.79% 12,542
LaSalle Note III........................ 115,000 @ 7.81% 8,982
Chase Manhattan Note.................... 97,123 @ 7.44% 7,226
Metropolitan Life Note II............... 44,831 @ 6.93% 3,107
Cigna Note.............................. 63,500 @ 7.47% 4,743
Metropolitan Life Note III.............. 40,000 @ 7.74% 3,096
Metropolitan Life Note IV............... 7,000 @ 7.11% 498
Northwestern Life Note.................. 26,000 @ 7.66% 1,992
Metropolitan Life Note I................ 12,030 @ 8.88% 1,068
Nomura Funding VI Note.................. 8,666 @ 10.07% 873
Rigney Note............................. 777 @ 8.50% 66
---------- ------------
Total annual amount..................... $3,072,777 $ 224,979
Less: Capitalized interest.............. (2,033)
Historical interest expense............. (86,441)
------------
$136,505
========
</TABLE>
(H) Amortization of capitalized costs associated with the September 1997 Note
Offering ($4,731 purchaser's discount and $500 other costs).
<TABLE>
<CAPTION>
AMORTIZATION OF
FEES
---------------
<S> <C> <C>
Note Offering -- 6.625% Notes due 2002...................... $392
Note Offering -- 7.125% Notes due 2007...................... 327
----
Total....................................................... $719
----
Prorated for nine months.................................... $ 539
========
</TABLE>
(I) Reflects adjustment needed to reflect minority partners'
weighted average 8.6% 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. $ 1,080
========
(J) Reflects the following:
<TABLE>
<S> <C> <C>
7% preferred dividend for the $103.5 million of preferred
shares issued in connection with the Station
transaction............................................... $ 7,245
6.75% preferred dividend for the February 1998 Preferred
Offering.................................................. 13,500
-------
$ 20,745
========
</TABLE>
(K) Reflects net income per share based on 136,519,512 weighted average Common
Shares -- basic and 141,120,366 weighted average Common Shares -- diluted
assumed to be outstanding during the year ended December 31, 1997.
F-11
