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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1998
REGISTRATION NO. 333-47563
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CRESCENT REAL ESTATE EQUITIES COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
TEXAS 52-1862813
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
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777 MAIN STREET, SUITE 2100
FORT WORTH, TEXAS 76102
TELEPHONE: (817) 321-2100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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GERALD W. HADDOCK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CRESCENT REAL ESTATE EQUITIES COMPANY
777 MAIN STREET, SUITE 2100
FORT WORTH, TEXAS 76102
TELEPHONE: (817) 321-2100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
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Copies to:
<TABLE>
<S> <C>
ROBERT B. ROBBINS, ESQ. DAVID M. DEAN, ESQ.
SYLVIA M. MAHAFFEY, ESQ. CRESCENT REAL ESTATE EQUITIES COMPANY
SHAW, PITTMAN, POTTS & TROWBRIDGE 777 MAIN STREET, SUITE 2100
2300 N STREET, N.W. FORT WORTH, TEXAS 76102
WASHINGTON, D.C. 20037
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after the effective date of the Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
of the Securities Act of 1933, please check the following box. [ ]
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
250,310 SHARES
[CRESCENT LOGO]
COMMON SHARES
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All of the common shares of beneficial interest, par value $.01 per share
(the "Common Shares"), of Crescent Real Estate Equities Company ("Crescent
Equities") offered hereby (the "Offering") are being offered by the Selling
Shareholders identified herein. See "Selling Shareholders." Crescent Equities
will not receive any of the proceeds from the sale of the Common Shares offered
hereby. The Common Shares are listed and traded on the New York Stock Exchange
(the "NYSE") under the symbol "CEI."
The sale or distribution of all or any portion of the Common Shares offered
hereby may be effected from time to time by the Selling Shareholders directly,
indirectly through brokers or dealers or in a distribution by one or more
underwriters on a firm commitment or best efforts basis, on the NYSE, in the
over-the-counter market, on any national securities exchange on which the Common
Shares are listed or traded, in privately negotiated transactions or otherwise,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. See "Plan of Distribution."
SEE "RISK FACTORS" AT PAGE 4 HEREIN FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMPANY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1998
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THE COMPANY
The term "Company" includes, unless the context otherwise requires,
Crescent Real Estate Equities Company, a Texas real estate investment trust
("Crescent Equities"), Crescent Real Estate Equities Limited Partnership, a
Delaware limited partnership (the "Operating Partnership"), and the other
subsidiaries of Crescent Equities.
The Company is a fully integrated real estate company, operated as a real
estate investment trust for federal income tax purposes (a "REIT"), which owns a
portfolio of real estate assets (the "Properties") located primarily in 17
metropolitan submarkets in Texas. The Properties include 89 office properties
(the "Office Properties") with an aggregate of approximately 31.8 million net
rentable square feet, 89 behavioral healthcare facilities (the "Behavioral
Healthcare Facilities"), seven full-service hotels with a total of 2,256 rooms
and two destination health and fitness resorts that can accommodate up to 452
guests daily (collectively, the "Hotel Properties"), the real estate mortgages
relating to and non-voting common stock in five residential development
corporations (the "Residential Development Corporations"), which in turn,
through joint venture or partnership arrangements, own interests in 13
residential development properties (the "Residential Development Properties")
and seven retail properties with an aggregate of approximately .8 million net
rentable square feet (the "Retail Properties"). The Company also owns an
indirect 38% interest in each of two corporations (the "Refrigerated Storage
Corporations") that own or operate 96 refrigerated warehouses with an aggregate
of approximately 480 million cubic feet (the "Refrigerated Storage Properties").
In addition, the Company has entered into an agreement to acquire, through a
joint venture, in which the Company will own and control a 50% interest, a
corporation that operates as a REIT for federal income tax purposes and owns 25
office buildings with an aggregate of approximately 4.3 million net rentable
square feet (the "Pending Investment").
The Company owns its assets and carries on its operations and other
activities, including providing management, leasing and development services for
certain of its Properties, through the Operating Partnership and its other
subsidiaries. The Company also has an economic interest in the development
activities of the Residential Development Corporations and the operating
activities of the Refrigerated Storage Corporations. The structure of the
Company is designed to facilitate and maintain its qualification as a REIT and
to permit persons contributing Properties (or interests therein) to the Company
to defer some or all of the tax liability that they otherwise might incur.
As of September 28, 1998, 120,937,062 common shares of beneficial interest
of the Company, par value $.01 per share (the "Common Shares"), 6,549,629 units
of ownership interest in the Operating Partnership ("Units"), 8,000,000 shares
of 6 3/4% Series A Convertible Cumulative Preferred Shares of beneficial
interest of the Company, par value $.01 per share (the "Series A Preferred
Shares") and 6,948,734 shares of Series B Convertible Preferred Shares of
beneficial interest of the Company, par value $.01 per share (the Series B
Preferred Shares) were outstanding.
The Company's executive offices are located at 777 Main Street, Suite 2100,
Fort Worth, Texas 76102, and its telephone number is (817) 321-2100.
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RECENT DEVELOPMENTS
TRANSACTIONS WITH AFFILIATES OF UNION BANK, AG AND MERRILL LYNCH INTERNATIONAL
On August 12, 1997, the Company entered into two transactions with
affiliates of Union Bank, AG. In one transaction, the Company sold 4,700,000
Common Shares to one of the affiliates for approximately $148 million and
received approximately $145 million in net proceeds. In the other transaction,
the Company entered into a forward share purchase agreement with a second
affiliate. On August 11, 1998 the Company paid a fee of approximately $3 million
to one of the affiliates of Union Bank, AG in connection with the exercise by
the Company and the affiliate of the right to extend the term of the forward
share purchase agreement for one year. Under the forward share purchase
agreement, the Company is committed to purchase 4,700,000 Common Shares from the
second affiliate by August 12, 1999. The price to be paid by the Company for the
4,700,000 Common Shares will be determined on the date the Company settles the
forward share purchase agreement and will include a forward accretion component,
minus an adjustment for the Company's distribution rate. The forward accretion
component, which is variable and cannot be determined at this time, represents a
guaranteed rate of return to the second affiliate. The Company may fulfill its
settlement obligations under the forward share purchase agreement in cash or
Common Shares, at its option. In the event that the Company issues additional
Common Shares pursuant to the forward share purchase agreement, the Company's
net income per Common Share and net book value per Common Share will decrease.
On December 12, 1997, the Company entered into two transactions with
Merrill Lynch International. In one transaction, the Company sold 5,375,000
Common Shares at $38.125 per share to Merrill Lynch International for
approximately $205 million and received approximately $199.9 million in net
proceeds. In the other transaction, the Company entered into a swap agreement
(the "Swap Agreement") with Merrill Lynch International relating to 5,375,000
Common Shares (the "Settlement Shares"), pursuant to which Merrill Lynch
International will sell, as directed by the Company on or before December 12,
1998, a sufficient number of Common Shares to achieve net sales proceeds equal
to the market value of the Settlement Shares on December 12, 1997 (approximately
$204.9 million), plus a forward accretion component, minus an adjustment for the
Company's distribution rate. The forward accretion component, which is variable
and cannot be determined at this time, represents a guaranteed rate of return to
Merrill Lynch International. The precise number of Common Shares that will be
required to be sold pursuant to the Swap Agreement will depend primarily on the
market price of the Common Shares at the time of settlement. The Common Shares
required to be sold by Merrill Lynch International pursuant to the Swap
Agreement are expected to be the same Common Shares initially issued by the
Company (although Merrill Lynch International, at its option, may substitute
other Common Shares that it holds). If, as a result of a decrease in the market
price of the Common Shares, the number of Common Shares required to be sold is
greater than the number of Settlement Shares, the Company will deliver
additional Common Shares to Merrill Lynch International. In contrast, if such
number of Common Shares is less than the number of Settlement Shares, as a
result of an increase in the market price of the Common Shares, Merrill Lynch
International will deliver Common Shares or, at the option of the Company, cash
to the Company. In the event that the Company issues additional Common Shares
pursuant to the Swap Agreement, the Company's net income per Common Share and
net book value per Common Share will decrease. On February 20, 1998 and June 25,
1998, the Company issued an additional 525,000 Common Shares and 759,254 Common
Shares, respectively, to Merrill Lynch International as a result of the decline
in market price of the Common Shares from the date of issuance on December 12,
1997 through February 12, 1998 and June 12, 1998, respectively. The issuance of
these shares did not have a material impact on the Company's net income per
Common Share or net book value per Common Share. On September 3, 1998, the
Company and Merrill Lynch International entered into an agreement in principle
to terminate the Swap Agreement. It is anticipated that, in order to effect the
termination, the Company will repurchase the 6,659,254 Common Shares previously
issued to Merrill Lynch International in exchange for delivery of a promissory
note, in the principal amount of approximately $208.3 million, secured by a
first mortgage lien on the Company's Houston Center Property. The promissory
note is expected to bear interest at 30-day LIBOR plus 75 basis points and to
mature in December 1998. The termination is subject to execution of a definitive
agreement.
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RISK FACTORS
Prospective investors should carefully consider the following summary
information in conjunction with the other information contained in this
Prospectus before purchasing securities.
CONCENTRATION OF ASSETS
A significant portion of the Company's assets are, and revenues are derived
from, Properties located in the metropolitan areas of Dallas-Fort Worth and
Houston, Texas. Due to this geographic concentration, any deterioration in
economic conditions in the Dallas-Fort Worth or Houston metropolitan areas or
other geographic markets in which the Company in the future may acquire
substantial assets could have a substantial effect on the financial condition
and results of operations of the Company.
RISKS ASSOCIATED WITH THE ACQUISITION OF SUBSTANTIAL NEW ASSETS
From the closing of the Company's initial public offering in May 1994
through June 30, 1998, the Company has experienced rapid growth, increasing its
total assets by approximately 1,337%. There can be no assurance that the Company
will be able to manage its growth effectively, or that the Company will be able
to maintain its current rate of growth in the future, and the failure to do so
may have a material adverse effect on the financial condition and results of
operations of the Company.
PURCHASES FROM FINANCIALLY DISTRESSED SELLERS
Implementation of the Company's strategy of investing in real estate assets
in distressed circumstances has resulted in the acquisition of certain
Properties from owners that were in poor financial condition, and such strategy
is expected to result in the purchase of additional properties under similar
circumstances in the future. In addition to general real estate risks,
properties acquired in distress situations present risks related to inadequate
maintenance, negative market perception and continuation of circumstances which
precipitated the distress originally.
CHANGE IN POLICIES
The Board of Trust Managers provides guidance to the senior management of
the Operating Partnership regarding the Company's operating and financial
policies and strategies, including its policies and strategies with respect to
acquisitions, growth, operations, indebtedness, capitalization and
distributions. These policies and strategies may be revised, from time to time,
without shareholder approval. Changes in the Company's policies and strategies
could adversely affect the Company's financial condition and results of
operations. In addition, the Company has the right and intends to acquire
additional real estate assets pursuant to and consistent with its investment
strategies and policies without shareholder approval.
POSSIBLE ADVERSE CONSEQUENCES OF OWNERSHIP LIMIT
The limitation on ownership of Common Shares set forth in the Company's
Restated Declaration of Trust (the "Declaration of Trust") could have the effect
of discouraging offers to acquire the Company and of inhibiting or impeding a
change in control and, therefore, could adversely affect the shareholders'
ability to realize a premium over the then-prevailing market price for the
Common Shares in connection with such a transaction.
RELIANCE ON KEY PERSONNEL
The Company is dependent on the efforts of Mr. Richard E. Rainwater,
Chairman of the Board of Trust Managers, and other senior management personnel.
While the Company believes that it could find replacements for these key
executives, the loss of their services could have an adverse effect on the
operations of the Company. Mr. Rainwater has no employment agreement with the
Company and, therefore, is not obligated to remain with the Company for any
specified term. John C. Goff, Trust Manager and Vice
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Chairman of the Board of Trust Managers, and Gerald W. Haddock, President, Chief
Executive Officer and Trust Manager, have entered into employment agreements
with the Company, and each of Messrs. Rainwater, Goff and Haddock has entered
into a noncompetition agreement with the Company. The Company has not obtained
key-man insurance for any of its senior management personnel.
RISKS RELATING TO QUALIFICATION AND OPERATION AS A REIT
The Company intends to continue to operate in a manner so as to qualify as
a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). A
qualified REIT generally is not taxed at the corporate level on income it
currently distributes to its shareholders, so long as it distributes at least 95
percent of its taxable income currently and satisfies certain other highly
technical and complex requirements. Unlike many REITs, which tend to make only
one or two types of real estate investment, the Company invests in a broad range
of real estate products, and certain of its investments are more complicated
than those of other REITs. As a result, the Company is likely to encounter a
greater number of interpretative issues under the REIT qualification rules, and
more such issues which lack clear guidance, than are other REITs. The Company,
as a matter of policy, regularly consults with outside tax counsel in
structuring its new investments. The Company has received an opinion from Shaw,
Pittman, Potts & Trowbridge ("Tax Counsel") that the Company qualified as a REIT
under the Code for its taxable years ending on or before December 31, 1996, is
organized in conformity with the requirements for qualification as a REIT under
the Code and its proposed manner of operation will enable it to continue to meet
the requirements for qualification as a REIT. However, this opinion is based
upon certain representations made by the Company and the Operating Partnership
and upon existing law, which is subject to change, both retroactively and
prospectively, and to possibly different interpretations. Furthermore, Tax
Counsel's opinion is not binding upon either the Internal Revenue Service or the
courts. Because the Company's qualification as a REIT in its current and future
taxable years depends upon its meeting the requirements of the Code in future
periods, no assurance can be given that the Company will continue to qualify as
a REIT in the future. If, in any taxable year, the Company were to fail to
qualify as a REIT for federal income tax purposes, it would not be allowed a
deduction for distributions to shareholders in computing taxable income and
would be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. In addition,
unless entitled to relief under certain statutory provisions, the Company would
be disqualified from treatment as a REIT for federal income tax purposes for the
four taxable years following the year during which the qualification was lost.
The additional tax liability resulting from the failure to so qualify would
significantly reduce the amount of funds available for distribution to
shareholders.
RISKS RELATING TO DEBT
The Company's organizational documents do not limit the level or amount of
debt that it may incur. It is the Company's current policy to pursue a strategy
of conservative use of leverage, generally with a ratio of debt to total market
capitalization targeted at approximately 40 percent, although this policy is
subject to reevaluation and modification by the Company and could be increased
above 40 percent. The Company has based its debt policy on the relationship
between its debt and its total market capitalization, rather than the book value
of its assets or other historical measures that typically have been employed by
publicly traded REITs, because management believes that market capitalization
more accurately reflects the Company's ability to borrow money and meet its debt
service requirements. Market capitalization is, however, more variable than book
value of assets or other historical measures. There can be no assurance that the
ratio of indebtedness to market capitalization (or any other measure of asset
value) or the incurrence of debt at any particular level would not adversely
affect the financial condition and results of operations of the Company.
RISKS RELATING TO CONTROL OF CERTAIN INVESTMENTS
Hotel Risks. The Company has leased the Hotel Properties to subsidiaries of
Crescent Operating, Inc. ("Crescent Operating") and such subsidiaries, rather
than the Company, are entitled to exercise all rights of the owner of the
respective hotel. The Company will receive both base rent and a percentage of
gross sales above a certain minimum level pursuant to the leases, which expire
between 2004 and 2012. As a result, the
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Company will participate in the economic operations of the Hotel Properties only
through its indirect participation in gross sales. To the extent that operations
of the Hotel Properties may affect the ability of such subsidiaries to pay rent,
the Company also may indirectly bear the risks associated with any increases in
expenses. Each of the Hotel Properties is managed pursuant to a management
agreement. The amount of rent payable to the Company under the leases with
respect to the Hotel Properties will depend on the ability of such subsidiaries
and the managers of the Hotel Properties to maintain and increase revenues from
the Hotel Properties. Accordingly, the Company's results of operations will be
affected by such factors as changes in general economic conditions, the level of
demand for rooms and related services at the Hotel Properties, the ability of
the subsidiaries and the managers of the Hotel Properties to maintain and
increase gross revenues at the Hotel Properties, competition in the hotel
industry and other factors relating to the operation of the Hotel Properties. In
addition, the Company expects, in accordance with the terms of an intercompany
agreement between the Company and Crescent Operating (the "Intercompany
Agreement"), to lease any hotel properties that it may acquire in the future to
Crescent Operating (or a subsidiary or subsidiaries) which, as lessees of any
such hotel properties, will be entitled to exercise all rights of the owner. See
"-- Real Estate Risks Specific to the Company's Business -- Potential Conflicts
of Interest."
Lack of Control of Residential Development Corporations. The Company is not
able to elect the boards of directors of the Residential Development
Corporations, and does not have the authority to control the management and
operation of the Residential Development Corporations. As a result, the Company
does not have the right to control the timing or amount of dividends paid by the
Residential Development Corporations and, therefore, does not have the authority
to require that funds be distributed to it by any of these entities.
Lack of Control of Refrigerated Storage Corporations. The Company owns,
through two subsidiaries (the "Crescent Subsidiaries"), a 38% interest in two
partnerships, each of which owns one of the two Refrigerated Storage
Corporations. Crescent Operating, through its ownership interest in the Crescent
Subsidiaries, owns a 2% interest in each of the partnerships. The remaining 60%
interest in the partnerships is owned by two subsidiaries of Vornado Realty
Trust (collectively, "Vornado"). The Company currently owns all of the
non-voting common stock, representing an approximately 95% economic interest, in
each of the Crescent Subsidiaries, and Crescent Operating owns all of the voting
stock, representing an approximately 5% economic interest, in each of the
Crescent Subsidiaries. As a result, Crescent is not able to elect the boards of
directors of the Crescent Subsidiaries and does not have the authority to
control the management or operation of the Crescent Subsidiaries. Under the
terms of the existing partnership agreements for each of the partnerships, the
Company does not have the right to participate in the decisions with respect to
the partnerships. Vornado has the right to make all decisions relating to the
management and operation of the partnerships other than certain major decisions
that require the approval of both Crescent Operating and Vornado. The
partnership agreement for each of the partnerships provides for a buy-sell
arrangement upon a failure of Crescent Operating and Vornado to agree on any of
the specified major decisions pursuant to which the entire interest of the
Company and Crescent Operating or the entire interest of Vornado may be
purchased by the other party. Until November 1, 2000, the buy-sell arrangement
can only be exercised by Vornado. There can be no assurance that Vornado or
Crescent Operating will operate the partnerships in a way that will maximize the
Company's return on its investment. See "-- Real Estate Risks Specific to the
Company's Business -- Risks of Joint Ownership of Assets."
GENERAL REAL ESTATE RISKS
Uncontrollable Factors Affecting Performance and Value. The economic
performance and value of the Company's real estate assets will be subject to all
of the risks incident to the ownership and operation of real estate. These
include the risks normally associated with changes in general national, regional
and local economic and market conditions. Such local real estate market
conditions may include excess supply and competition for tenants, including
competition based on rental rates, attractiveness and location of the property
and quality of maintenance, insurance and management services. In addition,
other factors may affect the performance and value of a property adversely,
including changes in laws and governmental regulations (including those
governing usage, zoning and taxes), changes in interest rates (including the
risk that
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increased interest rates may result in decreased sales of lots in the
Residential Development Properties) and the availability of financing.
Illiquidity of Real Estate Investments. Because real estate investments are
relatively illiquid, the Company's ability to vary its portfolio promptly in
response to economic or other conditions will be limited. In addition, certain
significant expenditures, such as debt service (if any), real estate taxes, and
operating and maintenance costs, generally are not reduced in circumstances
resulting in a reduction in income from the investment. The foregoing and any
other factor or event that would impede the ability of the Company to respond to
adverse changes in the performance of its investments could have an adverse
effect on the Company's financial condition and results of operations.
Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous or toxic
substances released on or in its property, as well as certain other costs
relating to hazardous or toxic substances. Such liability may be imposed without
regard to whether the owner or operator knew of, or was responsible for, the
release of such substances. The presence of, or the failure to remediate
properly, such substances, when released, may adversely affect the owner's
ability to sell the affected real estate or to borrow using such real estate as
collateral. Such costs or liabilities could exceed the value of the affected
real estate. The Company has not been notified by any governmental authority of
any non-compliance, liability or other claim in connection with any of the
Properties and the Company is not aware of any other environmental condition
with respect to any of the Properties that management believes would have a
material adverse effect on the Company's business, assets or results of
operations. Prior to the Company's acquisition of its Properties, independent
environmental consultants conducted or updated Phase I environmental assessments
(which generally do not involve invasive techniques such as soil or ground water
sampling) on the Properties. None of these Phase I assessments or updates
revealed any materially adverse environmental condition not known to the Company
or the independent consultants preparing the assessments. There can be no
assurance, however, that environmental liabilities have not developed since such
environmental assessments were prepared, or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability.
REAL ESTATE RISKS SPECIFIC TO THE COMPANY'S BUSINESS
Investment Risks. In implementing its investment strategies, the Company
has invested in a broad range of real estate assets, and in the future, may
invest in additional types of real estate assets not currently included in its
portfolio. There can be no assurance, however, that the Operating Partnership
will be able to implement its investment strategies successfully in the future.
As a result of its real estate investments, the Operating Partnership will be
subject to risks, in addition to general real estate risks, relating to the
specific assets and asset types in which it invests. For example, the Operating
Partnership is subject to risks that, upon expiration, leases for space in the
Office Properties and Retail Properties may not be renewed, the space may not be
re-leased, or the terms of renewal or re-lease (including the cost of required
renovations or concessions to tenants) may be less favorable than current lease
terms. In addition, the Company is subject to risks relating to the Behavioral
Healthcare Facilities, including the effect of any failure of the tenant to make
required lease payments (which equal more than 10% of the Company's current base
rental revenues), the effects of factors, such as regulation of the healthcare
industry and limitations on government disbursement programs, on the ability of
the tenant to make the required lease payments, and the limited number of
replacement tenants in the event of default under, or non-renewal of, the lease.
Similarly, the Company is subject to the risk that the success of its investment
in the Hotel Properties will be highly dependent upon the ability of the Hotel
Properties to compete in such features as access, location, quality of
accommodations, room rate structure and, to a lesser extent, the quality and
scope of other amenities such as food and beverage facilities.
Risks of Joint Ownership of Assets. The Company has the right to invest in
properties and assets jointly with other persons or entities. Joint ownership of
properties, under certain circumstances, may involve risks not otherwise
present, including the possibility that the Company's partners or co-investors
might become bankrupt, that such partners or co-investors might at any time have
economic or other business interests or goals which are inconsistent with the
business interests or goals of the Company, and that such partners or co-
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investors may be in a position to take action contrary to the instructions or
the requests of the Company or contrary to the Company's policies or objectives,
including the Company's policy with respect to maintaining its qualification as
a REIT. See "-- Risks Relating to Control of Certain Investments -- Lack of
Control of Refrigerated Storage Corporations."
Potential Conflicts of Interest. The Company has entered into the
Intercompany Agreement with Crescent Operating pursuant to which each has agreed
to provide the other with rights to participate in certain transactions. The
certificate of incorporation of Crescent Operating, as amended and restated,
generally prohibits Crescent Operating, for so long as the Intercompany
Agreement remains in effect, from engaging in activities or making investments
that a REIT could make, unless the Operating Partnership was first given the
opportunity but elected not to pursue such activities or investments. In
addition, subsidiaries of Crescent Operating are the lessees of each of the
Hotel Properties, and Crescent Operating owns a 50% interest in the entity which
is the lessee of the Behavioral Healthcare Facilities and the Company's largest
tenant in terms of current base rent. Richard E. Rainwater and John C. Goff are,
respectively, the Chairman of the Board and the Vice Chairman of the Board of
both the Company and Crescent Operating, and Gerald W. Haddock also serves as
President, Chief Executive Officer and a director of Crescent Operating, and
serves as President, Chief Executive Officer and a trust manager of the Company.
As of September 30, 1997, senior management and the trust managers of the
Company beneficially owned approximately 17.2% of the Company's common equity
(consisting of Common Shares and Units, including vested options to purchase
Common Shares and Units) and approximately the same percentage of the
outstanding common stock of Crescent Operating. The common management and
ownership among these entities may lead to conflicts of interest in connection
with transactions between the Operating Partnership and Crescent Operating.
USE OF PROCEEDS
This Prospectus relates to Common Shares being offered and sold for the
account of the Selling Shareholders. The Company will not receive any proceeds
from the sale of the Common Shares but will pay all expenses related to the
registration of the Common Shares offered hereby. See "Plan of Distribution."
SELLING SHAREHOLDERS
GENERAL
This Prospectus relates to the offer and sale from time to time of up to
250,310 Common Shares (the "Shares") by Senterra Corporation, a Texas
Corporation ("Senterra"), Myron G. Blalock, III ("Blalock") and Neil H. Tofsky
("Tofsky," and, together with Senterra and Blalock, the "Selling Shareholders"),
which are the members of Senterra Real Estate Group, L.L.C., a Texas limited
liability company (formerly known as Senterra Development, L.L.C.) ("Senterra
Real Estate"). It is unknown if, when or in what amounts each of the Selling
Shareholders may offer the Shares for sale. There is no assurance that any of
the Selling Shareholders will sell any or all of the Shares offered hereby.
Senterra Real Estate formerly owned certain assets (the "Greenway
Operations") which it employed in its business operations of providing property
and asset management services to Greenway Plaza, a mixed-use development located
in Houston, Texas, consisting of 10 office buildings, retail and storage space,
a hotel, a private athletic club, a central plant and six parking garages.
Pursuant to an Asset Contribution Agreement dated as of October 7, 1996, as
amended on December 31, 1997 and on March 2, 1998, by and among the Operating
Partnership, Senterra Real Estate, Senterra, Blalock and Tofsky, Senterra Real
Estate contributed to the Operating Partnership all of its right, title and
interest in and to the properties, contracts, rights and other assets used in or
attributable to the Greenway Operations in exchange for a limited partnership
interest in the Operating Partnership and 125,155 Units having a fair market
value at the date of closing equal to $8,521,500. Immediately upon issuance,
Senterra Real Estate distributed 83,441, 20,857 and 20,857 Units to Senterra,
Blalock and Tofsky, respectively.
This Prospectus has been prepared pursuant to the Company's obligations
under that certain Registration Rights Agreement, dated as of March 2, 1998, by
and among Crescent Equities, the Operating Partnership
8
<PAGE> 10
and the Selling Shareholders (the "Registration Rights Agreement"). In
accordance with the Registration Rights Agreement, which contains customary
representations and warranties relating to the Company, this Prospectus (and the
registration statement of which it is a part) relates to sales of the Shares by
the Selling Shareholders, subject to the terms and conditions set forth in the
Registration Rights Agreement.
In addition, in the Registration Rights Agreement, the Company has agreed
to indemnify the Selling Shareholders against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments the Selling Shareholders may be
required to make in respect thereof. Insofar as indemnification of the Selling
Shareholders for liabilities arising under the Securities Act may be permitted
pursuant to such agreements, the Company has been informed that, in the opinion
of the Securities and Exchange Commission (the "Commission"), such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Because the Selling Shareholders may offer all or some of the Shares
pursuant to the Offering, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Shares
that will be held by the Selling Shareholders after completion of the Offering,
no estimate can be given as to the number of Shares that will be held by each
Selling Shareholder after completion of the Offering.
The Selling Shareholders and any broker or dealer to or through whom any of
the Shares are sold may be deemed to be underwriters within the meaning of the
Securities Act with respect to the Shares offered hereby, and any profits
realized by the Selling Shareholders or such brokers or dealers may be deemed to
be underwriting commissions. Brokers' commissions and dealers' discounts, taxes
and other selling expenses to be borne by the Selling Shareholders are not
expected to exceed normal selling expenses for sales. The registration of the
Shares under the Securities Act shall not be deemed an admission by any of the
Selling Shareholders or the Company that the Selling Shareholders are
underwriters for purposes of the Securities Act of any Shares offered under this
Prospectus.
CERTAIN RELATIONSHIPS BETWEEN THE COMPANY AND CERTAIN SELLING SHAREHOLDERS
Senterra Real Estate is the property manager and marketing and leasing
agent for Greenway Plaza, which was acquired by the Operating Partnership on
August 15, 1996. On October 7, 1996, Senterra Real Estate and Crescent Real
Estate Funding III, L.P. ("Funding III"), Crescent Real Estate Funding IV, L.P.
("Funding IV") and Crescent Real Estate Funding V, L.P. ("Funding V"),
affiliates of the Company, entered into management and marketing and leasing
agreements extending the term during which Senterra Real Estate would provide
management, construction management and marketing services for Greenway Plaza
for two, three and five years following such acquisition, respectively. Senterra
Real Estate is providing similar services to the Operating Partnership for a
building in Houston, Texas known as 1800 West Loop South.
Also on October 7, 1996, each of Douglas W. Schnitzer ("Schnitzer"),
President of Senterra, and Blalock, Tofsky and Senterra Real Estate entered into
a Confidentiality and Noncompetition Agreement with the Operating Partnership,
Funding III, Funding IV and Funding V, which agreements were amended on December
31, 1997. Pursuant to such agreements, each of Schnitzer, Blalock, Tofsky and
Senterra Real Estate has agreed to maintain the confidentiality of certain
information relating to current and prospective tenants at Greenway Plaza and,
for a period of five years, not to interfere with tenant relationships at
Greenway Plaza or certain other office buildings within a specified radius
thereof and not to interfere with the Company's relationships with its
employees.
Crescent Equities has hired several Senterra employees to perform the
day-to-day operations of Greenway Plaza, and it is anticipated that Crescent
Equities will hire substantially all of the Senterra employees involved in the
day-to-day operations of Greenway Plaza prior to the expiration of the
management agreement between Senterra Real Estate and Funding III, Funding IV
and Funding V in October of 1998. In addition, Senterra is in the process of
implementing an agreement with Crescent Equities for the development of a
parking garage in Greenway Plaza that is expected to contain 1,000 to 1,500
parking spaces, pursuant to which Senterra will provide construction management
services for a proposed base fee of three percent of the cost of construction.
9
<PAGE> 11
In addition to the transactions relating to the Greenway Operations
described above under "General," the Company assumed certain obligations of the
Operating Partnership to Senterra Real Estate set forth in an agreement entered
into as of December 13, 1996 between the Operating Partnership and Senterra Real
Estate, which obligations the Pricing Committee of the Board of Trust Managers
of the Company valued at $1,200,200. On January 6, 1998, the Company issued
30,933 Common Shares to Senterra Real Estate pursuant to an existing
registration statement, in exchange for the release by Senterra Real Estate of
such obligations.
COMMON SHARES OFFERED
The following chart shows, according to the Company's records, the number
of Common Shares currently held by each Selling Shareholder and the number of
Shares of each Selling Shareholder being offered hereby.
<TABLE>
<CAPTION>
COMMON
SHARES
BENEFICIALLY NUMBER OF
NAME OF OWNED PRIOR TO SHARES OFFERED
SELLING SHAREHOLDER OFFERING(1)(2) HEREBY
------------------- -------------- --------------
<S> <C> <C>
Senterra Corporation............................. 166,882 166,882
Myron G. Blalock, III............................ 41,714 41,714
Neil H. Tofsky................................... 41,714 41,714
------- -------
Total.................................. 250,310 250,310(3)
</TABLE>
- ---------------
(1) Excludes 30,933 Common Shares in which Senterra, Tofsky and Blalock have a
63.33%, 26.67% and 10% interest, respectively. Such Common Shares are held
of record by Senterra Real Estate.
(2) The number of Common Shares beneficially owned prior to the Offering
represents Units exchangeable for Common Shares, subject to certain
exceptions, on a one-for-two basis. Alternatively, the Units are
exchangeable, at the option of the Company, for cash.
(3) Based on the number of Units and Common Shares owned as of the date hereof
(but excluding the 30,933 Common Shares held of record by Senterra Real
Estate), none of the Selling Shareholders will own any Common Shares or
Units upon completion of the Offering.
PLAN OF DISTRIBUTION
The sale or distribution of all or any portion of the Shares may be
effected from time to time by the Selling Shareholders directly, indirectly
through brokers or dealers or in a distribution by one or more underwriters on a
firm commitment or best efforts basis, on the NYSE, in the over-the-counter
market, on any other national securities exchange on which the Common Shares are
listed or traded, in privately negotiated transactions or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Company will not receive any of the
proceeds from the sale of the Shares.
The methods by which the Shares may be sold or distributed include, without
limitation, (i) a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (ii)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus, (iii) exchange distributions and/or
secondary distributions in accordance with the rules of the NYSE, (iv) ordinary
brokerage transactions and transactions in which the broker solicits purchasers,
(v) pro rata distributions as part of the liquidation and winding up of the
affairs of the Selling Shareholders, and (vi) privately negotiated transactions.
The Selling Shareholders may from time to time deliver all or a portion of the
Shares to cover a short sale or sales or upon the exercise, settlement or
closing of a call equivalent position or a put equivalent position. The Selling
Shareholders and the broker-dealers participating in the distribution of the
Shares may be deemed "underwriters" within the meaning of the Securities Act and
any profit on the sale of the Shares by the Selling Shareholders and any
commissions received by any such broker-
10
<PAGE> 12
dealers may be regarded as underwriting commissions under the Securities Act.
Underwriters, brokers, dealers or agents may be entitled, under agreements with
the Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act. The Shares may be
sold from time to time at varying prices determined at the time of sale or at
negotiated prices.
The Company will pay all expenses in connection with the registration of
the Shares. The Selling Shareholders will pay for any brokerage or underwriting
commissions and taxes of any kind (including, without limitation, transfer
taxes) with respect to any disposition, sale or transfer of the Shares.
Shares not sold pursuant to the registration statement on Form S-3 of which
this Prospectus is a part (the "Registration Statement") may be subject to
certain restrictions under the Securities Act and could be sold, if at all, only
pursuant to Rule 144 or another exemption from the registration requirements of
the Securities Act. In general, under Rule 144, a person (or persons whose
Shares are aggregated) who has satisfied a one-year holding period may, under
certain circumstances, sell within any three-month period a number of Shares
which does not exceed the greater of one percent of the Company's outstanding
Common Shares or the average weekly reported trading volume of the Company's
Common Shares during the four calendar weeks prior to such sale. Rule 144 also
permits, under certain circumstances, the sale of Shares by a person who is not
an affiliate of the Company and who has satisfied a two-year holding period
without any volume limitation. Therefore, both during and after the
effectiveness of the Registration Statement, sales of the Shares may be made by
the Selling Shareholders pursuant to Rule 144.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such
reports, proxy statements and other information can be inspected at the Public
Reference Section maintained by the Commission at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and the following regional
offices of the Commission: Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a Web
site (http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
In addition, the Company's Common Shares are listed on the NYSE and such
reports, proxy statements and other information concerning the Company can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission the Registration Statement, of
which this Prospectus is a part, under the Securities Act, with respect to the
Shares. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or documents filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Shares, reference is hereby made to the Registration Statement and such
exhibits and schedules which may be obtained from the Commission at its
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.
11
<PAGE> 13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed under the Exchange Act by the
Company (Exchange Act file number 1-13038) with the Commission and are
incorporated herein by reference:
(1) The Registration Statement on Form 8-B filed on March 24, 1997 registering
the Common Shares of the Company under Section 12(b) of the Exchange Act.
(2) The Proxy Statement in connection with the Company's 1998 Annual Meeting
of Stockholders.
(3) The Company's Annual Report on Form 10-K for the year ended December 31,
1997, as amended on May 15, 1997.
(4) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
(5) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
(6) The Company's Current Report on Form 8-K dated January 29, 1997 and filed
March 24, 1997, as amended on April 9, 1997, April 24, 1997, May 23, 1997
and July 2, 1997.
(7) The Company's Current Report on Form 8-K dated October 15, 1997 and filed
June 24, 1998.
(8) The Company's Current Report on Form 8-K dated December 22, 1997 and filed
March 4, 1998.
(9) The Company's Current Report on Form 8-K dated January 6, 1998 and filed
June 19, 1998.
(10) The Company's Current Report on Form 8-K dated January 16, 1998 and filed
January 27, 1998, as amended on February 13, 1998, April 27, 1998, June
10, 1998 and September 16, 1998.
(11) The Company's Current Report on Form 8-K dated February 12, 1998 and filed
February 23, 1998.
(12) The Company's Current Report on Form 8-K dated February 13, 1998 and filed
February 18, 1998.
(13) The Company's Current Report on Form 8-K dated February 13, 1998 and filed
February 18, 1998.
(14) The Company's Current Report on Form 8-K dated April 17, 1998 and filed
April 28, 1998 as amended on June 22, 1998 and August 13, 1998.
(15) The Company's Current Report on Form 8-K dated April 23, 1998 and filed
April 27, 1998.
(16) The Company's Current Report on Form 8-K dated June 15, 1998 and filed
June 16, 1998.
(17) The Company's Current Report on Form 8-K dated June 25, 1998 and filed
June 25, 1998.
(18) The Company's Current Report on Form 8-K dated June 29, 1998 and filed
June 30, 1998.
(19) The Company's Current Report on Form 8-K dated June 30, 1998 and filed
July 9, 1998, as amended on September 16, 1998.
(20) The Company's Current Report on Form 8-K dated August 7, 1998 and filed
August 7, 1998.
All documents filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of Shares to which this Prospectus relates shall be deemed to be
incorporated by reference in this Prospectus and shall be part hereof from the
date of filing of such document.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), or in any other
subsequently filed document that is also incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. Subject to the
foregoing, all information appearing in this Prospectus is qualified in its
entirety by the information appearing in the documents incorporated by
reference.
12
<PAGE> 14
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
in this Prospectus (other than exhibits and schedules thereto, unless such
exhibits or schedules are specifically incorporated by reference into the
information that this Prospectus incorporates). Written or telephonic requests
for copies should be directed to Crescent Real Estate Equities Company, 777 Main
Street, Suite 2100, Fort Worth, Texas, 76102, Attention: Company Secretary
(telephone number: (817) 321-2100).
EXPERTS
The financial statements and schedule incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements incorporated in this Prospectus by reference to
the Company's Current Reports on Form 8-K (i) dated January 29, 1997 and filed
on March 24, 1997, as amended on April 9, 1997, April 24, 1997, May 23, 1997 and
July 2, 1997, (ii) dated October 15, 1997 and filed June 24, 1998, (iii) dated
December 22, 1997 and filed on March 4, 1998 and (iv) dated June 30, 1998 and
filed on July 9, 1998, as amended on September 16, 1998, respectively, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
LEGAL MATTERS
The legality of the issuance of the Shares will be passed upon for the
Company by Shaw, Pittman, Potts & Trowbridge.
13
<PAGE> 15
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Company........................... 2
Recent Developments................... 3
Risk Factors.......................... 4
Use of Proceeds....................... 8
Selling Shareholders.................. 8
Plan of Distribution.................. 10
Available Information................. 11
Incorporation of Certain Documents by
Reference........................... 12
Experts............................... 13
Legal Matters......................... 13
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
250,310 SHARES
[CRESCENT LOGO]
COMMON SHARES
PROSPECTUS
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 16
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the issuance and
distribution of the Common Shares covered by this Registration Statement, all of
which will be paid by the Registrant, are as follows:
<TABLE>
<S> <C>
Registration Fee....................................... $ 2,480.61
Printing, Engraving and Filing Expenses................ $ 10,000
Accounting Fees and Expenses........................... $ 5,000
Legal Fees and Expenses................................ $ 10,000
Miscellaneous.......................................... $ 1,500
----------
Total.................................................. $28,980.61
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUST MANAGERS AND OFFICERS.
The Company's Restated Declaration of Trust (the "Declaration of Trust")
provides that no trust manager shall be liable to the Company for any act,
omission, loss, damage, or expense arising from the performance of his duties to
the Company save only for his own willful misfeasance or willful malfeasance or
gross negligence. In addition to, but in no respect whatsoever in limitation of
the foregoing, the liability of each trust manager for monetary damages shall be
eliminated to the fullest extent permitted by applicable law. The Declaration of
Trust also provides that no amendment thereto may limit or eliminate this
limitation of liability with respect to events occurring prior to the effective
date of such amendment.
The Company's Declaration of Trust provides that the trust managers and
officers shall be indemnified to the maximum extent permitted by Texas law.
Under current Texas law, the trust will indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a trust manager or officer if it is determined that the
person (i) conducted himself in good faith; (ii) reasonably believed: (a) in the
case of conduct in his official capacity as a trust manager or officer of the
real estate investment trust, that his conduct was in the real estate investment
trust's best interests; and (b) in all other cases, that his conduct was at
least not opposed to the real estate investment trust's best interests; and
(iii) in the case of any criminal proceeding, had no reasonable cause to believe
that his conduct was unlawful. Except to the extent provided in the following
sentence, a trust manager or officer may not be indemnified (i) in respect of a
proceeding in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted from
an action taken in the person's official capacity; or (ii) in which the person
is found liable to the real estate investment trust. Notwithstanding the
foregoing, a person may be indemnified against judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expenses actually
incurred by the person in connection with the proceeding; provided that if the
person is found liable to the real estate investment trust or is found liable on
the basis that personal benefit was improperly received by the person, the
indemnification (i) is limited to reasonable expenses actually incurred by the
person in connection with the proceeding, and (ii) shall not be made in respect
of any proceeding in which the person shall have been found liable for willful
or intentional misconduct in the performance of his duty to the real estate
investment trust. In addition, the Company's Declaration of Trust and Bylaws
require it to pay or reimburse, in advance of the final disposition of a
proceeding, reasonable expenses incurred by a present or former trust manager or
officer made a party to a proceeding by reason of his status as a trust manager
or officer, provided that the Company shall have received (i) a written
affirmation by the trust manager or officer of his good faith belief that he has
met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (ii) a written undertaking by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The Company's Declaration
of Trust and Bylaws also permit the Company to provide indemnification, payment
or reimbursement of expenses to any employee or agent of the Company in such
capacity. The Company's Declaration of Trust and Bylaws also permit the Company
to indemnify a
II-1
<PAGE> 17
person who was or who agreed to appear as a witness or other participant in a
proceeding at a time when he is not named a defendant or respondent in the
proceeding. Any indemnification, payment or reimbursement of the expenses
permitted by the Declaration of Trust and Bylaws shall be furnished in
accordance with the procedures provided for indemnification and payment or
reimbursement of expenses under Texas Real Estate Investment Trust Act for trust
managers.
The limited partnership agreement of the Operating Partnership contains
indemnification provisions comparable to those contained in the Declaration of
Trust.
The Company carries insurance that purports to insure officers and trust
managers of the Company against certain liabilities incurred by them in the
discharge of their official functions.
The Company has entered into indemnification agreements with each of the
Company's executive officers and trust managers. The indemnification agreements
require, among other things, that the Company indemnify such officers and trust
managers to the fullest extent permitted by law, and advance to the officers and
directors all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. The Company also must
indemnify and advance expenses incurred by officers and directors seeking to
enforce their rights under the indemnification agreements and cover officers and
directors under the Company's directors' and officers' liability insurance, if
any. Although the indemnification agreements offer substantially the same scope
of coverage afforded by provisions in the Declaration of Trust and the Company's
Bylaws, they provide greater assurance to directors and executive officers that
indemnification will be available, because, as contracts, they cannot be
modified unilaterally in the future by the Board of Trust Managers or by the
stockholders to alter, limit or eliminate the rights they provide.
II-2
<PAGE> 18
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
4.01 Restated Declaration of Trust of the Registrant (filed as Exhibit No. 4.01 to the
Registrant's Registration Statement on Form S-3 (File No. 333-21905) (the "1997 Form
S-3") and incorporated herein by reference)
4.02 Amended and Restated Bylaws of the Registrant (filed as Exhibit 4.02 to the
Registrant's Registration Statement on Form S-3 (File No. 333-57863) and incorporated
herein by reference)
4.03 Form of Common Share Certificate (filed as Exhibit No. 4.03 to the 1997 Form S-3 and
incorporated herein by reference)
*4.05 Registration Rights Agreement dated as of March 2, 1998 by and among Crescent Equities,
the Operating Partnership and the Selling Shareholders
4.06 Statement of Designation of 6 3/4% Series A Convertible Cumulative Preferred Shares of
the Registrant (filed as Exhibit 4.07 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 and incorporated herein by reference)
4.07 Statement of Designation of Series B Convertible Preferred Shares of the Registrant
(filed as Exhibit 4.01 to the Registrant's Current Report on Form 8-K dated June 29,
1998 and filed June 30, 1998 and incorporated herein by reference)
*5.01 Opinion of Shaw, Pittman, Potts & Trowbridge as to the legality of the securities being
registered by Crescent Real Estate Equities Company
23.01 Consent of Shaw, Pittman, Potts & Trowbridge (included in its opinion filed as Exhibit
5.01 to this Registration Statement)
23.02 Consent of Arthur Andersen LLP (Dallas), Certified Public Accountants, dated September
25, 1998 (filed herewith)
23.03 Consent of Arthur Andersen LLP (Atlanta), Certified Public Accountants, dated September
24, 1998 (filed herewith)
*24.01 Powers of Attorney
</TABLE>
- ---------------
* Previously filed.
II-3
<PAGE> 19
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth, State of Texas, on the 30th day of
September, 1998.
CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ GERALD W. HADDOCK
-------------------------------------
Gerald W. Haddock
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ RICHARD E. RAINWATER* Trust Manager and Chairman of the September 30, 1998
- ----------------------------------------------------- Board
Richard E. Rainwater
/s/ JOHN C. GOFF* Trust Manager and Vice Chairman of September 30, 1998
- ----------------------------------------------------- the Board
John C. Goff
/s/ GERALD W. HADDOCK Trust Manager, President and Chief September 30, 1998
- ----------------------------------------------------- Executive Officer (Principal
Gerald W. Haddock Executive Officer)
/s/ JERRY R. CRENSHAW, JR. Vice President, Controller and September 30, 1998
- ----------------------------------------------------- Co-Chief Financial Officer
Jerry R. Crenshaw, Jr.
/s/ BRUCE A. PICKER Vice President, Treasurer and September 30, 1998
- ----------------------------------------------------- Co-Chief Financial Officer
Bruce A. Picker
/s/ ANTHONY M. FRANK* Trust Manager September 30, 1998
- -----------------------------------------------------
Anthony M. Frank
/s/ MORTON H. MEYERSON* Trust Manager September 30, 1998
- -----------------------------------------------------
Morton H. Meyerson
/s/ WILLIAM F. QUINN* Trust Manager September 30, 1998
- -----------------------------------------------------
William F. Quinn
/s/ PAUL E. ROWSEY, III* Trust Manager September 30, 1998
- -----------------------------------------------------
Paul E. Rowsey, III
/s/ MELVIN ZUCKERMAN* Trust Manager September 30, 1998
- -----------------------------------------------------
Melvin Zuckerman
</TABLE>
*By: /s/ GERALD W. HADDOCK
----------------------------------
Gerald W. Haddock
Attorney-In-Fact
II-5
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
4.01 Restated Declaration of Trust of the Registrant (filed as Exhibit No. 4.01 to the
Registrant's Registration Statement on Form S-3 (File No. 333-21905) (the "1997 Form
S-3") and incorporated herein by reference)
4.02 Amended and Restated Bylaws of the Registrant (filed as Exhibit 4.02 to the
Registrant's Registration Statement on Form S-3 (File No. 333-57863) and incorporated
herein by reference)
4.03 Form of Common Share Certificate (filed as Exhibit No. 4.03 to the 1997 Form S-3 and
incorporated herein by reference)
*4.05 Registration Rights Agreement dated as of March 2, 1998 by and among Crescent Equities,
the Operating Partnership and the Selling Shareholders
4.06 Statement of Designation of 6 3/4% Series A Convertible Cumulative Preferred Shares of
the Registrant (filed as Exhibit 4.07 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 and incorporated herein by reference)
4.07 Statement of Designation of Series B Convertible Preferred Shares of the Registrant
(filed as Exhibit 4.01 to the Registrant's Current Report on Form 8-K dated June 29,
1998 and filed June 30, 1998 and incorporated herein by reference)
*5.01 Opinion of Shaw, Pittman, Potts & Trowbridge as to the legality of the securities being
registered by Crescent Real Estate Equities Company
23.01 Consent of Shaw, Pittman, Potts & Trowbridge (included in its opinion filed as Exhibit
5.01 to this Registration Statement)
23.02 Consent of Arthur Andersen LLP (Dallas), Certified Public Accountants, dated September
25, 1998 (filed herewith)
23.03 Consent of Arthur Andersen LLP (Atlanta), Certified Public Accountants, dated September
24, 1998 (filed herewith)
*24.01 Powers of Attorney
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3 of our report dated
January 23, 1998 included in Crescent Real Estate Equities Company's Form 10-K
for the year ended December 31, 1997, and of our reports dated August 29, 1997
on U.S. Home Building, December 4, 1997 on Energy Centre, December 12, 1997 on
Austin Centre, January 16, 1998 on Post Oak Central, January 16, 1998 on
Washington Harbour, March 4, 1998 on Datran Center and June 12, 1998 on BP Plaza
included in Crescent Real Estate Equities Company's Forms 8-K and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
September 25, 1998
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3 of our report dated
November 7, 1996 on the Provider Segment of Magellan Health Services, Inc.
included in Crescent Real Estate Equities Company's Form 8-K dated January 29,
1997, as amended by Form 8-K/A on July 2, 1997, and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
September 24, 1998
