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Crescent Real Estate Equities Co · 10-Q/A · For 9/30/97

Filed On 12/5/97   ·   Accession Number 950134-97-9166   ·   SEC File 1-13038

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  As Of                Filer                Filing    For/On/As Docs:Size              Issuer               Agent

12/05/97  Crescent Real Estate Equities Co  10-Q/A      9/30/97    1:61K                                    Bowne of Dallas I..01/FA

Amendment to Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q/A      Amendment No.1 to Form 10-Q                           20    112K 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
3Item 1. Financial Statements (Unaudited)
7Operating Partnership
14Carter-Crowley Portfolio
17October 1997 Offering
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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1997 COMMISSION FILE NO 1-13038 CRESCENT REAL ESTATE EQUITIES COMPANY (formerly known as Crescent Real Estate Equities, Inc.) ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) TEXAS 52-1862813 ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 777 Main Street, Suite 2100, Fort Worth, Texas 76102 ------------------------------------------------------------------------------- (Address of principal executive offices)(Zip code) Registrant's telephone number, including area code (817) 877-0477 Number of shares outstanding of each of the registrant's classes of common shares, as of December 3, 1997 Common Shares, par value $.01 per share: 112,556,374 ------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days. YES [X] NO [ ]
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The Form 10-Q of Crescent Real Estate Equities Company (the "Company") for the quarter ended September 30, 1997 is being amended to restate the disclosure contained in Part I, Item 1, Notes to the Financial Statements (Note 11) thereof, to reflect certain updated and corrected information relating to the refrigerated warehouse investment made by the Company.
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CRESCENT REAL ESTATE EQUITIES COMPANY FORM 10-Q TABLE OF CONTENTS [Enlarge/Download Table] PART I: FINANCIAL INFORMATION PAGE ----  Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 (Audited)............................................................ 3 Consolidated Statements of Operations for the three and nine months ended September 30, 1997 and 1996......................................... 4 Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996............................................... 5 Notes to Financial Statements............................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Historical Results of Operations............................ 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk............... 31 PART II: OTHER INFORMATION Item 1. Legal Proceedings......................................................... 31 Item 2. Changes in Securities..................................................... 31 Item 3. Defaults Upon Senior Securities........................................... 31 Item 4. Submission of Matters to a Vote of Security Holders....................... 31 Item 5. Other Information......................................................... 31 Item 6. Exhibits and Reports on Form 8-K.......................................... 31 2
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CRESCENT REAL ESTATE EQUITIES COMPANY CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (NOTE 1) [Enlarge/Download Table] SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------ ------------ (UNAUDITED) (AUDITED) ASSETS: Investments in real estate: Land $ 418,625 $ 146,036 Building and improvements 2,647,981 1,561,639 Furniture, fixtures and equipment 47,137 24,951 Less - accumulated depreciation (256,204) (208,808) ------------ ------------ Net investment in real estate 2,857,539 1,523,818 Cash and cash equivalents 47,082 25,592 Restricted cash and cash equivalents 32,462 36,882 Accounts receivable, net 24,010 15,329 Deferred rent receivable 30,649 16,217 Investments in real estate mortgages and common stock of unconsolidated companies 369,779 41,059 Notes receivable, net 163,219 28,890 Other assets, net 87,293 43,135 ------------ ------------ Total assets $ 3,612,033 $ 1,730,922 ============ ============ LIABILITIES: Borrowings under Credit Facility $ 316,500 $ 40,000 Notes payable 1,460,404 627,808 Accounts payable, accrued expenses and other liabilities 88,230 48,462 ------------ ------------ Total liabilities 1,865,134 716,270 ------------ ------------ MINORITY INTERESTS: Operating partnership, 6,445,227 and 6,640,336 units, respectively 110,648 120,227 Investment joint ventures 28,396 29,265 ------------ ------------ Total minority interests 139,044 149,492 ------------ ------------ SHAREHOLDERS' EQUITY: Common stock, $.01 par value, authorized 250,000,000 shares, 102,442,050 and 36,146,380 shares issued and outstanding at September 30, 1997 and December 31, 1996, respectively 1,024 361 Additional paid-in capital 1,666,978 905,724 Deferred compensation on restricted shares (283) (364) Retained deficit (59,864) (40,561) ------------ ------------ Total shareholders' equity 1,607,855 865,160 ------------ ------------ Total liabilities and shareholders' equity $ 3,612,033 $ 1,730,922 ============ ============ The accompanying notes are integral part of these financial statements. 3
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CRESCENT REAL ESTATE EQUITIES COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (NOTE 1) [Enlarge/Download Table] FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ (UNAUDITED) (UNAUDITED) REVENUES: Office and retail properties $ 92,014 $ 43,255 $ 247,333 $ 120,080 Hotel properties 9,032 5,051 26,453 13,775 Behavioral healthcare properties 13,824 -- 15,966 -- Interest and other income 5,187 1,062 13,508 3,572 ------------ ------------ ------------ ------------ Total revenues 120,057 49,368 303,260 137,427 ------------ ------------ ------------ ------------ EXPENSES: Real estate taxes 10,607 5,077 28,229 13,454 Repairs and maintenance 6,301 2,369 17,244 7,248 Other rental property operating 22,500 9,452 59,100 27,294 Corporate general and administrative 2,372 1,199 9,855 3,498 Interest expense 23,075 11,843 54,687 30,861 Amortization of deferred financing costs 937 745 2,157 2,065 Depreciation and amortization 20,549 11,058 50,840 29,339 ------------ ------------ ------------ ------------ Total expenses 86,341 41,743 222,112 113,759 ------------ ------------ ------------ ------------ Operating income 33,716 7,625 81,148 23,668 OTHER INCOME: Equity in net income of unconsolidated companies 1,119 892 3,118 3,067 ------------ ------------ ------------ ------------ INCOME BEFORE MINORITY INTERESTS AND EXTRAORDINARY ITEM 34,835 8,517 84,266 26,735 Minority interests (4,432) (2,239) (12,018) (5,858) ------------ ------------ ------------ ------------ INCOME BEFORE EXTRAORDINARY ITEM 30,403 6,278 72,248 20,877 Extraordinary item -- -- -- (1,306) ------------ ------------ ------------ ------------ NET INCOME $ 30,403 $ 6,278 $ 72,248 $ 19,571 ============ ============ ============ ============ PER SHARE DATA: Income before extraordinary item $ 0.30 $ 0.13 $ 0.83 $ 0.44 Extraordinary item -- -- -- (0.02) ------------ ------------ ------------ ------------ Net income $ 0.30 $ 0.13 $ 0.83 $ 0.42 ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING 99,894,600 47,190,564 87,364,374 47,127,264 ============ ============ ============ ============ The accompanying notes are integral part of these financial statements. 4
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CRESCENT REAL ESTATE EQUITIES COMPANY CONSOLIDATED STATEMENTS OF CASHFLOWS (DOLLARS IN THOUSANDS) (NOTES 1 AND 3) [Enlarge/Download Table] FOR THE NINE MONTHS ENDED SEPTEMBER 30, ---------------------------- (UNAUDITED) 1997 1996 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 72,248 $ 19,571 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 52,997 31,404 Minority interest 12,018 5,858 Extraordinary item -- 1,306 Non-cash compensation 157 91 Equity in earnings in excess of distributions received from unconsolidated companies (252) (363) Increase in accounts receivable (8,681) (3,997) Increase in deferred rent receivable (14,432) (2,932) Increase in other assets (23,879) (1,445) Decrease in restricted cash and cash equivalents 4,944 1,451 Increase (decrease) in accounts payable, accrued expenses and other liabilities 39,768 (1,394) ------------ ------------ Net cash provided by operating activities 134,888 49,550 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of investment properties (1,356,266) (173,091) Capital expenditures - rental properties (14,497) (4,504) Tenant improvement and leasing costs - rental properties (27,121) (8,738) (Increase) decrease in restricted cash and cash equivalents (524) 1,682 Investment in unconsolidated companies (328,468) (18,924) Increase in escrow deposits - acquisition of investment properties (4,190) (6,350) Increase in notes receivable (134,329) (11,525) ------------ ------------ Net cash used in investing activities (1,865,395) (221,450) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Debt financing costs (11,329) (4,317) Borrowings under Credit Facility 612,500 172,500 Payments under Credit Facility (336,000) (20,000) Debt proceeds 990,696 124,638 Debt payments (158,100) (57,184) Capital contributions - joint venture -- 750 Capital distributions - joint venture (2,061) (988) Proceeds from common shares offering 760,460 -- Proceeds from exercise of share options 953 -- Issuance of partnership units -- 1,574 Distribution of Crescent Operating, Inc. shares to unitholders of Operating Partnership and shareholders of Crescent Equities (11,907) -- Dividends and unitholder distributions (93,215) (47,637) ------------ ------------ Net cash provided by financing activities 1,751,997 169,336 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 21,490 (2,564) CASH AND CASH EQUIVALENTS, Beginning of period 25,592 16,931 ------------ ------------ CASH AND CASH EQUIVALENTS, End of period $ 47,082 $ 14,367 ============ ============ The accompanying notes are integral part of these financial statements. 5
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CRESCENT REAL ESTATE EQUITIES COMPANY NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. ORGANIZATION AND BASIS OF PRESENTATION: ORGANIZATION Crescent Real Estate Equities Company ("Crescent Equities" and, together with its subsidiaries, the "Company") is a fully integrated real estate company operating as a real estate investment trust for federal income tax purposes (a "REIT"). The Company provides management, leasing, and development services with respect to certain of its properties. Crescent Equities is a Texas real estate investment trust which became the successor to Crescent Real Estate Equities, Inc., a Maryland corporation (the "Predecessor Corporation"), on December 31, 1996, through the merger (the "Merger") of the Predecessor Corporation and CRE Limited Partner, Inc., a Delaware corporation, into Crescent Equities. The direct and indirect subsidiaries of Crescent Equities include Crescent Real Estate Equities Limited Partnership (the "Operating Partnership"); Crescent Real Estate Equities, Ltd. (the "General Partner"), which is the sole general partner of the Operating Partnership; seven single purpose limited partnerships (formed for the purpose of obtaining securitized debt) in which the Operating Partnership owns substantially all of the economic interests directly or indirectly, with the remaining interests owned indirectly by the Company through seven separate corporations, each of which is a wholly owned subsidiary of the General Partner and a general partner of one of the seven limited partnerships. The term "Company" includes, unless the context otherwise requires, Crescent Equities, the Predecessor Corporation, the Operating Partnership, and the other subsidiaries of the Company. As of September 30, 1997, the Company directly or indirectly owned a portfolio of real estate assets (the "Properties") located primarily in 20 metropolitan submarkets in Texas and Colorado. The Properties include 76 office properties (the "Office Properties") with an aggregate of approximately 24.7 million net rentable square feet, 91 behavioral healthcare facilities ("Behavioral Healthcare Facilities"), five full-service hotels with a total of 1,900 rooms and two destination health and fitness resorts (the "Hotel Properties"), seven retail properties (the "Retail Properties") with an aggregate of approximately .8 million net rentable square feet and real estate mortgages and non-voting common stock representing economic interest ranging from 42.5% to 98% in five unconsolidated residential development corporations (the "Residential Development Corporations"). The Company also, has a 42.5% partnership interest in an unconsolidated entity whose primary holdings consist of a 364-room executive conference center and general partner interests ranging from one to 50%, in additional office, retail, multi-family and industrial properties. The Company owns its assets and carries on its operations and other activities through the Operating Partnership and its other subsidiaries. The following table sets forth, by subsidiary, the Properties owned by such subsidiary as of September 30, 1997:  Operating Partnership: The Addison, Addison Tower, The Amberton, AT&T Building, Bank One Tower, Canyon Ranch-Tucson, Cedar Springs Plaza, Central Park Plaza, Chancellor Park(1), Concourse Office Park, Denver Marriott City Center, Four Seasons Hotel-Houston, Frost Bank Plaza, Greenway I and IA, Greenway II, Houston Center Office Properties, MCI Tower, The Meridian, Miami Center, One Preston Park, Palisades Central I, Palisades Central II, The Park Shops in Houston Center, Reverchon Plaza, Sonoma Mission Inn & Spa, Spectrum Center(2), Stemmons Place, Three Westlake Park(3), Trammell Crow Center(4), The Woodlands Office Properties(5), The Woodlands Retail Properties(5), Valley Centre, Walnut Green, 44 Cook, 55 Madison, 160 Spear Street, 301 Congress Avenue(6), 1615 Poydras, 3333 Lee Parkway, 5050 Quorum, and 6225 North 24th Street Crescent Real Estate The Aberdeen, The Avallon, Caltex House, The Citadel, Funding I, L.P.: Continental Plaza, The Crescent Atrium, The Crescent ("Funding I") Office Towers, Regency Plaza One, and Waterside Commons 6
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Crescent Real Estate Albuquerque Plaza, Barton Oaks Plaza One, Briargate Funding II, L.P.: Office and Research Center, Hyatt Regency Albuquerque, ("Funding II") Hyatt Regency Beaver Creek, Las Colinas Plaza, Liberty Plaza I & II, MacArthur Center I & II, Ptarmigan Place, Stanford Corporate Centre, Two Renaissance Square, and 12404 Park Central Crescent Real Estate Greenway Plaza Portfolio(7) Funding III, IV, and V, L.P.: ("Funding III, IV and V") Crescent Real Estate Canyon Ranch-Lenox Funding VI, L.P.: ("Funding VI") Crescent Real Estate Behavioral Healthcare Facilities Funding VII, L.P.: ("Funding VII") ------------- (1) The Operating Partnership owns Chancellor Park through its ownership of a mortgage note secured by the building and through its direct and indirect interests in the partnership which owns the building. (2) The Operating Partnership owns the principal economic interest in Spectrum Center through an interest in the limited partnership which owns both a mortgage note secured by Spectrum Center and the ground lessor's interest in the land underlying the building. (3) The Operating Partnership owns the principal economic interest in Three Westlake Park through its ownership of a mortgage note secured by Three Westlake Park. (4) The Operating Partnership owns the principal economic interest in Trammell Crow Center through its ownership of fee simple title to the property (subject to a ground lease and a leasehold estate regarding the building) and two mortgage notes encumbering the leasehold interests in the land and building. (5) The Operating Partnership owns a 75% limited partner interest and an indirect approximately 10% general partner interest in the partnerships that own The Woodlands Office and Retail Properties. (6) The Operating Partnership owns a 49% limited partner interest and Crescent/301, L.L.C., a wholly owned subsidiary of the General Partner and the Operating Partnership, owns a 1% general partner interest in 301 Congress Avenue, L.P., the partnership that owns 301 Congress Avenue. (7) Funding III owns the Greenway Plaza Portfolio, except for the central heated and chilled water plant building and Coastal Tower Office property, both located within Greenway Plaza, which are owned by Funding IV and Funding V, respectively. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management's opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited interim financial statements have been included. Operating results for interim periods reflected are not necessarily indicative of the results that may be expected for a full fiscal year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K. Certain reclassifications have been made to previously reported amounts to conform with current presentation. 2. NEW ACCOUNTING PRONOUNCEMENT: In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("EPS") ("SFAS 128") which supersedes APB No. 15 for periods ending after December 15, 1997. SFAS 128 specifies the computation, presentation and disclosure requirements for earnings per share. Primary EPS and Fully Diluted EPS are replaced by Basic EPS and Diluted EPS, respectively. Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. The Company does not expect the effect of its adoption of SFAS 128 to be material. 7
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3. SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS: [Enlarge/Download Table] Nine months ended September 30, ----------------- 1997 1996 ------- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $52,594 $30,930 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Two-for-one stock split $ 361 $ -- Conversion of operating partnership units to common shares with resulting reduction in minority interest and increases in common share and additional paid-in capital $ 426 $ 857 Minority interest - joint venture capital $ -- $21,635 Issuance of operating partnership units in conjunction with property acquisition $ -- $27,056 4. INVESTMENTS IN REAL ESTATE MORTGAGES AND COMMON STOCK OF UNCONSOLIDATED COMPANIES: The Company reports its share of income and losses based on its ownership interest in the respective equity investments. The following summarized information for all unconsolidated companies (see Note 1) has been presented on an aggregated basis as of September 30, 1997. [Download Table] For the three For the nine months ended months ended September 30, 1997 September 30, 1997 ------------------ ------------------ Total revenues $ 27,685 $ 34,105 Total expenses 26,247 30,853 -------- -------- Net income $ 1,438 $ 3,252 ======== ======== Company equity in net income of unconsolidated companies $ 1,119 $ 3,118 ======== ======== 8
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5. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY: Following is a summary of the Company's debt financing: [Enlarge/Download Table] September 30, 1997 -------------- Note payable to LaSalle National Bank, as Trustee for Commercial Mortgage Pass-Through Certificates, Series 1995-MD IV ("LaSalle Note I") bears interest at 7.83% with an initial seven-year interest-only term (through August 2002), followed by principal amortization based on a 25-year amortization schedule through maturity in August 2027 (1), secured by the Funding I properties ..................................................................... $239,000 Note payable to LaSalle National Bank, as Trustee for Commercial Mortgage Pass-Through Certificates, Series 1996-MD V ("LaSalle Note II") bears interest at 7.79% with an initial seven-year interest-only term (through March 2003), followed by principal amortization based on a 25-year amortization schedule through maturity in March 2028(2), secured by the Funding II properties ..................................................................... 161,000 Note payable to LaSalle National Bank, as Trustee for Commercial Mortgage Pass-Through Certificates, Series 1994-MD II ("LaSalle Note III") due July 1999, bears interest at 30-day LIBOR plus a weighted average rate of 2.135% (at September 30, 1997 the rate was 7.82% subject to a rate cap of 10%) with a five-year interest-only term, secured by the Funding III, IV and V properties ..................................................................... 115,000 Note payable to Connecticut General Life Insurance Company ("CIGNA") due December 2002, bears interest at 7.47% with a seven-year interest-only term, secured by the MCI Tower and Denver Marriott City Center properties ............ 63,500 Note payable to Northwestern Mutual Life Insurance Company due January 2004, bears interest at 7.66% with a seven-year interest-only term, secured by the 301 Congress Avenue property ....................................................... 26,000 Note payable to Metropolitan Life Insurance Company due September 2001, bears interest at 8.88% with monthly principal and interest payments, secured by five of The Woodlands Office Properties ............................................. 12,188 Note payable to Nomura Asset Capital Corporation ("Nomura Funding VI Note") bears interest at 10.07% with monthly principal and interest payments based on a 25-year amortization schedule through July 2020(3), secured by the Funding VI property ....................................................................... 8,716 Short-term unsecured note payable to BankBoston, N.A. ("BankBoston") due October 1997, bears interest at Eurodollar rate plus 137.5 basis points (at September 30, 1997, the rate was 7.03%) ........................................ 235,000(4) Short-term unsecured note payable to BankBoston due August 1998, bears interest at Eurodollar rate plus 120 basis points (at September 30, 1997, the rate was 6.86%) ........................................................................ 200,000 9
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[Enlarge/Download Table] September 30, 1997 ----------------- Senior unsecured notes to State Street Bank & Trust Company of Missouri, N.A., as Trustee, bear interest at a fixed rate of 6.63% with a five-year interest-only term, due September 2002 (see description of Notes offering below) .................................................................... 150,000 Senior unsecured notes to State Street Bank & Trust Company of Missouri, N.A., as Trustee, bear interest at a fixed rate of 7.13% with a ten-year interest-only term, due September 2007 (see description of Notes offering below) .................................................................... 250,000 ---------- Total Notes Payable ....................................................... $1,460,404 ========== (1) In August 2007, the interest rate increases, and the Company is required to remit, in addition to the monthly debt service payment, excess property cash flow, as defined, to be applied first against principal until the note is paid in full and thereafter, against accrued excess interest, as defined. It is the Company's intention to repay the note in full at such time (August 2007) by making a final payment of approximately $220,000. (2) In March 2006, the interest rate increases, and the Company is required to remit, in addition to the monthly debt service payment, excess property cash flow, as defined, to be applied first against principal until the note is paid in full and thereafter, against accrued excess interest, as defined. It is the Company's intention to repay the note in full at such time (March 2006) by making a final payment of approximately $154,000. (3) In July 1998, the Company may defease the note by purchasing Treasury obligations to pay the note without penalty. In July 2010, the interest rate due under the note will change to a 10-year Treasury yield plus 500 basis points or, if the Company so elects, it may repay the note without penalty. (4) On October 15, 1997, the note was repaid in full through a draw under the Company's Credit Facility (see Note 11 - October 1997 Offering). On September 22, 1997, the Company's line of credit from a consortium of banks led by BankBoston (the "Credit Facility") was increased to $450,000 to enhance the Company's financial flexibility in making new real estate investments. Concurrently with such increase, the interest rate on advances under the Credit Facility was decreased from the Eurodollar rate plus 137.5 basis points to the Eurodollar rate plus 120 basis points. The Credit Facility is unsecured and expires in June 2000. The Credit Facility requires the Company to maintain compliance with a number of customary financial and other covenants on an ongoing basis, including leverage ratios based on book value and debt service coverage ratios, limitations on additional secured and total indebtedness and distributions, and a minimum net worth requirement. As of September 30, 1997, the Company was in compliance with all covenants. As of September 30, 1997, the interest rate was 6.86% and the outstanding balance was $316,500, with availability of $133,500. On September 22, 1997, the Operating Partnership completed a private note offering of senior unsecured notes in an aggregate principal amount of $400,000 (the "Notes"). The Notes were issued in two series, the 6 5/8%, $150,000 notes with maturity on September 15, 2002, yielding a 6.73% effective rate (the "2002 Notes") and the 7 1/8%, $250,000 notes with maturity on September 15, 2007, yielding a 7.151% effective rate (the "2007 Notes"). The Notes pay interest semi-annually in arrears. The interest rate on the Notes is subject to temporary increase by 50 basis points in the event that a registered offer to exchange the Notes for notes of the Operating Partnership with terms identical in all material respects to the Notes is not consummated or a shelf registration statement with respect to the resale of the Notes is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the 180th day following the date of original issuance of the Notes. The interest rate on the Notes also is subject to temporary or permanent increase by 37.5 basis points in the event that, within the period from the date of original issuance of the Notes to the first anniversary of original issuance, the Notes are assigned a rating that is not an investment grade rating (as defined in the Notes) or are not assigned or do not retain, a rating by specified rating agencies. These adjustments may apply simultaneously. The Notes are redeemable, in whole or in part, at the option of the Operating Partnership upon payment of principal, accrued and unpaid interest, and the premium specified in the Notes. The Notes also 10
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contain certain covenants, including limitations on the ability of the Operating Partnership and its subsidiaries to incur additional debt, other than certain intercompany debt that is subordinate to payment of the Notes, unless certain asset and income tests are satisfied. The net proceeds of the Notes offering were used to fund the approximately $327,600 purchase price of Houston Center, to repay approximately $50,000 of borrowings under the Credit Facility, to fund approximately $10,000 of the purchase price of Miami Center, and to repay approximately $7,200 of short term indebtedness. 6. MINORITY INTERESTS: Minority interests represents (i) the limited partnership interests owned by unitholders in the Operating Partnership ("units") and (ii) joint venture interests held by outside interests. Due to the March 26, 1997 two-for-one stock split, the exchange factor has been adjusted in accordance with the Operating Partnership's limited partnership agreement and each unit may be exchanged for either two common shares or, at the election of the Company, cash equal to the fair market value of two common shares at the time of the exchange. When a unitholder exchanges a unit, the Company's investment in the Operating Partnership is increased. During the nine months ended September 30, 1997, there were 18,551 units exchanged for 37,102 common shares. 7. SHAREHOLDERS' EQUITY: On February 4, 1997, the Company paid a cash dividend and unitholder distribution of $26,100 or $.61 per share and equivalent unit, to shareholders and unitholders of record on January 21, 1997. The dividend represented an annualized distribution of $2.44 per share and equivalent unit. On March 2, 1997, the Company declared a two-for-one stock split in the form of a 100% share dividend. The share dividend was paid on March 26, 1997 to shareholders of record on March 20, 1997. On April 28, 1997, the Company completed an offering (the "April 1997 Offering") of 24,150,000 common shares (including the underwriters' overallotment option) at $25.375 per share. Net proceeds from the April 1997 Offering to the Company after underwriting discount of $29,222 and other offering costs of $3,000 were approximately $580,584. On May 14, 1997, the Company completed an additional offering of 500,000 common shares to several underwriters who participated in the April 1997 Offering. The common shares were sold at $25.875 per share, totaling gross proceeds of approximately $12,938 (collectively, the "Offerings"). In the second quarter of 1997, the Company used net proceeds of $593,522 from the Offerings and approximately $314,700 from borrowings under the Credit Facility and $160,000 of short-term borrowings from BankBoston (i) to fund approximately $30,000 in connection with the formation and capitalization of Crescent Operating, Inc. ("Crescent Operating"); (ii) to repay the $150,000 BankBoston short-term note payable; (iii) to reduce by $131,000 borrowings under the Credit Facility; (iv) to fund approximately $306,300 of the purchase price of the Carter-Crowley Portfolio (as defined in Note 9) acquired by the Company; and (v) to fund the commitments of the Company and Crescent Operating related to the Magellan transaction totaling approximately $419,700. The remaining $31,222 has been used for working capital purposes. On May 14, 1997, the Company paid a cash dividend and unitholder distribution of $33,476 or $.305 per share and equivalent unit, to shareholders and unitholders of record on April 30, 1997. The dividend represented an annualized distribution of $1.22 per share and equivalent unit. On July 23, 1997, the Company sold to Merrill Lynch & Co. 351,185 common shares at $28.475 per share (the "Merrill Offering"). The proceeds were used to repay approximately $10,000 of borrowings under the Credit Facility. 11
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On August 5, 1997, the Company paid a cash dividend and unitholder distribution of $33,639 or $.305 per share and equivalent unit, to shareholders and unitholders of record on July 16, 1997. The dividend represented an annualized distribution of $1.22 per share and equivalent unit. On August 12, 1997, the Company entered into two transactions with affiliates of Union Bank of Switzerland ("UBS"). In one transaction, the Company sold 4,700,000 common shares at $31.5625 per share to UBS Securities, LLC for approximately $148 million (approximately $145 million of net proceeds) ("UBS Offering"). In the other transaction, the Company entered into a forward share purchase agreement with Union Bank of Switzerland, London Branch ("UBS-LB") which provides that the Company will purchase 4,700,000 common shares from UBS-LB within one year. The purchase price will be determined on the date the Company settles the agreement and will include a forward accretion component, minus an adjustment for the Company's distribution rate. The Company may complete the settlement for cash or common shares at its option. The net proceeds were used to repay borrowings under the Credit Facility. On September 22, 1997, in connection with the acquisition of Houston Center, the Company sold to the seller of Houston Center, 307,831 common shares at $32.485 per share (the "HC Offering"). The proceeds were used to repay approximately $10,000 of borrowings under the Credit Facility. 8. FORMATION AND CAPITALIZATION OF CRESCENT OPERATING, INC. In April 1997, the Company established a new Delaware Corporation, Crescent Operating. All of the outstanding common stock of Crescent Operating was distributed, effective June 12, 1997, to those persons who were limited partners of the Operating Partnership or shareholders of the Company on May 30, 1997, in a spin-off. Crescent Operating was formed to become a lessee and operator of various assets and to perform the Intercompany Agreement between Crescent Operating and the Company, pursuant to which each has agreed to provide the other with rights to participate in certain transactions. As a result of the formation of Crescent Operating and the execution of the Intercompany Agreement, persons who own equity interests in both Crescent Operating and the Company have the opportunity to participate in the benefits of both the real estate investments of the Company (including ownership of real state assets) and the lease of certain of such assets and the ownership of other non-real estate assets by Crescent Operating. The certificate of incorporation, as amended and restated, of Crescent Operating 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 Company was first given the opportunity but elected not to pursue such activities or investments. In connection with the formation and capitalization of Crescent Operating, the Company provided to Crescent Operating approximately $50,000 in the form of cash contributions and loans to be used by Crescent Operating to acquire certain assets described in Note 9. The Company also made available to Crescent Operating a line of credit in the amount of $20,400 to be used by Crescent Operating to fulfill certain ongoing obligations associated with these assets. 9. ACQUISITIONS: Greenway II. On January 17, 1997, the Company acquired Greenway II, a seven-story Class A office building containing approximately 154,000 net rentable square feet and located in the Richardson/Plano submarket of Dallas, Texas. The purchase price was approximately $18,200, which was funded through a draw under the Credit Facility. Trammell Crow Center. On February 28, 1997, the Company acquired substantially all of the economic interest in Trammell Crow Center, a 50-story Class A office building, which contains approximately 1,128,000 net rentable square feet. The property is located in the cultural and financial district of the Central Business District ("CBD") submarket of Dallas, Texas. The Company acquired its interest in Trammell Crow Center through the purchase of fee simple title to the property (subject to a 12
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ground lease and a leasehold estate regarding the building) and two mortgage notes encumbering the leasehold interests in the land and building. The purchase price was approximately $162,000, of which $150,000 was funded through proceeds from an unsecured, short-term loan with BankBoston and the remaining balance of $12,000 through a draw under the Credit Facility. Denver Properties. On February 28, 1997, the Company acquired three office buildings in Denver, Colorado, in a single transaction: 44 Cook, 55 Madison and the AT&T Building. 44 Cook, a 10-story Class A office building containing approximately 119,000 net rentable square feet, and 55 Madison, an eight-story Class A office building containing approximately 125,000 net rentable square feet, are both located in the Cherry Creek submarket of Denver, Colorado. The AT&T Building, a 15-story office building, contains approximately 170,000 net rentable square feet and is located in the Denver CBD submarket. The three office properties were acquired for an aggregate purchase price of approximately $42,675, which was funded through a draw under the Credit Facility.  Carter-Crowley Portfolio. On February 10, 1997, the Company entered into a contract to acquire for approximately $383,300, substantially all of the assets (the "Carter-Crowley Portfolio") of Carter-Crowley Properties, Inc. ("Carter-Crowley"), an unaffiliated company controlled by the family of Donald J. Carter. At the time the contract was executed, the Carter-Crowley Portfolio included 14 office properties (the "Carter-Crowley Office Portfolio"), with an aggregate of approximately 3.0 million net rentable square feet, approximately 1,216 acres of commercially zoned, undeveloped land located in the Dallas/Fort Worth metropolitan area, two multifamily residential properties located in the Dallas/Fort Worth metropolitan area, marketable securities, an approximately 12% limited partner interest in the limited partnership that owns the Dallas Mavericks NBA basketball franchise, secured and unsecured promissory notes, certain direct non-operating working interests in various oil and gas wells, an approximately 35% limited partner interest in two oil and gas limited partnerships, and certain other assets (including operating businesses). Pursuant to an agreement between Carter-Crowley and the Company, Carter-Crowley liquidated approximately $51,000 of such assets originally included in the Carter-Crowley Portfolio, consisting primarily of the marketable securities and the oil and gas investments, resulting in a reduction in the total purchase price by a corresponding amount to approximately $332,300. On May 9, 1997, the Company and Crescent Operating acquired the Carter-Crowley Portfolio. The Company acquired certain assets from the Carter-Crowley Portfolio, with an aggregate purchase price of approximately $306,300, consisting primarily of the Carter-Crowley Office Portfolio, the two multifamily residential properties, the approximately 1,216 acres of undeveloped land and the secured and unsecured promissory notes relating primarily to the Dallas Mavericks. In addition to the promissory notes relating to the Dallas Mavericks, the Company obtained rights from the current holders of the majority interest in the Dallas Mavericks to a contingent $10,000 payment after a new arena is constructed within a 75-mile radius of Dallas. Crescent Operating purchased the remainder of the Carter-Crowley Portfolio utilizing cash contributions and loan proceeds provided to Crescent Operating by the Company. These assets, which have an allocated cost of approximately $26,000, consisted primarily of the approximately 12% limited partner interest in the limited partnership that owns the Dallas Mavericks, an approximately 1% interest in a private venture capital fund, and a 100% interest in a construction equipment sale, leasing and services company. Dallas Mavericks Interest. On June 11, 1997, DBL Holdings, Inc. ("DBL"), a wholly owned subsidiary of the Operating Partnership was formed. In connection with the formation of DBL, the Operating Partnership acquired all the voting and non-voting common stock of DBL, for an aggregate purchase price of approximately $2,500 and loaned to DBL approximately $10,100. The voting common stock, which represented a 5% effective interest in DBL, was subsequently sold to Gerald W. Haddock , the President and Chief Executive Officer of the Company and Crescent Operating, and John C. Goff, the Vice Chairman of the Company and Crescent Operating, for $126. On June 11, 1997, DBL acquired from Crescent Operating, for approximately $12,550, the limited partner interest in the partnership that owns the Dallas Mavericks. 13
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Magellan Transaction. On June 17, 1997, the Company acquired substantially all of the real estate assets of the domestic hospital provider business of Magellan Health Services, Inc. ("Magellan"), as previously owned and operated by a wholly owned subsidiary of Magellan. The Magellan transaction involved various components, certain of which related to the Company and certain of which related to Crescent Operating. The total purchase price of the assets acquired in the Magellan transaction was approximately $419,700. Of this amount, the Company paid approximately $387,200 for the acquisition of the 91 Behavioral Healthcare Facilities (and one additional behavioral healthcare facility, which subsequently was sold) and $12,500 for the acquisition of warrants to purchase 1,283,311 shares of common stock of Magellan. Crescent Operating paid $5,000 for its interest in Charter Behavioral Health Systems, LLC, a limited liability company ("CBHS"), $12,500 for the acquisition of warrants to purchase 1,283,311 shares of common stock of Magellan and $2,500 to CBHS after the closing. CBHS is owned 50% by Crescent Operating and 50% by a wholly owned subsidiary of Magellan, subject to potential dilution of each by up to 5% in connection with future incentive compensation of management of CBHS. The principal component of the transaction was the Company's acquisition of the Behavioral Healthcare Facilities, which are leased to CBHS, and the subsidiaries of CBHS, under a triple-net lease. The lease requires the payment of annual minimum rent in the amount of $41,700, increasing in each subsequent year during the 12-year term at a 5% compounded annual rate. The lease provides for four, five-year renewal options. All maintenance and capital improvement costs are the responsibility of CBHS during the term of the lease. In addition, CBHS is required to pay annually an additional $20,000 under the lease, at least $10,000 of which must be used, as directed by CBHS, for capital expenditures each year and up to $10,000 of which may be used, if requested by CBHS, to cover capital expenditures, property taxes, insurance premiums, and franchise fees. Woodlands Transaction. On July 31, 1997, the Company and certain Morgan Stanley funds (the "Morgan Stanley Group") acquired The Woodlands Corporation, a subsidiary of Mitchell Energy Corporation, for approximately $543,000. In connection with the acquisition, the Company and the Morgan Stanley Group made equity investments of approximately $80,000 and $109,000, respectively. The Company's contribution was funded through the $235,000 BankBoston loan. The remaining approximately $354,000 and associated acquisition and financing costs of approximately $15,000 were financed by the two limited partnerships, described below, through which the investment was made. The Woodlands Corporation was the principal owner, developer and operator of The Woodlands, an approximately 27,000-acre, master-planned residential and commercial community located 27 miles north of downtown Houston, Texas. The Woodlands which is approximately 50% developed, includes a shopping mall, retail centers, office buildings, a hospital, club facilities, a community college, a performance pavilion, and numerous other amenities. The acquisition was made through The Woodlands Commercial Properties Company, L.P. ("Woodlands-CPC"), a limited partnership in which the Morgan Stanley Group holds a 57.5% interest and the Company holds a 42.5% interest, and the Woodlands Land Development Company, L.P. ("Woodlands-LDC"), a limited partnership in which the Morgan Stanley Group holds a 57.5% interest and a newly formed Residential Development Corporation, The Woodlands Land Company, Inc. ("WLC"), holds a 42.5% interest. The Company currently owns all of the non-voting common stock, representing a 95% economic interest in WLC and, effective September 29, 1997, Crescent Operating owns all of the voting common stock, representing a 5% economic interest, in WLC. The Company is the managing general partner of Woodlands-CPC and WLC is the managing general partner of Woodlands-LDC. In connection with the acquisition, Woodlands-CPC acquired The Woodlands Corporation's 25% general partner interest in the partnerships that own approximately 1.2 million square feet of The Woodlands Office and Retail Properties. The Company previously held a 75% limited partner interest in each of these partnerships and, as a result of the acquisition, the Company's indirect economic ownership interest in these Properties increased to approximately 85%. The other assets acquired by Woodlands-CPC include a 364-room executive conference center, a private golf and tennis club serving approximately 1,600 members and offering 81 holes of golf, and approximately 400 acres of land that will support commercial development of more than 3.5 million square feet of office, multi-family, industrial, retail and 14
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lodging properties. In addition, Woodlands-CPC acquired The Woodlands Corporation's general partner interests, ranging from one to 50%, in additional office and retail properties and in multi-family and light industrial properties. Woodlands-LDC acquired approximately 6,400 acres of land that will support development of more than 20,000 lots for single-family homes and approximately 2,500 acres of land that will support more than 21.5 million net rentable square feet of commercial development. The executive conference center, including the golf and tennis club and golf courses, is operated and leased by a wholly owned subsidiary of a partnership owned 42.5% by a subsidiary of Crescent Operating and 57.5% by the Morgan Stanley Group. Desert Mountain. On August 29, 1997, the Company acquired, through a newly formed Residential Development Corporation, Desert Mountain Development Corporation ("DMDC"), the majority economic interest in Desert Mountain Properties Limited Partnership ("DMPLP"), the partnership that owns Desert Mountain, a master-planned, luxury residential and recreational community in northern Scottsdale, Arizona. Desert Mountain is an 8,300-acre property that is zoned for the development of approximately 4,500 lots, approximately 1,500 of which have been sold. Desert Mountain also includes The Desert Mountain Club, a private golf, tennis and fitness club serving over 1,600 members. The partnership interest was acquired from a subsidiary of Mobil Land Development Corporation for approximately $214,000, which was funded through the $200,000 BankBoston loan and a draw under the Credit Facility. The sole limited partner of DMPLP is Sonora Partners Limited Partnership ("Sonora") whose principal owner is Lyle Anderson, the original developer of Desert Mountain. A portion of Sonora's interest in DMPLP is exchangeable for common shares of the Company. Sonora currently owns a 7% economic interest in DMPLP, and DMDC, which is the sole general partner of DMPLP, owns the remaining 93% economic interest. The Company owns all of the non-voting common stock, representing a 95% economic interest, and, effective September 29, 1997, Crescent Operating owns all of the voting common stock, representing a 5% economic interest, in DMDC. The Company also holds a residential development property mortgage on Desert Mountain. Houston Center. On September 22, 1997, the Company acquired Houston Center, an approximately 3.0 million square foot, mixed-use property located in the CBD submarket of Houston, Texas. Houston Center consists of three high-rise Class A office buildings aggregating approximately 2.8 million net rentable square feet ("Houston Center Office Properties"), a 399-room Four Seasons Hotel-Houston, 114 luxury apartments, The Park Shops in Houston Center (a retail property containing approximately 191,000 net rentable square feet), and approximately 20 acres of contiguous undeveloped commercial land. The aggregate purchase price for Houston Center was approximately $327,600 which was funded from the proceeds of the Notes offering (described in Note 5). Miami Center. On September 30, 1997, the Company acquired Miami Center, a 34-story Class A office building containing approximately 783,000 net rentable square feet located in the Downtown-CBD submarket of Miami, Florida. The Company acquired fee simple title, subject to a Condominium Declaration, to Miami Center for approximately $131,500. The purchase price was funded through an approximately $121,500 draw under the Credit Facility and $10,000 from proceeds of the Notes offering. The Company owns the single condominium unit that comprises the Miami Center office building and an unaffiliated party owns the hotel unit. The Condominium Declaration grants each unit a 50% interest in common areas, as well as in the common operating expenses of the condominium. 10. PRO FORMA FINANCIAL INFORMATION The pro forma financial information for the nine months ended September 30, 1997 and 1996 assumes the completion, in each case as of January 1, 1996, of (i) the 11,500,000 common share offering on October 2, 1996 and the additional 450,000 common share offering on October 9, 1996; (ii) the Offerings; (iii) the Merrill Offering; (iv) the UBS Offering; (v) the Notes offering; (vi) the HC Offering; (vii) the 1996 and 1997 completed acquisitions inclusive of subsequent events (see Note 11), except for the Refrigerated Warehouses transaction (collectively referred to as the, "Acquisitions"); and (viii) the October 1997 Offering (as defined in Note 11). Proforma information assumes as of January 1, 1996, all offering proceeds were used for repayment of indebtedness for Acquisitions. 15
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[Enlarge/Download Table] Nine Months Ended Nine Months Ended September 30,1997 September 30,1996 ----------------- ----------------- Total revenue .............................................. $437,619 $408,865 Operating income ............................................. $100,440 $ 79,165 Income before minority interests and extraordinary item .................................. $120,339 $ 95,185 Net income ................................................... $107,694 $ 84,109 Per share: Income before extraordinary item ........................ $ .96 $ .76 Net income .............................................. $ .96 $ .75 The pro forma operating results combine the Company's historical operating results with the historical incremental rental income and operating expenses including an adjustment for depreciation based on the acquisition price associated with the Office and Retail Property acquisitions. Pro forma adjustments primarily represent the following: (i) rental income to the Company from the hotels acquired during 1996 and 1997, based on the lease payments from the hotel lessees and calculated on a pro forma basis by applying the rent provisions (as set forth in the lease agreements); (ii) rental income based on the lease payment from CBHS to the Company by applying the rent provisions (as set forth in the lease agreement); (iii) adjustment for depreciation expense for Hotel Properties and Magellan Facilities; (iv) adjustment for equity in net income for the Woodlands and Desert Mountain transactions; (v) interest income for the notes acquired in the Carter-Crowley transaction, the loans to Crescent Operating and the loans to DMPL; and (vi) interest costs assuming the borrowings to finance acquisitions and assumption of debt for property acquisitions. These pro forma amounts are not necessarily indicative of what the actual financial position of the Company would have been assuming the above investments had been consummated as of the beginning of the period, nor do they purport to represent the future financial position of the Company. 11. SUBSEQUENT EVENTS Distribution. On September 10, 1997, the Company declared a cash distribution of $.38 per share and equivalent unit, to shareholders and unitholders of record on October 16, 1997. The cash dividend and unitholder distribution were paid on November 4, 1997, and represented an annualized distribution of $1.52 per share and equivalent unit.  October 1997 Offering. On October 8, 1997, the Company completed an offering (the "October 1997 Offering") of 10,000,000 common shares at $39.00 per share. Net proceeds from the October 1997 Offering to the Company after underwriting discount of $19,900 were approximately $370,100 (with other estimated offering costs of $1,500). The net proceeds of $370,100 were used to partially repay approximately $325,100 of borrowings under the Credit Facility and to fund approximately $45,000 of the purchase price of the U.S. Home Building. U.S. Home Building. On October 15, 1997, the Company acquired U.S. Home Building, a 21-story Class A office building located in the West Loop/Galleria submarket of Houston, Texas, containing approximately 400,000 net rentable square feet. The purchase price was approximately $45,000, which was funded from proceeds of the October 1997 Offering. Bank One Center. On October 22, 1997, the Company, together with affiliates of TrizecHahn Corporation ("Trizec") acquired Bank One Center, a 60-story Class A office building located in the CBD submarket of Dallas, Texas. Bank One Center contains approximately 1.5 million net rentable square feet. The acquisition was made by Main Street Partners, L.P. (the "Partnership"), a Texas limited partnership in which the Company and Trizec each own a 50% interest. Crescent 1717 Main, L.L.C., a Texas limited liability company that is wholly owned by the Operating Partnership and TrizecHahn 1717 Main St., Inc., a Delaware corporation, serve as the general partners of the Partnership. The Partnership acquired Bank One Center for approximately $238,000 from two unaffiliated entities. The purchase price was funded through (i) proceeds from two secured loans aggregating $155,000 provided by The Travelers Insurance Company and (ii) capital contributions of $41,500 from each of the Company and Trizec partner groups. The Company's capital contribution of $41,500 was funded through a draw under the Credit Facility. 16
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Registration Statement. On October 29, 1997, the Company filed a shelf registration with the SEC for an aggregate of $1.5 billion of common shares, preferred shares, and warrants exercisable for common shares. Any securities issued under the registration statement may be offered from time to time in amounts, at prices, and on terms to be determined at the time of the offering. Management believes this shelf registration will provide the Company with more efficient and immediate access to the capital markets at such time as it is considered appropriate. Net proceeds from any offering of these securities are expected to be used for general business purposes, including the acquisition and development of additional properties and other acquisition transactions, the payment of certain outstanding debt, and improvements to certain properties in the Company's portfolio. Refrigerated Warehouses Transaction. Effective September 28, 1997, the Company entered into a partnership with Vornado Realty Trust ("Vornado" and, collectively with its affiliates, "VNO") to participate in the acquisition of Americold Corporation ("Americold") and URS Logistics, Inc. ("URS"), two suppliers of refrigerated warehouse space in the United States. On October 30, 1997, the Company and VNO agreed to the termination of that partnership and the formation of two new partnerships, one of which was formed to consummate the acquisition of Americold (the "Americold Partnership") and the other to consummate the acquisition of URS (the "URS Partnership"). The Company, through two newly formed subsidiaries ("Crescent Subsidiaries"), will own 40% of these partnerships, and Vornado, through two newly formed subsidiaries ("Vornado Subsidiaries"), will own 60%. On October 31, 1997, the Americold Partnership acquired all of the common stock of Americold through the merger of a subsidiary of Vornado into Americold, and the URS Partnership acquired all of the common stock of URS through the merger of a separate subsidiary of Vornado into URS. As a result, the Americold Partnership and the URS Partnership became the owners and operators of approximately 79 refrigerated warehouses with an aggregate of approximately 368 million cubic feet. The aggregate purchase price for the acquisition of Americold and URS was approximately $1.0 billion (including transaction costs associated with the acquisition). Of this amount, the purchase price for the acquisition of Americold was approximately $632,000 (consisting of approximately $112,000 in cash for the purchase of the equity, approximately $151,000 in cash for the repayment of certain outstanding bonds issued by Americold, approximately $367,000 in retention of debt and approximately $2,000 in transaction costs), and the purchase price for the acquisition of URS was approximately $372,000 (consisting of approximately $173,000 in cash for the purchase of equity, approximately $192,000 in retention of debt and approximately $7,000 in transaction costs). The Company currently owns all of the voting common stock, representing an approximately 5% economic interest, and all of the nonvoting common stock, representing an approximately 95% economic interest, of the Crescent Subsidiaries. The Company expects to offer its interest in the voting common stock to Crescent Operating, but no offer had been made as of November 14, 1997. It is intended that the transfer of the voting common stock to another entity will take place in the near future and in no event later than December 31, 1997. The parties have not yet determined certain matters relating to the future ownership and operations of Americold and URS, including the identification and division of the assets that will continue to be owned by one of the partnerships and those that will be owned by one or more other entities formed to conduct the business operations currently conducted by Americold and URS, and the nature and terms of any lease that may be entered into between the operating entity and the owner of the warehouses. 17
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Term Loan. On November 3, 1997, the Company negotiated a term loan with BankBoston in the amount of $50,000 (the "BankBoston Term Loan"). The loan bears interest at Eurodollar plus 120 basis points and matures on March 31, 1998. The BankBoston Term Loan can be increased to $150,000 subject to certain conditions. Fountain Place. On November 7, 1997, the Company acquired Fountain Place, a 60-story Class A office building located in the CBD submarket of Dallas, Texas containing approximately 1.2 million net rentable square feet. The purchase price was approximately $114,000 of which the Company funded $16,900 through the BankBoston Term Loan and $97,100 through the assumption of nonrecourse indebtedness. 18
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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CRESCENT REAL ESTATE EQUITIES COMPANY /s/ Gerald W. Haddock ---------------------------------------- Date: December 5, 1997 Gerald W. Haddock, President and Chief Executive Officer /s/ Dallas E. Lucas ---------------------------------------- Date: December 5, 1997 Dallas E. Lucas, Senior Vice President, Chief Financial Officer and Chief Accounting Officer 19

Dates Referenced Herein   and   Documents Incorporated By Reference

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This 10-Q/A Filing   Date First   Last      Other Filings
1/1/9616
9/30/9631610-Q, 10-Q/A, 424B5
10/2/9616
10/9/9616
12/31/963710-K405, 10-K405/A, 11-K
1/17/9713
1/21/9712
2/4/9712
2/10/9714SC 13G/A
2/28/9713148-K, 8-K/A
3/2/9712
3/20/9712
3/26/9712
4/28/9712
4/30/971210-K405/A
5/9/9714
5/14/9712
5/30/9713
6/11/9714
6/12/9713
6/17/9715
7/16/9713
7/23/9712424B5, 8-K
7/31/9715
8/5/9713
8/12/9713
8/29/9716
9/10/9717
9/22/9711168-K
9/28/97188-K/A
9/29/971516
For The Period Ended9/30/9711610-Q, 8-K, 8-K/A
10/8/97178-K
10/15/9711178-K
10/16/9717S-3
10/22/97178-K
10/29/9718S-3/A
10/30/9718
10/31/9718
11/3/9719
11/4/9717
11/7/9719
11/14/971810-Q
12/3/971
Filed On / Filed As Of12/5/9720
12/15/978
12/31/971810-K, 10-K/A, 11-K
3/31/981910-K, 10-Q
9/15/0211
9/15/0711
 
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