Press Release: Crescent Real Estate Equities Company
August 14, 2002
FORT WORTH, TX -- Crescent Real Estate Equities Company (NYSE:CEI) August 8 announced results for the second quarter
2002. Funds from operations ("FFO") for the three months ended June 30, 2002 was $53.2 million, or $.45
per share and equivalent unit (diluted), which met the Company's guidance and analyst consensus. FFO for the six
months ended June 30, 2002 was $117.3 million or $.99 per share and equivalent unit (diluted). These compare to
$81.4 million, or $.66 per share and equivalent unit (diluted), for the three months ended June 30, 2001 and $153.6
million or $1.25 per share and equivalent unit (diluted), for the six months ended June 30, 2001.
According to John C. Goff, Chief Executive Officer, "We are pleased to have met our earnings expectation for
the second quarter. While we look forward to a recovery in the national economy, we feel the company is well positioned
in the current environment and will quickly benefit when the recovery occurs. We recently completed a $500 million
capital raising initiative which strengthened our balance sheet, addressed our significant debt maturities through
2004, and created substantial liquidity, which will allow us to take advantage of investment opportunities as they
arise."
Net income available to common shareholders for the three months ended June 30, 2002 was $6.7 million, or $.07
per share (diluted). Net income available to common shareholders for the six months ended June 30, 2002 was $17.3
million, or $.17 per share (diluted). These compare to $11.6 million, or $.10 per share (diluted), for the three
months ended June 30, 2001 and $39.5 million, or $.36 per share (diluted), for the six months ended June 30, 2001.
In accordance with SFAS 144, gains of $.01 per share and $.04 per share related to office property sales were recorded
as discontinued operations for the three months and six months ended June 30, 2002, respectively.
BUSINESS SECTOR REVIEW
Office Sector (67% of Gross Book Value of Real Estate Assets as of June 30, 2002)
Office property same-store net operating income ("NOI") declined 1.5% for the three months ended June
30, 2002 over the same period in 2001 for the 25.7 million square feet of office property space owned during both
periods. Average occupancy for these properties for the three months ended June 30, 2002 was 89.6% leased compared
to 92.6% leased for the same period in 2001. As of June 30, 2002, the overall office portfolio was 90.4% leased
based on executed leases. During the three months ended June 30, 2002 and 2001, Crescent received $0.6 million
and $2.3 million, respectively, of lease termination fees. Crescent's policy is to exclude lease termination fees
from its same-store NOI calculation.
Office property same-store NOI declined 1.0% for the six months ended June 30, 2002 over the same period in 2001
for the 25.7 million square feet of office property space owned during both periods. Average occupancy for these
properties for the six months ended June 30, 2002 was 89.8% leased compared to 92.6% leased for the same period
in 2001. During the six months ended June 30, 2002 and 2001, Crescent received $1.8 million and $4.0 million, respectively,
of lease termination fees.
The Company leased 807,000 net rentable square feet during the three months ended June 30, 2002, of which 473,000
square feet was renewed or re-leased. The weighted average FFO net effective rental rate (rental rate less operating
expenses) increased 4% over the expiring rates for the renewed or re-leased leases, all of which have commenced
or will commence within the next twelve months. Tenant improvements related to these leases were $1.73 per square
foot per year and leasing costs were $.92 per square foot per year.
The Company leased 1.9 million net rentable square feet during the six months ended June 30, 2002, of which 1.1
million square feet was renewed or re-leased. The weighted average FFO net effective rental rate (rental rate less
operating expenses) increased 9% over the expiring rates for the renewed or re-leased leases, all of which have
commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.06
per square foot per year and leasing costs were $.67 per square foot per year.
Denny Alberts, President and Chief Operating Officer, commented, "Although the national office market is challenging,
we are encouraged by the leasing velocity that we are seeing in Houston. We have already signed or are in negotiations
for 70% of our leases expiring in Houston this year. Also, we have recently signed two very important new customers
- one is a Houston company moving to Greenway Plaza for 215,000 square feet and the other is a company relocating
its headquarters to 5 Houston Center for 30,000 square feet. Further, we are in serious negotiations with various
existing customers for over 1 million square feet in Houston that, if consummated, would have a positive impact
to 2003 operating performance. In 2002, we believe our office segment will produce between $320 million and $329
million in FFO."
On May 29, 2002, Crescent closed on the sale of two buildings within The Woodlands Commercial Properties Company,
L.P., Venture Tech II and III, totaling 99,000 square feet. The sale generated net proceeds and gain to Crescent
of $3.2 million and $1.9 million, respectively.
On August 1, 2002, Crescent closed on the sale of 6225 N. 24th Street, a 86,000 square foot office building located
in the Camelback Corridor of Phoenix. The sale generated net proceeds and gain to Crescent of $9.0 million and
$1.3 million, respectively.
Resort and Residential Development Sector (22% of Gross Book Value of Real Estate Assets as of June 30, 2002) Destination
Resort Properties Based on actual performance of Crescent's five resort properties, same-store NOI declined 2%
for the three months ended June 30, 2002 over the same period in 2001. The average daily rate decreased 5% and
revenue per available room decreased 8% for the three months ended June 30, 2002 compared to the same period in
2001. Weighted average occupancy was 63% for the three months ended June 30, 2002 compared to 65% for the three
months ended June 30, 2001.
Based on actual performance of Crescent's five resort properties, same-store NOI declined 7% for the six months
ended June 30, 2002 over the same period in 2001. The average daily rate decreased 1% and revenue per available
room decreased 6% for the six months ended June 30, 2002 compared to the same period in 2001. Weighted average
occupancy was 69% for the six months ended June 30, 2002 compared to 72% for the six months ended June 30, 2001.
Upscale Residential Development Properties
According to Alberts, "Our overall residential investment generated $12.5 million in FFO for the second quarter,
which was in line with our expectation. After extensive operating reviews with our residential partners, we believe
that our overall residential business will deliver between $61 million and $65 million in FFO this year. Last year
the overall residential business delivered $54 million in FFO."
Investment Sector (11% of Gross Book Value of Real Estate Assets as of June 30, 2002)
Business-Class Hotel Properties
Based on actual performance of Crescent's four business-class hotel properties, same-store NOI increased 7% for
the three months ended June 30, 2002 over the same period in 2001. The average daily rate decreased 3%, while revenue
per available room increased 1% for the three months ended June 30, 2002 compared to the same period in 2001. Weighted
average occupancy was 75% for the three months ended June 30, 2002 compared to 72% for the three months ended June
30, 2001.
Based on actual performance of Crescent's four business-class hotel properties, same-store NOI declined 5% for
the six months ended June 30, 2002 over the same period in 2001. The average daily rate decreased 4%, while revenue
per available room decreased 7% for the six months ended June 30, 2002 compared to the same period in 2001. Weighted
average occupancy was 70% for the six months ended June 30, 2002 compared to 72% for the six months ended June
30, 2001.
Temperature-Controlled Logistics Investment
AmeriCold Logistics' same-store EBITDAR (earnings before interest, taxes, depreciation and amortization, and rent)
remained flat for the three months ended June 30, 2002, compared to the same period in 2001. AmeriCold Logistics
elected to defer $6.2 million (of the $33.9 million contracted rent) for the second quarter, of which Crescent's
share was $2.5 million.
AmeriCold Logistics' same-store EBITDAR (earnings before interest, taxes, depreciation and amortization, and rent)
remained flat for the six months ended June 30, 2002, compared to the same period in 2001. AmeriCold Logistics
elected to defer $9.3 million (of the $69.0 million contracted rent) for the first six months of 2002, of which
Crescent's share was $3.7 million. Crescent recognizes rental income when earned and collected and has not recognized
the $3.7 million deferral in its equity in net income.
BALANCE SHEET REVIEW
On April 15, 2002, Crescent's operating partnership completed a private offering of $375 million in 9.25% senior,
unsecured notes due 2009. Proceeds were used to repay existing indebtedness and redeem preferred units of one of
its subsidiaries.
On April 26, 2002, Crescent completed a preferred stock issuance of 2.8 million shares of its 6.75% Series A convertible
cumulative preferred stock to an institutional investor. Proceeds of $50 million were used to redeem preferred
units of one of its operating partnership subsidiaries.
On May 10, 2002, Crescent completed a 9.5% Series B cumulative redeemable preferred stock issuance, which, including
the underwriters' exercise of an over-allotment option, totaled 3.4 million shares. Proceeds of $85 million were
used to redeem preferred units of one of its operating partnership subsidiaries.
In June 2002, the Company repurchased 1.5 million of its common shares at an average price of $19.00 per share,
for a total purchase price of $28.5 million. From inception of the original program in late 1999 to date, the Company
has repurchased approximately 20.3 million shares, or 16.6% of the Company's outstanding common shares at December
31, 1999. The average price per share was $19.04, for a total purchase price of $387 million. Repurchases are made
in the open market at prevailing prices or in privately negotiated transactions.
2002 OUTLOOK
Crescent's management expects 2002 FFO in the lower end of its original guidance range of $2.00 to $2.30 per share.
Included in the Company's second quarter supplemental and operating financial data report is 2002 guidance by business
segment, and based on this information, we expect 2002 FFO to be in the range of $2.00 to $2.10 per share. For
the third quarter 2002 we expect FFO to be in the range of $.40 to $.45 per share.
SUPPLEMENTAL OPERATING AND FINANCIAL DATA
Crescent's supplemental and operating financial data report for the second quarter is available on the Company's
website (www.cei-crescent.com) in the investor relations section. To request a hard copy, please call the Company's
investor relations department at (817) 321-2180.
CONFERENCE CALL, WEBCAST AND PRESENTATION
The Company will also host a conference call and audio webcast, both open to the general public, at 10:00 A.M.
Central Time on Thursday, August 8, 2002, to discuss the second quarter results and provide a Company update. To
participate in the conference call, please dial (800) 818-4442 domestically or (706) 679-3110 internationally,
or you may access the audio webcast on the Company's website (www.cei-crescent.com) in the investor relations section.
During the call, reference will be made to a presentation that will also be posted on the Company's website. A
replay of the conference call will be available through August 15, 2002, by dialing (800) 642-1687 domestically
or (706) 645-9291 internationally with a passcode of 4717703. The webcast and presentation will be available on
Crescent's website for 30 days.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are generally
characterized by terms such as "believe", "expect" and "may".
Although the Company believes that the expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially from those described in the forward-looking
statements.
The following factors might cause such a difference:
Given these uncertainties, readers are cautioned not to place undue reliance on such statements. The Company
is not obligated to update these forward-looking statements to reflect any future events or circumstances.
ABOUT THE COMPANY
Crescent Real Estate Equities Company (NYSE:CEI) is one of the largest publicly held real estate investment trusts
in the nation. Through its subsidiaries and partners, Crescent owned and managed, as of June 30, 2002, a portfolio
of 74 premier office buildings totaling over 28 million square feet and centered in the Southwestern United States,
with major concentrations in Dallas, Houston, Austin and Denver. In addition, the company invests in world-class
resorts and spas and upscale residential developments. With award-winning customer service and industry-leading
amenities, Crescent offers an exceptional experience at every property, every day.
Crescent Real Estate Equities Company
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CONTACT: Crescent Real Estate Equities Company, Fort Worth Investors: Jane E. Mody, 817/321-1086 or Jerry R. Crenshaw, 817/321-1492 or Keira B. Moody, 817/321-1412 or Media: Sandra Porter, 817/321-1460