Press Release: Crescent Real Estate Equities Company
August 11, 2000
FT. WORTH, TX -- Crescent Real Estate Equities Company (NYSE: CEI) -- Crescent's second quarter 2000 FFO per share
of $.63 exceeded the Company's estimates for the quarter by $.05 per share primarily due to favorable office results,
accelerated residential development sales and collection of rent from the behavioral healthcare segment. According
to John C. Goff, chief executive officer, ``We are pleased to report strong second quarter results and see it as
a reflection of our continued focus on the execution of our strategic plan.''
Key Highlights:
-- Funds from operations ("FFO") for the three months ended June 30, 2000
was $82.0 million, or $.63 per share and equivalent unit (diluted).
FFO for the six months ended June 30, 2000 was $157.2 million, or $1.18
per share and equivalent unit (diluted).
-- To date, the Company has repurchased approximately 12.4 million shares
of the Company's common shares at an average price of $18.87 per share,
or approximately $234 million.
-- Office property same-store net operating income ("NOI") for the three
months ended June 30, 2000 increased 5.2% over the same period in 1999
for properties owned as of June 30, 2000.
-- Renewed or re-leased space totaling 575,000 net rentable square feet
during the three months ended June 30, 2000, resulting in a 23%
increase in the weighted average full-service rental rate and a 42%
increase in the FFO annual net effective rental rate over expiring
rates for the same space.
-- Hotel and resort average daily rate and revenue per available room
increased 7% and 13%, respectively, for the three months ended June 30,
2000 compared to the same period in 1999.
-- Asset disposition net proceeds received to date total approximately
$332 million out of the $455 million net proceeds that the Company
expects to receive upon completion of its previously announced asset
disposition strategy.
-- During the six months ended June 30, 2000, the Company collected
$5.4 million of rent from Charter Behavioral Health Systems, LLC
("CBHS"). Behavioral healthcare facility disposition net proceeds
received to date total approximately $71 million.
FINANCIAL REVIEW
FFO for the three months ended June 30, 2000 was $82.0 million, or $.63 per share and equivalent unit (diluted),
compared to $104.4 million, or $.74 per share and equivalent unit (diluted) for the same period in 1999. FFO for
the six months ended June 30, 2000 was $157.2 million, or $1.18 per share and equivalent unit (diluted), compared
to $197.3 million, or $1.40 per share and equivalent unit (diluted) for the same period in 1999.
Net income available to common shareholders for the three months ended June 30, 2000 was $32.0 million, or $.27
per share (diluted), compared to $49.6 million, or $.39 per share (diluted) for the same period in 1999. Net income
available to common shareholders for the six months ended June 30, 2000 was $77.6 million, or $.65 per share (diluted),
compared to $80.1 million, or $.63 per share (diluted) for the same period in 1999.
INVESTMENT SEGMENTS
Office Operations
Office property same-store NOI increased 5.2% for the three months ended June 30, 2000 over the same period in
1999 for properties owned as of June 30, 2000. Average occupancy for these properties for both the three months
ended June 30, 2000 and June 30, 1999 was 92.1%. Office property same- store NOI for the six months ended June
30, 2000 increased 3.8% over the same period in 1999 for properties owned as of June 30, 2000. Average occupancy
for these properties for the six months ended June 30, 2000 was 91.6% compared to 92.7% for the same period in
1999. Management's expectation for total 2000 same-store NOI growth remains between 4% and 5%. As of June 30, 2000,
the overall office portfolio was approximately 93.7% leased based on executed leases.
The Company renewed or re-leased 575,000 net rentable square feet in the three months ended June 30, 2000. The
weighted average full-service rental rate increased 23% and the FFO annual net effective rental rate increased
42% over the expiring rates for these leases, all of which have commenced or will commence within the next twelve
months. Tenant improvements related to these leases were $1.16 per square foot per year and leasing costs were
$.74 per square foot per year. The Company renewed or re-leased 1.4 million net rentable square feet in the six
months ended June 30, 2000. The weighted average full-service rental rate increased 18% and the FFO annual net
effective rental rate increased 32% over the expiring rates for these leases, all of which have commenced or will
commence within the next twelve months. Tenant improvements related to these leases were $1.22 per square foot
per year and leasing costs were $.82 per square foot per year.
Dennis H. Alberts, president and chief operating officer, commented, ``Our office portfolio experienced a very
successful second quarter, with the portfolio ending the quarter leased at nearly 94% and same-store NOI growth
in excess of 5% for the quarter. Leasing and rental rate growth for the quarter and year have been strong, and
we look for the balance of 2000 to be just as strong.''
Hotel and Resort Investments
Hotel and resort same-store rental income for properties owned as of January 1, 1999 increased 8% for the three
months and six months ended June 30, 2000 compared to the same period in 1999.
The average daily rate and revenue per available room increased 7% and 13%, respectively, for the three months
ended June 30, 2000 compared to the same period in 1999. The average daily rate and revenue per available room
increased 7% and 10%, respectively, for the six months ended June 30, 2000 compared to the same period in 1999.
The Sonoma Mission Inn and Spa, Sonoma, California:
The $21 million expansion, consisting of 30 additional guest rooms and a 30,000 square foot full-service spa, was
completed in April 2000.
Renaissance Houston Hotel, Houston, Texas (located within the Greenway Plaza Office Property Complex):
Renovation to all guest rooms, the lobby, corridors and building systems commenced in the first quarter 2000. The
estimated $15 million project is scheduled to be completed in the fourth quarter 2000.
Residential Development Investments
The Woodlands Land Development, L.P. and The Woodlands Commercial Properties Company, L.P. (collectively ``The
Woodlands''), The Woodlands, Texas:
Residential lot sales at The Woodlands increased by 94 lots, or 10%, for the six months ended June 30, 2000 compared
to the same period in 1999. The Woodlands estimates that additional sales of approximately 1,100 residential lots
and 60 acres of commercial land will close during the remainder of 2000.
Desert Mountain Properties Limited Partnership (``Desert Mountain''), Scottsdale, Arizona:
Desert Mountain's average sales price per lot increased $49,000, or 9%, as a reflection of a higher priced product
mix sold in the six months ended June 30, 2000 compared to the same period in 1999.
Crescent Development Management Corporation (``CDMC''), Beaver Creek, Colorado:
CDMC experienced 10% growth in total revenue for the six months ended June 30, 2000 compared to the same period
in 1999. Total revenue for the six months ended June 30, 2000 was $52.1 million compared to $47.2 million for the
same period in 1999.
Riverfront Park, a master-planned residential and commercial development in downtown Denver, broke ground in July
2000. The first phase consists of condominiums and lofts with prices ranging from $200,000 to $2.1 million. Park
Place, the first residential project in this first phase consists of 71 lofts, for which pre-selling commenced
in January 2000. As of June 30, 2000, contracts had been signed on 93% of the lofts. Pre-selling has also commenced
on the 58 Park Tower condominiums and the 53 Promenade lofts, which are also first phase developments. As of June
30, 2000, contracts had been signed on 45% of the condominiums and 66% of the lofts.
The first phase of Main Street Station, a premier slope-side residential project in Breckenridge, Colorado, began
development in April 2000. All of the 82 condominiums are pre-sold with prices ranging from $200,000 to $1.1 million
per unit.
CDMC estimates the following sales from its 13 active projects during the remainder of 2000: 357 residential lots,
15 townhomes, 41 condominiums and 1 single-family home. 85% of the sales anticipated for the full year of 2000
have occurred or have been pre-sold as of June 30, 2000.
Temperature-Controlled Logistics Investments
AmeriCold Logistics' same-store EBITDAR (earnings before interest, taxes, depreciation and amortization, and rent)
declined 2% for the six months ended June 30, 2000 compared to the same period in 1999. It is AmeriCold's expectation
that same-store EBITDAR for the year will be flat compared to 1999, down from the 3% to 5% growth initially anticipated.
The shift is primarily due to a reduction in warehouse margins caused by higher labor costs and two business lines'
lower volumes. For the second quarter 2000, AmeriCold elected to defer approximately $6.7 million of rent of which
Crescent's share was approximately $2.7 million. Crescent's second quarter 2000 results include a charge for its
$1.6 million share of rent receivable valuation allowance in connection with the probable restructuring of the
leases.
Behavioral Healthcare Investments
Crescent has collected $5.4 million of rent from CBHS, of which $2.1 million and $3.3 million was received in the
first and second quarters of 2000, respectively. Of the 37 core behavioral healthcare facilities leased to CBHS,
three have been sold to date and 26 are under contract to sell upon the satisfaction of certain closing conditions
contained in the operating asset sales contracts.
Out of the 88 total core and non-core behavioral healthcare facilities held for sale at December 31, 1999, 23 of
the facilities have been sold, including the three core facilities mentioned above, at or above gross appraised
value, generating approximately $71 million in net proceeds. Of the $71 million, approximately $38 million was
received in the first quarter 2000 and approximately $11 million was received in the second quarter 2000. 35 additional
facilities, including the 26 core facilities mentioned above, are currently under contract or are subject to a
letter of intent, and are expected to generate in excess of $165 million in net proceeds over the next two quarters.
CAPITAL REVIEW
Common Share Repurchase
On November 10, 1999, Crescent announced that its Board of Trust Managers had authorized the repurchase of a portion
of its outstanding common shares, from time to time in the open market or through privately negotiated transactions,
in an amount not to exceed $500 million. The Company commenced its share repurchase program in March 2000. To date,
the Company has repurchased approximately 12.4 million common shares at an average price of $18.87 per share, or
approximately $234 million, using net proceeds received from GMAC Commercial Mortgage Corporation (``GMACCM'').
GMAC Preferred Partnership Arrangement
On March 16, 2000, Crescent entered into a preferred partnership arrangement, whereby Crescent may sell to GMACCM
up to $275 million of preferred units in a partnership to which the Company contributed seven office properties
and two hotel properties. To date, Crescent has received from GMACCM net proceeds of approximately $241 million,
$133 million of which was used to purchase approximately 6.6 million of the Company's common shares in the open
market at an average price of $20.11 per share, (4.6 million common shares at an average price of $19.26 had been
purchased as of June 30, 2000), and $101 million of which was used to purchase 5.8 million shares from UBS Warburg,
as noted below.
UBS Warburg Share Repurchase Agreement
In the fourth quarter 1999, the Company entered into an agreement with UBS Warburg, as a result of which UBS Warburg
purchased approximately 5.8 million of the Company's common shares, or approximately $101 million, in the open
market. Crescent purchased approximately 4.0 million of these shares, or approximately $70 million, from UBS Warburg
in April 2000, and purchased the remaining 1.8 million shares, or approximately $31 million, from UBS Warburg in
July 2000. The average price to Crescent was $17.44 per share, $2.67 per share below the Company's subsequent average
open market share repurchase price of $20.11. As mentioned above, the shares were purchased through the sale of
preferred partnership units to GMACCM.
ASSET DISPOSITIONS
To date, $332 million of the $455 million of net proceeds expected from Crescent's previously announced disposition
strategy has been received, $179 million and $52 million of which was received in the first and second quarters
of 2000, respectively. The remaining $123 million is expected to be received in the third and fourth quarters.
The overall net gain from these asset dispositions is expected to be in excess of $40 million.
Crescent Wholly-Owned Office Properties
Approximately $199 million of net proceeds has been received to date, $147 million and $52 million in the first
and second quarters of 2000, respectively, related to the sales of nine of the eleven previously disclosed non-strategic
or non-core office properties selected for disposition. The nine properties are as follows: Energy Centre and 1615
Poydras in New Orleans; The Meridian, The Amberton, Concourse Office Park, Walnut Green and One Preston Park in
Dallas; Central Park Plaza in Omaha, and the AT&T Building in Denver. A $10 million net gain related to these
sales has been realized in 2000, $8 million and $2 million in the first and second quarters of 2000, respectively,
following a $17 million loss recorded in the fourth quarter 1999 related to Energy Centre. The remaining two disposition
properties, Valley Center in Dallas and 160 Spear in San Francisco, are currently under contract with closings
anticipated to occur in the third quarter 2000. The overall net gain from these eleven wholly-owned properties
is expected to be in excess of $20 million.
The Woodlands Commercial Properties Company
The Woodlands multi-family portfolio was sold in the third quarter 1999, followed by the retail portfolio sale
in January 2000. Together these sales generated approximately $44 million of net proceeds to Crescent. The sale
of The Woodlands office/venture tech portfolio is anticipated to close in late 2000 or early 2001. The overall
net gain to Crescent from the sale of these three portfolios is expected to be in excess of $20 million, of which
$5 million was recognized in the fourth quarter 1999 and $7 million was recognized in the first quarter 2000.
ASSET JOINT VENTURES
Crescent is receiving strong interest from prospective partners on its first pool of assets selected for possible
joint venture and continues to work closely with Chadwick Saylor & Co., Inc. and UBS Warburg in their marketing
efforts.
SUPPLEMENTAL INVESTMENT INFORMATION
For additional information related to Crescent's office, hotel and resort, residential development, and temperature-controlled
logistics investment segments, please refer to the attached ``Supplement to Press Release''.
CONFERENCE CALL AND WEBCAST
Crescent will conduct a conference call to discuss its first quarter earnings on Thursday, August 10, 2000 at 9:00
a.m. CST. To access the conference call, please dial (800) 521-5439 (no pass code needed). A replay will be available
through August 17, 2000, by dialing (800) 696-1588 (passcode: 764112). A simultaneous webcast will be held on our
website ( www.cei-crescent.com ) within the Investor Relations section
and will be accessible for replay for 30 days thereafter.
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 given 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, one of the country's largest real estate investment trusts, owns and manages a diversified portfolio
consisting of Class A office properties, luxury hotels and resorts, destination fitness resorts and spas, residential
land developments, and temperature-controlled logistics facilities. Our mission is to expand the dimensions of
business for our customers and to maximize value to our shareholders by distinguishing ourselves as the undisputed
leader in each of our businesses through customer service and asset quality, and by executing a disciplined real
estate investment and operating strategy that focuses on market leadership, innovative growth opportunities, and
outstanding customer, employee and partner alliances.
FOR MORE INFORMATION
Investors: Jerry R. Crenshaw, Senior Vice President and Chief Financial Officer, (817) 321-1492 or Keira B. Moody,
Vice President, Investor Relations, (817) 321-1412
Media: Sandra Porter, Director of Public Relations, (817) 321-1460
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
2000 1999
(unaudited) (audited)
ASSETS:
Investments in real estate:
Land $356,488 $398,754
Land held for development or sale 110,811 95,760
Building and improvements 3,347,882 3,529,344
Furniture, fixtures and equipment 72,971 71,716
Less - accumulated depreciation (543,189) (507,520)
Net investment in real estate 3,344,963 3,588,054
Cash and cash equivalents 40,235 72,926
Restricted cash and cash equivalents 66,678 87,939
Accounts receivable, net 45,798 37,204
Deferred rent receivable 80,117 74,271
Investments in real estate mortgages
and equity of unconsolidated companies 816,362 812,494
Notes receivable, net 135,883 131,542
Other assets 168,836 146,131
Total assets $4,698,872 $4,950,561
LIABILITIES:
Borrowings under Bank Boston Credit Facility $ - $ 510,000
UBS Facility 713,452 -
Notes payable 1,722,852 2,088,929
Accounts payable, accrued expenses
and other liabilities 140,799 170,984
Total liabilities 2,577,103 2,769,913
MINORITY INTERESTS:
Operating partnership, 7,010,823 and
6,975,952 units, respectively 96,151 99,226
Investment joint ventures 178,551 24,648
Total minority interests 274,702 123,874
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value,
authorized 100,000,000 shares:
6 3/4% Series A Convertible Cumulative
Preferred Shares, 8,000,000 shares
issued and outstanding at June 30, 2000
and December 31, 1999, respectively 200,000 200,000
Common shares, $.01 par value,
authorized 250,000,000 shares,
121,756,960 and 121,537,353 shares
issued and outstanding at June 30,
2000 and December 31, 1999, respectively 1,211 1,208
Additional paid-in capital 2,224,270 2,229,680
Deferred compensation on restricted shares (41) (41)
Retained deficit (436,655) (386,532)
Accumulated other comprehensive income 13,101 12,459
2,001,886 2,056,774
Less - shares held in treasury, at cost,
8,422,420 common shares at
June 30, 2000 (154,819) -
Total shareholders' equity 1,847,067 2,056,774
Total liabilities and
shareholders' equity $4,698,872 $4,950,561
TOTAL COMMON SHARES AND
UNITS OUTSTANDING 127,356,186(a) 135,489,257(a)
COMMON SHARE PRICE $20.48 $18.38
MARKET VALUE OF EQUITY $2,808,255 $2,689,615
TOTAL MARKET CAPITALIZATION INCLUDING DEBT $5,244,559 $5,288,544
(a) Units are exchangeable on a one-for-two basis for Common Shares.
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
For the three months For the six months
ended June 30, ended June 30,
2000 1999 2000 1999
(unaudited) (unaudited)
REVENUES:
Office and retail
properties $147,534 $155,713 $296,642 $305,735
Hotel properties 18,463 16,107 36,007 31,511
Behavioral healthcare
properties 3,304 13,825 5,383 27,648
Interest and
other income 5,928 6,752 12,985 13,250
Total revenues 175,229 192,397 351,017 378,144
EXPENSES:
Real estate taxes 21,579 22,454 44,250 43,200
Repairs and
maintenance 10,569 10,668 22,766 21,692
Other rental property
operating 29,776 32,498 60,042 65,110
Corporate general
and administrative 4,082 3,816 9,327 7,930
Interest expense 51,836 44,917 104,086 87,398
Amortization of
deferred financing
costs 2,341 2,755 4,688 5,824
Depreciation and
amortization 31,718 33,010 62,620 66,657
Total expenses 151,901 150,118 307,779 297,811
Operating income 23,328 42,279 43,238 80,333
OTHER INCOME AND EXPENSE:
Equity in net income
of unconsolidated
companies:
Office and retail
properties 396 (5) 3,100 1,956
Temperature-
controlled
logistics
properties 192 4,021 4,228 9,730
Residential
development
properties 11,717 14,415 22,181 23,044
Other 2,978 603 5,319 910
Settlement of
merger dispute - - - (15,000)
Gain on property
sales, net 6,126 - 28,753 -
Total other income
and expense 21,409 19,034 63,581 20,640
INCOME BEFORE
MINORITY INTERESTS 44,737 61,313 106,819 100,973
AND EXTRAORDINARY ITEM
Minority interests (8,675) (6,149) (15,707) (9,798)
NET INCOME BEFORE
EXTRAORDINARY ITEM 36,062 55,164 91,112 91,175
Extraordinary item
- extinguishment of
debt - - (3,928) -
NET INCOME 36,062 55,164 87,184 91,175
Preferred share
dividends (3,375) (3,375) (6,750) (6,750)
Share repurchase
agreement return (718) - (2,794) -
Forward share purchase
agreement return - (2,165) - (4,317)
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $31,969 $49,624 $77,640 $80,108
BASIC EARNINGS PER
SHARE DATA:
Net income available
to common shareholders
before extraordinary
item $0.28 $0.39 $0.69 $0.64
Extraordinary item -
extinguishment of debt - - (0.03) -
Net income available
to common
shareholders $0.28 $0.39 $0.66 $0.64
DILUTED EARNINGS PER
SHARE DATA:
Net income available
to common shareholders
before extraordinary
item $0.27 $0.39 $0.68 $0.63
Extraordinary item -
extinguishment of debt - - (0.03) -
Net income available
to common
shareholders $0.27 $0.39 $0.65 $0.63
WEIGHTED AVERAGE
SHARES OUTSTANDING
- BASIC 115,367,972 126,366,593 118,487,477 125,532,733
WEIGHTED AVERAGE
SHARES OUTSTANDING
- DILUTED 116,341,065 128,494,003 119,156,678 127,671,415
DEBT SERVICE
COVERAGE RATIO 2.4 3.2 2.4 3.2
For the three months For the six months
ended June 30, ended June 30,
2000 1999 2000 1999
(unaudited) (unaudited)
NET INCOME $36,062 $55,164 $87,184 $91,175
ADJUSTMENTS:
Depreciation and
amortization
of real estate
assets 30,353 32,149 60,145 65,026
Gain on property
sales, net (6,126) - (28,753) -
Settlement of merger
dispute - - - 15,000
Extraordinary item
- extinguishment
of debt - - 3,928 -
Adjustment for
investments in real
estate mortgages and
equity of
unconsolidated
companies:
Office and retail
properties 1,789 2,597 1,717 4,354
Temperature-
controlled
logistics
properties 7,438 5,187 12,889 7,758
Residential
development
properties 11,144 6,622 15,723 11,294
Other - 172 - 172
Unitholder minority
interest 4,712 5,910 11,094 9,314
Preferred stock
dividends (3,375) (3,375) (6,750) (6,750)
FUNDS FROM
OPERATIONS (a) (b) $81,997 $104,426 $157,177 $197,343
INVESTMENT SEGMENTS:
Office and retail
properties $87,213 $92,373 $173,424 $181,479
Hotel properties 18,346 15,896 35,637 31,094
Behavioral healthcare
properties 3,304 13,825 5,383 27,648
Temperature
-controlled
logistics
properties 7,630 9,208 17,117 17,488
Residential
development
properties 22,861 21,037 37,904 34,338
Corporate general
& administrative (4,082) (3,816) (9,327) (7,930)
Interest expense (51,836) (44,917) (104,086) (87,398)
Preferred stock
dividends (3,375) (3,375) (6,750) (6,750)
Other (c) 1,936 4,195 7,875 7,374
FUNDS FROM OPERATIONS
(b) $81,997 $104,426 $157,177 $197,343
WEIGHTED AVERAGE
SHARES/UNITS
OUTSTANDING -
BASIC 129,417,618 139,309,593 132,499,178 138,508,733
WEIGHTED AVERAGE
SHARES/UNITS
OUTSTANDING -
DILUTED 130,390,711 141,675,489 133,168,379 141,168,025
DIVIDEND PAID PER
SHARE DURING
PERIOD $0.550 $0.550 $1.100 $1.100
SUPPLEMENTAL
INFORMATION:
Rental income from
straight-line
rents $(4,185) $(7,524) $(8,638) $(15,053)
Residential
development capital
expenditures - (985) - (1,548)
Temperature-
controlled capital
expenditures (1,485) - (1,980) (2,600)
Non-incremental
revenue
generating exp.:
Hotel property
capital
expenditures (1,444) (2,147) (3,677) (3,233)
Office and retail
property capital
expenditures (1,007) (1,759) (1,677) (2,552)
Tenant improvement
and leasing costs (9,186) (9,598) (16,565) (18,242)
Depreciation and
amortization of
non-real estate
assets 1,102 578 1,963 1,134
Amortization of
deferred financing
costs 2,341 2,755 4,688 5,824
(a) To calculate Basic Fund from Operations ("FFO") per share, deduct
Unitholder minority interest.
(b) For the periods beginning after December 31, 1999, the Company has
adopted the revised definition of FFO adopted by NAREIT. Effective
January 1, 2000, the revised definition modifies the FFO calculation
to include certain nonrecurring charges.
(c) Includes interest and other income, net of gains on behavioral
healthcare facilities and office property dispositions, preferred
return paid to GMAC less depreciation and amortization of non-real
estate assets and amortization of deferred financing costs.
SOURCE: Crescent Real Estate Equities Company