Company Press Release: Crescent Real Estate Equities Company
In the fourth quarter of 1999, Crescent completed the refinancing of $47 million of debt secured by the Datran
Center office property. The original notes had a weighted-average fixed interest rate of 7.65% and were scheduled
to mature on December 1, 1999. The new note of $39.7 million has a fixed interest rate of 8.49% and will mature
in six years.
As announced on February 10, 2000, Crescent completed the refinancing of 86% of the company's debt scheduled to
mature in years 2000 and 2001. The new $850 million secured, variable-rate facility, backed by UBS AG and Fleet
Boston Financial, increases the company's weighted-average debt maturity period to 5.2 years. The company's variable-rate
exposure to rising short- term interest rates has been reduced to less than 30% of total debt through a $200 million
interest-rate swap agreement. In addition, proceeds from the properties slated for disposition are expected to
be used to pay down the new facility, which should further reduce variable-rate exposure to approximately 20% of
total debt. Factoring in all components related to the refinancing, including the interest-rate swap and modification
of a $200 million term loan for increased flexibility in loan covenants, Crescent's weighted-average spread over
LIBOR will increase approximately 70 basis points. The new facility is secured by 42 office properties, which include
certain properties slated for disposition, and 4 hotel properties. The company's total unencumbered assets remain
above $1.5 billion.
COMMON SHARE REPURCHASE
On November 10, 1999, Crescent announced that its Board of Trust Managers has 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 proposed repurchases will be subject to prevailing market conditions
and other considerations.
Crescent expects the share repurchase program to be funded through a combination of asset sales and financing arrangements,
which, in some cases, may be secured by the repurchased shares. The amount of shares that Crescent actually will
purchase will be determined from time to time, in its reasonable judgment, based on market conditions and the availability
of funds, among other factors. There can be no assurance that any number of shares actually will be purchased within
a particular time period.
In the fourth quarter of 1999, the company entered into an agreement with UBS AG in which UBS AG purchased approximately
5.8 million, or approximately $102 million, of the Company's common shares in the open market. The company has
the option to purchase the common shares from UBS AG by January 4, 2001. The price that the company will pay for
the common shares is based on the average cost of the common shares to UBS AG, which was approximately $17.67 per
share, plus or minus a spread of one month LIBOR plus 250 basis points and distributions on the shares during the
term of the agreement. The company's intention is to ultimately purchase and retire these shares with office property
joint venture proceeds. If the company does not exercise the option to purchase the common shares from UBS AG by
January 4, 2001, UBS will sell the shares in the open market.
ASSET DISPOSITIONS
In continuing with its disposition plan, Crescent has completed several sale transactions and is actively marketing
the remainder of assets previously identified for disposition. These assets are either non-strategic or non-core
assets within the company's business segments. The proceeds generated from these assets sales are expected to be
used to reduce Crescent's remaining variable-rate debt, make investments, fund a stock repurchase program or any
combination of these purposes.
The company continues to project gross proceeds from the office properties slated for disposition to be approximately
$455 million. To date, approximately half has been received, including the previously disclosed $89 million for
the Dallas Mavericks interest, as the company continues executing its disposition strategy.
ASSET JOINT VENTURES
Crescent has entered into agreements with Chadwick Saylor & Co., Inc. and Warburg Dillon Read to provide investment
advisory services to Crescent in the successful execution of Crescent's joint-venture strategy. The first assets
to be marketed for joint ventures are estimated to be seven office properties and two business class hotels. Crescent
intends to hold at least a 20% equity interest in these assets and will continue to market and manage these buildings.
IMPACT TO YEAR 2000 EARNINGS ESTIMATES (AS PREVIOUSLY DISCLOSED)
Primarily as a result of the refinancings noted above, anticipation of an additional approximate 75 basis point
increase in LIBOR during the year, and Richard Rainwater, John Goff, and other members of senior management increasing
their ownership in the company through the exercise of approximately 2.8 million stock options in the fourth quarter
of 1999, the company projects base-case year 2000 Funds From Operations earnings estimates to range between $2.40
to $2.45 per share. Base-case does not include any future impact to earnings due to the timing of execution of
the common share repurchase program and the joint venture strategy, both announced in the fourth quarter of 1999,
and does not contemplate the receipt of any rent from Charter Behavioral Healthcare Systems LLC in year 2000.
CONFERENCE CALL AND WEBCAST
Crescent will conduct a conference call to discuss its fourth quarter earnings on Thursday, February 24, 2000 at
10:00 a.m. CST. To access the conference call, please dial 877-282-0743 (no pass code needed). A replay will be
available through March 2, 2000, by dialing 888-266-2086 (#3038146). 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 90
days thereafter.
FORWARD-LOOKING STATEMENTS
Certain matters discussed within this press release are forward-looking statements within the meaning of the federal
securities laws, and the transactions contemplated herein are subject to certain closing conditions. Although Crescent
believes that the expectations reflected in such forward- looking statements are based upon reasonable assumptions,
Crescent's actual results could differ materially from those set forth in the forward-looking statements. Factors
that could cause actual results to differ materially from Crescent's expectations include:
Crescent's ability to timely lease unoccupied square footage and timely re-lease occupied square footage upon expiration;
Changes in real estate conditions (including rental rates, competition from other properties and new development
of competing properties);
The concentration of a significant percentage of Crescent's assets in Texas;
Crescent's ability to generate revenues sufficient to meet debt service payments, satisfy existing financial covenants
and pay other operating expenses;
Financing risks, such as increases in debt service associated with variable-rate debt and Crescent's ability to
consummate planned financings and refinancings on the terms and within the time frames anticipated;
Crescent's ability to close anticipated sales of assets or joint venture transactions or other pending transactions;
The failure of Charter as debtor in possession to negotiate or consummate a sale of its core operating assets in
the on-going bankruptcy proceedings;
The failure of Charter, the successful purchaser of such core operating assets out of bankruptcy, and the company
to negotiate and consummate a master lease for the core facilities or the inability of Crescent to secure on a
timely basis the release of hospital facilities from the debtor in possession;
The failure of the purchaser of the core operating assets of Charter, following any purchase and bankruptcy restructuring,
to fulfill all of its new lease obligations to the company over the long term;
Crescent's ability to close sales of behavioral healthcare facilities released from Charter;
Crescent's ability to find acquisition and development opportunities which meet Crescent's investment strategy;
The existence of complex regulations relating to Crescent's status as a REIT, the effect of future changes in REIT
requirements as a result of new legislation and the adverse consequences of the failure to qualify as a REIT;
Adverse changes in the financial condition of existing tenants; and
Other risks detailed from time to time in Crescent's filings with the SEC.
Given these uncertainties, readers are cautioned not to place undue reliance on such statements.
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 and retail properties, hotels and destination resorts, residential land developments,
temperature-controlled logistics facilities, and behavioral healthcare facilities. Our mission is to maximize value
to our shareholders by: i) distinguishing ourselves as the undisputed leader in each of our businesses through
customer service and asset quality; and ii) executing a disciplined real estate investment and operating strategy
that focuses on market leadership, innovative growth opportunities, and outstanding employee and partner alliances.
FOR MORE INFORMATION
For further information, please contact Jerry R. Crenshaw, Senior Vice- President and Chief Financial Officer,
at 817-321-1492 or refer to Crescent's web site at www.cei-crescent.com.
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, December 31,
1999 1998
(unaudited) (audited)
ASSETS:
Investments in real estate:
Land $398,754 $400,690
Land held for development or sale 95,760 95,282
Building and improvements 3,529,344 3,569,774
Furniture, fixtures
and equipment 71,716 63,626
Less -accumulated depreciation (507,520) (387,457)
Net investment in
real estate 3,588,054 3,741,915
Cash and cash equivalents 72,926 110,292
Restricted cash and cash
equivalents 87,939 46,841
Accounts receivable, net 37,204 32,730
Deferred rent receivable 74,271 73,635
Investments in real estate
mortgages and equity of
unconsolidated companies 812,494 743,516
Notes receivable, net 131,542 183,974
Other assets, net 146,131 110,544
Total assets $4,950,561 $5,043,447
LIABILITIES:
Borrowings under Credit Facility $510,000 $660,000
Notes payable 2,088,929 1,658,156
Accounts payable, accrued
expenses and other liabilities 170,984 149,444
Total liabilities 2,769,913 2,467,600
MINORITY INTERESTS:
Operating partnership, 6,975,952
and 6,545,528 units, respectively 99,226 126,575
Investment joint ventures 24,648 26,727
Total minority interests 123,874 153,302
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 December 31, 1999
and 1998, respectively 200,000 200,000
Common shares, $.01 par value,
authorized 250,000,000 shares,
121,537,353 and 124,555,447
shares issued and outstanding
at December 31, 1999 and 1998,
respectively 1,208 1,245
Additional paid-in capital 2,229,680 2,336,621
Deferred compensation on
restricted shares (41) (88)
Retained deficit (386,532) (110,196)
Accumulated other
comprehensive income 12,459 (5,037)
Total shareholders' equity 2,056,774 2,422,545
Total liabilities and
shareholders' equity $4,950,561 $5,043,447
TOTAL COMMON SHARES AND UNITS
OUTSTANDING 135,489,257(a) 137,646,503(a)
COMMON SHARE PRICE $18.38 $23.00
MARKET VALUE OF EQUITY $2,689,615 $3,365,870
TOTAL MARKET CAPITALIZATION
INCLUDING DEBT $5,288,544 $5,684,026
DEBT AS A % OF TOTAL MARKET
CAPITALIZATION 49% 41%
(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 year
ended December 31, ended December 31,
1999 1998 1999 1998
(unaudited) (unaudited) (unaudited) (audited)
REVENUES:
Office and retail
properties $155,746 $153,068 $614,493 $563,005
Hotel properties 16,727 15,005 65,237 53,355
Behavioral healthcare
properties 4,809 13,824 41,091 55,295
Interest and other
income 5,328 6,400 25,458 26,688
Total revenues 182,610 188,297 746,279 698,343
EXPENSES:
Real estate taxes 20,032 23,139 84,401 75,076
Repairs and maintenance 11,911 12,979 44,024 41,160
Other rental property
operating 31,109 33,730 128,723 126,733
Corporate general and
administrative 4,261 5,228 16,274 16,264
Interest expense 53,551 40,939 192,033 152,214
Amortization of
deferred financing
costs 2,426 1,921 10,283 6,486
Depreciation and
amortization 34,656 33,480 131,657 118,082
Total expenses 157,946 151,416 607,395 536,015
Operating income 24,664 36,881 138,884 162,328
OTHER INCOME AND
EXPENSES:
Equity in net income
of unconsolidated
companies:
Office and retail
properties (469) 3,648 5,265 4,159
Temperature-controlled
logistics facilities 3,563 1,544 15,039 512
Residential
development
properties 11,883 12,603 42,871 33,517
Other 2,845 307 5,122 1,129
Settlement of merger
dispute - - (15,000) -
Carrying value in
excess of market
value of asset held
for sale (16,800) - (16,800) -
Impairment and other
charges related to
the behavioral
healthcare assets - - (162,038) -
Write-off of costs
associated with
unsuccessful
acquisitions - - - (18,435)
Total other income
and expenses 1,022 18,102 (125,541) 20,882
INCOME BEFORE
MINORITY INTERESTS 25,686 54,983 13,343 183,210
Minority interests (3,620) (4,813) (2,384) (17,610)
NET INCOME 22,066 50,170 10,959 165,600
PREFERRED SHARE
DIVIDENDS (3,375) (3,375) (13,500) (11,700)
RETURN ON SHARE
REPURCHASE AGREEMENT (583) - (583) -
FORWARD SHARE PURCHASE
AGREEMENT RETURN - (2,108) (4,317) (3,316)
NET INCOME/(LOSS)
AVAILABLE TO COMMON
SHAREHOLDERS $18,108 $44,687 $(7,441) $150,584
PER COMMON
SHARE DATA:
Net Income/(Loss)
- Basic $0.15 $0.37 $(0.06) $1.26
Net Income/(Loss)
- Diluted $0.15 $0.37 $(0.06) $1.21
WEIGHTED AVERAGE
SHARES OUTSTANDING
BASIC 120,630,053 118,172,993 122,875,772 119,442,837
WEIGHTED AVERAGE
SHARES OUTSTANDING
DILUTED 121,136,509 127,172,732 124,813,290 127,401,495
DEBT SERVICE
COVERAGE RATIO 3.1 3.4 3.1 3.4
DEBT SERVICE
COVERAGE RATIO 2.5 3.2 2.8 3.1
CRESCENT REAL ESTATE EQUITIES COMPANY
STATEMENTS OF FUNDS FROM OPERATIONS
(dollars in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
(unaudited) (unaudited) (unaudited) (unaudited)
NET INCOME $22,066 $50,170 $10,959 $165,600
ADJUSTMENTS:
Depreciation and
amortization of
real estate assets 33,861 32,759 128,403 115,678
Settlement of
merger dispute - - 15,000 -
Carrying value in
excess of market
value of asset held
for sale 16,800 - 16,800 -
Impairment adjustment
related to the
behavioral healthcare
segment assets - - 136,435 -
Write-off of costs
associated with
unsuccessful acquisitions - - - 18,435
Gain on behavioral
healthcare property
disposition (439) - (439) -
Adjustment for investments
in real estate
mortgages and equity of
unconsolidated companies:
Office and retail
properties 2,507 (2,283) 6,110 2,530
Temperature-controlled
logistics facilities 9,597 7,816 22,400 28,115
Residential development
properties 16,974 9,756 31,725 25,379
Other - - 611 -
Unitholder minority
interest 3,246 4,320 1,273 16,111
Other adjustment (a) - (1,579) - -
Preferred stock
dividends (3,375) (3,375) (13,500) (11,700)
FUNDS FROM OPERATIONS(b) $101,237 $97,584 $355,777 $360,148
INVESTMENT SEGMENTS:
Office and retail
properties $94,435 $84,205 $367,830 $325,442
Hotel properties 16,421 14,698 64,079 52,375
Behavioral healthcare
properties 4,809 13,824 15,488 55,295
Temperature-controlled
logistics facilities 13,160 9,359 37,439 28,626
Residential development
properties 28,858 22,359 74,597 58,892
Corporate general &
administrative (4,261) (5,228) (16,274) (16,264)
Interest expense (53,551) (40,939) (192,033) (152,214)
Preferred stock dividends (3,375) (3,375) (13,500) (11,700)
Other (c) 4,741 2,681 18,151 19,696
FUNDS FROM OPERATIONS $101,237 $97,584 $355,777 $360,148
WEIGHTED AVERAGE SHARES
OUTSTANDING -
BASIC 134,147,175 131,267,080 135,954,043 132,429,405
WEIGHTED AVERAGE
SHARES/UNITS
OUTSTANDING -
DILUTED 134,653,631 140,266,819 137,891,561 140,388,063
DIVIDEND PAID PER
SHARE DURING PERIOD $0.550 $0.550 $2.200 $1.690
SUPPLEMENTAL
INFORMATION:
Rental income from
straight-line rents $(5,682) $(10,252) $(25,638) $(34,047)
Rental income from
straight-line rents -
behavioral healthcare
segment adjustment - (2,872) 25,603 (12,530)
Residential development
capital expenditures (70) (465) (1,787) (1,602)
Temperature-controlled
logistics capital
expenditures - - (2,600) -
Non-incremental revenue
generating expenditures:
Hotel property capital
expenditures (545) (878) (4,761) (5,058)
Office and retail
property capital
expenditures (3,151) (1,353) (6,048) (5,021)
Tenant improvement and
leasing costs (11,979) (8,442) (36,399) (26,014)
Depreciation and
amortization of non-real
estate assets 559 523 2,311 1,631
Amortization of deferred
financing costs 2,426 2,292 10,283 6,486
(a) Reversal adjustment of interest expense and amortization of deferred
financing costs related to the forward share purchase agreement from
the third quarter of 1998 as a result of a change in accounting
position relating to forward share arrangements.
(b) To calculate Basic Fund from Operations per share,deduct Unitholder
minority interest.
(c) Includes Interest and other income, net of gain on a behavioral
healthcare facility disposition, less depreciation and amortization of
non-real estate assets and amortization of deferred financing costs.
SOURCE: Crescent Real Estate Equities Company