Crescent Announces Fourth Quarter 2005 Results.FORT WORTH, Texas Fort Worth is the fifth-largest city in the state of Texas, 18th-largest city in the United States[1], and voted one of "America’s Most Livable Communities. -- Crescent Real Estate Equities Company Crescent Real Estate Equities Co. (NYSE: CEI) is a Fort Worth, Texas-based real estate investor with holdings mainly in office and hotel properties, including several landmark buildings in the southern United States. (NYSE NYSE See: New York Stock Exchange :CEI CEI Competitive Enterprise Institute CEI Conferenza Episcopale Italiana (Italian bishop conference) CEI Central European Initiative CEI Comitato Elettrotecnico Italiano (Italian Electrotechnical Committee) ) today announced results for the fourth quarter of 2005. Net income available to common shareholders for the three months ended December December: see month. 31, 2005, was $14.5 million, or $0.14 per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ). These compare to net income available to common shareholders of $202.1 million, or $1.86 per share (diluted), for the three months ended December 31, 2004. Net income available to common shareholders for the year ended December 31, 2005, was $63.3 million, or $0.63 per share (diluted). These compare to net income available to common shareholders of $141.1 million, or $1.42 per share (diluted) for the year ended December 31, 2004. The decrease in net income from 2004 to 2005 is primarily the result of a $266 million gain recorded in the fourth quarter 2004 that was generated from the sale of joint-venture interests in certain of Crescent's existing office assets. Funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. available to common shareholders -- diluted, as adjusted to exclude impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges and debt extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. charges related to the sale of real estate assets ("FFO FFO See: Funds from operations , as adjusted"), was $61.5 million, or $0.51 per share and equivalent unit, for the three months ended December 31, 2005, compared to $53.5 million, or $0.45 per share and equivalent unit, for the three months ended December 31, 2004. FFO, as adjusted, for the year ended December 31, 2005, was $146.1 million, or $1.23 per share and equivalent unit, compared to $143.2 million, or $1.22 per share and equivalent unit, for the year ended December 31, 2004. Crescent crescent, emblematic representation of the quarter moon. The crescent and star, ancient Byzantine symbols that became the emblems of Constantinople, were also assumed as the standard of the Ottoman Turks. provides this calculation of FFO, as adjusted, because management utilizes it in making operating decisions and assessing performance, and to assist investors in assessing Crescent's operating performance. Funds from operations available to common shareholders -- diluted, calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the NAREIT NAREIT National Association of Real Estate Investment Trusts definition ("FFO"), was $60.5 million, or $0.50 per share and equivalent unit, for the three months ended December 31, 2005, compared to $11.9 million, or $0.10 per share and equivalent unit, for the three months ended December 31, 2004. FFO, for the year ended December 31, 2005, was $144.3 million, or $1.21 per share and equivalent unit, compared to $95.7 million, or $0.82 per share and equivalent unit, for the year ended December 31, 2004. Both uses of FFO are non-GAAP financial measures, and as such, are reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to net income in the documents accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. this press release. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. John C. Goff n. 1. A silly clown. 1. A game. See Golf. , vice chairman and chief executive officer, "2005 can best be characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. as simply 'our strategy in action.' We achieved a 17.9% total return for our shareholders this year, exceeding the NAREIT All Equity Index of 12.2%. We continue to focus on our office investment management business and are seeing improved results from strengthening occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy levels in our office markets. The quarter was highlighted by the sale of 5 Houston Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; Center, a record per-square-foot sale in Houston, which illustrates the potential value of the promote structure in our joint-venture partnerships. This sale resulted in FFO of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $27 million, of which almost $14 million was from our promoted interest, and a 47% internal rate of return to Crescent. Overall, the partnership recorded a $68 million gain, while holding 5 Houston Center for a little more than three years." On January January: see month. 13, 2006, Crescent announced that its Board of Trust Managers had declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. cash dividends of $0.375 per share for its Common Shares, $0.421875 per share for its Series A Convertible Preferred Shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. , and $0.59375 per share for its Series B Redeemable Redeemable Eligible for redemption under the terms of an indenture. Preferred Shares. The dividends were payable February February: see month. 15, 2006, to shareholders of record on January 31, 2006. BUSINESS SECTOR REVIEW Office Segment (60% of Gross Book Value of Real Estate Assets as of December 31, 2005) Operating Results Crescent reports operating statistics in this press release assuming 100% ownership without adjusting for joint-venture interests. Crescent owned and managed, through its subsidiaries and joint ventures, 30.7 million square feet at December 31, 2005, including 14.3 million square feet of office properties in unconsolidated joint ventures and 0.4 million square feet in consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: joint ventures. Denny Denny may refer to:
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , commented, "Our office portfolio made considerable improvement in 2005. We had overall positive net absorption absorption [Lat.,=sucking from], taking of molecules of one substance directly into another substance. It is contrasted with adsorption, in which the molecules adhere only to the surface of the second substance. , and our leased occupancy reached 90.8% at December 31, 2005, exceeding our guidance of 90%. While we had a sizeable portion of our portfolio expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in 2005, this was also one of our best leasing years on record, leasing 5.7 million square feet. For 2006, we anticipate modest growth in occupancy and rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. rates as demand continues to improve in our markets. We expect to be 91% to 92% leased for our stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. office portfolio at the end of 2006. "For 2006, we expect 3.2 million gross square feet to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. , a much smaller amount than 2005's expirations of 5.2 million gross square feet. To date, we have addressed 76% of 2006 gross expirations -- 52% by signed leases and 24% by leases in negotiation." - Same-store NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics - Office property same-store net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. ("NOI") declined 2.4% for the three months ended December 31, 2005, from the same period in 2004 for the 26.7 million square feet of office property space owned during both periods. Average economic occupancy for these same-store properties for the three months ended December 31, 2005, was 87.8% compared to 87.1% for the same period in 2004. Office property same-store net operating income ("NOI") declined 1.5% for the twelve months ended December 31, 2005, from the same period in 2004 for the 26.7 million square feet of office property space owned during both periods. Average economic occupancy for these same-store properties for the twelve months ended December 31, 2005, was 87.3% compared to 86.3% for the same period in 2004. - Total Portfolio Occupancy - As of December 31, 2005, leased occupancy was 90.8%, and economic occupancy was 88.5%. - Leasing Activity - Crescent leased 1.9 million net rentable square feet during the three months ended December 31, 2005, of which 752,000 square feet were renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. or re-leased. The weighted average full service rental rate (which includes expense reimbursements) increased 5% from the expiring rates for the leases of the renewed or re-leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $2.12 per square foot per year, and leasing costs were $1.35 per square foot per year. Crescent leased 5.7 million net rentable square feet during the twelve months ended December 31, 2005, of which 2.8 million square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) remained flat as compared to the expiring rates for the leases of the renewed or re-leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.94 per square foot per year, and leasing costs were $1.20 per square foot per year. - Lease Termination Fees termination fee The one-time charge for terminating or transferring an individual retirement account. If a financial institution charges a termination fee, the fee must be spelled out in the original agreement that is signed when the account is opened. - Crescent received $4.3 million and $12.2 million of lease termination fees during the three and twelve months ended December 31, 2005, respectively. These compare to $1.1 million and $9.7 million of lease termination fees received during the three and twelve months ended December 31, 2004, respectively. Crescent's policy is to exclude lease termination fees from its same-store NOI calculation. Dispositions On December 20, 2005, a partnership of Crescent and a pension fund investor advised by an affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. of JP Morgan Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. Asset Management sold 5 Houston Center, a 580,875 square-foot Class A office property developed by Crescent in 2002 and located in downtown Houston Downtown Houston is Houston's largest business district. In terms of office square footage, it is the seventh largest in the United States. Downtown Houston contains the headquarters of many prominent companies. . The property was sold for gross proceeds of $166.0 million, or $286 per square foot. As a result of Crescent developing 5 Houston Center, Crescent has recognized its $26.9 million share of the gain in FFO. On February 17, 2006, Crescent sold Waterside Commons, a 458,906 square-foot Class A office property located in the Las Colinas Las Colinas is a developed area in the Dallas suburb of Irving, Texas. Due to its central location between Dallas and Fort Worth and its proximity to DFW Airport, Las Colinas has been a viable place in the Metroplex for corporate and business relocation. submarket sub·mar·ket n. A geographic, economic, or specialized subdivision of a market. adj. Being below what is usual in a particular market: submarket wages; submarket interest rates. of Dallas Dallas, city (1990 pop. 1,006,877), seat of Dallas co., N Tex., on the Trinity River near the junction of its three forks; inc. 1871. The second largest Texas city, after Houston, and the eighth largest U.S. . The property was sold for gross proceeds of $25.3 million, or $55 per square foot. In expectation of the sale, Crescent recorded $1.0 million impairment charge in the fourth quarter 2005. Acquisitions On January 23, 2006, Crescent purchased Financial Plaza For the hotel in New York City, see . Plaza (IPA /'plaθa/ or /'plasa/ , a 309,983 square-foot Class A office property located in the Mesa/Superstition submarket of Phoenix, AZ. Constructed in 1986, Financial Plaza is currently 90% leased. Crescent acquired Financial Plaza for $55.0 million, or $178 per square foot. Resort Residential Development Segment (19% of Gross Book Value of Real Estate Assets as of December 31, 2005) Operating Results Crescent's overall resort residential investments generated $22.4 million and $43.9 million in FFO for the three and twelve months ended December 31, 2005, respectively. This compares to $16.1 million and $31.2 million in FFO generated for the three and twelve months ended December 31, 2004, respectively. According to Denny Alberts, "Beginning in late November November: see month. , we closed on the sale of its first units at the Village at Northstar in Tahoe Ta·hoe , Lake A lake on the California-Nevada border west of Carson City, Nevada. It is a popular resort area. , California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . These unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. , as well as the confirmed success of lot sales in Gray's Gray's Gray's Anatomy Medtalk The prototypic textbook of anatomy, first written and published in the UK in 1858, in the US in 1859 Crossing in Tahoe, combined for a total contribution of $19.3 million in FFO from our Tahoe development." Resort / Hotel Segment (10% of Gross Book Value of Real Estate Assets as of December 31, 2005) Operating Results Crescent reports operating statistics in this press release for its five luxury resorts and spas and three upscale business-class hotels assuming 100% ownership without adjusting for joint-venture interests. - Same-store NOI - For the three months ended December 31, 2005, Crescent's overall resort/hotel segment generated same-store NOI of $12.2 million, which is a 43% increase from $8.5 million generated for the same period in 2004. For the year ended December 31, 2005, Crescent's overall resort/hotel segment generated same-store NOI of $50.4 million, which is a 36% increase from $37.0 million generated for the same period in 2004. - Operating Statistics - The average daily rate increased 6%, and revenue per available room increased 13% for the three months ended December 31, 2005, compared to the same period in 2004. Weighted average occupancy was 71% for the three months ended December 31, 2005, compared to 66% for the three months ended December 31, 2004. The average daily rate increased 6%, and revenue per available room increased 12% for the year ended December 31, 2005, compared to the same period in 2004. Weighted average occupancy was 73% for the twelve months ended December 31, 2005, compared to 69% for the twelve months ended December 31, 2004. Denny Alberts commented, "2004 renovations at Sonoma Sonoma may refer to
Ventana Medical is one of the world’s leading developers and manufacturers of medical diagnostic instrument and reagent systems providing leading-edge automation technology for use in slide-based diagnosis of cancer and infectious disease. Inn & Spa certainly contributed to our growth of occupancy and rates over the last year. In addition, the overall resort/hotel market is continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. improving as demand increases, and our luxury resorts and business-class hotels are benefiting from economic expansion." Temperature-Controlled Logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. Segment (11% of Gross Book Value of Real Estate Assets as of December 31, 2005) Operating Results Crescent's investment in temperature-controlled logistics properties generated $7.0 million and $18.4 million in FFO for the three and twelve months ended December 31, 2005, respectively. This compares to $18.2 million and $31.0 million of FFO generated for the three and twelve months ended December 31, 2004, respectively. FFO in the prior year included $12.3 million gain recognized on the sale of 20.7% of Crescent's interest in the temperature-controlled logistics properties in November 2004. The sale reduced Crescent's ownership from 40% to 31.7%. The reduction in ownership and the gain recognized in the prior year are favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. offset by continually improving operations at the properties. OTHER Mezzanine mez·za·nine n. 1. A partial story between two main stories of a building. 2. The lowest balcony in a theater or the first few rows of that balcony. Investments During the quarter ended December 31, 2005, Crescent invested in three mezzanine loans A mezzanine loan is a relatively large loan, typically unsecured (ie., not backed by a pledging of assets) or with a deeply subordinated security structure (e.g., third lien on the property but non-recourse vis-a-vis the borrower). totaling $60.7 million, which are secured by ownership interests in office and hospitality properties. The average yield was 11.28% at December 31, 2005, and all loans float with a spread over LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). . Crescent received origination fees A charge imposed by a lending institution or a bank for the service of processing a loan. For example, a bank might charge an individual who has applied for a student loan an origination fee of one percent for processing the application and granting the loan. on two of the three loans. Subsequent to December 31, 2005, Crescent invested in a mezzanine loan for $15.0 million, secured by ownership interests in six Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and hotels. The current yield for the loan is 12.57%, which floats float v. float·ed, float·ing, floats v.intr. 1. a. To remain suspended within or on the surface of a fluid without sinking. b. with a spread over LIBOR. Crescent received an origination fee. On February 1, 2006, Crescent received $18.7 million, including $1.2 million prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. fees and $0.2 million accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. , for the full repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of a mezzanine investment secured by a New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. office property. EARNINGS OUTLOOK Crescent addresses earnings guidance in its earnings conference calls and provides documentation of its quarterly supplemental operating and financial data reports. Refer to the following paragraphs for details about accessing today's conference call, presentation, and supplemental operating and financial data report. FUNDS FROM OPERATIONS Funds from operations is a supplemental non-GAAP financial measurement used in the real estate industry to measure and compare the operating performance of real estate companies, although those companies may calculate funds from operations in different ways. The National Association of Real Estate Investment Trusts ("NAREIT") defines funds from operations as Net Income (Loss) determined in accordance with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), excluding gains (or losses) from sales of depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. operating property, excluding extraordinary items (determined by GAAP), excluding depreciation and amortization of real estate assets, and including the impact of adjustments for unconsolidated partnerships and joint ventures. Crescent's FFO, as adjusted, follows the NAREIT definition, but is adjusted to exclude the impact of impairment charges and debt extinguishment charges related to the sale of real estate assets. Crescent provides this additional calculation of FFO, as adjusted, to exclude these charges, because management utilizes it in making operating decisions and assessing performance, and to assist investors in assessing the operating performance of Crescent. A reconciliation of Crescent's FFO before and after such adjustments to GAAP net income is included in the financial statements accompanying this press release and in the "Fourth Quarter 2005 Supplemental Operating and Financial Data" located on Crescent's website. FFO should not be considered an alternative to net income. SUPPLEMENTAL OPERATING AND FINANCIAL DATA Crescent's fourth quarter supplemental operating and financial data report is available on Crescent's website (www.crescent.com) in the investor relations Investor relations The process by which the corporation communicates with its investors. section. To request a hard copy, please call Crescent at 817-321-2100. CONFERENCE CALL, WEBCAST AND PRESENTATION Crescent will also host a conference call and audio webcast, both open to the general public, at 10:00 A.M. Central Time on Thursday Thursday: see week. , February 23, 2006, to discuss the fourth 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 Crescent's website (www.crescent.com) in the investor relations section. A replay of the conference call will be available through March 2, 2006, by dialing 800-642-1687 domestically or 706-645-9291 internationally with a passcode of 3101661. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are generally characterized by terms such as "believe," "expect," "anticipate" and "may." 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 described in the forward-looking statements. The following factors might cause such a difference: --The concentration of a significant percentage of Crescent's office assets in Texas; --Crescent's ability, at its office properties to timely lease unoccupied square footage and timely re-lease re-lease tr.v. re-leased, re-leas·ing, re-leas·es To lease again: re-leased the car. occupied oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. square footage upon expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms, which continue to be adversely affected by existing real estate conditions (including the vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. levels in particular markets, decreased rental rates and competition from other properties) and may also be adversely affected by general economic downturns; --Adverse changes in the financial condition of existing office customers and the ability of these office customers to pay rent; --The ability of Crescent to reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. available funds at anticipated returns and consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. anticipated office acquisitions on favorable terms and within anticipated time frames; --The ability of El Paso El Paso (ĕl pă`sō), city (1990 pop. 515,342), seat of El Paso co., extreme W Tex., on the Rio Grande opposite Juárez, Mex.; inc. 1873. Energy to satisfy its obligations to pay rent and termination fees in accordance with the terms of its agreement with Crescent; --The ability to develop, sell and deliver residential units and lots within anticipated time frames; --Deterioration in the market or in the economy generally and increases in construction cost associated with development of residential land or luxury residences, including single-family sin·gle-fam·i·ly adj. Relating to or being a dwelling designed for one family only: a single-family home; single-family occupancy. homes, town homes and condominiums; --Financing risks, such as Crescent's ability to generate revenue sufficient to service and repay existing or additional debt, increases in debt service associated with increased debt and with variable-rate Variable-rate A varible-rate agreement, as distinguished from a fixed-rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. debt, Crescent's ability to meet financial and other covenants and Crescent's ability to consummate financings and refinancings on favorable terms and within any applicable time frames; --Deterioration in Crescent's resort / business-class hotel markets or in the economy generally; --Lack of control and limited flexibility in dealing with Crescent's jointly owned investments; --The inherent risk of mezzanine investments, which are structurally or contractually con·trac·tu·al adj. Of, relating to, or having the nature of a contract. con·trac  tu·al·ly adv.Adv. 1. subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. to senior debt, may become unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. as a result of foreclosure foreclosure Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. by a senior lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. on its collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although , and are riskier than conventional mortgage loans; --The existence of complex regulations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Crescent's status as a REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (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; 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. Crescent is not obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to update these forward-looking statements to reflect any future events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . ABOUT CRESCENT Crescent Real Estate Equities Company (NYSE:CEI) is a real estate investment trust headquartered in Fort Worth, Texas. Through its subsidiaries and joint ventures, Crescent owns and manages a portfolio of 75 premier office buildings totaling 31 million square feet located in select markets across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , with major concentrations in Dallas, Houston, Austin Austin. 1 City (1990 pop. 21,907), seat of Mower co., SE Minn., on the Cedar River, near the Iowa line; inc. 1868. The commercial and industrial center of a rich farm region, it is noted as home to the Hormel meatpacking company, whose Spam Town museum , Denver Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. , Miami and Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. . Crescent also makes strategic investments in resort residential development, as well as destination resorts, including Canyon Ranch Canyon Ranch is a brand associated with several properties, communities, resorts, and spas. Properties & communities
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, December 31,
2005 2004
------------ ------------
(unaudited) (unaudited)
ASSETS:
Investments in real estate:
Land $ 186,878 $ 206,164
Land improvements, net of accumulated
depreciation of $29,784 and $23,592 at
December 31, 2005 and 2004,
respectively 70,494 69,086
Buildings and improvements, net of
accumulated depreciation of $464,049
and $411,634 at December 31, 2005 and
2004, respectively 1,781,015 1,811,305
Furniture, fixtures and equipment, net
of accumulated depreciation of $34,129
and $48,304 at December 31, 2005 and
2004, respectively 37,236 49,561
Land held for investment or development 574,527 501,379
Properties held for disposition, net 4,137 117,399
------------ ------------
Net investment in real estate $ 2,654,287 $ 2,754,894
Cash and cash equivalents $ 86,228 $ 92,291
Restricted cash and cash equivalents 84,699 93,739
Defeasance investments 274,134 175,853
Accounts receivable, net 56,356 60,004
Deferred rent receivable 70,201 56,295
Investments in unconsolidated companies 393,535 362,643
Notes receivable, net 219,016 102,173
Income tax asset -- current and
deferred, net 8,291 13,839
Other assets, net 295,115 326,033
------------ ------------
Total assets $ 4,141,862 $ 4,037,764
============ ============
LIABILITIES:
Borrowings under Credit Facility $ 234,000 $ 142,500
Notes payable 1,948,152 2,009,755
Junior subordinated notes 77,321 -
Accounts payable, accrued expenses and
other liabilities 471,920 422,348
Deferred tax liability 1,093 -
------------ ------------
Total liabilities $ 2,732,486 $ 2,574,603
------------ ------------
COMMITMENTS AND CONTINGENCIES:
MINORITY INTERESTS:
Operating partnership, 11,416,173 and
10,535,139 units, at
December 31, 2005 and 2004, respectively $ 113,819 $ 113,572
Consolidated real estate partnerships 53,562 49,339
------------ ------------
Total minority interests $ 167,381 $ 162,911
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred shares, $0.01 par value,
authorized 100,000,000 shares:
Series A Convertible Cumulative
Preferred Shares, liquidation
preference of $25.00 per share,
14,200,000 shares issued and
outstanding at December 31, 2005 and
2004 $ 319,166 $ 319,166
Series B Cumulative Preferred Shares,
liquidation preference of $25.00 per
share, 3,400,000 shares issued and
outstanding at December 31, 2005 and
2004 81,923 81,923
Common shares, $0.01 par value,
authorized 250,000,000 shares,
126,562,980 and 124,542,018 shares
issued and outstanding at December 31,
2005 and 2004, respectively 1,266 1,245
Additional paid-in capital 2,271,888 2,246,335
Deferred compensation on restricted
shares (1,182) (2,233)
Accumulated deficit (972,319) (885,016)
Accumulated other comprehensive income
(loss) 1,385 (1,022)
------------ ------------
$ 1,702,127 $ 1,760,398
Less -- shares held in treasury, at
cost, 25,120,917 and 25,121,861 common
shares at December 31, 2005 and 2004,
respectively (460,132) (460,148)
------------ ------------
Total shareholders' equity $ 1,241,995 $ 1,300,250
------------ ------------
Total liabilities and
shareholders' equity $ 4,141,862 $ 4,037,764
============ ============
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
For the three months For the twelve months
ended December 31, ended December 31,
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
(unaudited) (unaudited)
REVENUE:
Office Property $ 95,813 $ 103,037 $ 377,337 $ 481,710
Resort
Residential
Development
Property 284,853 147,322 503,568 311,197
Resort/Hotel
Property 37,072 55,718 142,618 214,531
------------ ------------ ------------ ------------
Total Property
Revenue $ 417,738 $ 306,077 $ 1,023,523 $ 1,007,438
------------ ------------ ------------ ------------
EXPENSE:
Office Property
real estate
taxes $ 8,776 $ 10,608 $ 39,195 $ 58,776
Office Property
operating
expenses 43,823 43,881 160,077 179,413
Resort
Residential
Development
Property expense 241,466 125,016 432,620 271,819
Resort/Hotel
Property expense 29,288 47,587 111,277 179,825
------------ ------------ ------------ ------------
Total Property
Expense $ 323,353 $ 227,092 $ 743,169 $ 689,833
------------ ------------ ------------ ------------
Income from
Property
Operations $ 94,385 $ 78,985 $ 280,354 $ 317,605
------------ ------------ ------------ ------------
OTHER INCOME
(EXPENSE):
Income from sale
of investment in
unconsolidated
company, net $ 29,934 $ - $ 29,934 $ -
Income from
investment land
sales 199 10,347 8,622 18,879
(Loss) gain on
joint venture of
properties, net (4,558) 265,772 (2,743) 265,772
Gain on property
sales, net - - 141 -
Interest and
other income 8,487 9,756 29,109 18,005
Corporate general
and
administrative (17,220) (16,156) (50,363) (38,889)
Interest expense (33,230) (39,763) (136,664) (176,771)
Amortization of
deferred
financing costs (1,925) (2,813) (8,108) (13,056)
Extinguishment of
debt (133) (39,527) (2,161) (42,608)
Depreciation and
amortization (33,261) (36,692) (146,173) (164,056)
Impairment
charges related
to real estate
assets (1,047) - (1,047) (4,094)
Other expenses (1,602) (487) (3,964) (725)
Equity in net
income (loss) of
unconsolidated
companies:
Office
Properties 1,575 2,651 11,464 6,262
Resort
Residential
Development
Properties 157 (1,156) (491) (2,266)
Resort/Hotel
Properties (1,569) (18) (1,541) (245)
Temperature-
Controlled
Logistics
Properties 2,500 10,667 234 6,153
Other 6,914 110 17,885 (280)
------------ ------------ ------------ ------------
Total Other
Income
(Expense) $ (44,779) $ 162,691 $ (255,866) $ (127,919)
------------ ------------ ------------ ------------
INCOME FROM
CONTINUING
OPERATIONS BEFORE
MINORITY
INTERESTS AND
INCOME TAXES $ 49,606 $ 241,676 $ 24,488 $ 189,686
Minority
interests (15,404) (42,203) (15,239) (37,294)
Income tax
(expense)
benefit (9,677) (423) (7,378) 13,078
------------ ------------ ------------ ------------
INCOME BEFORE
DISCONTINUED
OPERATIONS AND
CUMULATIVE
EFFECT OF A
CHANGE IN
ACCOUNTING
PRINCIPLE $ 24,525 $ 199,050 $ 1,871 $ 165,470
(Loss) income
from
discontinued
operations, net
of minority
interests (27) 1,928 4,266 9,755
Impairment
charges related
to real estate
assets from
discontinued
operations, net
of minority
interests - (263) (64) (2,978)
(Loss) gain on
real estate from
discontinued
operations, net
of minority
interests (2,005) 3,204 89,234 1,052
Cumulative effect
of a change in
accounting
principle, net
of minority
interests - - - (363)
------------ ------------ ------------ ------------
NET INCOME $ 22,493 $ 203,919 $ 95,307 $ 172,936
Series A Preferred
Share
distributions (5,991) (5,990) (23,963) (23,723)
Series B Preferred
Share
distributions (2,019) (2,019) (8,075) (8,075)
------------ ------------ ------------ ------------
NET INCOME
AVAILABLE TO
COMMON
SHAREHOLDERS --
BASIC $ 14,483 $ 195,910 $ 63,269 $ 141,138
============ ============ ============ ============
Dilutive effect
of convertible
securities - 6,239 - -
------------ ------------ ------------ ------------
NET INCOME
AVAILABLE TO
COMMON
SHAREHOLDERS --
DILUTED $ 14,483 $ 202,149 $ 63,269 $ 141,138
============ ============ ============ ============
BASIC EARNINGS PER
SHARE DATA:
Income (loss)
available to
common
shareholders
before
discontinued
operations and
cumulative
effect of a
change in
accounting
principle $ 0.16 $ 1.93 $ (0.30) $ 1.35
(Loss) income
from
discontinued
operations, net
of minority
interests - 0.02 0.04 0.10
Impairment
charges related
to real estate
assets from
discontinued
operations, net
of minority
interests - - - (0.03)
(Loss) gain on
real estate from
discontinued
operations, net
of minority
interests (0.02) 0.03 0.89 0.01
Cumulative effect
of a change in
accounting
principle, net
of minority
interests - - - -
------------ ------------ ------------ ------------
Net income
available to
common
shareholders --
basic $ 0.14 $ 1.98 $ 0.63 $ 1.43
============ ============ ============ ============
DILUTED EARNINGS
PER SHARE DATA:
Income (loss)
available to
common
shareholders
before
discontinued
operations and
cumulative
effect of a
change in
accounting
principle $ 0.16 $ 1.81 $ (0.30) $ 1.34
(Loss) income
from
discontinued
operations, net
of minority
interests - 0.02 0.04 0.10
Impairment
charges related
to real estate
assets
from discontinued
operations, net
of minority
interests- - - (0.03)
(Loss) gain on
real estate from
discontinued
operations, net
of minority
interests (0.02) 0.03 0.89 0.01
Cumulative effect
of a change in
accounting
principle, net
of minority
interests - - - -
------------ ------------ ------------ ------------
Net income
available to
common
shareholders --
diluted $ 0.14 $ 1.86 $ 0.63 $ 1.42
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES
OUTSTANDING --
BASIC 100,901,753 99,061,061 100,179,471 99,025,138
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES
OUTSTANDING --
DILUTED 102,422,428 108,737,976 100,179,471 99,243,627
============ ============ ============ ============
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS
(dollars in thousands, except share data)
For the three months
ended December 31,
---------------------------------------------
(unaudited)
2005 2005 2004 2004
$ Per share $ Per share
------------ --------- ------------ ---------
NET INCOME 22,493 0.18 203,919 1.73
ADJUSTMENTS:
Depreciation and
amortization of real
estate assets 28,932 0.24 37,359 0.32
Loss (gain) on property
sales, net 6,781 0.06 (269,581) (2.29)
Extinguishment of debt
expense related to
real estate asset
sales (a) - - 38,966 0.33
Impairment charges
related to real estate
assets and assets held
for sale 1,047 0.01 310 -
Adjustment for
investments in
unconsolidated
companies:
Office Properties 3,245 0.03 4,412 0.04
Resort Residential
Development
Properties (2,858) (0.02) 1,870 0.02
Resort/Hotel
Properties 1,068 0.01 - -
Temperature-Controlled
Logistics Properties
(b) 4,482 0.04 7,525 0.06
Unitholder minority
interest 4,115 0.03 36,500 0.31
Dilutive effect of
Convertible Securities 249 - 249 -
Series A Preferred
Share distributions (5,991) (0.05) (5,990) (0.05)
Series B Preferred
Share distributions (2,019) (0.02) (2,019) (0.02)
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS --
DILUTED, AS ADJUSTED
(c) 61,544 0.51 53,520 0.45
============ ========= ============ =========
Impairment charges
related to real estate
assets (1,047) (0.01) (2,634) (0.02)
Extinguishment of debt
expense related to
real estate asset
sales (a) - - (38,966) (0.33)
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS -- DILUTED
(c) -- NAREIT
DEFINITION 60,497 0.50 11,920 0.10
============ ========= ============ =========
INVESTMENT SEGMENTS:
Office Properties 76,198 0.63 57,121 0.49
Resort Residential
Development Properties 22,431 0.18 16,096 0.14
Resort/Hotel Properties 6,006 0.05 9,685 0.08
Temperature-Controlled
Logistics Properties 6,982 0.06 18,192 0.15
OTHER:
Corporate general and
administrative (17,220) (0.14) (16,156) (0.14)
Interest expense (33,230) (0.27) (39,763) (0.34)
Series A Preferred
Share distributions (5,991) (0.05) (5,990) (0.05)
Series B Preferred
Share distributions (2,019) (0.02) (2,019) (0.02)
Dilutive effect of
Convertible Securities 249 - 249 -
Other (d) 8,138 0.07 16,105 0.14
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS --
DILUTED, AS ADJUSTED
(c) 61,544 0.51 53,520 0.45
============ ========= ============ =========
Impairment charges
related to real estate
assets (1,047) (0.01) (2,634) (0.02)
Extinguishment of debt
expense related to
real estate asset
sales (a) - - (38,966) (0.33)
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS -- DILUTED
(c) -- NAREIT
DEFINITION 60,497 0.50 11,920 0.10
============ ========= ============ =========
WEIGHTED AVERAGE SHARES
OUTSTANDING -- BASIC 100,901,753 99,061,061
WEIGHTED AVERAGE
SHARES/UNITS
OUTSTANDING -- DILUTED 121,520,969 117,748,893
DIVIDEND PAID PER SHARE
DURING PERIOD 0.375 0.375
For the twelve months
ended December 31,
---------------------------------------------
(unaudited)
2005 2005 2004 2004
$ Per share $ Per share
------------ --------- ------------ ---------
NET INCOME 95,307 0.80 172,936 1.48
ADJUSTMENTS:
Depreciation and
amortization of real
estate assets 131,391 1.11 156,766 1.34
Loss (gain) on property
sales, net (102,803) (0.87) (267,053) (2.28)
Extinguishment of debt
expense related to
real estate asset
sales (a) 729 0.01 39,121 0.33
Impairment charges
related to real estate
assets and assets held
for sale 1,047 0.01 6,008 0.05
Adjustment for
investments in
unconsolidated
companies:
Office Properties 18,872 0.16 11,601 0.10
Resort Residential
Development
Properties (5,467) (0.04) (228) -
Resort/Hotel
Properties 3,881 0.03 - -
Temperature-Controlled
Logistics Properties
(b) 18,210 0.15 24,873 0.21
Unitholder minority
interest 16,964 0.14 30,950 0.26
Dilutive effect of
Convertible Securities - - - -
Series A Preferred
Share distributions (23,963) (0.20) (23,723) (0.20)
Series B Preferred
Share distributions (8,075) (0.07) (8,075) (0.07)
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS --
DILUTED, AS ADJUSTED
(c) 146,093 1.23 143,176 1.22
============ ========= ============ =========
Impairment charges
related to real estate
assets (1,047) (0.01) (8,332) (0.07)
Extinguishment of debt
expense related to
real estate asset
sales (a) (729) (0.01) (39,121) (0.33)
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS -- DILUTED
(c) -- NAREIT
DEFINITION 144,317 1.21 95,723 0.82
============ ========= ============ =========
INVESTMENT SEGMENTS:
Office Properties 237,711 2.00 268,829 2.30
Resort Residential
Development Properties 43,868 0.37 31,216 0.27
Resort/Hotel Properties 34,440 0.29 44,978 0.38
Temperature-Controlled
Logistics Properties 18,444 0.15 31,026 0.26
OTHER:
Corporate general and
administrative (50,363) (0.42) (38,889) (0.33)
Interest expense (136,664) (1.15) (176,771) (1.51)
Series A Preferred
Share distributions (23,963) (0.20) (23,723) (0.20)
Series B Preferred
Share distributions (8,075) (0.07) (8,075) (0.07)
Dilutive effect of
Convertible Securities - - - -
Other (d) 30,695 0.26 14,585 0.12
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS --
DILUTED, AS ADJUSTED
(c) 146,093 1.23 143,176 1.22
============ ========= ============ =========
Impairment charges
related to real estate
assets (1,047) (0.01) (8,332) (0.07)
Extinguishment of debt
expense related to
real estate asset
sales (a) (729) (0.01) (39,121) (0.33)
------------ --------- ------------ ---------
FUNDS FROM OPERATIONS
AVAILABLE TO COMMON
SHAREHOLDERS -- DILUTED
(c) -- NAREIT
DEFINITION 144,317 1.21 95,723 0.82
============ ========= ============ =========
WEIGHTED AVERAGE SHARES
OUTSTANDING -- BASIC 100,179,471 99,025,138
WEIGHTED AVERAGE
SHARES/UNITS
OUTSTANDING -- DILUTED 118,836,421 116,965,897
DIVIDEND PAID PER SHARE
DURING PERIOD 1.500 1.500
(a) Extinguishment of debt directly related to the sale of real estate
assets. An additional $1.4 million for year-to-date 2005 and $3.5
million for year-to-date 2004 of extinguishment of debt that is
not related to the sale of real estate assets is included in funds
from operations available to common shareholders.
(b) Excludes impairment charges related to real estate assets of $2.3
million for fourth quarter 2004 and for the twelve months ended
2004. FFO for 2004 includes $12.3 million net gain recognized on
sale of Americold comon shares.
(c) Funds from operations is a supplemental non-GAAP financial
measurement used in the real estate industry to measure and
compare the operating performance of real estate companies,
although those companies may calculate funds from operations in
different ways. The National Association of Real Estate Investment
Trusts ("NAREIT") defines funds from operations as Net Income
(Loss) determined in accordance with generally accepted accounting
principles ("GAAP"), excluding gains (or losses) from sales of
depreciable operating property, excluding extraordinary items
(determined by GAAP), excluding depreciation and amortization of
real estate assets, and including the impact of adjustments for
unconsolidated partnerships and joint ventures. Crescent's FFO, as
adjusted, follows the NAREIT definition, but is adjusted to
exclude the impact of impairment charges and debt extinguishment
charges related to the sale of real estate assets. Crescent
provides this additional calculation of FFO, as adjusted, to
exclude these charges because management utilizes it in making
operating decisions and assessing performance, and to assist
investors in assessing the operating performance of Crescent. FFO
should not be considered an alternative to net income.
(d) Includes income from investment land sales, net, interest and
other income, extinguishment of debt, income/loss from other
unconsolidated companies, other expenses, depreciation and
amortization of non-real estate assets, and amortization of
deferred financing costs.
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