Crescent Announces Lease Termination Agreement with El Paso Corporation.

FORT WORTH, Texas -- Crescent Real Estate Equities Company (NYSE: CEI) announced today that its subsidiaries, Crescent Real Estate Funding III, L.P., and Crescent Real Estate Funding V, L.P., have signed an agreement with Crescent's largest office customer, El Paso Corporation ("El Paso"), which will terminate El Paso's leases effective December 31, 2007. Under the agreement, El Paso is required to pay in cash to Crescent:

--$65 million in termination fees in periodic installments through December 31, 2007; and

--$62 million in rent according to original contractual lease terms from July 1, 2005, through December 31, 2007.

Crescent plans to immediately begin re-marketing all space not currently subleased. Crescent can collect rent simultaneous with El Paso's rent if the vacant space of approximately 762,000 square feet is re-leased before 2007.

In May 2004, El Paso notified Crescent that, as part of its long-range plan to reposition the company, it was consolidating its personnel from Crescent's Greenway Plaza to a building El Paso owns in downtown Houston. At the time, El Paso was under lease obligations for 912,000 square feet in Greenway Plaza, a 4.3 million square-foot, mixed-use, Class A complex located in one of Houston's premier submarkets. Since then, 24,000 square feet of the original lease have expired, leaving El Paso contractually responsible for 888,000 square feet. El Paso is current on all rental obligations, and, under the termination agreement, will continue paying rent through 2007. Original expirations for the space ranged from 2007 through 2014.

John C. Goff, Crescent's vice chairman and chief executive officer, commented, "We have been working with El Paso for some time now on an agreement that satisfies both Crescent's and El Paso's two very distinct goals. Crescent's desire was to arrive at an appropriate termination fee while having the time and the opportunity to re-lease El Paso's space prior to termination. El Paso, on the other hand, wanted to consolidate its Houston-based workforce to one location. We believe that we reached an agreement that works well for both parties."

Regarding Crescent's plans to re-lease the El Paso space, Goff added, "We are bullish about the Houston office market and, specifically, the attractiveness of Greenway Plaza as an office location. We believe that it is realistic to re-lease this space by the end of 2007."

EARNINGS GUIDANCE

Crescent expects to recognize approximately $62 million in GAAP rental income from El Paso from July 1, 2005, through December 31, 2007. In addition to the recognition of rental income, Crescent expects to recognize income from termination fees of $65 million, net of existing straight-line rent adjustments, which will result in $8.4 million of income in 2005 and $16.8 million of income in each of 2006 and 2007.

Due to the anticipated recognition of termination fees, Crescent is guiding to the upper end of its previously disclosed earnings guidance of $1.00 to $1.10 funds from operations per share for 2005. Crescent reports funds from operations per share before taking into account impairment charges related to real estate assets and before costs associated with the extinguishment of debt in connection with the sale of real estate assets.

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 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 after adjustments for unconsolidated partnerships and joint ventures. Crescent's guidance as to funds from operations per common share for 2005 does not take into account impairment charges or costs associated with the extinguishment of debt in connection with the sale of real estate assets that have occurred or may occur during the remainder of the calendar year.

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", "anticipate" and "may". Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company's actual results could differ materially from those described in the forward-looking statements.

The following factors might cause such a difference:

--The Company's ability, at its office properties, including the office properties in which El Paso Energy leases space, to timely lease unoccupied square footage and timely re-lease occupied square footage upon expiration on favorable terms, which continue to be adversely affected by existing real estate conditions (including the vacancy levels in particular markets, decreased rental rates and competition from other properties) and may also be adversely affected by general economic downturns;

--The continuation of relatively high vacancy rates and reduced rental rates in the Company's office portfolio as a result of conditions within the Company's principal markets;

--The ability of the Company to reinvest available funds at anticipated returns and consummate anticipated office acquisitions on favorable terms and within anticipated time frames;

--Adverse changes in the financial condition of existing tenants;

--The ability of El Paso Energy to satisfy its obligations to pay rent and termination fees in accordance with the terms of its agreement with the Company;

--Deterioration in the Company's resort/business-class hotel markets or in the economy generally;

--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 homes, town homes and condominiums;

--Financing risks, such as the Company'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 debt, the Company's ability to meet financial and other covenants and the Company's ability to consummate financings and refinancings on favorable terms and within any applicable time frames;

--The ability of the Company to dispose of its investment land, and other non-core assets, on favorable terms and within anticipated time frames;

--The concentration of a significant percentage of the Company's assets in Texas;

--The existence of complex regulations relating to the Company'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; and

--Other risks detailed from time to time in the Company's filings with the SEC.

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 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 more than 75 premier office buildings totaling more than 30 million square feet located in select markets across the United States, with major concentrations in Dallas, Houston, Austin, Denver, Miami and Las Vegas. Crescent also makes strategic investments in resort residential development, as well as resorts, including Canyon Ranch(R). For more information, visit the Company's website at http://www.crescent.com.