Crescent Enters Into Letter Agreement for the Restructuring of CBHS.

FORT WORTH, Texas--(BUSINESS WIRE)--Aug. 16, 1999--

Crescent Real Estate Equities Company ("Crescent") (NYSE:CEI), today announced that Crescent, Crescent Operating, Inc. ("Crescent Operating") (Nasdaq:COPI), Magellan Health Services, Inc. ("Magellan") (NYSE:MGL) and Charter Behavioral Health Systems, LLC ("CBHS") entered into a binding Letter Agreement dated August 10, 1999, relating to a proposed recapitalization of CBHS and restructuring of relationships among the parties. CBHS is the lessee, under a master lease agreement, of 88 psychiatric hospitals owned by Crescent.

Under the Letter Agreement, Magellan agreed that it will, at the closing of the transactions, transfer its remaining hospital-based assets (including Charter Advantage, Charter Franchise Services, LLC, the call center assets, the Charter name and related intellectual property and certain other assets) to CBHS, and cancel its accrued franchise fees. Thereafter, Magellan will no longer be obligated to provide franchise services to CBHS. Magellan will also effectively transfer 80% of its CBHS common interest and all of its preferred interest to CBHS, leaving Magellan with a 10% common membership interest, and Crescent Operating with a 90% common membership interest and 100% of the preferred membership interest in CBHS. Additionally, it is anticipated that CBHS management and staff will have the ability to acquire up to 30% of the common membership interests.

In connection with the execution of the Letter Agreement, Magellan, CBHS, Crescent and Crescent Operating have agreed to provide each other with mutual releases of all claims and disputes against each other, with certain specified exceptions, and Crescent has deferred the August 1999 rent due from CBHS to the last four months of 1999. Additionally, with the execution of the Letter Agreement, the $2.5 million held in escrow in connection with a pending arbitration between Magellan and Crescent Operating was released to Crescent Operating.

Magellan and CBHS also have modified and extended their existing arrangement which designates CBHS a preferred provider of inpatient acute behavioral health services.

John C. Goff, President and Chief Executive Officer of Crescent, stated, "This Letter Agreement is a major step towards our goal of significantly strengthening the financial position of our tenant, CBHS. Not only will CBHS's balance sheet be materially improved when the contemplated transactions are closed, but the complicated elements of the original structure will also be eliminated. This Letter Agreement also paves the way for a second phase in the recapitalization of CBHS, in which Crescent will be actively evaluating a number of options to further strengthen CBHS's business and thus the predictability of our current lease payments. As a part any such structure, the management and staff of CBHS will be given the opportunity to invest in the business for a sizable stake. We anticipate that any such additional transactions undertaken by Crescent will be finalized in within the next 60 days."

The closing of the transactions contemplated by the Letter Agreement is anticipated to take place within 30 days, subject to the satisfaction of certain customary closing conditions and consents, and other contingencies. If the closing does not occur within 30 days, the Letter Agreement will terminate unless extended by the parties.

Certain matters discussed within this press release are forward-looking statements within the meaning of the federal securities laws, and the transactions contemplated by the Letter Agreement are subject to certain closing conditions, including the negotiation of definitive agreements, and consents. 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 the failure to complete the recapitalization of CBHS contemplated by the Letter Agreement (which would adversely affect CBHS's ability to fulfill all of its lease obligations), Crescent's ability to service existing debt, to satisfy its existing financial covenants and meet its other operating expenses, and other risks detailed from time to time in Crescent's second quarter earnings release dated July 27, 1999, and its SEC reports, including its annual report on Form 10-K, quarterly reports on Form 10-Q, and its current reports on Form 8-K.

Crescent is a fully integrated real estate company which owns through its subsidiaries a portfolio of real estate assets, consisting primarily of 89 office properties and 7 retail properties with a total of 32.6 million square feet, a 39.6% interest in 86 refrigerated storage properties with a total of approximately 16.6 million square feet, 88 behavioral healthcare properties, 8 full-service hotel properties with a total of 2,636 rooms, 2 destination health and fitness resorts and economic interests in 5 residential development corporations. The office properties are located in 31 metropolitan submarkets in 9 states.

For further information, please contact Jack I. Tompkins, Executive Vice-President and Chief Financial Officer, at 817/321-1426 or refer to Crescent's Web page at www.cei-crescent.com.