Crescent Real Estate Announces Alternative Plan for Acquiring COPI Assets and COPI Related Non-Recurring Charge.

Business Editors

FORT WORTH, Texas--(BUSINESS WIRE)--Jan. 23, 2002

Crescent Real Estate Equities Company (NYSE:CEI) ("Crescent") announced today that it has terminated its agreement with Crescent Operating, Inc. ("COPI") to purchase certain assets.

According to John C. Goff, Chief Executive Officer, "As you know, in June 2001 Crescent entered into an agreement with COPI, the cornerstone of which was Crescent's intended purchase of the resort/hotel lease interests in eight of our resort/hotel properties and the voting stock of our residential development corporations. Included in our original proposal to COPI was our commitment to make a $10 million capital contribution to Crescent Machinery in exchange for convertible preferred stock, which along with capital from a third party investment firm was expected to put its machinery business on solid financial footing. Unfortunately, Crescent Machinery has not escaped the impact from the recessionary economic environment. Particularly post September 11th, the equipment rental and sales business has been affected by the overall reduction in national construction levels. We believe that in order to provide adequate capitalization of Crescent Machinery and satisfy lender concerns, substantial additional capital would have to be contributed. We are unwilling to make this non-core investment. Crescent Machinery continues to work with its lenders and third party investors, but there is no assurance that Crescent Machinery will be able to reach an acceptable agreement with its lenders to allow it to continue operations."

"Without the closing of the asset purchase agreement, COPI will not be able to continue as a going concern or satisfy the principal conditions to the closing of its previously announced restructuring plan. Having said that, we are still committed to acquiring these assets and are working with COPI to reach a mutually acceptable resolution such as a pre-packaged bankruptcy but, if necessary, through a foreclosure. What this means, however, is that we will have to record different results than we would have if the contractual asset purchase agreement had been completed as originally planned," Goff added.

The following tables indicate the anticipated impact to Crescent's balance sheet as of December 31, 2001 and to its income statement and funds from operations ("FFO") for the fourth quarter 2001.

                         Balance Sheet Impact
             (dollars in millions, except per share data)

COPI-Related Assets to be Impaired as of December 31, 2001(1):

     Resort/Hotel Accounts Receivable                    $   33.2
     Resort/Hotel Straight-Line Rent                         12.7
     Notes Receivable and Accrued Interest                   71.5
     Asset transaction costs                                  2.8
                                                       -----------
                                                         $  120.2
Less Assets to be received from COPI:

     Estimated Fair Value of Resort/Hotel FF&E           $    6.9
     Estimated Fair Value of Voting Stock of
      Residential Development Corporations                   38.5
                                                       -----------
                                                         $   45.4

Net Asset Reduction as of December 31, 2001              $   74.8


                        Income Statement Impact
             (dollars in millions, except per share data)

                                                      $     Per Share
                                                  --------- ---------
Net Asset Reduction as of December 31, 2001        $ 74.8
Plus Estimated Costs Related to a COPI Bankruptcy    18.0
                                                  --------

4Q 2001 Net Income Charge (diluted)                $ 92.8     $ .76


                     Funds From Operations Impact
             (dollars in millions, except per share data)

                                                      $     Per Share
                                                  --------- ---------

4Q 2001 Net Income Charge (diluted)                $ 92.8    $ .76
Plus 4Q 2001 Resort/Hotel Base Rent and
 Percentage Rent Not Recorded                        12.0
                                                  ---------

4Q 2001 FFO Impact                                 $104.8    $ .86
Less Estimated Resort/Hotel Lease Value(2)           31.0
                                                  ---------

4Q 2001 Comparative FFO(3)Impact                   $ 73.8    $ .60

Goff further stated, "Over the course of the last two years, we have focused on simplifying our strategy, proactively exiting non-core and non-strategic investments and strengthening our balance sheet. Integral to that strategy is the acquisition of certain COPI assets. However, our current plan results in an impact to our 2001 comparative FFO of $73.8 million, which falls into three categories. $41.1 million relates to COPI's liquidity shortfall primarily due to COPI's inability to consummate its intended recapitalization plan. Another $18.0 million relates to estimated costs we expect to incur in connection with the assumed COPI bankruptcy. The remaining $14.7 million relates to our re-valuation of the resort/hotel leases and interests in residential development corporations, as the original values were only appropriate assuming the proposed asset purchase agreement."

With respect to the operating interest in AmeriCold that COPI owns, REIT tax rules prohibit Crescent from acquiring or owning the interest directly. Crescent, therefore, is evaluating structures that will permit Crescent's shareholders to obtain the value of that interest through a $15 million investment by Crescent. Crescent expects that it would be a condition to the acquisition that COPI use those proceeds to retire debt.

Goff concluded, "While we are disappointed that the original proposal to resolve COPI is no longer viable, we are confident in Crescent's ability to acquire the desired assets in a timely manner. This will enable us to manage our resort/hotel and residential development investments more efficiently and should also lead to more predictable overall earnings in the future. After acquiring the assets, we will have completed the strategic initiatives that we laid out in 1999. Pursuant to our strategic plan, Crescent will continually move toward becoming a company with 80% to 90% of its assets in the office sector. We expect to target office property acquisitions as well as selectively develop office properties in markets where we either currently have achieved or plan to achieve a dominant position. We remain bullish on our stock and since initiation of the common share repurchase program have repurchased over $350 million, or 18.8 million shares. We believe our net asset value, considering the current economic environment, is in the $24 to $26 range."

2001 AND 2002 FFO GUIDANCE

Crescent expects its 2001 FFO, before the non-recurring charges and other adjustments related to COPI, to be in the range of $2.25 to $2.27 per share. Including the non-recurring charges and other adjustments related to COPI, Crescent expects its 2001 FFO to be in the range of $1.45 to $1.47 per share.

Crescent is revising its 2002 FFO guidance from the previously issued range of $2.15 to $2.30 per share to a range of $2.00 to $2.30 per share due to the continued uncertainty in the economy. The $.15 per share reduction in the low end reflects a broader range of both office property same-store NOI growth (now 0% to 4%) and average occupancy (now 90% to 93%) as well as adjusting for flat resort/hotel revenue per available room. The 2002 FFO range excludes the potential positive impact of any future investments or share repurchase activity.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and audio webcast, both open to the general public, at 10:00 A.M. Central Time on Wednesday, January 23, 2002, to discuss this release. 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 the Company's website (www.cei-crescent.com) in the Investor Relations section. A replay of the conference call will be available through January 30, 2002 by dialing 800/642-1687 domestically or 706/645-9291 internationally with a passcode of 3014486. The webcast will be available on the Company's website for 10 days.

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 described in the forward-looking statements.

The following factors might cause such a difference:

-- The Company's inability to acquire the lease interests in the resort and
hotel properties and the voting common stock of the residential development
corporations from COPI through a pre-packaged bankruptcy binding all creditors
or through a foreclosure;

-- Any significant delay in the Company's acquisition from COPI of the lease
interests in the resort and hotel properties or the voting common stock of the
residential development corporations, or any increase in the anticipated
charges and expenses to the Company in connection with a COPI bankruptcy or the
acquisition of COPI assets;

-- Further deterioration in the resort/business-class hotel markets or in the
market for residential land or luxury residences, including single-family
homes, townhomes and condominiums, or in the economy generally;

-- Further adverse conditions in the temperature-controlled logistics business
(including both industry-specific conditions and a general downturn in the
economy) which may further jeopardize the ability of the tenant of the
temperature-controlled logistics properties to pay all current and deferred
rent due and the resulting adverse impact on the value of the Company's
investment in the owner of the properties;

-- The Company's ability, at its office properties, to timely lease unoccupied
square footage and timely re-lease occupied square footage upon expiration on
favorable terms, which may be adversely affected by changes in real estate
conditions (including rental rates and competition from other properties and
new development of competing properties or a general downturn in the economy);

-- Financing risks, such as the ability to generate revenue sufficient to
service and repay existing or additional debt, the ability to meet applicable
debt covenants, the ability to fund the share repurchase program, increases in
debt service associated with increased debt and with variable-rate debt, and
the ability to consummate financings and refinancings on favorable terms and
within any applicable time frames;

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

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

-- The Company's ability to find acquisition and development opportunities
which meet the Company's investment strategy;

-- 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 THE COMPANY

Crescent Real Estate Equities Company (NYSE:CEI) is one of the largest publicly held real estate investment trusts in the nation and, through its subsidiaries, owns and manages some of the country's most desirable properties. Its portfolio consists primarily of 75 office buildings totaling over 28 million square feet located in six states and 26 sub-markets primarily in the southwestern U.S., as well as world-renowned luxury resorts and spas and upscale residential developments.

(1) Balances have not changed from September 30, 2001, with the exception of a $5.0 decrease in Resort/Hotel Accounts Receivable representing cash that was collected in the fourth quarter 2001.

(2) Inclusive of straight-line rent.

(3) Represents total FFO impact excluding the estimated value of resort/hotel lease interests that will be acquired and the write-off of resort/hotel straight-line rent.