Crescent Real Estate Equities Announces $548 Million of Real Estate Investments and Convertible Preferred Stock Placement.

FORT WORTH, Texas--(BUSINESS WIRE)--July 2, 1998--Crescent Real Estate Equities Company (NYSE:CEI), one of the country's largest real estate investment trusts, today announced that it has completed the acquisition of BP Plaza, a 561,000 square foot class A office building located in the Katy Freeway suburban office market of Houston. The acquisition increases Crescent's percentage ownership of class A office space in the Katy Freeway submarket and Houston metropolitan market to 42% and 14%, respectively.

Crescent has also agreed to acquire a portfolio of properties aggregating 2.6 million square feet. The properties include Woodfield Corporate Center, a 1.6 million square foot office complex located in Schaumburg, Illinois, Two Town Center, a 732,000 square foot mixed-use complex located in Costa Mesa, California and 6701 Tower, a 321,000 square foot office building located in Los Angeles, California. Two of the properties are being purchased from entities that include The Prudential Insurance Company of America and the third property is being purchased directly from Prudential. Crescent has also completed the sale of an aggregate $225 million of convertible preferred stock to Prudential and certain of its institutional clients. The real estate acquisitions are expected to be completed within the next 45 days subject to customary closing conditions.

Gerald W. Haddock, Crescent's president and chief executive officer, commented, "These acquisitions are consistent with our strategy of increasing Crescent's competitive position in core office markets such as Dallas and Houston while selectively investing in non-core markets possessing good supply/demand fundamentals."

"We are pleased with Prudential's vote of confidence in Crescent evidence by such a significant equity investment. This unique structured security provides us the opportunity to produce a significant conversion premium to the current share price over the next three years," Mr. Haddock further stated.

Of Prudential's Crescent stock acquisitions, $121 million was invested directly by Prudential's General Account while the remaining $104 million was purchased by institutional funds managed by Prudential Real Estate Investors.

Bernard Winograd, CEO for Prudential Real Estate Investors, said, "We regard Crescent as one of the nation's premier real estate companies. This investment will provide our clients with a uniquely structured investment designed to provide returns likely to exceed the broad REIT index."

BP Plaza was built in 1992 and is 100% occupied, including 86% of the space that is leased to BP Exploration & Oil, Inc., Union Pacific Resources Co. and Tejas Power Corporation. The building has an approximate in-place weighted-average full-service rental rate of $18.13 per square foot, which is approximately 64% of estimated replacement cost rental rates, and a weighted-average remaining lease term of approximately 8.8 years. As of March 31, 1998, the Katy Freeway submarket had a class A office occupancy of 98% and a market rental rate of $23.00 per square foot. As of March 31,1998, the metropolitan Houston office market had a class A occupancy of 95% and a market rental rate of $19.29 per square foot. The acquisition also included an adjacent 3.2 acre parcel of land which will support the development of 350,000 square feet of new office space.

Woodfield Corporate Center is a six building office complex situated nine miles from O'Hare International Airport in suburban Chicago. In addition to its ideal proximity to the airport, the development offers an amenity package and campus-like environment that has contributed to the dominant Fortune 500 character of the property's current tenancy, including Advantis/IBM, Motorola, Inc. and Northern Telecom, Inc. The complex is 94% occupied and the current quoted property rental rates are approximately 26% above in-place rental rates. The weighted-average remaining term of in-place leases is 4.6 years. As of March 31, 1998, the Schaumburg submarket had a class A office occupancy of 92%. The site also provides for the development of an additional 376,000 square feet of office space.

Two Town Center is a 732,000 square foot mixed-use property consisting of 677,000 square feet of office space and 55,000 square feet of retail space. The complex is located in South Coast Plaza, Orange County's premier master-planned development which offers unparalleled amenities including the Orange County Performing Arts Center and South Coast Plaza Retail Center, a 2.9 million square foot regional mall. The property is 79% leased and the current quoted property rental rates are 38% above in-place rental rates. The weighted-average remaining term of in-place leases is 5.1 years. As of March 31, 1998, the South Coast Metro submarket had a class A office occupancy of 84%.

6701 Tower is located in the Howard Hughes Center, a master-planned development situated along the San Diego freeway in West Los Angeles and adjacent to Playa Vista. The Howard Hughes Center is one of the areas premier developments offering excellent freeway access and proximity to executive residential neighborhoods. The property is 83% leased and current quoted property rental rates are approximately 22% above in-place rental rates. As of March 31, 1998, the Culver City/Westchester submarket had a class A office occupancy of 87%.

The $225 million of convertible preferred stock sold to Prudential and its clients will not pay regular dividends and will be convertible into common shares within three years based upon a comparison of the investment return produced by Crescent's common shares and the National Association of Real Estate Investment Trusts' index of common stocks.

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, it can give no assurance that its expectations will be achieved. Factors that could cause actual results to differ materially from Crescent's expectations include changes in real estate conditions (including rental rates and competing properties) or in industries in which our principal tenants compete, failure to consummate anticipated transactions, timely leasing of unoccupied square footage, timely releasing of occupied square footage upon expiration, finding acquisition opportunities which meet its investment strategy and other risks detailed from time to time in the Company's SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K, and annual reports on Form 10-K.

Crescent is a fully integrated real estate company which, upon completion of certain pending transactions, will own through its subsidiaries a portfolio of real estate assets, consisting of 99 office properties and 7 retail properties totaling 35.3 million square feet, a 38% interest in 94 refrigerated warehouse facilities, 89 behavioral healthcare facilities, 6 hotel/casino properties, 7 full-service hotels totaling 2,276 rooms, 2 destination health and fitness resorts, and economic interests in 5 residential development corporations. The office and retail properties are located primarily in 17 metropolitan submarkets in Texas.

For further information, please contact Dallas E. Lucas, Chief Financial Officer, Crescent Real Estate Equities Company at 817/321-1426. Crescent is also online at www.cei-crescent.com.

    CONTACT:  Crescent Real Estate Equities Company
               Dallas E. Lucas, 817/321-1426