Crescent Real Estate Equities Announces Acquisition of Desert Mountain.

FORT WORTH, Texas--(BUSINESS WIRE)--Aug. 8, 1997--Crescent Real Estate Equities Company (NYSE:CEI), one of the country's largest real estate investment trusts, today announced that it has entered into a definitive agreement to acquire Desert Mountain, an exclusive master- planned community located in northern Scottsdale, Ariz.

The transaction is expected to close in the third quarter of 1997, subject to due diligence and customary closing conditions.

Desert Mountain, located in the high Sonoran desert, is the southwest's premier, luxury residential and recreational community with substantial investment by all parties in infrastructure, amenity and home improvements. The 8,300-acre property is currently zoned for the development of over 4,500 lots; however, the future development plans may ultimately be revised to only develop approximately 3,000 lots in order to enhance the exclusivity and overall experience of the community. As of June 30, 1997, over 1,450 lots had been sold. Lot sales prices have ranged from $100,000 to $1 million and have increased at a 10% compound annual rate over the last three years. Certain of the near term planned phases have projected lot sales prices of up to $2 million. For the year ended December 31, 1996, Desert Mountain sold 188 lots, inclusive of golf memberships, at an average sales price of approximately $300,000.

Desert Mountain also owns and operates The Desert Mountain Club, a private golf, tennis and fitness club serving over 1,600 members. The club offers four Jack Nicklaus signature 18-hole golf courses, including Cochise, site of the Senior PGA Tour's The Tradition golf tournament. The club has 1,000 full golf memberships and 600 social memberships remaining for sale with the completion of a fifth signature 18-hole golf course in 1999. Currently, golf and social memberships require initiation fees of $125,000 and $50,000, respectively. The club is also generally entitled to 20% of proceeds upon future resale of club memberships.

Desert Mountain is being acquired from a Mobil Land Development Corporation subsidiary and a Lyle Anderson owned company for approximately $229 million, including approximately $80 million of assumed debt which will be repaid at closing. As partial consideration for the purchase, Anderson will convert his existing ownership into a new partnership interest. Anderson will also serve as the development and operating manager for Desert Mountain.

Haddock commented, "Our investment in Desert Mountain typifies our selective strategy for residential land developments. We target substantially improved high-end properties possessing a successful track record and which offer the potential to achieve superior returns. With our investments in Mira Vista in Fort Worth, The Highlands at Breckenridge and One Beaver Creek and Market Square located at the Beaver Creek Ski Resort, we have seen substantial demand for unique, upscale residential developments providing premier recreational amenities. This structured transaction was designed to provide Crescent with a preferred return, protecting against downside risk while participating in the anticipated growth of the community. It is expected that this investment will generate in excess of a 20% unleveraged IRR."

Haddock continued, "In addition to Desert Mountain, we have pending acquisitions for 4 to 5 million square feet of high end office properties located in the Southwest which we also anticipate closing in the third quarter. Upon completion of Desert Mountain and these other transactions, Crescent's portfolio composition in terms of contribution to funds from operations is expected to be approximately 62% from office and retail properties, 15% from behavioral healthcare facilities, 12% from hotel properties, and 11% from investments in residential development corporations."

Crescent also announced today that it intends to offer Crescent Operating, Inc. (OTC BB/COPI) the opportunity to acquire all of the voting stock, representing a 5% equity interest, in the corporation which will make the investment in the Desert Mountain assets. Crescent will retain a 95% non-voting interest in this land development corporation. The offer of the voting interest will be made by Crescent to Crescent Operating, Inc. pursuant to the Intercompany Agreement between the two companies.

Certain matters discussed within this press release are forward-looking statements within the meaning of the federal securities laws. 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 general economic conditions, local real estate conditions, timely releasing of occupied square footage upon expiration, interest rates, availability of equity and debt financing and other risks detailed from time to time in the 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 owns through its subsidiaries a portfolio of real estate assets, consisting of 72 office properties and 6 retail properties totaling 21.6 million square feet, 92 behavioral healthcare facilities, 4 full-service hotels totaling 1,471 rooms, 2 destination health and fitness resorts, and economic interests in 4 residential development corporations. The office and retail properties are located primarily in 19 metropolitan submarkets in Texas and Colorado.

CONTACT: Crescent Real Estate Equities Company, Fort Worth

Dallas E. Lucas, 817/878-0426

cei-crescent.com