Crescent Real Estate Simplifies Operating Strategy Through Transaction With Crescent Operating.

Business Editors

FORT WORTH, Texas--(BUSINESS WIRE)--June 29, 2001

Crescent Real Estate Equities Company (NYSE:CEI) today announced that it has entered into a definitive agreement with Crescent Operating, Inc. (OTCBB:COPI.OB) for the acquisition of certain resort/hotel lease interests, residential development corporations and other assets for $78.4 million. The acquisition agreement takes advantage of the REIT Modernization Act, legislation which became effective January 1, 2001. The new legislation allows Crescent Real Estate Equities Company ("Crescent"), through its subsidiaries, to operate or lease certain of its investments that are currently operated or leased by Crescent Operating, Inc. ("COPI").

Resort/Hotel Lease Interests

Crescent, through its subsidiaries, will purchase certain resort/hotel lease interests, including the lease interests of Sonoma Mission Inn & Spa (including Sonoma Mission Golf and Country Club), Ventana Inn & Spa, Hyatt Regency Beaver Creek, Canyon Ranch-Tucson, Canyon Ranch-Lenox, Denver Marriott City Center, Hyatt Regency Albuquerque and Renaissance Houston, from COPI. The Crescent subsidiaries will become lessees under the long-term leases, replacing subsidiaries of COPI, the current lessees. As a result of the purchase, Crescent will receive 100% of the net cash flow from the resort/hotel operations.

Residential Development Corporations and Other Assets

Crescent, through its subsidiaries, will also purchase 100% of the voting common stock of certain residential development corporations, including Desert Mountain Development Corporation, The Woodlands Land Company, Inc. and Crescent Development Management Corp., from COPI. Crescent currently owns 100% of the nonvoting common stock of these corporations, representing economic interests from 90% to 95%. As a result of the purchase, Crescent will gain control of the residential development corporations and also will obtain the 5% to 10% economic interests in the residential development projects currently held by COPI. In addition, Crescent, through its subsidiaries, will purchase COPI's 52.5% partnership interest in the operator of The Woodlands, The Woodlands Operating Company, L.P.

John C. Goff, Chief Executive Officer of both Crescent and COPI, commented, "We saw the REIT Modernization Act as a means to simplify the businesses of Crescent Real Estate and Crescent Operating, so the challenge was to develop a solution that works for both. We have been dedicated to this initiative for some time and are pleased with the outcome. "

Goff added, "I think the acquisition does three things. First, it simplifies both companies' structure. Second, Crescent Real Estate gains operating efficiencies by being able to exercise complete control over the resort/hotel and residential development investments. And finally, Crescent Operating benefits by having a focused business strategy and enhanced capitalization."

Of the total $78.4 million purchase price, $37.8 million relates to the resort/hotel lease interests and $40.6 million relates to the residential development corporations and other assets. Crescent will satisfy the purchase price through a cancellation of accounts receivable and certain debt owed to Crescent by COPI or its subsidiaries. Not included in the cancellation of debt is a $16.8 million note payable to Crescent related to the 40% ownership interest in AmeriCold Logistics LLC, which COPI will retain following the transaction. In addition, the Intercompany Agreement between Crescent and COPI will be terminated.

Closing of the transaction is scheduled to occur following approval by the shareholders of COPI and the satisfaction of customary closing conditions. In addition, the transaction was approved by committees of the independent members of both Crescent's Board of Trust Managers and COPI's Board of Directors, after consideration of supportive information including fairness opinions from two nationally-recognized financial advisory firms, separately representing Crescent and COPI, related to significant aspects of the transaction.

In a related transaction, Crescent has agreed to acquire a $10 million preferred interest in Crescent Machinery, Inc. ("Crescent Machinery"), a wholly-owned subsidiary of COPI. Crescent has also agreed to invest in SunTx Fulcrum Fund, L.P. ("SunTx"), a Dallas-based private equity fund which has committed to acquire a preferred interest in Crescent Machinery. As a limited partner of SunTx, Crescent is committed to contribute up to $19 million over a period of up to five years. These transactions are subject to satisfaction of certain closing conditions.

Impact to Crescent's Estimated Funds From Operations

Crescent reiterates its 2001 estimated funds from operations range of $2.60 to $2.62 per share, which reflects, consistent with previous guidance, $.01 to $.02 per share anticipated initial dilution from the transactions described above. Crescent further anticipates that the transactions will be approximately $.02 to $.03 dilutive in 2002, neutral in 2003, and approximately $.01 to $.02 accretive in 2004.

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 its forward-looking statements are based upon reasonable assumptions, actual results could differ materially from those given in the forward-looking statements.

The following factors might cause such a difference:

-- The inability of the Company to consummate the transactions as described,

-- Financing risks, such as the ability to generate revenue sufficient to
service existing debt, increases in debt service associated with variable-rate
debt, the ability to meet existing financial covenants and the Company's
ability to consummate planned financings and refinancings on the terms and
within the time frames anticipated;

-- The Company's ability to timely lease unoccupied square footage and timely
re-lease occupied square footage upon expiration on favorable terms;

-- The Company's ability to close anticipated sales of assets or joint venture
transactions or other pending transactions;

-- 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);

-- Changes in conditions in the resort/business-class hotel markets or in the
market for residential land or luxury residences, which include single-family
homes, townhomes and condominiums (including a general downturn in the
economy);

-- Change in conditions in the temperature-controlled logistics business
(including a general downturn in the economy);

-- 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. Crescent Real Estate Equities 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, one of the country's largest real estate investment trusts, owns and manages, through its subsidiaries, a diversified portfolio consisting of Class A office properties, destination resorts, and upscale residential developments. Its mission is to expand the dimensions of business to its customers and maximize value to its shareholders by distinguishing itself as the undisputed leader in each of its businesses. Crescent will accomplish these goals by providing exceptional customer service and asset quality, and by executing a disciplined real estate investment and operating strategy that focuses on market leadership, innovative growth opportunities, and outstanding customer, employee and partner alliances.