Crescent Real Estate Announces First Quarter Results; Company Reports First Quarter Office Property Same-Store NOI Growth of 8.4%

Business Wire, May 10, 2001

Business Editors

FORT WORTH, Texas--(BUSINESS WIRE)--May 10, 2001

Crescent Real Estate Equities Company (NYSE:CEI) announced first quarter 2001 funds from operations ("FFO") per share of $.59, which met the Company's estimates for the quarter.

"As a result of the strength of our office sector, I am pleased to report solid first quarter earnings results. Our office properties produced same-store NOI growth of over 8% and FFO net effective rental rate growth on expiring rents of 20%," commented John C. Goff, Chief Executive Officer.

"Equally important, we recently received debt refinancing commitments of $970 million which will give us substantial financial flexibility. The refinancing will return us to the status of an unsecured borrower, reduce overall borrowing costs and extend our average debt maturity period," further commented Goff. "We believe that this refinancing will position us to take advantage of future investment opportunities within our core business sectors."

"In today's economy, we face the same challenge as everyone in predicting the degree to which a national slowdown will affect us. However, we continue to believe that our major office markets and our office assets are in a position to deliver favorable results. We remain cautious and alert to the economic risks we are subject to in our destination resort and upscale residential development properties," Goff added.

HIGHLIGHTS

-- The March 2001 unemployment rate of 3.5% remains below the state (4.0%) and
national (4.3%) levels.

-- According to recent Bureau of Labor statistics, Houston added 52,700 new
jobs for the twelve months ended March 31, 2001, which represents a 2.6%
year-over-year increase.

-- The Federal Reserve Bank of Dallas-Houston Branch predicts that strong
drilling activity and momentum from 2000 are expected to create 60,000 to
80,000 new jobs in 2001.

-- CB Richard Ellis predicts that the Houston commercial real estate market
will outpace the nation due to strong job growth generated by the energy
industry.

-- Cushman & Wakefield claims Houston is poised to be one of the
nation's hardiest high-tech centers, a positioning that is predicted to
have a dramatic impact on the city's commercial real estate market.

FINANCIAL REVIEW

FFO for the three months ended March 31, 2001 was $72.3 million, or $.59 per share and equivalent unit (diluted), compared to $75.2 million, or $.55 per share and equivalent unit (diluted), for the same period in 2000.

Net income available to common shareholders for the three months ended March 31, 2001 was $27.9 million, or $.26 per share (diluted), compared to $45.7 million, or $.38 per share (diluted), for the same period in 2000.

BUSINESS SECTOR REVIEW

Office Sector (68% of Asset Value as of March 31, 2001)

Office property same-store NOI increased 8.4% for the three months ended March 31, 2001 over the same period in 2000 for the 27.1 million square feet of office property space owned during both periods. Average occupancy for these properties for the three months ended March 31, 2001 was 93.1% compared to 91.0% for the same period in 2000. As of March 31, 2001, the overall office portfolio was approximately 94.4% leased based on executed leases. During the three months ended March 31, 2001, Crescent received $1.7 million of lease termination fees.

The Company renewed or re-leased 371,000 net rentable square feet during the three months ended March 31, 2001. The weighted average FFO net effective rental rate increased 20% over the expiring rates for these leases, all of which have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.23 per square foot per year and leasing costs were $.84 per square foot per year.

"Dallas and Houston continue to experience strong job growth, with Houston being positively affected by the consolidation occurring within the energy industry. Therefore, we believe that our office portfolio is well positioned to outperform the overall national market. Even if market rental rates remained at current levels, we feel that our embedded lease growth from the rollover of 10.3 million square feet over the next 3 years will provide us with a source of solid cash flow growth," commented Dennis H. Alberts, President and Chief Operating Officer.

Resort and Residential Development Sector (16% of Asset Value as of March 31, 2001)

Destination Resort Properties

Destination resort property same-store rental income increased 3% for the three months ended March 31, 2001 over the same period in 2000 for the five properties owned during both periods. The average daily rate increased 7% and revenue per available room increased 1% for the three months ended March 31,

2001 compared to the same period in 2000.

Upscale Residential Development Properties

"As expected, the economic uncertainty affected the performance of our upscale residential development properties in the first quarter. Desert Mountain continues to be our main concern, as it did not meet first quarter volume expectations. The Woodlands, however, is performing at an acceptable level and is deriving strength from Carlton Woods, its newest upscale gated community. And in Colorado, the mountain development properties are on track to report a solid year by having presold 75% of their total 2001 budgeted unit sales. We will continue to monitor the effect of the economy on these developments and the impact to our sales projections," commented Alberts.