Crescent Announces Third Quarter 2005 Results

Business Wire, Nov 1, 2005

FORT WORTH, Texas -- Crescent Real Estate Equities Company (NYSE:CEI) today announced results for the third quarter of 2005. Net income available to common shareholders for the three months ended September 30, 2005, was $71.6 million, or $0.71 per share (diluted). These compare to a net loss of ($18.7) million, or ($0.19) per share (diluted), for the three months ended September 30, 2004. Net income available to common shareholders for the nine months ended September 30, 2005, was $48.8 million, or $0.49 per share (diluted). These compare to net loss available to common shareholders of ($54.8) million, or ($0.55) per share for the nine months ended September 30, 2004.

Funds from operations available to common shareholders - diluted, as adjusted to exclude impairment charges and debt extinguishment charges related to the sale of real estate assets ("FFO, as adjusted"), was $22.8 million, or $0.19 per share and equivalent unit, for the three months ended September 30, 2005, compared to $31.3 million, or $0.27 per share and equivalent unit, for the three months ended September 30, 2004. FFO, as adjusted, for the nine months ended September 30, 2005, was $84.8 million, or $0.72 per share and equivalent unit, compared to $89.9 million, or $0.77 per share and equivalent unit, for the nine months ended September 30, 2004. Crescent provides this calculation of FFO, as adjusted, to assist investors in assessing Crescent's operating performance. Funds from operations available to common shareholders - diluted, calculated in accordance with the NAREIT definition ("FFO"), was $22.5 million, or $0.19 per share and equivalent unit, for the three months ended September 30, 2005, compared to $28.3 million, or $0.24 per share and equivalent unit, for the three months ended September 30, 2004. FFO, for the nine months ended September 30, 2005, was $84.1 million, or $0.71 per share and equivalent unit, compared to $84.1 million, or $0.72 per share and equivalent unit, for the nine months ended September 30, 2004. Both uses of FFO are non-GAAP financial measures, and as such, are reconciled to net income in the documents accompanying this press release.

According to John C. Goff, vice chairman and chief executive officer, "We are pleased to report that third quarter earnings results were better than our expectations. The quarter was highlighted by the sale of three office properties totaling 770,000 square feet, for which we recorded a net gain exceeding $105 million. We expect to see material accretion to earnings upon reinvestment of those proceeds."

On October 14, 2005, Crescent announced that its Board of Trust Managers had declared cash dividends of $0.375 per share for its Common Shares, $0.421875 per share for its Series A Convertible Preferred Shares, and $0.59375 per share for its Series B Redeemable Preferred Shares. The dividends are payable November 15, 2005, to shareholders of record on October 31, 2005.

BUSINESS SECTOR REVIEW

Office Sector (59% of Gross Book Value of Real Estate Assets as of September 30, 2005)

Operating Results

Crescent reports operating statistics in this press release assuming 100% ownership without adjusting for joint-venture interests. Crescent owned and managed, through its subsidiaries and joint ventures, 31.3 million square feet at September 30, 2005, including 14.9 million square feet of office properties in unconsolidated joint ventures and 0.5 million square feet in consolidated joint ventures.

Denny Alberts, president and chief operating officer, commented, "In the third quarter, Crescent's portfolio experienced overall positive absorption, ending the quarter at 89.7% leased. Consistent with original expectations, we anticipate ending the year at 90% leased. From a rollover standpoint, a total of 5.3 million gross square feet of leases was anticipated to expire in 2005. To date, 89% of that expiring space has been addressed - 87% by signed leases and 2% by leases in negotiation."

- Same-store NOI -

Office property same-store net operating income ("NOI") declined 1.1% for the three months ended September 30, 2005, from the same period in 2004 for the 27.3 million square feet of office property space owned during both periods. Average economic occupancy for these same-store properties for the three months ended September 30, 2005, was 86.8% compared to 86.3% for the same period in 2004.

Office property same-store net operating income ("NOI") declined 1.0% for the nine months ended September 30, 2005, from the same period in 2004 for the 27.3 million square feet of office property space owned during both periods. Average economic occupancy for these same-store properties for the nine months ended September 30, 2005, was 87.3% compared to 86.2% for the same period in 2004.

- Total Portfolio Occupancy -

As of September 30, 2005, leased occupancy was 89.7%, and economic occupancy was 87.6%.

- Leasing Activity -

The Company leased 1.5 million net rentable square feet during the three months ended September 30, 2005, of which 890,080 square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) decreased 2% from the expiring rates for the leases of the renewed or re-leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.79 per square foot per year, and leasing costs were $0.97 per square foot per year.