Crescent Announces Second Quarter 2006 Results

Business Wire, August 1, 2006

FORT WORTH, Texas -- Crescent Real Estate Equities Company (NYSE:CEI) today announced results for the second quarter of 2006. Net loss available to common shareholders for the three months ended June 30, 2006, was ($4.7) million, or ($0.05) per share (diluted). These compare to net loss available to common shareholders of ($13.6) million, or ($0.14) per share (diluted), for the three months ended June 30, 2005. Net loss available to common shareholders for the six months ended June 30, 2006, was ($17.8) million, or ($0.18) per share (diluted). These compare to net loss available to common shareholders of ($22.8) million, or ($0.23) per share (diluted) for the six months ended June 30, 2005.

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 $31.4 million, or $0.26 per share and equivalent unit, for the three months ended June 30, 2006, compared to $33.1 million, or $0.28 per share and equivalent unit, for the three months ended June 30, 2005. FFO, as adjusted to exclude debt extinguishment charges related to the sale of real estate assets for the six months ended June 30, 2006, was $56.2 million, or $0.46 per share and equivalent unit, compared to $62.0 million, or $0.53 per share and equivalent unit for the six months ended June 30, 2005. Crescent provides this calculation of FFO, as adjusted, because management utilizes it in making operating decisions and assessing performance, and 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 $31.4 million, or $0.26 per share and equivalent unit, for the three months ended June 30, 2006, compared to $33.8 million, or $0.29 per share and equivalent unit, for the three months ended June 30, 2005. FFO for the six months ended June 30, 2006, was $56.2 million, or $0.46 per share and equivalent unit, compared to $61.6 million, or $0.53 per share and equivalent unit, for the six months ended June 30, 2005. Both uses of FFO are non-GAAP financial measures, and as such, are reconciled to net income in the documents accompanying this press release. The definitions of FFO and FFO, as adjusted, are set forth in the press release in the section labeled "Funds From Operations."

According to John C. Goff, vice chairman and chief executive officer, "Our second quarter FFO per share of $0.26 exceeded our previously issued guidance of $0.20 to $0.22 per share primarily due to the acceleration of El Paso Energy's lease termination fees for approximately 258,000 square feet of re-leased space in Greenway Plaza, which was signed during second quarter. Re-leasing the El Paso space is proceeding well, and we are encouraged by the prospects. As for 2006 results, we anticipate modest growth in occupancy and rental rates in our portfolio as demand continues to improve in our markets. We remain comfortable with our 2006 full year guidance of $1.25 to $1.40 in FFO, as adjusted, per share."

On July 14, 2006, 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 August 15, 2006, to shareholders of record on July 31, 2006.

BUSINESS SECTOR REVIEW

Office Segment (58% of Gross Book Value of Real Estate Assets as of June 30, 2006)

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, 30.1 million square feet at June 30, 2006, including 14.3 million square feet of office properties in joint ventures.

- Same-store NOI -

Office property same-store net operating income ("NOI") declined 0.9% for the three months ended June 30, 2006, from the same period in 2005, for the 27.4 million square feet of office property space owned during both periods. Average economic occupancy for these same-store properties for the three months ended June 30, 2006, was 88.4% compared to 88.0% for the same period in 2005. Management expects full year 2006 same-store NOI growth of 0% to 2%.

Office property same-store net operating income ("NOI") declined 2.3% for the six months ended June 30, 2006, from the same period in 2005 for the 27.4 million square feet of office property space owned during both periods. Average economic occupancy for these same-store properties for the six months ended June 30, 2006, was 88.5% compared to 88.1% for the same period in 2005.

-Total Portfolio Occupancy -

As of June 30, 2006, leased occupancy was 91.1%, and economic occupancy was 88.2%.

- Leasing Activity -

Crescent leased 1.7 million net rentable square feet during the three months ended June 30, 2006, of which 0.9 million square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) increased 3% 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 $2.06 per square foot per year, and leasing costs were $1.08 per square foot per year.