**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

FORM 10-Q

**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe quarterly period ended March 31, 2005**

**Or**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe transition periodfrom           to           **

**Commissionfile number 1-13531**

----

Trammell Crow Company

(Exact name of registrantas specified in its charter)

| **Delaware**  (State or other jurisdiction of  incorporation or organization) | **75-2721454**  (IRS Employer  Identification No.) |
|-------------------------------------------------------------------------------|----------------------------------------------------|
| **2001 Ross Avenue  Suite 3400  Dallas, Texas**                          | **75201**                                          |
| (Address of  principal executive offices)                                     | (Zip Code)                                         |

 

**(214) 863-3000**

(Registrant’s telephonenumber, including area code)

**Not applicable**

(Former name, formeraddress and formerfiscal year, if changed since last report)

----

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x  No o

There were 34,895,515 shares of the registrant’scommon stock outstanding as of May 1, 2005.

 

----

**TRAMMELLCROW COMPANY AND SUBSIDIARIESINDEX**
|               | ** ** | ** **                                                                                                                                                            | ** ** | **Page  Number** |
|---------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|
| PART I.  |       | Financial  Information                                                                                                                                                |       | 3                |   |
| Item 1.       |       | Financial  Statements                                                                                                                                                 |       | 3                |   |
|          |       | Condensed  Consolidated Balance Sheets as of March 31, 2005 (unaudited) and  December 31, 2004                                                              |       | 3                |   |
|          |       | Condensed  Consolidated Statements of Income for the three months ended March 31,  2005 and 2004 (unaudited)                                                     |       | 4                |   |
|          |       | Condensed  Consolidated Statements of Stockholders’ Equity for the three months ended  March 31, 2005 (unaudited) and the year ended December 31, 2004 |       | 5                |   |
|          |       | Condensed  Consolidated Statements of Cash Flows for the three months ended  March 31, 2005 and 2004 (unaudited)                                                 |       | 6                |   |
|          |       | Condensed  Consolidated Statements of Comprehensive Income for the three months ended  March 31, 2005 and 2004 (unaudited)                                       |       | 7                |   |
|          |       | Notes  to Condensed Consolidated Financial Statements (unaudited)                                                                                                     |       | 8                |   |
| Item 2.       |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                           |       | 27               |   |
| Item 3.       |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                           |       | 35               |   |
| Item 4.       |       | Controls  and Procedures                                                                                                                                              |       | 36               |   |
| PART II. |       | Other  Information                                                                                                                                                    |       | 37               |   |
| Item 1.       |       | Legal  Proceedings                                                                                                                                                    |       | 37               |   |
| Item  2.      |       | Unregistered Sales of Equity  Securities and Use of Proceeds                                                                                                          |       | 37               |   |
| Item 6.       |       | Exhibits                                                                                                                                                              |       | 38               |   |

 

2

----

**PART I—FINANCIALINFORMATION**

**ITEM 1.     *Financial Statements***

**TRAMMELL CROWCOMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data)**
| ** **                                                                                                                                                                                                 | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                 | ** ** | **(Unaudited)**          | ** ** | **(Note 1)**           | ** ** |
| **ASSETS**                                                                                                                                                                                                 | ** ** |                     | ** ** | ** **                  |       |   | ** ** | ** ** |   |
| Current assets                                                                                                                                                                                             |       |                     |       | ** **                  |       |   |   | ** ** |   |
| Cash and cash  equivalents                                                                                                                                                                                 |       |                     | $          | 38,486                      | ** ** |   |   | $ | 163,637 | ** ** |   |
| Restricted cash                                                                                                                                                                                            |       |                     | 7,122      | ** **                  |       |   | 9,950 | ** ** |   |
| Accounts  receivable, net of allowance for doubtful accounts of $3,126 in 2005 and  $3,144 in 2004                                                                                                         |       |                     | 91,023     | ** **                  |       |   | 103,551 | ** ** |   |
| Receivables from  affiliates                                                                                                                                                                               |       |                     | 3,145      | ** **                  |       |   | 1,626 | ** ** |   |
| Notes and other  receivables                                                                                                                                                                               |       |                     | 22,235     | ** **                  |       |   | 19,726 | ** ** |   |
| Income taxes  recoverable                                                                                                                                                                                  |       |                     | 2,021      | ** **                  |       |   | — | ** ** |   |
| Deferred income  taxes                                                                                                                                                                                     |       |                     | 4,022      | ** **                  |       |   | 4,021 | ** ** |   |
| Real estate under  development                                                                                                                                                                             |       |                     | 29,998     | ** **                  |       |   | 20,756 | ** ** |   |
| Real estate and  other assets held for sale                                                                                                                                                                |       |                     | 16,266     | ** **                  |       |   | 6,423 | ** ** |   |
| Available for sale  securities                                                                                                                                                                             |       |                     | 495        | ** **                  |       |   | — | ** ** |   |
| Other current  assets                                                                                                                                                                                      |       |                     | 17,361     | ** **                  |       |   | 18,089 | ** ** |   |
| Total current  assets                                                                                                                                                                                      |       |                     | 232,174    | ** **                  |       |   | 347,779 | ** ** |   |
| Furniture and  equipment, net                                                                                                                                                                              |       |                     | 18,563     | ** **                  |       |   | 18,649 | ** ** |   |
| Deferred income  taxes                                                                                                                                                                                     |       |                     | 23,187     | ** **                  |       |   | 22,935 | ** ** |   |
| Real estate under  development                                                                                                                                                                             |       |                     | 109,012    | ** **                  |       |   | 60,530 | ** ** |   |
| Real estate held  for investment                                                                                                                                                                           |       |                     | 120,074    | ** **                  |       |   | 134,376 | ** ** |   |
| Investments in  unconsolidated subsidiaries                                                                                                                                                                |       |                     | 82,190     | ** **                  |       |   | 74,090 | ** ** |   |
| Goodwill, net                                                                                                                                                                                              |       |                     | 74,355     | ** **                  |       |   | 74,357 | ** ** |   |
| Available for sale  securities                                                                                                                                                                             |       |                     | 16,976     | ** **                  |       |   | — | ** ** |   |
| Other assets                                                                                                                                                                                               |       |                     | 18,890     | ** **                  |       |   | 16,234 | ** ** |   |
|                                                                                                                                                                                                       |       |                     | $          | 695,421                     | ** ** |   |   | $ | 748,950 | ** ** |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                             | ** ** |                     | ** ** | ** **                  |       |   | ** ** | ** ** |   |
| Current liabilities                                                                                                                                                                                        |       |                     |       | ** **                  |       |   |   | ** ** |   |
| Accounts payable                                                                                                                                                                                           |       |                     | $          | 20,702                      | ** ** |   |   | $ | 23,731 | ** ** |   |
| Accrued expenses                                                                                                                                                                                           |       |                     | 87,725     | ** **                  |       |   | 148,757 | ** ** |   |
| Payables to  affiliates                                                                                                                                                                                    |       |                     | 152        | ** **                  |       |   | 40 | ** ** |   |
| Income taxes  payable                                                                                                                                                                                      |       |                     | —     | ** **                  |       |   | 18,121 | ** ** |   |
| Current portion of  long-term debt                                                                                                                                                                         |       |                     | 6          | ** **                  |       |   | 6 | ** ** |   |
| Current portion of  notes payable on real estate                                                                                                                                                           |       |                     | 27,193     | ** **                  |       |   | 21,937 | ** ** |   |
| Liabilities  related to real estate and other assets held for sale                                                                                                                                         |       |                     | 13,983     | ** **                  |       |   | 5,914 | ** ** |   |
| Other current  liabilities                                                                                                                                                                                 |       |                     | 12,440     | ** **                  |       |   | 12,623 | ** ** |   |
| Total current  liabilities                                                                                                                                                                                 |       |                     | 162,201    | ** **                  |       |   | 231,129 | ** ** |   |
| Long-term  debt, less current portion                                                                                                                                                                      |       |                     | 5          | ** **                  |       |   | 8 | ** ** |   |
| Notes payable on  real estate, less current portion                                                                                                                                                        |       |                     | 155,707    | ** **                  |       |   | 122,079 | ** ** |   |
| Other liabilities                                                                                                                                                                                          |       |                     | 11,127     | ** **                  |       |   | 10,028 | ** ** |   |
| Total liabilities                                                                                                                                                                                          |       |                     | 329,040    | ** **                  |       |   | 363,244 | ** ** |   |
| Minority interest                                                                                                                                                                                          |       |                     | 32,807     | ** **                  |       |   | 44,756 | ** ** |   |
| Stockholders’ equity                                                                                                                                                                                  |       |                     |       | ** **                  |       |   |   | ** ** |   |
| Preferred stock;  $0.01 par value; 30,000,000 shares authorized; none issued or outstanding                                                                                                                |       |                     | —     | ** **                  |       |   | — | ** ** |   |
| Common stock;  $0.01 par value; 100,000,000 shares authorized; 37,903,058 shares issued and  35,264,347 shares outstanding in 2005 and 37,902,998 shares issued and  35,605,007 shares outstanding in 2004 |       |                     | 379        | ** **                  |       |   | 379 | ** ** |   |
| Paid-in  capital                                                                                                                                                                                           |       |                     | 196,472    | ** **                  |       |   | 196,314 | ** ** |   |
| Retained earnings                                                                                                                                                                                          |       |                     | 189,365    | ** **                  |       |   | 190,252 | ** ** |   |
| Accumulated other  comprehensive income                                                                                                                                                                    |       |                     | 1,921      | ** **                  |       |   | 2,043 | ** ** |   |
| Less: Treasury  stock                                                                                                                                                                                      |       |                     | (45,161    | )                           |       |   | (36,921 | ) |   |
| Unearned stock  compensation, net                                                                                                                                                                          |       |                     | (9,402     | )                           |       |   | (11,117 | ) |   |
| Total stockholders’  equity                                                                                                                                                                           |       |                     | 333,574    | ** **                  |       |   | 340,950 | ** ** |   |
|                                                                                                                                                                                                       |       |                     | $          | 695,421                     | ** ** |   |   | $ | 748,950 | ** ** |   |

 

See accompanying notes.

3

----

**TRAMMELL CROWCOMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(in thousands, except share and per share data)(Unaudited)**
| ** **                                                                                                                                 | ** **   | **For the Three Months  Ended March 31,**                                                               | ** **   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------------------------------------------------------------------------------------------------|--------------|
| ** **                                                                                                                                 | ** **   | **          2005          ** | ** **   | **          2004          ** | ** ** |
| **REVENUES**                                                                                                                               | ** **   |                                                                                                                             | ** **   | ** ** |   |   | ** ** | ** ** |   |
| ***User  Services:***                                                                                                                      | *** *** | * *                                                                                                                         | *** *** | ** ** | * * | * * | *** *** | ** ** |   |
| Facilities  management                                                                                                                     |         |                                                                                                                             | $            | 55,137 |   |   |   | $ | 50,756 |   |   |
| Corporate advisory  services                                                                                                               |         |                                                                                                                             | 24,673       |   |   |   | 22,534 |   |   |
| Project management  services                                                                                                               |         |                                                                                                                             | 25,324       |   |   |   | 17,962 |   |   |
|                                                                                                                                       |         |                                                                                                                             | 105,134      |   |   |   | 91,252 |   |   |
| ***Investor  Services:***                                                                                                                  | *** *** | * *                                                                                                                         | *** *** |   | * * | * * | *** *** |   |   |
| Property  management                                                                                                                       |         |                                                                                                                             | 34,087       |   |   |   | 34,562 |   |   |
| Brokerage                                                                                                                                  |         |                                                                                                                             | 27,780       |   |   |   | 22,149 |   |   |
| Construction  management                                                                                                                   |         |                                                                                                                             | 2,215        |   |   |   | 1,718 |   |   |
|                                                                                                                                       |         |                                                                                                                             | 64,082       |   |   |   | 58,429 |   |   |
| Development and  construction                                                                                                              |         |                                                                                                                             | 9,067        |   |   |   | 8,329 |   |   |
|                                                                                                                                       |         |                                                                                                                             | 178,283      |   |   |   | 158,010 |   |   |
| Gain on  disposition of real estate                                                                                                        |         |                                                                                                                             | 1,568        |   |   |   | 468 |   |   |
|                                                                                                                                       |         |                                                                                                                             | 179,851      |   |   |   | 158,478 |   |   |
| **COSTS AND EXPENSES**                                                                                                                     | ** **   |                                                                                                                             | ** **   |   |   |   | ** ** |   |   |
| Salaries, wages  and benefits                                                                                                              |         |                                                                                                                             | 125,745      |   |   |   | 116,152 |   |   |
| Commissions                                                                                                                                |         |                                                                                                                             | 22,658       |   |   |   | 20,022 |   |   |
| General and  administrative                                                                                                                |         |                                                                                                                             | 30,881       |   |   |   | 26,335 |   |   |
| Depreciation and  amortization                                                                                                             |         |                                                                                                                             | 2,684        |   |   |   | 3,198 |   |   |
| Interest                                                                                                                                   |         |                                                                                                                             | 1,308        |   |   |   | 853 |   |   |
|                                                                                                                                       |         |                                                                                                                             | 183,276      |   |   |   | 166,560 |   |   |
| Operating loss                                                                                                                             |         |                                                                                                                             | (3,425       | ) |   |   | (8,082 | ) |   |
| Interest and other  income                                                                                                                 |         |                                                                                                                             | 927          |   |   |   | 886 |   |   |
| Loss from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries        |         |                                                                                                                             | (2,498       | ) |   |   | (7,196 | ) |   |
| Income tax benefit                                                                                                                         |         |                                                                                                                             | 953          |   |   |   | 3,020 |   |   |
| Minority interest,  net of income tax (expense) benefit of $(1,227) and $25 in 2005  and 2004, respectively                           |         |                                                                                                                             | 1,988        |   |   |   | (35 | ) |   |
| Income from  investments in unconsolidated subsidiaries, net of income tax expense  of $977 and $4,316 in 2005 and 2004, respectively |         |                                                                                                                             | 1,583        |   |   |   | 5,970 |   |   |
| Income from  continuing operations                                                                                                         |         |                                                                                                                             | 2,026        |   |   |   | 1,759 |   |   |
| Income from  discontinued operations, net of income tax expense of $16 and $246  in 2005 and 2004, respectively                            |         |                                                                                                                             | 27           |   |   |   | 340 |   |   |
| Net income                                                                                                                                 |         |                                                                                                                             | $            | 2,053 |   |   |   | $ | 2,099 |   |   |
| Income per share from continuing operations:                                                                                               |         |                                                                                                                             |         |   |   |   |   |   |   |
| Basic                                                                                                                                      |         |                                                                                                                             | $            | 0.06 |   |   |   | $ | 0.05 |   |   |
| Diluted                                                                                                                                    |         |                                                                                                                             | $            | 0.06 |   |   |   | $ | 0.05 |   |   |
| Income per share from discontinued operations, net of  income taxes:                                                                  |         |                                                                                                                             |         |   |   |   |   |   |   |
| Basic                                                                                                                                      |         |                                                                                                                             | $            | — |   |   |   | $ | 0.01 |   |   |
| Diluted                                                                                                                                    |         |                                                                                                                             | $            | — |   |   |   | $ | 0.01 |   |   |
| Net income per share:                                                                                                                      |         |                                                                                                                             |         |   |   |   |   |   |   |
| Basic                                                                                                                                      |         |                                                                                                                             | $            | 0.06 |   |   |   | $ | 0.06 |   |   |
| Diluted                                                                                                                                    |         |                                                                                                                             | $            | 0.06 |   |   |   | $ | 0.06 |   |   |
| Weighted average common shares outstanding:                                                                                                |         |                                                                                                                             |         |   |   |   |   |   |   |
| Basic                                                                                                                                      |         |                                                                                                                             | 33,690,507   |   |   |   | 35,498,197 |   |   |
| Diluted                                                                                                                                    |         |                                                                                                                             | 36,144,031   |   |   |   | 37,390,140 |   |   |

 

See accompanying notes.

4

----

**TRAMMELL CROWCOMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYThree Months Ended March 31, 2005 (Unaudited) and Year EndedDecember 31, 2004 (Note 1)(in thousands, except share data)**
| ** **                                                                           | ** ** | **Common Shares** | ** ** | **Common  Stock Par** | ** ** | **Paid-In** | ** ** | **Retained** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | **Treasury** | ** ** | **Unearned  Stock** | ** ** | ** **       | ** ** |
|--------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|-------------|------------|--------------|------------|---------------------------------------|------------|--------------|------------|---------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **Issued**             | ** ** | **Treasury**               | ** ** | **Value**   | ** ** | **Capital**  | ** ** | **Earnings**                          | ** ** | **Income**   | ** ** | **Stock**           | ** ** | **Compensation** | ** ** | **Total** | ** ** |
| Balance at January 1, 2004                                       |       | 37,783,595             |       | 921,353                    |       |        | $          | 377          |       |                                  | $          | 192,336      |       | $                   | 151,560    |             |       | $ | 1,106 |   |   | $ | (8,363 | ) |   | $ | (9,387 | ) |   | $ | 327,629 |   |
| Net income                                                                           |       | —                 |       | —                     |       |        | —     |         |       | —                                |       | 39,119       |       |                | —     |             |       | — |   |   | — |   |   | 39,119 |   |
| Issuance of restricted stock                                                         |       | 28,000                 |       | (644,313                   | )          |        | 1          |         |       | 2,846                                 |       | —       |       |                | —     |             |       | 5,870 |   |   | (8,717 | ) |   | — |   |
| Forfeiture of restricted stock                                                       |       | —                 |       | 32,632                     |       |        | —     |         |       | —                                |       | —       |       |                | —     |             |       | (394 | ) |   | 304 |   |   | (90 | ) |
| Amortization of unearned stock compensation                                     |       | —                 |       | —                     |       |        | —     |         |       | —                                |       | —       |       |                | —     |             |       | — |   |   | 6,683 |   |   | 6,683 |   |
| Issuance of common stock                                                             |       | 91,403                 |       | (366,118                   | )          |        | 1          |         |       | 1,132                                 |       | (427         | )          |                | —     |             |       | 3,900 |   |   | — |   |   | 4,606 |   |
| Stock repurchase                                                                     |       | —                 |       | 2,354,437                  |       |        | —     |         |       | —                                |       | —       |       |                | —     |             |       | (37,934 | ) |   | — |   |   | (37,934 | ) |
| Foreign currency translation adjustment, net of tax                                  |       | —                 |       | —                     |       |        | —     |         |       | —                                |       | —       |       |                | 937        |             |       | — |   |   | — |   |   | 937 |   |
| Balance at December 31, 2004                                                    |       | 37,902,998             |       | 2,297,991                  |       |        | 379        |         |       | 196,314                               |       | 190,252      |       |                | 2,043      |             |       | (36,921 | ) |   | (11,117 | ) |   | 340,950 |   |
| Net income                                                                           |       | —                 |       | —                     |       |        | —     |         |       | —                                |       | 2,053        |       |                | —     |             |       | — |   |   | — |   |   | 2,053 |   |
| Forfeiture of restricted stock                                                       |       | —                 |       | 91,305                     |       |        | —     |         |       | —                                |       | —       |       |                | —     |             |       | (1,822 | ) |   | — |   |   | (1,822 | ) |
| Amortization of unearned stock compensation                                     |       | —                 |       | —                     |       |        | —     |         |       | 148                                   |       | —       |       |                | —     |             |       | — |   |   | 1,715 |   |   | 1,863 |   |
| Issuance of common stock                                                             |       | 60                     |       | (289,885                   | )          |        | —     |         |       | 10                                    |       | (2,940       | )          |                | —     |             |       | 4,705 |   |   | — |   |   | 1,775 |   |
| Stock Repurchase                                                                     |       | —                 |       | 539,300                    |       |        | —     |         |       | —                                |       | —       |       |                | —     |             |       | (11,123 | ) |   | — |   |   | (11,123 | ) |
| Foreign currency translation adjustment, net of tax                                  |       | —                 |       | —                     |       |        | —     |         |       | —                                |       | —       |       |                | (11        | )                |       | — |   |   | — |   |   | (11 | ) |
| Unrealized holding gains/(losses) on available  for sale securities, net of tax |       | —                 |       | —                     |       |        | —     |         |       | —                                |       | —       |       |                | (111       | )                |       | — |   |   | — |   |   | (111 | ) |
| Balance at  March 31, 2005                                                      |       | 37,903,058             |       | 2,638,711                  |       |        | $          | 379          |       |                                  | $          | 196,472      |       | $                   | 189,365    |             |       | $ | 1,921 |   |   | $ | (45,161 | ) |   | $ | (9,402 | ) |   | $ | 333,574 |   |

 

See accompanying notes.

5

----

**TRAMMELL CROWCOMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited)**
| ** **                                                            | ** ** | **For the   Three Months   Ended March 31,** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **2005**                                                                   | ** ** | **2004** | ** ** |
| **Operating activities**                                              |       |                                                                       |       |   |   |
| Cash flows from earnings:                                             |       |                                                                       |       |   |   |
| Net income                                                            |       | $                                                                          | 2,053      |   | $ | 2,099 |   |
| Reconciliation of net  income to net cash provided by earnings:       |       |                                                                       |       |   |   |
| Depreciation and  amortization                                        |       | 2,684                                                                      |       | 3,257 |   |
| Amortization of  employment contracts and unearned stock compensation |       | 2,141                                                                      |       | 1,491 |   |
| Amortization of  contract intangibles                                 |       | 372                                                                        |       | 525 |   |
| Bad debt expense  (recovery)                                          |       | 84                                                                         |       | (320 | ) |
| Provision for  losses and writedowns for impairment on real estate    |       | —                                                                     |       | 31 |   |
| Gain on  disposition of real estate held for investment               |       | (28                                                                        | )          | (556 | ) |
| Minority interest                                                     |       | (3,215                                                                     | )          | 60 |   |
| Deferred income  tax benefit                                          |       | (199                                                                       | )          | (10 | ) |
| Income from  investments in unconsolidated subsidiaries               |       | (2,560                                                                     | )          | (10,286 | ) |
| Net cash provided  by (used in) earnings                              |       | 1,332                                                                      |       | (3,709 | ) |
| Changes in operating  assets and liabilities:                         |       |                                                                       |       |   |   |
| Restricted cash                                                       |       | 2,828                                                                      |       | 296 |   |
| Accounts  receivable                                                  |       | 12,526                                                                     |       | 4,240 |   |
| Receivables from  affiliates                                          |       | (1,519                                                                     | )          | (4,580 | ) |
| Notes receivable  and other assets                                    |       | (6,635                                                                     | )          | 1,809 |   |
| Real estate held  for sale and under development                      |       | (36,346                                                                    | )          | (12,130 | ) |
| Notes payable on  real estate held for sale and under development     |       | 28,414                                                                     |       | 6,670 |   |
| Accounts payable  and accrued expenses                                |       | (63,049                                                                    | )          | (30,736 | ) |
| Payables to  affiliates                                               |       | 112                                                                        |       | (60 | ) |
| Income taxes  payable                                                 |       | (20,142                                                                    | )          | (6,114 | ) |
| Other liabilities                                                     |       | 1,111                                                                      |       | (138 | ) |
| Net cash flows  from changes in working capital                       |       | (82,700                                                                    | )          | (40,743 | ) |
| Net cash used in  operating activities                                |       | (81,368                                                                    | )          | (44,452 | ) |
| **Investing activities**                                              |       |                                                                       |       |   |   |
| Expenditures for  furniture and equipment                             |       | (1,862                                                                     | )          | (1,387 | ) |
| Purchase of  available for sale securities                            |       | (17,629                                                                    | )          | — |   |
| Additions to real  estate held for investment                         |       | (17,588                                                                    | )          | (1,902 | ) |
| Net proceeds from  disposition of real estate held for investment     |       | 28                                                                         |       | 11,335 |   |
| Investments in  unconsolidated subsidiaries                           |       | (8,035                                                                     | )          | (575 | ) |
| Distributions from  unconsolidated subsidiaries                       |       | 2,495                                                                      |       | 10,670 |   |
| Net cash provided  by (used in) investing activities                  |       | (42,591                                                                    | )          | 18,141 |   |
| **Financing activities**                                              |       |                                                                       |       |   |   |
| Principal payments  on long-term debt and capital lease obligations   |       | (192                                                                       | )          | (46,109 | ) |
| Proceeds from long-term  debt                                         |       | —                                                                     |       | 34,929 |   |
| Contributions from  minority interest                                 |       | 2,271                                                                      |       | 7,144 |   |
| Distributions to  minority interest                                   |       | (11,005                                                                    | )          | (67 | ) |
| Proceeds from  notes payable on real estate held for investment       |       | 17,126                                                                     |       | 584 |   |
| Payments on notes  payable on real estate held for investment         |       | (44                                                                        | )          | (9,629 | ) |
| Proceeds from  exercise of stock options                              |       | 272                                                                        |       | 140 |   |
| Proceeds from  issuance of common stock                               |       | 1,503                                                                      |       | 1,240 |   |
| Purchase of common  stock                                             |       | (11,123                                                                    | )          | — |   |
| Net cash used in  financing activities                                |       | (1,192                                                                     | )          | (11,768 | ) |
| Net decrease in  cash and cash equivalents                            |       | (125,151                                                                   | )          | (38,079 | ) |
| Cash and cash  equivalents, beginning of period                       |       | 163,637                                                                    |       | 105,616 |   |
| Cash and cash  equivalents, end of period                             |       | $                                                                          | 38,486     |   | $ | 67,537 |   |

 

See accompanying notes.

6

----

**TRAMMELL CROWCOMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in thousands)(Unaudited)**
| ** **                                                                                                    | ** ** | **For the  Three Months  Ended March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                                    | ** ** | **2005**                                                       | ** ** | **2004** | ** ** |
| Net income                                                                                                    |       | $                                                              | 2,053      |   | $ | 2,099 |   |
| Other  comprehensive income:                                                                                  |       |                                                           |       |   |   |
| Foreign currency translation adjustments, net of tax  expense (benefit) of $(7) in 2005 and $148 in 2004 |       | (11                                                            | )          | 199 |   |
| Unrealized holding gains/(losses) on available for  sale securities, net of tax  benefit of $47 in 2005       |       | (111                                                           | )          | — |   |
| Comprehensive income                                                                                          |       | $                                                              | 1,931      |   | $ | 2,298 |   |

 

See accompanying notes.

7

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**1.**   General

The condensed consolidated interim financialstatements of Trammell Crow Company and subsidiaries (the “Company”) includedherein have been prepared in accordance with the requirements for interimfinancial statements and do not include all disclosures required underaccounting principles generally accepted in the United States (“GAAP”) forcomplete financial statements. These financial statements should be read inconjunction with the consolidated financial statements included in the Company’sAnnual Report on Form 10-K for the year ended December 31, 2004. Inthe opinion of management, all adjustments and eliminations, consisting only ofrecurring adjustments, necessary for a fair presentation of the financialstatements for the interim periods have been made. Interim results ofoperations are not necessarily indicative of the results to be expected for thefull year.

The Company hasexperienced and expects to continue to experience quarterly variations inrevenues and net income as a result of several factors. The Company’s quarterlyrevenues tend to increase throughout the year, particularly in the last quarterof the year, because its clients have demonstrated a tendency to closetransactions toward the end of the year. The timing and introduction of newcontracts, the disposition of investments in real estate assets, therecognition of incentive fees as contractual targets are met and other factorsmay also cause quarterly fluctuations in the Company’s results of operations.

*Reclassifications*

In accordance withFinancial Accounting Standards Board (“FASB”) Statement of Financial AccountingStandards No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets*(“FAS 144”),certain assets and liabilities at December 31, 2004, and certain revenuesand expenses for the three months ended March 31, 2004, have beenreclassified to conform to the presentation at and for the three months ended March 31,2005 (see Notes 9 and 11). As a result, certain balances differ from theamounts reported in previously filed documents.

*Use of Estimates*

The preparation of thefinancial statements in accordance with GAAP requires management to makeestimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes. Actual results could differ from thoseestimates.

*MarketableSecurities*

The Company accounts for investments in debt andequity securities in accordance with FASB Statement of Financial AccountingStandards No. 115, *Accounting for CertainInvestments in Debt and Equity Securities* (“FAS 115”). The Companydetermines the appropriate classification of debt and equity securities at thetime of purchase and reevaluates such designation as of each balance sheetdate. The Company classifies marketable securities it acquires with the intentto generate a profit from short-term movements in market prices as tradingsecurities. Debt securities are classified as held to maturity when the Companyhas the positive intent and ability to hold the securities to maturity.Marketable equity and 

8

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**1.**   General(Continued)

debt securities notclassified as trading or held to maturity are classified as available for sale.All of the marketable securities held by the Company at March 31, 2005 areclassified as available for sale.

In accordance with FAS115, available for sale securities are carried at fair market value and anydifference between cost and market value is recorded as unrealized gain orloss, net of income taxes, and is reported as accumulated other comprehensiveincome in the consolidated statement of stockholders’ equity. Premiums anddiscounts are recognized in interest and other income using the effectiveinterest method. Realized gains and losses and declines in value judged to beother-than-temporary on available for sale securities are included in interestand other income. The cost of securities sold is based on the specificidentification method. Interest and dividends on securities classified asavailable for sale are included in interest and other income.

*Income Taxes*

The Company accounts forincome taxes using the liability method. Deferred income taxes result fromtemporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for federal income tax purposes,and are measured using the enacted tax rates and laws that are expected to bein effect when the differences reverse.

*Earnings Per Share*

The weighted-averagecommon shares outstanding used to calculate diluted earnings per share for thethree months ended March 31, 2005 and 2004, include 2,453,524 and1,891,943 shares, respectively, to reflect the dilutive effect of unvestedrestricted stock and options to purchase shares of common stock.

*Stock-BasedCompensation*

The Company has elected to use the intrinsic methodunder Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees*(“APB 25”),to account for its stock-based compensation arrangements. Compensationexpense for stock options is recognized to the extent the market price of theunderlying stock on the date of grant exceeds the exercise price of the option.The Company recognizes compensation expense related to restricted stock awardsover the vesting period of the underlying award in an amount equal to the fairmarket value of the Company’s stock on the date of grant.

9

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**1.**   General (Continued)

Pro forma informationregarding net income and net income per share, shown in the table below, hasbeen determined as if the Company had applied the fair value recognitionprovisions of Statement of Financial Accounting Standards No. 123, *Accounting for Stock-Based Compensation* (“FAS 123”).
| ** **                                                                                                                               | ** ** | **For the Three Months  Ended March 31,**   | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                                                                                               | ** ** | **     2005     ** | ** ** | **     2004     ** | ** ** |
| Net income, as  reported                                                                                                                 |       |                                                                 | $          | 2,053 |   |   |   | $ | 2,099 |   |   |
| Add: Stock-based  employee compensation expense  included in net income, net of related tax effects                                      |       |                                                                 | 1,061      |   |   |   | 694 |   |   |
| Deduct: Stock-based  employee compensation expense  determined under fair value based method for all awards, net of related tax  effects |       |                                                                 | 1,793      |   |   |   | 1,206 |   |   |
| Pro forma net  income                                                                                                                    |       |                                                                 | $          | 1,321 |   |   |   | $ | 1,587 |   |   |
| Net income per  share:                                                                                                                   |       |                                                                 |       |   |   |   |   |   |   |
| Basic—as reported                                                                                                                   |       |                                                                 | $          | 0.06 |   |   |   | $ | 0.06 |   |   |
| Basic—pro forma                                                                                                                     |       |                                                                 | $          | 0.04 |   |   |   | $ | 0.04 |   |   |
| Net income per  share:                                                                                                                   |       |                                                                 |       |   |   |   |   |   |   |
| Diluted—as reported                                                                                                                 |       |                                                                 | $          | 0.06 |   |   |   | $ | 0.06 |   |   |
| Diluted—pro forma                                                                                                                   |       |                                                                 | $          | 0.04 |   |   |   | $ | 0.04 |   |   |

 

*Non-ControllingInterests in Consolidated Limited Life Subsidiaries*

In May 2003, the FASBissued Statement of Financial Accounting Standards No. 150, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity* (“FAS 150”). Certainprovisions of FAS 150 would have required the Company to classifynon-controlling interests in consolidated limited life subsidiaries asliabilities adjusted to their settlement values in the Company’s financialstatements. In November 2003, the FASB indefinitely deferred applicationof the measurement and recognition provisions (but not the disclosurerequirements) of FAS 150 with respect to these non-controlling interests.As of March 31, 2005, the estimated settlement value of non-controllinginterests in the Company’s consolidated limited life subsidiaries is $8,403, ascompared to book value (included in minority interest on the Company’s balancesheet) of $6,051. The excess of settlement value over book value is driven byan even larger estimated appreciation of certain consolidated real estateassets and investments from the Company’s book value, offset by selling costsand debt prepayment penalties, if any.

*New Accounting Pronouncements*

On December 16, 2004, the FASB issued Statementof Financial Accounting Standards No. 123 (revised 2004), *Share-Based Payment* (“FAS 123R”), which is a revision of FAS123. Generally, the approach in FAS 123R is similar to the approach described inFAS 123. However, FAS 123R requires all 

10

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**1.**   General(Continued)

share-based payments toemployees, including grants of employee stock options, to be recognized in theincome statement based on their fair values. Pro forma disclosure is no longeran alternative.

In April 2005, the SEC deferred the implementationdate of FAS 123R to become effective for annual periods beginning after June 15,2005, or January 1, 2006, for the Company. FAS 123R permits publiccompanies to adopt its requirements using one of two methods: a “modified-prospective”method or a “modified-retrospective” method. The company plans to adopt FAS123R using the modified-prospective method.

As permitted by FAS 123,the Company currently accounts for share-based payments to employees using APB25’s intrinsic value method and, as such, generally recognizes no compensationcost for employee stock options. Accordingly, the adoption of FAS 123R’s fairvalue method could have a significant impact on the Company’s results ofoperations, although it will have no impact on the Company’s overall financialposition. The impact of adoption of FAS 123R cannot be predicted at this timebecause it will depend on levels of share-based payments granted in the future.However, had the Company adopted FAS 123R, the impact of that standard wouldhave approximated the impact of FAS 123 as described in the disclosure ofpro forma net income and earnings per share in this Note 1.

**2.**   Variable InterestEntities

The Company was involved in the formation of a legalentity to act primarily as an agent of the Company to enter into policies withinsurance carriers. The policies are for various types of insurance, includinggeneral liability, workers’ compensation and auto. The entity is wholly-ownedby an employee of the Company who holds the appropriate local insurance agent’slicense required to issue these insurance policies on behalf of the insurancecarriers. The entity collects premiums and remits them to the insurancecarriers. In exchange, the entity receives commissions from the insurancecarriers and remits a portion of the commission revenue to the Company(determined at the Company’s full discretion) in accordance with a facilitiesand services agreement. Based upon its evaluation, the Company consolidatesthis entity as the primary beneficiary of a variable interest entity (“VIE”)under FASB Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest Entities* (“FIN 46R”). Asof March 31, 2005, the Company has $2,567 recorded in restricted cash and$366 recorded in available for sale securities that serve as collateral for theVIE’s obligations to the insurance carriers.

In January 2005, the Company restructured aconsolidated entity established to develop an office building by admitting amajority interest partner. Based upon its evaluation at this reconsiderationevent, the Company consolidates this entity as the primary beneficiary of aVIE. The entity’s note payable balance of $21,323 is non-recourse to theCompany and is collateralized by the real estate project.

In September 2004, the Company issued a budgetguaranty relating to a development project. Under the budget guaranty, theCompany is responsible for all costs in excess of an approved budget ofapproximately $35,400. The Company was involved in the design of the underlyingentity and has determined that its budget guaranty represents a variableinterest in a VIE for which the Company is not 

11

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**2.**   VariableInterest Entities (Continued)

the primary beneficiary.The Company cannot estimate its actual maximum exposure to loss as a result ofits involvement with this VIE because the budget guaranty is unlimited.However, based on the Company’s experience of minimal payments under similararrangements and the existence of a guaranteed maximum contract between thegeneral contractor and the owner of the project that mitigates the Company’srisk, the Company believes that its exposure to loss is not material.

In December 2003, the Company sold a parcel ofland for $1,750 to an independent third party (see Note 3). The considerationreceived included a $1,125 interest-bearing note from the buyer which theCompany has determined is a variable interest in a VIE. The VIE is a singleasset entity financed with the Company’s note and another loan subordinate tothe Company’s note. Based on the Company’s evaluation, the Company is not theprimary beneficiary of the entity, and therefore, has not consolidated the entity.The Company’s maximum exposure to loss as a result of its involvement with thisVIE is limited to its outstanding note balance of $1,093 as of March 31,2005.

The Company is part of a co-lender group with anindependent third party that issued a mezzanine loan to the owner of two officebuildings. In April 2000, the Company provided $567 of the total $5,667mezzanine loan. At that time, another independent third-party lender providedthe senior financing of $19,100 to the owner. The Company also providesbuilding management and leasing services for the buildings under a long-termcontract at market rates for such services. The mezzanine loan arrangement isconsidered to be a variable interest in the entity that owns the property,which the Company believes is a VIE. However, based upon the Company’sevaluation, the Company is not the primary beneficiary of the entity, and,therefore, the Company has not consolidated the VIE. The VIE sold one of itsbuildings in December 2004 and paid a portion of the Company’s notereceivable at that time. The Company’s maximum exposure to loss as a result ofits involvement with this VIE is limited to its outstanding note balance of$430 as of March 31, 2005.

In 2002, the Company paid$1,500 to an entity in exchange for entering into a management agreement andobtaining participation rights in the residual cash flows of the entityavailable to its equity holders after repayment of debt. This arrangement isconsidered to be a variable interest in the entity, which is a VIE. The Companyholds no other interest in the entity. The entity is a single purpose entitywhich owns and operates a real estate asset with an estimated fair value inexcess of $90,000 as of March 31, 2005. Based on the Company’s evaluation,the Company is not the primary beneficiary of the entity and therefore, has notconsolidated the entity. The Company’s maximum exposure to loss as a result ofits involvement with this VIE is limited to $1,500 (recorded in other assets onthe Company’s consolidated balance sheet) as of March 31, 2005.

12

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**3.**   Real Estate

Allreal estate is included in the Company’s Development and Investment segment(see Note 14). Certain real estate assets owned by the Company secure theoutstanding balances of underlying mortgage or construction loans. Real estateowned by the Company consists of the following:
| ** **                                                      | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Real estate under  development (current)                        |       | $                        | 29,998     |                        |       | $ | 20,756 |   |   |
| Real estate  included in assets held for sale (see Note 9) |       | 15,137                   |       |                        | 5,323      |   |   |
| Real estate under  development (non-current)                    |       | 109,012                  |       |                        | 60,530     |   |   |
| Real estate held  for investment(1)                             |       | 120,074                  |       |                        | 134,376    |   |   |
|                                                            |       | $                        | 274,221    | (2)                         |       | $ | 220,985 | (2) |   |

----

(1)                 Netof accumulated depreciation of $1,414 and $1,001 at March 31, 2005, and December 31,2004, respectively.

(2)                 Includes$3,741 and $1,146 at March 31, 2005, and December 31, 2004,respectively, of lease intangibles and tenant origination costs, net ofaccumulated amortization.

In 2004, the Company sold a 150-acre land parcel to athird party for cash of $30,010. At the time of sale, a consolidated subsidiaryof the Company (other than the entity that sold the property) held a purchasecontract on seven acres of the 150-acre land parcel. As a result, the Companyrecorded the transaction related to the seven-acre parcel as a financingtransaction, rather than a sale. As of March 31, 2005, real estate andother assets held for sale includes $344 of real estate, and liabilitiesrelated to real estate and other assets held for sale includes $1,386 of notespayable related to this seven-acre land parcel.

In 2003, the Company sold a parcel of land for $1,750to an entity determined to be a VIE, of which $1,125 of the considerationreceived was in the form of an interest-bearing note from the buyer (see Note 2).The Company retained a unilateral right to repurchase the property at any timethrough 2006, in addition to maintaining the right to approve any plans fordevelopment on the property. If the Company exercises its repurchase option,the Company would repay the amount it received from the buyer, plus a return onthe buyer’s investment. Because of the Company’s continuing involvement in andoption to repurchase the property, the transaction was recorded as a financingtransaction rather than a sale. As of March 31, 2005, real estate andother assets held for sale includes $1,408 of real estate, $1,093 of notesreceivable and $3 of other current assets, and liabilities related to realestate and other assets held for sale include $1,750 of notes payable and $211of accrued interest, all related to this parcel of land.

13

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**4.**   MarketableSecurities

Thefollowing is a summary of marketable securities held by the Company at March 31,2005, all of which are classified as available for sale. The Company held nomarketable securities at December 31, 2004.
| ** **                                                            | ** ** | **Amortized        Cost      ** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Estimated  Fair         Value      ** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|------------------------------|------------|-------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| U.S. Treasury  securities and obligations of U.S. government agencies |       |                                                                                        | $          | 5,811                        |       |                          |       | $                                                                                                        | 3          |   |   |   | $ | (36 | ) |   |   | $ | 5,778 |   |   |
| Corporate debt  securities                                            |       |                                                                                        | 3,566      |                         |       |                          | —     |                                                                                                     |       |   | (15 | ) |   |   | 3,551 |   |   |
| Asset-backed  securities                                              |       |                                                                                        | 1,616      |                         |       |                          | 5          |                                                                                                     |       |   | (2 | ) |   |   | 1,619 |   |   |
| Collateralized  mortgage obligations                                  |       |                                                                                        | 988        |                         |       |                          | 4          |                                                                                                     |       |   | — |   |   |   | 992 |   |   |
| Total debt securities                                                 |       |                                                                                        | 11,981     |                         |       |                          | 12         |                                                                                                     |       |   | (53 | ) |   |   | 11,940 |   |   |
| Equity securities                                                     |       |                                                                                        | 5,648      |                         |       |                          | 78         |                                                                                                     |       |   | (195 | ) |   |   | 5,531 |   |   |
| Total available  for sale securities                                  |       |                                                                                        | $          | 17,629                       |       |                          |       | $                                                                                                        | 90         |   |   |   | $ | (248 | ) |   |   | $ | 17,471 |   |   |

 

Thenet carrying value and estimated fair value of available for sale debtsecurities at March 31, 2005, by contractual maturity, are shown below.Expected maturities may differ from contractual maturities because the issuersof the securities may have the right to prepay obligations without prepaymentpenalties.
| ** **                              | ** ** | **Amortized        Cost      ** | ** ** | **Estimated        Fair Value      ** | ** ** |
|-----------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| **Debt  securities:**                   |       |                                                                                        |       |                                                                                                   |       |   |   |   |   |
| Due in one year  or less                |       |                                                                                        | $          | 495                                                                                                    |       |   |   | $ | 495 |   |   |
| Due after one  year through five years  |       |                                                                                        | 4,250      |                                                                                                   |       |   | 4,234 |   |   |
| Due after five  years through ten years |       |                                                                                        | 4,379      |                                                                                                   |       |   | 4,349 |   |   |
| Due after ten  years                    |       |                                                                                        | 253        |                                                                                                   |       |   | 251 |   |   |
| Asset-backed  securities                |       |                                                                                        | 1,616      |                                                                                                   |       |   | 1,619 |   |   |
| Collateralized  mortgage obligations    |       |                                                                                        | 988        |                                                                                                   |       |   | 992 |   |   |
| Total debt  securities                  |       |                                                                                        | $          | 11,981                                                                                                 |       |   |   | $ | 11,940 |   |   |

 

**5.**   Investmentsin Unconsolidated Subsidiaries

Investmentsin unconsolidated subsidiaries consist of the following:
| ** **  | ** ** | **March 31,        2005      ** | ** ** | **December 31,        2004      ** | ** ** |
|-------------|------------|--------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|
| Real estate |       |                                                                                             | $          | 47,201                                                                                              |       |   |   | $ | 39,829 |   |   |
| Other       |       |                                                                                             | 34,989     |                                                                                                |       |   | 34,261 |   |   |
|        |       |                                                                                             | $          | 82,190                                                                                              |       |   |   | $ | 74,090 |   |   |

** **

14

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**5.**   Investments inUnconsolidated Subsidiaries (Continued)

The Company owns approximately 10.0% of theoutstanding stock of Savills plc (“Savills”), a property services firmheadquartered in the United Kingdom and a leading provider of real estateservices in Europe, Asia-Pacific and Australia (see Note 17). The investment isclassified as an “other” investment in the table above.

Summarizedoperating results for unconsolidated subsidiaries accounted for on the equitymethod are as follows:
| ** **        | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|-------------------|------------|--------------------------------------------------------------------|------------|
| ** **        | ** ** | **2005**                                                           | ** ** | **2004** | ** ** |
| **Real  Estate:** |       |                                                               |       |   |   |
| Total revenues    |       | $                                                                  | 4,520      |   | $ | 43,661 |   |
| Total expenses    |       | 2,863                                                              |       | 5,707 |   |
| Net income        |       | $                                                                  | 1,657      |   | $ | 37,954 |   |
| **Other:**        |       |                                                               |       |   |   |
| Total revenues    |       | $                                                                  | 143,246    |   | $ | 123,182 |   |
| Total expenses    |       | 135,814                                                            |       | 119,310 |   |
| Net income        |       | $                                                                  | 7,432      |   | $ | 3,872 |   |
| **Total:**        |       |                                                               |       |   |   |
| Total revenues    |       | $                                                                  | 147,766    |   | $ | 166,843 |   |
| Total expenses    |       | 138,677                                                            |       | 125,017 |   |
| Net income        |       | $                                                                  | 9,089      |   | $ | 41,826 |   |

 

15

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**6.   Accrued Expenses**

Accruedexpenses consist of the following:
| ** **                                                                                                               | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Payroll and  bonuses                                                                                                     |       |                     | $          | 25,973                      |       |   |   | $ | 67,315 |   |   |
| Commissions                                                                                                              |       |                     | 17,371     |                        |       |   | 36,171 |   |   |
| Development costs                                                                                                        |       |                     | 15,589     |                        |       |   | 16,601 |   |   |
| Deferred income                                                                                                          |       |                     | 14,961     |                        |       |   | 13,160 |   |   |
| Interest                                                                                                                 |       |                     | 400        |                        |       |   | 455 |   |   |
| Insurance                                                                                                                |       |                     | 1,912      |                        |       |   | 2,150 |   |   |
| Restructuring  charges (see Note 15)                                                                                |       |                     | 1,800      |                        |       |   | 1,902 |   |   |
| Other                                                                                                                    |       |                     | 10,065     |                        |       |   | 11,229 |   |   |
|                                                                                                                     |       |                     | 88,071     |                        |       |   | 148,983 |   |   |
| Less: Accrued  expenses included in liabilities related to real estate and other assets  held for sale (see Note 9) |       |                     | 346        |                        |       |   | 226 |   |   |
|                                                                                                                     |       |                     | $          | 87,725                      |       |   |   | $ | 148,757 |   |   |

 

**7.   Long-Term Debt**

Long-termdebt consists of the following:
| ** **                                                                                                        | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Borrowings under  $150,000 line of credit with a bank (the “Credit Facility”)                           |       |                     | $          | —                      |       |   |   | $ | — |   |   |
| Borrowings under  $25,000 discretionary line of credit with a bank                                                |       |                     | —     |                        |       |   | — |   |   |
| Borrowings under  £1,100 short-term borrowing facility with a bank (the “European  Facility”) |       |                     | —     |                        |       |   | — |   |   |
| Other                                                                                                             |       |                     | 11         |                        |       |   | 14 |   |   |
| Total long-term  debt                                                                                             |       |                     | 11         |                        |       |   | 14 |   |   |
| Less: Current  portion of long-term debt                                                                          |       |                     | 6          |                        |       |   | 6 |   |   |
|                                                                                                              |       |                     | $          | 5                           |       |   |   | $ | 8 |   |   |

 

The Company is subject to various covenants associatedwith the Credit Facility, such as maintenance of minimum equity and liquidityand certain key financial data. In addition, the Company may not pay dividendsor make other distributions on account of its common stock exceeding 50% of theprevious year’s net income before depreciation and amortization, and there arecertain restrictions on investments and acquisitions that can be made by theCompany. At March 31, 2005, the Company is in compliance with all covenantsof the Credit Facility. The Credit Facility expires on June 28, 2005.

The covenants associated with the Credit Facility andthe amount of the Company’s other borrowings and contingent liabilities mayhave the effect of limiting the borrowing capacity available to the Company 

16

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**7.**   Long-Term Debt(Continued)

under the Credit Facilityto an amount less than the $150,000 commitment. At March 31, 2005, theCompany has unused borrowing capacity of $127,169 (taking into account lettersof credit outstanding) under its Credit Facility.

Borrowings under theCompany’s $25,000 discretionary line of credit are unsecured and reduce theborrowing capacity of the Credit Facility dollar for dollar.

**8.   Notes Payable onReal Estate**

TheCompany has loans secured by real estate consisting of the following:
| ** **                                                                                                                     | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Current portion  of notes payable on real estate                                                                               |       | $                        | 27,193     |                        |       | $ | 21,937 |   |   |
| Notes payable on  real estate included in liabilities related to real estate and other  assets held for sale (see Note 9) |       | 13,629                   |       |                        | 5,688      |   |   |
| Total notes  payable on real estate, current portion                                                                           |       | 40,822                   |       |                        | 27,625     |   |   |
| Notes payable on  real estate, non-current portion                                                                             |       | 155,707                  |       |                        | 122,079    |   |   |
| Total notes payable on  real estate                                                                                            |       | $                        | 196,529    |                        |       | $ | 149,704 |   |   |

 

Notes payable on real estate held for sale areincluded in liabilities related to real estate and other assets held for sale.Notes payable on real estate under development (current) are included incurrent portion of notes payable on real estate. Notes payable on real estateunder development (non-current) and real estate held for investment areclassified according to payment terms and maturity date.

At March 31, 2005, $8,480 of the current portionand $10,919 of the non-current portion of notes payable on real estate arerecourse to the Company (beyond being recourse to the single-purpose entitythat holds the real estate asset and is the obligor on the note payable). Withrespect to a project to which $3,322 of the current recourse obligationsrelate, the Company has an agreement with an investor client to purchase theproject upon completion, the proceeds of which will be used to repay therelated note payable.

The Company has aparticipating mortgage loan obligation related to a real estate projectclassified as real estate under development (non-current). The participatingmortgage loan is subordinate to a construction loan on the underlying project.The lender participates in net operating cash flow of the mortgaged real estateproject, if any, and capital proceeds, net of related expenses, upon the saleof the project, after payment of amounts due under the construction loan. Thelender receives 6% fixed interest on the outstanding balance of its note,compounded monthly, and participates in 35% to 80% of proceeds remaining afterthe construction loan is paid, based on reaching various internal rates ofreturn. The amount of the participating liability and the related debt discountare $10,030 and $3,565, respectively, at March 31, 2005 and $10,030 and$4,894, respectively, at December 31, 2004. In the three months ended 

17

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**8.**   Notes Payable onReal Estate (Continued)

March 31,2005 and 2004, the Company amortized $1,329 and $1,400, respectively, of thedebt discount, which has been capitalized to real estate under development(non-current).

**9.   Real Estate andOther Assets Held for Sale and Related Liabilities**

Real estate and other assets held for sale includecompleted real estate projects or land for sale in their present condition thathave met all of the “held for sale” criteria of FAS 144 and other assetsdirectly related to such projects. Liabilities related to real estate and otherassets held for sale have been included as a single line item in the Company’sbalance sheet. In accordance with FAS 144, balances related to assetsclassified as held for sale at March 31, 2005, or sold in the three monthsended March 31, 2005, that were not classified as held for sale at December 31,2004, have been reclassified to real estate and other assets held for sale inthe Company’s balance sheet as of December 31, 2004 presented herein.

Realestate and other assets held for sale and related liabilities are as follows:
| ** **                                                               | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|--------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **Assets:**                                                              |       |                     |       |                        |       |   |   |   |   |
| Notes and other receivables                                              |       |                     | $          | 1,093                       |       |   |   | $ | 1,099 |   |   |
| Real estate held for sale (see Note 3)                                   |       |                     | 15,137     |                        |       |   | 5,323 |   |   |
| Other current assets                                                     |       |                     | 36         |                        |       |   | 1 |   |   |
| Total real estate  and other assets held for sale                        |       |                     | 16,266     |                        |       |   | 6,423 |   |   |
| **Liabilities:**                                                         |       |                     |       |                        |       |   |   |   |   |
| Accrued expenses (see Note 6)                                            |       |                     | 346        |                        |       |   | 226 |   |   |
| Notes payable on real estate held for sale (see Note  8)                 |       |                     | 13,629     |                        |       |   | 5,688 |   |   |
| Other current liabilities                                                |       |                     | 8          |                        |       |   | — |   |   |
| Total liabilities  related to real estate and other assets held for sale |       |                     | 13,983     |                        |       |   | 5,914 |   |   |
| **Net real estate and other  assets held for sale**                      |       |                     | $          | 2,283                       |       |   |   | $ | 509 |   |   |

 

18

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**10.   Stockholders’Equity**

Asummary of the Company’s stock option activity for the three months ended March 31,2005, is as follows:
| ** **                                      | ** ** | **Exercise Price  of $3.85 (below  market price  at grant date)** | ** ** | **Exercise Price  of $9.74 to  $14.50 (at  market price  at grant date)** | ** ** | **Exercise Price  of $14.51 to  $22.75 (at  market price  at grant date)** | ** ** | **Exercise Price  of $22.76 to  $36.00 (at  market price  at grant date)** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|-----------|------------|
| **Options  outstanding:**                       |       |                                                                                            |       |                                                                                                         |       |                                                                                                          |       |                                                                                                          |       |      |       |   |   |   |   |   |   |   |   |
| December 31,  2004                         |       |                                                                                            | 896,135    |                                                                                                         |       |                                                                                                          | 3,004,925  |                                                                                                          |       |      | 1,921,135  |   |   |   | 144,621 |   |   | 5,966,816 |   |
| Granted                                         |       |                                                                                            | —     |                                                                                                         |       |                                                                                                          | —     |                                                                                                          |       |      | —     |   |   |   | — |   |   | — |   |
| Exercised                                       |       |                                                                                            | (141,289   | )                                                                                                            |       |                                                                                                          | (4,952     | )                                                                                                             |       |      | (19,366    | ) |   |   | — |   |   | (165,607 | ) |
| Forfeited                                       |       |                                                                                            | (41,740    | )                                                                                                            |       |                                                                                                          | (798       | )                                                                                                             |       |      | (487       | ) |   |   | — |   |   | (43,025 | ) |
| March 31,  2005                            |       |                                                                                            | 713,106    |                                                                                                         |       |                                                                                                          | 2,999,175  |                                                                                                          |       |      | 1,901,282  |   |   |   | 144,621 |   |   | 5,758,184 |   |
| **Options exercisable at  March 31, 2005** |       |                                                                                            | 713,106    |                                                                                                         |       |                                                                                                          | 2,233,384  |                                                                                                          |       |      | 1,901,282  |   |   |   | 144,621 |   |   | 4,992,393 |   |

 

**11.   Gain onDisposition of Real Estate and Discontinued Operations**

During the three months ended March 31, 2005, theCompany recognized total gain on disposition of real estate of $1,568. Thisgain was comprised of a sale of a real estate project with a net sales price of$820 and a settlement related to the estimated cost****tocomplete construction related to a previous period disposition. During thethree months ended March 31, 2004, the Company sold one real estateproject for a net sales price of $533, resulting in an aggregate gain ondisposition of $187. The Company also recognized $281 of deferred gain fromprevious period dispositions.

The Company’s discontinued operations include theoperations and gains on disposition of real estate projects held for sale orsold subsequent to the adoption of FAS 144 effective January 1, 2002,that are considered “components of an entity” as defined by FAS 144 andfor which the Company does not have or expect to have any significantinvolvement in the operations of the project after the disposal. The Companyhas certain real estate assets that are land parcels and constitute a componentof an entity. From time to time, the Company disposes of these land parcels insmaller lots. An individual lot that is part of a larger land parcel does notconstitute a component of an entity within the meaning of paragraph 41 of FAS144 until it is either classified as held for sale in accordance with FAS 144or sold. As required by FAS 144, certain revenues and expenses for thethree months ended March 31, 2004 have been reclassified to conform to thepresentation for the three months ended March 31, 2005.

In the first three months of 2005, the Company soldone real estate project that was considered a discontinued operation underFAS 144. The aggregate net sales price for this project was $1,834, andthe Company recognized a gain on disposition of $84. In the three months ended March 31,2004, the Company sold one real estate project that was considered adiscontinued operation under FAS 144. The net sales price for this projectwas $11,335, and the Company recognized a gain on disposition of $821, 

19

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**11.**   Gain on Disposition of Real Estate and DiscontinuedOperations (Continued)

includinginterest forgiveness of $326. The gain on disposition related to these projectshas been reported as discontinued operations, net of applicable income taxes,in the consolidated statements of income.

The components ofdiscontinued operations are as follows:
| ** **                                                | ** ** | **For the Three Months  Ended March 31,**   | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                | ** ** | **     2005     ** | ** ** | **     2004     ** | ** ** |
| **Revenues:**                                             |       |                                                                 |       |   |   |   |   |   |   |
| Development and  construction                             |       |                                                                 | $          | 2 |   |   |   | $ | — |   |   |
| Gain on disposition of  real estate                       |       |                                                                 | 84         |   |   |   | 821 |   |   |
|                                                      |       |                                                                 | 86         |   |   |   | 821 |   |   |
| **Expenses:**                                             |       |                                                                 |       |   |   |   |   |   |   |
| General and  administrative                               |       |                                                                 | 42         |   |   |   | 55 |   |   |
| Depreciation and  amortization                            |       |                                                                 | —     |   |   |   | 59 |   |   |
| Interest                                                  |       |                                                                 | 10         |   |   |   | 122 |   |   |
|                                                      |       |                                                                 | 52         |   |   |   | 236 |   |   |
| Operating income                                          |       |                                                                 | 34         |   |   |   | 585 |   |   |
| Interest and other  income                                |       |                                                                 | 9          |   |   |   | 1 |   |   |
| Income from discontinued  operations, before income taxes |       |                                                                 | 43         |   |   |   | 586 |   |   |
| Income tax expense                                        |       |                                                                 | (16        | ) |   |   | (246 | ) |   |
| Income from discontinued operations, net of income  taxes |       |                                                                 | $          | 27 |   |   |   | $ | 340 |   |   |

 

**12.   FinancialInstruments**

The Company has enteredinto various interest rate agreements to manage market risks related to changesin interest rates, primarily in satisfaction of requirements under theCompany’s Credit Facility. The Company’s participation in derivativetransactions has been limited to risk management purposes. Derivativeinstruments are not held or issued for trading purposes.

In March 2005, theCompany entered into an interest rate cap agreement with a notional amount of$10,000 expiring June 24, 2005, under which the Company will receive paymentsif the 30-day LIBOR based interest rate exceeds 3.25%. Effective March31, 2005, the interest rate cap agreement has been designated an effectivehedge on certain variable rate debt of the Company, and, to the extent thehedging relationship remains effective, changes in fair value of the interestrate cap agreement will be recorded in other comprehensive income.

InDecember 2004, the Company entered into an interest rate cap agreement inorder to limit its interest expense on a construction loan with a 30-dayLIBOR-based floating interest rate related to a consolidated real estateproject. The interest rate cap agreement has a notional amount of $2,498 atMarch 31, 2005, and the Company will receive payments if the LIBOR-basedinterest rate exceeds 3.5%. The interest rate cap agreement has not beendesignated as an effective hedge, and, therefore, the interest rate capagreement will be marked to market each period with the change in fair marketvalue recognized in current period earnings. The interest rate cap agreementexpires on January 1, 2006. Through March 31, 2005, amounts recordedby the Company related to this interest rate cap agreement were not material.

20

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**12.   Financial Instruments**(Continued)

In March 2003, the Company entered into aninterest rate cap agreement in order to limit its interest expense on aconstruction loan with a 30-day LIBOR-based floating interest rate related to aconsolidated real estate project. The interest rate cap agreement had anotional amount of $11,400 and the Company was to receive payments if theLIBOR-based interest rate exceeds 3.5%. The interest rate cap agreement was notdesignated as an effective hedge and therefore was marked to market each periodwith the change in fair market value recognized in current period earnings. Theinterest rate cap agreement expired on March 1, 2005. The amounts recordedby the Company related to this interest rate cap agreement were not material.

Accounts receivable,accounts payable and accrued expenses and other liabilities are carried atamounts that reasonably approximate their fair values. The fair values of theCompany’s long-term debt and notes payable on real estate reasonably approximatetheir fair values based on the Company’s incremental borrowing rates forsimilar types of borrowing arrangements.

**13.   Commitments and Contingencies**

At March 31, 2005, the Company has guaranteedrepayment of a maximum of $16,303 of real estate notes payable of itsunconsolidated subsidiaries, of which $15,553 of the underlying notes payableis outstanding. These notes are secured by the underlying real estate and havematurity dates through December 2009.

The Company issued several debt repayment guaranteesof others that are subject to the fair value provisions of FASB Interpretation No. 45,*Guarantor’s Accounting and Disclosure Requirementsfor Guarantees, Including Direct Guarantees of Indebtedness of Others*(“FIN 45”).

In 2004, the Company issued a debt repayment guarantyof an unconsolidated subsidiary in conjunction with a $30,000 loan agreement.As part of this loan agreement, the Company issued a repayment guaranty of upto 50% of the loan balance plus any accrued and unpaid interest. At such timeas the principal balance has been reduced to $15,000 or less and a targetloan-to-value ratio has been reached, the Company’s guaranty is reduced to 25%of the loan balance. In exchange for the guaranty, the Company will receive apriority return with respect to its capital contribution based on theoutstanding amount of principal on the loan. The Company estimates that its likelyexposure under the guaranty is not material and has determined that the presentvalue of the priority return is the best estimate of the fair value of theguaranty under FIN 45. The Company has recorded a liability offset by anincrease in its investment in unconsolidated subsidiary balance of $1,886.

In 2004, the Company also issued a $1,000 debtrepayment guaranty on a $10,185 construction loan in order to obtain adevelopment fee contract and allow a third-party owner to obtain financing fora construction project. The guaranty expires upon project completion andachievement of a specified leasing target. The third-party owner has provided theCompany with a deed of trust on a separate parcel of land as security should theCompany be required to perform under the guaranty. The loan matures in 

21

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**13.**   Commitments andContingencies (Continued)

November 2009. TheCompany estimates that its likely exposure under the guaranty is not materialand has recorded the fair value of the guaranty in an amount equivalent to theconsideration received, or $102.

During 2004, the Company issued several other debtrepayment guarantees of unconsolidated subsidiaries that are subject to theprovisions of FIN 45. The Company estimates that its likely exposure underthese guarantees is not material. On this basis, the Company estimates that thefair value of these guarantees is equivalent to the amount necessary to securethe guarantees using letters of credit from a bank, and the aggregate amount isnominal.

At March 31, 2005, the Company has outstandingletters of credit totaling $35,427, including $8,639 and $15,155 of whichcollateralize amounts recorded in other current liabilities and otherliabilities, respectively. The letters of credit expire at varying datesthrough March 2006.

In addition, the Company has numerous completion andbudget guarantees relating to development projects. These guarantees are madewith third-party owners in the normal course of business. Each of theseguarantees requires the Company to complete construction of the relevantproject within a specified time frame and/or within a specified budget, withthe Company potentially being liable for costs to complete in excess of suchbudget. However, the Company generally has “guaranteed maximum price” contractswith reputable general contractors with respect to projects for which theCompany provides these guarantees. These contracts are intended to pass thebudget risk to such contractors. Management does not expect to incur anymaterial losses under these guarantees.

From time to time, the Company acts as a generalcontractor with respect to construction projects. The Company does not considerthese activities to be a material part of its business. In connection withthese activities, the Company seeks to subcontract construction work forcertain projects to reputable subcontractors. Should construction defects ariserelated to the underlying projects, the Company could potentially be liable tothe client for the costs to repair such defects, but the Company wouldgenerally look to the subcontractor that performed the work to remedy thedefect. Management does not expect to incur material losses with respect toconstruction defects.

As of March 31, 2005, the Company has madenon-refundable earnest money deposits totaling $3,800 in conjunction with contractsto acquire approximately $180,856 of real estate from other entities.

The Company and one of itssubsidiaries are defendants in a lawsuit styled* **Bank One Oklahoma, N.A., et al.*(the “Bank”) *v. Trammell Crow Services, Inc. and Trammell Crow Company*,No. 03 C 3624, pending in the US District Court for the Northern Districtof Illinois, originally filed on April 2, 2003. The claims asserted by theplaintiffs relate to a sale/leaseback transaction involving a property inOklahoma City previously owned by the Bank. The suit alleges breach ofcontract, breach of fiduciary duty, negligent misrepresentation, fraudulentmisrepresentation and fraudulent concealment against the Company and/or itssubsidiary and alleges that the plaintiffs have been damaged in an unspecifiedamount in excess of $15,000. The plaintiffs seek to recover actual damages,punitive damages and reasonable attorneys’ fees. The suit is in the process ofdiscovery, and no trial date has been set. As of the date of this Form 10-Q,the outcome of the suit cannot be predicted with any certainty, and the Companycannot at this time estimate 

22

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**13.**   Commitments andContingencies (Continued)

an amount or range ofpotential loss in the event of an unfavorable outcome. While the Company cannotpredict with any certainty the outcome of this matter, the Company currentlybelieves the plaintiffs’ claims are without merit and is vigorously defendingthe lawsuit.

From time to time, theCompany is involved in other litigation matters that arise in the ordinarycourse of its business, some of which involve claims for damages which aresubstantial in amount. The ultimate liability for these matters cannot bedetermined. However, based on the information currently available, the Companydoes not believe that the resolution of any such matters to which it iscurrently a party will have a material adverse effect on the Company’s resultsof operations, financial condition or liquidity.

**14.   Segment Information**

*Description ofServices by Segment*

The Global Services segment includes property andfacilities management, brokerage and corporate advisory, and project and constructionmanagement services delivered to both user and investor clients.

The Development andInvestment segment includes development activities performed on behalf ofinvestor and user clients on a fee basis, as well as development activitypursuant to which the Company takes an ownership position. The Development andInvestment segment also includes activities related to the Company’s operatingreal estate projects prior to disposition.

*Measurement ofSegment Profit or Loss and Segment Assets*

The Company evaluates performance and allocatesresources among its two reportable segments based on income before incometaxes. The accounting policies of the reportable segments are the same as thosedescribed in the summary of significant accounting policies.

Virtually all of theCompany’s revenues are from clients located in the United States. For the threemonths ended March 31, 2005, one individual client accounts for $23,948,or 13%, of the Company’s consolidated revenues. For the three months ended March 31,2004, the same client accounted for $16,494, or 10%, of the Company’sconsolidated revenues. Revenues from this client are included primarily in theCompany’s Global Services segment.

23

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**14.**   SegmentInformation (Continued)

Summarized financialinformation for reportable segments is as follows:
| ** **                                                                                                                                   | ** ** | **For the Three Months  Ended March 31,**               | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                   | ** ** | **      2005      ** | ** ** | **      2004      ** | ** ** |
| **Global Services:**                                                                                                                         |       |                                                                             |       |   |   |   |   |   |   |
| Total revenues                                                                                                                               |       |                                                                             | $          | 169,216 |   |   |   | $ | 149,740 |   |   |
| Costs and expenses(1)                                                                                                                        |       |                                                                             | 165,249    |   |   |   | 151,645 |   |   |
| Operating income  (loss)                                                                                                                     |       |                                                                             | 3,967      |   |   |   | (1,905 | ) |   |
| Interest and other  income                                                                                                                   |       |                                                                             | 777        |   |   |   | 471 |   |   |
| Income (loss) from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries |       |                                                                             | 4,744      |   |   |   | (1,434 | ) |   |
| Minority interest,  before income taxes                                                                                                      |       |                                                                             | 189        |   |   |   | — |   |   |
| Income from  investments in unconsolidated subsidiaries, before income taxes                                                                 |       |                                                                             | 701        |   |   |   | 1,204 |   |   |
| Income (loss) from  continuing operations, before income taxes                                                                               |       |                                                                             | 5,634      |   |   |   | (230 | ) |   |
| Income from  discontinued operations, before income taxes                                                                                    |       |                                                                             | —     |   |   |   | — |   |   |
| Income (loss)  before income taxes                                                                                                           |       |                                                                             | $          | 5,634 |   |   |   | $ | (230 | ) |   |
| **Development and Investment:**                                                                                                              |       |                                                                             |       |   |   |   |   |   |   |
| Total revenues                                                                                                                               |       |                                                                             | $          | 10,635 |   |   |   | $ | 8,738 |   |   |
| Costs and expenses(1)                                                                                                                        |       |                                                                             | 18,027     |   |   |   | 14,915 |   |   |
| Operating loss                                                                                                                               |       |                                                                             | (7,392     | ) |   |   | (6,177 | ) |   |
| Interest and other  income                                                                                                                   |       |                                                                             | 150        |   |   |   | 415 |   |   |
| Loss from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries          |       |                                                                             | (7,242     | ) |   |   | (5,762 | ) |   |
| Minority interest,  before income taxes                                                                                                      |       |                                                                             | 3,026      |   |   |   | (60 | ) |   |
| Income from  investments in unconsolidated subsidiaries, before income taxes                                                                 |       |                                                                             | 1,859      |   |   |   | 9,082 |   |   |
| Income (loss) from  continuing operations, before income taxes                                                                               |       |                                                                             | (2,357     | ) |   |   | 3,260 |   |   |
| Income from  discontinued operations, before income taxes                                                                                    |       |                                                                             | 43         |   |   |   | 586 |   |   |
| Income (loss)  before income taxes                                                                                                           |       |                                                                             | $          | (2,314 | ) |   |   | $ | 3,846 |   |   |
| **Total:**                                                                                                                                   |       |                                                                             |       |   |   |   |   |   |   |
| Total revenues                                                                                                                               |       |                                                                             | $          | 179,851 |   |   |   | $ | 158,478 |   |   |
| Costs and expenses(1)                                                                                                                        |       |                                                                             | 183,276    |   |   |   | 166,560 |   |   |
| Operating income  (loss)                                                                                                                     |       |                                                                             | (3,425     | ) |   |   | (8,082 | ) |   |
| Interest and other  income                                                                                                                   |       |                                                                             | 927        |   |   |   | 886 |   |   |
| Loss from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries          |       |                                                                             | (2,498     | ) |   |   | (7,196 | ) |   |
| Minority interest,  before income taxes                                                                                                      |       |                                                                             | 3,215      |   |   |   | (60 | ) |   |
| Income from  investments in unconsolidated subsidiaries, before income taxes                                                                 |       |                                                                             | 2,560      |   |   |   | 10,286 |   |   |
| Income from  continuing operations, before income taxes                                                                                      |       |                                                                             | 3,277      |   |   |   | 3,030 |   |   |
| Income from  discontinued operations, before income taxes                                                                                    |       |                                                                             | 43         |   |   |   | 586 |   |   |
| Income before  income taxes                                                                                                                  |       |                                                                             | $          | 3,320 |   |   |   | $ | 3,616 |   |   |

----

(1)                 Costs and expenses for the three monthsended March 31, 2005 and 2004, include non-cash compensation expenserelated to the amortization of employment contracts and unearned stockcompensation of $1,500 and $1,016 related to the Global Services segment and$641 and $475 related to the Development and Investment segment, respectively. 

24

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**14.**   SegmentInformation (Continued)
| ** **                  | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **Total Assets:**           | ** ** | ** **               | ** ** |                        | ** ** | ** ** |   |
| Global Services             |       | $                        | 261,285    |                        |       | $ | 319,464 | ** ** |   |
| Development and  Investment |       | 434,136                  |       |                        | 429,486    | ** ** |   |
| Total consolidated  assets  |       | $                        | 695,421    |                        |       | $ | 748,950 | ** ** |   |

 

**15.**   RestructuringCharges

During 2001, the Company announced an internalreorganization of its business designed to consolidate all of the property andfacilities management, brokerage and corporate advisory, and construction andproject management services delivered to both user and investor clients under asingle leadership structure. As part of its restructuring plans, primarilyduring the fourth quarter of 2001, the Company closed several offices andidentified offices with excess space that it intends to sublease to thirdparties. The Company recorded restructuring charges primarily comprised oflease obligations, costs to sublease excess space (offset by estimated futuresublease income) and miscellaneous furniture and equipment writeoffs. Theseaccruals will be relieved over the remaining terms of the underlying leasesthrough March 2012.

Activityrelated to the Company’s lease obligations and related costs included inrestructuring accruals in 2005 is as follows:
| Balance at  December 31, 2004 |   | $   | 1,902  |   |
|------------------------------------|--------|-----|--------|--------|
| Cash payments                      |   | 102 |   |
| Balance at  March 31, 2005    |   | $   | 1,800  |   |

 

**16.**   Supplemental Cash Flow Information

Supplementalcash flow information is summarized below:
| ** **                                       | ** ** | **Three Months Ended  March 31,**                                 | ** ** |
|--------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **      2005      ** | ** ** | **      2004      ** | ** ** |
| **Non-cash activities:**                         |       |                                                                             |       |   |   |   |   |   |   |
| Issuance of restricted stock, net of forfeitures |       |                                                                             | $          | (1,822 | ) |   |   | $ | 199 |   |   |
| Capital lease  obligations                       |       |                                                                             | 2          |   |   |   | 300 |   |   |
|                                                  |            |                                                                                  |            |  |  |  |  |  |  |  |  |

 

**17.**   SubsequentEvents

In April 2005, the Company completed its $20,000share repurchase program announced and begun in March 2005. A total of970,142 shares were repurchased, at an average price of $20.61 per share, allthrough open market purchases.

25

----

**TRAMMELL CROW COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 2005 (dollars in thousands, except per share data) (Unaudited)**

**17.**   SubsequentEvents (Continued)

In April 2005, the Company exercised its optionto acquire additional shares of Savills, thereby increasing its ownership staketo 19.6% of Savills’ Ordinary Shares outstanding. The exercise of the optionresulted in the issuance of 5,243,229 shares by Savills at a price of 701.28pence per share, for a total cost of £36,770 ($70,392). The exercise pricerepresented a 20% premium to the average mid-market closing price of the sharesin trading on the London Stock Exchange for the five trading days precedingexercise of the option.

Preceding its exercise of the option, on April 25,2005, the Company also acquired 1,677,970 of Savills’ Ordinary Shares in openmarket purchases at a price of 650.00 pence per share, having the effect ofreducing the number of shares purchasable under the option. The cost of boththe market purchases and the shares issued upon exercise of the option was$91,272. The purchases were funded by borrowings under the Company’s CreditFacility.

26

----

**ITEM 2.**                *Management’s Discussion and Analysis of Financial Condition and Resultsof Operations*

The following discussionshould be read in conjunction with the Company’s unaudited CondensedConsolidated Financial Statements and the notes thereto included in Item 1 ofthis Quarterly Report on Form 10-Q.

**Overview**

Trammell Crow Company (the “Company”) is one of thelargest diversified commercial real estate service companies in the world. TheCompany delivers a comprehensive range of services to leading multinationalcorporations, institutional investors and other users of real estate services.In the United States, the Company is a leading provider of commercial propertyand facilities management services, commercial property brokerage andtransaction management services, commercial property development andconstruction services and project management services. In addition to its fullservice offices located throughout the United States, the Company has officesin Canada, Europe, Asia and Latin/South America focused on the delivery of realestate services to users of commercial real estate. The Company deliversbrokerage services outside the United States through strategic alliances withleading providers—in Europe and Asia, through Savills plc, (“Savills”) a leadingproperty services company based in the United Kingdom; and in Canada, throughJJ Barnicke, a leading Canadian real estate services provider. The Companydelivers four core services—building management services, brokerage services,project management services and development services—to both user and investorclients. The Company’s business is organized under two separate nationalleadership structures. The Global Services Group includes substantially all ofthe building management services, brokerage services, and project managementservices delivered to both user and investor clients. Substantially all of theCompany’s real estate development, capital markets and investment activitiesare conducted through the Company’s Development and Investment Group.

Within the Global Services segment, with approximately6,000 full-time equivalent (“FTE”) employees, the Company provides services touser clients, including multinational corporations, hospitals and universities,who are typically the primary occupants of the commercial properties withrespect to which services are performed, and investor clients that are nottypically the primary occupants of the commercial properties with respect towhich services are performed. The building management services provided to userclients consist primarily of facilities management, which entails providingcomprehensive day-to-day occupancy related services, principally to largecorporations, healthcare systems and other users that occupy commercialfacilities in multiple locations. These services include administration andday-to-day maintenance and repair of client-occupied facilities.Brokerage services provided to user clients include corporate advisory servicessuch as portfolio management and tenant representation. Project managementservices provided to user clients include facility planning and projectmanagement, such as construction oversight, space planning, siteconsolidations, facilities design, and workplace moves, adds, and changes. Thebuilding management services provided to investor clients include propertymanagement services relating to all aspects of building operations, tenantrelations and oversight of building improvement processes. Brokerage servicesprovided to investor clients include project leasing and investment salesservices whereby the Company advises buyers, sellers and landlords inconnection with the leasing and sale of office, industrial and retail space,and land. Project management services provided to investor clients includeconstruction management services such as space planning and tenant finish andcoordination.

Within the Development andInvestment segment, encompassing approximately 200 FTE employees, the Companyprovides development services to both investor and user clients—both thosepursuant to which the Company takes an ownership position in a project andthose pursuant to which the Company provides development services to others inexchange for fees. The Company provides comprehensive project developmentservices and acquires and disposes of commercial real estate projects. The 

27

----

developmentservices provided include financial planning, site acquisition, procurement ofapprovals and permits, design and engineering coordination, constructionbidding and management, tenant finish coordination, project closeout andproject finance coordination. The Company will continue to focus its efforts inthis area on risk-mitigated opportunities for investor clients and feedevelopment and build-to-suit projects for user clients, including those inhigher education and healthcare. From time to time, the Company may pursuedevelopment and investment activities, including opportunistic propertyacquisitions and new development, for its own account or on a co-investmentbasis. With an organization comprised of professionals dedicated fully todevelopment and investment activities, the Company is positioned to pursue andexecute new development business, particularly programmatic business with theCompany’s large investor clients, and exploit niche market opportunities.

**Resultsof Operations—Three Months Ended March 31, 2005 Compared to Three MonthsEnded March 31, 2004**

Inaccordance with Statement of Financial Accounting Standards No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets*(“FAS144”), certain revenues and expenses for the three months ended March 31,2004 have been reclassified to conform to the presentation for the three monthsended March 31, 2005. As a result, certain balances differ from theamounts reported in previously filed documents. See *Income fromDiscontinued Operations, Net of Income Taxes*, below, for additionalinformation.
| ** **                         | ** ** | **For the Three Months  Ended March 31,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------|------------|--------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                         | ** ** | **2005**                                                           | ** ** | **2004**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                         | ** ** | **($ in thousands)**                                     | ** ** |
| **REVENUES:**                      |       |                                                               |       |       |       |              |       |   |   |   |   |
| ***User Services:***               |       |                                                               |       |       |       |              |       |   |   |   |   |
| Facilities  management             |       | $                                                                  | 55,137     |       | $          | 50,756            |       | $ | 4,381 |   |   | 8.6 | % |   |
| Corporate advisory services        |       | 24,673                                                             |       | 22,534     |       | 2,139             |       |   | 9.5 | % |   |
| Project  management services       |       | 25,324                                                             |       | 17,962     |       | 7,362             |       |   | 41.0 | % |   |
|                               |       | 105,134                                                            |       | 91,252     |       | 13,882            |       |   | 15.2 | % |   |
| ***Investor Services:***           |       |                                                               |       |       |       |              |       |   |   |   |   |
| Property management                |       | 34,087                                                             |       | 34,562     |       | (475              | )          |   | (1.4 | )% |   |
| Brokerage                          |       | 27,780                                                             |       | 22,149     |       | 5,631             |       |   | 25.4 | % |   |
| Construction  management           |       | 2,215                                                              |       | 1,718      |       | 497               |       |   | 28.9 | % |   |
|                               |       | 64,082                                                             |       | 58,429     |       | 5,653             |       |   | 9.7 | % |   |
| Development and construction       |       | 9,067                                                              |       | 8,329      |       | 738               |       |   | 8.9 | % |   |
|                               |       | 178,283                                                            |       | 158,010    |       | 20,273            |       |   | 12.8 | % |   |
| Gain on disposition of real estate |       | 1,568                                                              |       | 468        |       | 1,100             |       |   | 235.0 | % |   |
|                               |       | $                                                                  | 179,851    |       | $          | 158,478           |       | 21,373 |   |   | 13.5 | % |   |
|                                    |            |                                                                    |            |            |            |                   |            |  |  |  |  |  |  |  |

 

28

----

 
| ** **                                                                                                                          | ** ** | **For the Three Months  Ended March 31,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                                                                                                          | ** ** | **2005**                                                           | ** ** | **2004**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                                                                                                          | ** ** | **($ in thousands)**                                     | ** ** |
| **COST AND  EXPENSES:**                                                                                                             |       |                                                               |       |       |       |              |       |   |   |   |   |
| Salaries, wages  and benefits                                                                                                       |       | $                                                                  | 125,745    |       | $          | 116,152           |       | $ | 9,593 |   |   | 8.3 | % |   |
| Commissions                                                                                                                         |       | 22,658                                                             |       | 20,022     |       | 2,636             |       |   | 13.2 | % |   |
| General and  administrative                                                                                                         |       | 30,881                                                             |       | 26,335     |       | 4,546             |       |   | 17.3 | % |   |
| Depreciation and  amortization                                                                                                      |       | 2,684                                                              |       | 3,198      |       | (514              | )          |   | (16.1 | )% |   |
| Interest                                                                                                                            |       | 1,308                                                              |       | 853        |       | 455               |       |   | 53.3 | % |   |
|                                                                                                                                |       | 183,276                                                            |       | 166,560    |       | 16,716            |       |   | 10.0 | % |   |
| Operating loss                                                                                                                      |       | (3,425                                                             | )          | (8,082     | )          | 4,657             |       |   | 57.6 | % |   |
| Interest and  other income                                                                                                          |       | 927                                                                |       | 886        |       | 41                |       |   | 4.6 | % |   |
| Loss from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries |       | (2,498                                                             | )          | (7,196     | )          | 4,698             |       |   | 65.3 | % |   |
| Income tax  benefit                                                                                                                 |       | 953                                                                |       | 3,020      |       | (2,067            | )          |   | (68.4 | )% |   |
| Minority  interest, net of income taxes                                                                                             |       | 1,988                                                              |       | (35        | )          | 2,023             |       |   | 5,780.0 | % |   |
| Income from  investments in unconsolidated subsidiaries, net of income taxes                                                   |       | 1,583                                                              |       | 5,970      |       | (4,387            | )          |   | (73.5 | )% |   |
| Income from  continuing operations                                                                                                  |       | 2,026                                                              |       | 1,759      |       | 267               |       |   | 15.2 | % |   |
| Income from  discontinued operations, net of income taxes                                                                      |       | 27                                                                 |       | 340        |       | (313              | )          |   | (92.1 | )% |   |
| **Net income**                                                                                                                      |       | $                                                                  | 2,053      |       | $          | 2,099             |       | $ | (46 | ) |   | (2.2 | )% |   |

 

***Revenues.  ***Facilitiesmanagement revenue increased in the first quarter of 2005, primarily as aresult of an expansion of a large client relationship in the second quarter of2004. Reimbursement of salaries, wages, benefits and out-of-pocket general andadministrative costs, a component of facilities management revenue, increased$5.0 million in the first quarter 2005, compared to the same period in 2004.The composition of facilities management revenue, including management fees andreimbursements, can vary significantly from period to period based on the termsof the underlying management agreements in effect each period.

Corporate advisory services revenue increased for thefirst quarter of 2005 primarily driven by increased commission revenues in2005. The increase is the result of growth in the number of tenantrepresentation brokers as part of the Company’s focus on expanding itsbrokerage network. In addition, transaction volumes have increased, reflectingclients’ increased confidence in the economic recovery.

The revenue growth in project management was theresult of the addition of new clients and the expansion of services provided toexisting clients (due to increases in clients’ portfolios, the scope of theCompany’s services required under certain outsourcing contracts and transactionvolumes).

The decrease in property management revenue waspartially the result of decreased square footage under management in 2005 ascompared to 2004. The reduction in square footage primarily resulted from salesof buildings in the Company’s management portfolio to REITs or other investorsthat self-manage their properties or use other service providers. In addition,some square footage decreases resulted from clients taking services backin-house or to other service providers. These decreases were partially offsetby additions to square footage from new business.

The increase in brokerage revenue was driven byincreases in investment sales commissions, and to a lesser extent, projectleasing commissions. Favorable capital market fundamentals, including lowinterest rates, led to increased investment sales transaction volumes, whichcontributed to the improvement in investment sales commissions.

29

----

Construction management revenue increased in the firstquarter of 2005 as compared to the same period in 2004. Construction managementrevenue is generated from services including space planning and tenant finishcoordination for investor clients in conjunction with property management andleasing assignments, and are directly related to clients’ real estate demands.The increase in construction management revenue resulted from a higher volumeof construction projects as tenant leasing activity increased, reflectingincreased confidence in the economic recovery.

The increase in development and construction revenueprimarily resulted from an increase in development and development incentivefees. Development incentive fees increased, largely due to the timing ofsignificant transactions in the first quarter of 2005 as compared to the first quarterof 2004. Typically, the impact of increases and decreases in the Company’sdevelopment starts and investments is not reflected in financial results untillater periods. The Company experienced an increase in development andconstruction revenue in the first quarter of 2005 as a consequence ofdevelopment starts and investments trending up in 2004, with 2004 starts morethan doubling those for 2003. In addition, rental revenue increased in 2005,due to acquisitions of operating real estate properties subsequent to the firstquarter of 2004. The Company, mainly through certain of its discretionarydevelopment and investment funds, continues to direct its efforts towardacquisitions of operating real estate properties, including those whereopportunities exist to add value through re-development or re-leasing.

Historically, the Company primarily focused itscommercial real estate development business on office, industrial and retailprojects for investor clients. Increasingly, however, the Company has focusedon development for user clients, including corporations and those in thehealthcare sector. By expanding its focus on development for user clients,particularly those in the healthcare sector, the Company seeks to mitigate thecyclicality traditionally inherent in the commercial development business. Inaddition, through High Street Residential, a wholly-owned subsidiary of theCompany, the Company has expanded its focus to include development of mixed-usefacilities with a residential component, including condominium development andtransit-oriented development.

The Company’s gain on disposition of real estateincreased in the first quarter of 2005 from the same period in 2004. In thefirst quarter of 2005, the Company recognized total gain on disposition of realestate of $1.6 million. This gain was comprised of a sale of a real estateproject with a net sales price of $820 and a settlement related to theestimated cost to complete construction related to a previous perioddisposition. In the first quarter of 2004, the Company sold one real estateproject for a net sales price of $0.5 million, resulting in an aggregate gainon disposition of $0.2 million. The Company also recognized $0.3 million ofdeferred gain relating to dispositions in previous periods.

***Costs and Expenses.  ***Salaries,wages and benefits expense includes all compensation paid to Company employeesother than brokerage commissions. As such, it includes salaries, benefits andannual incentive bonuses for employees whose compensation is reimbursed byclients (“reimbursed employees”); salaries, benefits and annual incentivebonuses for employees whose compensation is not so reimbursed (“unreimbursedemployees”); long-term incentive compensation associated with restricted stock grantsto certain employees; and transaction-related incentive compensationother than brokerage commissions, primarily paid in connection with developmentand investment transactions. The increase in the first quarter of 2005 wasprimarily driven by growth in salaries, wages and benefits for reimbursedemployees as the Company increased its facilities management and projectmanagement headcount to service client expansions and the addition of newclients.

The 2005 increase in commission expense was directlyattributable to the increase in the Company’s corporate advisory services andbrokerage revenue discussed above.

General and administrative expenses increased in thefirst quarter of 2005, partially due to increased client-reimbursedout-of-pocket general and administrative expenses, largely driven by the growthin the Company’s facilities management and project management service line. Inaddition, the acquisition of 

30

----

several operating realestate properties subsequent to the first quarter of 2004 led to increased realestate operating expenses in 2005. These properties, which the Company plans toredevelop, lease and sell, include acquisitions made through the Company’sfifth discretionary development and investment fund (“Fund V”).

Depreciation and amortization expenses decreased forthe first quarter of 2005 from the first quarter of 2004. The Company hasreplaced many of its computer assets at a lower cost than the assets that wereretired, which has reduced the Company’s depreciation expense. In addition,several intangible asset balances related to acquired management contractsbecame fully amortized in 2004, which created a decrease in amortizationexpense in the first quarter of 2005 as compared to the first quarter of 2004.

The increase in interest expense is primarily theresult of higher borrowings outstanding under notes payable on real estaterelated to operating real estate properties in the first quarter of 2005 ascompared to the first quarter of 2004.

***Minority Interest,Net of Income Taxes.  ***Minority interestfluctuated from expense in the first quarter of 2004 to income in the firstquarter of 2005. This change from expense to income primarily relates to lossesincurred by Fund V during the 2005 period, which are shared with outsidepartners. Fund V has acquired several operating real estate properties sincethe first quarter of 2004 that have generated losses in the current period. TheCompany plans to redevelop, lease and sell these properties. In addition, aportion of the 2005 income amounts relates to the minority interest owners’share of fees earned by the Company related to certain consolidated real estateprojects.

***Income fromInvestments in Unconsolidated Subsidiaries, Net of Income Taxes.  ***Inthe ordinary course of business, a significant portion of the Company’sdevelopment and investment activities are conducted, and are expected to beconducted in future periods, through unconsolidated subsidiaries. The Companyalso has certain investments in unconsolidated subsidiaries which are notrelated to its development and investment activities. Income from investmentsin unconsolidated subsidiaries fluctuates from period to period based on thevolume and profitability of transactions carried out by the underlyingunconsolidated subsidiaries. The overall decrease in the first quarter of 2005was primarily the result of significant income from an unconsolidatedsubsidiary that sold its building portfolio in the first quarter of 2004, inexcess of such sales that occurred in the first quarter of 2005.

***Income fromDiscontinued Operations, Net of Income Taxes.  ***Incomefrom discontinued operations includes the operations of real estate propertiesand gain on disposition of real estate properties held for sale or soldsubsequent to the adoption of FAS 144 effective January 1, 2002, thatwere considered components of an entity under FAS 144 and in which theCompany has not retained or does not expect to retain significant continuinginvolvement. Dispositions of real estate assets have been and will continue tobe a significant part of the Company’s activities and, as a result of applyingthe provisions of FAS 144, the Company expects a greater amount of theseactivities to be classified as discontinued operations in future periods asfewer asset dispositions will qualify for grandfathered treatment underFAS 144. During the first quarter of 2005, the Company sold one realestate project that was considered a discontinued operation for a net salesprice of $1.8 million, resulting in a gain on disposition of $0.1 million. Inthe first quarter of 2004, the Company sold one real estate project that wasconsidered a discontinued operation for a net sales price of $11.3 million. Thesale resulted in an aggregate gain on disposition of real estate (before incometaxes) of $0.8 million, including interest forgiveness of $0.3 million.

***Net Income.  ***Netincome increased due to the fluctuations in revenues and expenses describedabove, in addition to a decrease in the Company’s effective tax rate driven bythe increase in the Company’s income from its investment in Savills, as well asfavorable results from state tax planning.

31

----

**QuarterlyResults of Operations and Seasonality**

The results of operationsfor any quarter are not necessarily indicative of results for any futureperiod. The Company’s revenues and net income during the fourth fiscal quarterhistorically have been somewhat greater than in each of the first three fiscalquarters, primarily because its clients have demonstrated a tendency to closetransactions toward the end of the fiscal year. The timing and introduction ofnew contracts, the disposition of investments in real estate assets, therecognition of incentive fees as contractual targets are met and other factorsmay also cause quarterly fluctuations in the Company’s results of operations.

**Liquidity and Capital Resources**

The Company’s liquidity and capital resourcesrequirements include the funding of working capital needs, primarily costsincurred in providing services to its clients before collection of relatedbillings; the funding of capital investments, including the acquisition of orinvestments in other real estate service companies; the repurchase of its sharesif authorized by the Board of Directors; expenditures for real estate andpayments on notes payable associated with its development and investmentactivities; and expenditures related to upgrading the Company’s managementinformation systems. The Company finances its operations with internallygenerated funds and borrowings under the Credit Facility (described below). Theportion of the Company’s development and investment business that includes theacquisition and development of real estate is financed with loans secured byunderlying real estate, external equity, internal sources of funds, or acombination thereof.

Net cash used in operating activities totaled $81.4million for the first quarter of 2005, compared to $44.5 million for the sameperiod in 2004. Cash used in operating activities, excluding the change in realestate and related borrowings, increased to $73.5 million in the first quarterof 2005 as compared to $39.0 million in the first quarter of 2004. Thisincrease in cash used is primarily due to greater incentive compensation andtax payments made in the first quarter of 2005, on account of 2004 activity ascompared to such payments made in the first quarter of 2004. In addition, cashused in real estate activities, net of related borrowings, was $7.9 million inthe first quarter of 2005, compared to $5.5 million for the same period in 2004as a result of increased real estate investment activity in 2005.

Net cash used in investing activities totaled $42.6million for the first quarter of 2005, compared to $18.1 million in cashprovided by investing activities for the same period in 2004. This change isprimarily due to the purchase of $17.6 million in available for sale securitiesby the Company’s wholly-owned captive insurance company in the first quarter of2005, as compared to no such purchases in 2004. In addition, expenditures madein the first quarter of 2005 related to real estate classified as “held forinvestment” were $17.6 million, as compared to similar expenditures of $1.9 millionin the first quarter of 2004. These 2005 expenditures were offset by $0.03million of proceeds from the dispositions of real estate projects classified as“held for investment” at the time of disposition in accordance with FAS 144, ascompared to $11.3 million of such proceeds in 2004. Investments inunconsolidated subsidiaries, net of distributions, increased to $5.5 million inthe first quarter of 2005, compared to distributions from investments inunconsolidated subsidiaries, net of contributions, of $10.1 million in the sameperiod in 2004.

Net cash used in financing activities totaled $1.2million for the first quarter of 2005, compared to $11.8 million for the sameperiod in 2004. In 2005, the Company received proceeds from borrowings, net ofpayments, of $17.1 million on notes payable related to real estate held forinvestment as compared to net payments of $9.0 million in 2004. In addition,the Company made principal payments (and no borrowings) of $0.2 million,compared to principal payments, net of additional borrowings, of $11.2 millionin the first quarter of 2004. The 2005 payments primarily relate to payments oncapital lease obligations and the 2004 payments, net of borrowings, primarilyrelate to activity on the Company’s Credit Facility. These decreases in cashused were offset by distributions, net of contributions, to minority interestholders of $8.7 million in the first quarter of 2005, compared to $7.1 millionof contributions received, net of distributions, in the 

32

----

same period in 2004. Inaddition, the Company repurchased common stock utilizing cash of $11.1 million(including related costs) in the first quarter of 2005, while no suchrepurchases were made in the same period in 2004. The Company also received$1.8 million in proceeds in 2005 from the exercise of stock options andissuance of common stock, compared to $1.4 million in the first quarter of2004.

In June 2002, the Company obtained a$150.0 million revolving line of credit (the “Credit Facility”) arrangedby Bank of America, N.A., as the administrative agent (the “AdministrativeAgent”), which replaced the Company’s previous $150.0 million revolvingline of credit. The Credit Facility expires on June 28, 2005. The Company canobtain loans under the terms of the Credit Facility, which are Base Rate Loansor Eurodollar Rate Loans. Base Rate Loans bear interest at a base rate plus amargin up to 0.75% depending on the Company’s leverage ratio. The base rate isthe higher of the prime lending rate announced from time to time by theAdministrative Agent or an average federal funds rate plus 0.5%. EurodollarRate Loans bear interest at the Eurocurrency rate plus a margin, which rangesfrom 1.75% to 2.5%, depending upon the Company’s leverage ratio. The CreditFacility contains various covenants such as the maintenance of minimum equity,liquidity, revenues, interest coverage ratios and fixed charge ratios. TheCredit Facility also includes restrictions on recourse indebtedness and totalindebtedness, restrictions on liens and certain restrictions on investments andacquisitions that can be made by the Company. In addition, the Company may notpay dividends, repurchase common shares, or make other distributions on accountof its common stock exceeding 50% of the previous year’s net income beforedepreciation and amortization. The Credit Facility is guaranteed by certainsignificant subsidiaries of the Company and is secured by a pledge of a stockof such significant subsidiaries and a pledge of certain intercompanyindebtedness.

The Company’s participation in derivative transactionshas been limited to risk management purposes, and derivative instruments arenot held for trading purposes. The Credit Facility requires the Company toenter into one or more interest rate agreements for the Company’s floating rateindebtedness in excess of $30.0 million (other than construction loansunder which interest is capitalized in accordance with accounting principlesgenerally accepted in the United States (“GAAP”)) ensuring the net interest onsuch excess is fixed, capped or hedged. In March 2005, the Company enteredinto an interest rate cap agreement with a notional amount of $10.0 millionexpiring June 24, 2005, under which the Company will receive payments ifthe 30-day LIBOR based interest rate exceeds 3.25%. Effective March 31,2005, the interest rate cap agreement has been designated an effective hedge oncertain variable rate debt of the Company, and, to the extent the hedgingrelationship remains effective, changes in fair value of the interest rate capagreement will be recorded in other comprehensive income.

The Company also has a $25.0 milliondiscretionary line of credit (the “Discretionary Line”) with Bank of America,N.A. Each loan obtained by the Company under the Discretionary Line matures infive business days, but no later than June 28, 2005, and bears interest ata LIBOR-based rate (plus a bank margin negotiated from time to time).Borrowings under the Discretionary Line are unsecured and reduce borrowingcapacity under the Credit Facility.

At March 31, 2005, the Company had no borrowingsunder the Credit Facility or the Discretionary Line. The covenants contained inthe Credit Facility and the amount of the Company’s other borrowings andcontingent liabilities may have the effect of limiting the borrowing capacityavailable to the Company under the Credit Facility to an amount less than the$150.0 million commitment. The Company’s unused borrowing capacity (takinginto account letters of credit outstanding) under the Credit Facility was$127.2 million at March 31, 2005. Since it takes longer for theCompany to dispose of real estate investments in a weaker economy, an economicslow down could adversely impact the Company’s ability to comply with certainof the real estate-related financial covenants in the Company’s CreditFacility, which could negatively impact the Company’s borrowing capacity. Also,since many of the financial covenants in the Credit Facility are dependent onthe Company’s “EBITDA,” as defined in the Credit Facility agreement andcalculated on a trailing four-quarter basis, a decline in the Company’s overalloperations 

33

----

could adversely impact theCompany’s ability to comply with these financial covenants and, in turn, theCompany’s borrowing capacity.

At March 31, 2005, the Company was in compliancewith all covenants of the Credit Facility. The Company expects to continue toborrow under the Credit Facility to finance future strategic acquisitions, fundits co-investment activities and provide the Company with an additional sourceof working capital. In April 2005, the Company borrowed $91.3 millionunder the Credit Facility to fund its purchase of additional shares of Savillson the open market and pursuant to the Company’s exercise of an option grantedby Savills.

In December 2004, the Company entered into aninterest rate cap agreement in order to limit its interest expense on aconstruction loan with a 30-day LIBOR-based floating interest raterelated to a consolidated real estate project. The interest rate cap agreementhas a notional amount of $2.5 million at March 31, 2005, and the Companywill receive payments if the LIBOR-based interest rate exceeds 3.5%. Theinterest rate cap agreement has not been designated as an effective hedge, andtherefore the interest rate cap agreement will be marked to market each periodwith the change in fair market value recognized in current period earnings. Theinterest rate cap agreement expires on January 1, 2006. Through March 31,2005, amounts recorded by the Company related to this interest rate capagreement were not material.

In March 2003, the Company entered into aninterest rate cap agreement in order to limit its interest expense on aconstruction loan with a 30-day LIBOR-based floating interest raterelated to a consolidated real estate project. The interest rate cap agreementhad a notional amount of $11.4 million and the Company was to receive paymentsif the LIBOR-based interest rate exceeds 3.5%. The interest rate capagreement was not designated as an effective hedge and, therefore, was markedto market each period with the change in fair market value recognized incurrent period earnings. The interest rate cap agreement expired on March 1,2005. The amounts recorded by the Company related to this interest rate capagreement were not material.

The Company does notanticipate paying any dividends in the foreseeable future. The Company believesthat funds generated from operations, together with existing cash and availablecredit under the Credit Facility and loans secured by underlying real estatewill be sufficient to finance its current operations, planned capitalexpenditure requirements, payment obligations for development purchases, sharerepurchases, acquisitions of service companies, signing bonuses or loans fornew employees and internal growth for the foreseeable future. As of the date ofthis Form 10-Q, the Company is negotiating a renewal of the Credit Facility.The Company anticipates it will renew the Credit Facility on terms that aresubstantially similar to the existing terms. The Company’s need, if any, toraise additional funds to meet its working capital and capital requirementswill depend upon numerous factors, including the success and pace ofimplementation of its growth strategy. The Company regularly considers capitalraising alternatives to be able to take advantage of available avenues tosupplement its working capital, including strategic corporate partnerships orother alliances, bank borrowings and the sale of equity and/or debt securities.

**Off-balance Sheet Arrangements**

The Company hasoff-balance sheet arrangements consisting of certain debt repayment guaranteesthat have been provided by the company as security for the obligations ofothers (primarily unconsolidated subsidiaries of the Company) in the normalcourse of the Company’s real estate development business. The Company has notmade any material payments under such arrangements in the three months ended March 31,2005 or 2004. As of March 31, 2005, the Company has guaranteed a maximumof $16.3 million of such notes payable, of which $15.6 million is outstanding.Payments required under these arrangements, if any, would generally result inan increase in the Company’s investment in the underlying unconsolidatedsubsidiaries.

34

----

**Forward-Looking Statements**

Certain statementscontained or incorporated by reference in this Quarterly Report on Form 10-Q,including without limitation statements containing the words “believe,” “anticipate,”“forecast,” “will,” “may,” “expect,” “envision,” “project,” “budget,” “target,”“estimate,” “could,” “should,” “would,” “conceivable,” “intend,” “possible,” “foresee,”“look(ing) for,” “look to” and words of similar import, are forward-lookingstatements within the meaning of the federal securities laws. Such forward-lookingstatements involve known and unknown risks, uncertainties and other matterswhich may cause the actual results, performance or achievements of the Companyor industry results to be materially different from any future results,performance or achievements expressed or implied by such forward-lookingstatements. Such risks, uncertainties and other matters include, but are notlimited to (i) the timing of individual transactions, (ii) theability of the Company to identify, implement and maintain the benefit of costreduction measures and achieve economies of scale, (iii) the ability ofthe Company to compete effectively in the international arena, (iv) theability of the Company to retain its major clients and renew its contracts, (v) theability of the Company to attract new user and investor clients, (vi) theability of the Company to manage fluctuations in net earnings and cash flowwhich could result from the Company’s participation as a principal in realestate investments, (vii) the Company’s ability to continue to pursue itsgrowth strategy, (viii) the Company’s ability to pursue strategicacquisitions on favorable terms and manage challenges and issues commonlyencountered as a result of those acquisitions, (ix) the Company’s abilityto compete in highly competitive national and local business lines, and (x) theCompany’s ability to attract and retain qualified personnel in all areas of itsbusiness (particularly senior management). In addition, the Company’s abilityto achieve certain anticipated results will be subject to other factorsaffecting the Company’s business that are beyond the Company’s control,including but not limited to general economic conditions (including the costand availability of capital for investment in real estate and clients’willingness to make real estate commitments), the effect of government regulationon the conduct of the Company’s business and the threat of terrorism and actsof war. Given these uncertainties, readers are cautioned not to place unduereliance on such forward-looking statements. The Company disclaims anyobligation to update any such statements or publicly announce any updates orrevisions to any of the forward-looking statements contained herein toreflect any change in the Company’s expectation with regard thereto or anychange in events, conditions, circumstances or assumptions underlying suchstatements. Reference is hereby made to the disclosures contained under theheading “Risk Factors” in “Item 1. Business” of the Company’s AnnualReport on Form 10-K filed with the Securities and ExchangeCommission on March 16, 2005.

**ITEM 3.****           ***Quantitative and Qualitative Disclosures About Market Risk*

The Company’s primarymarket risk exposure is to changes in interest rates. The Company is exposed tomarket risk related to its Credit Facility and loans secured by real estateproperties as discussed in “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Liquidity and Capital Resources” and inNotes 7 and 8 to the Company’s Condensed Consolidated FinancialStatements. The Credit Facility and the majority of the loans secured by realestate bear interest at variable rates and are subject to fluctuations in themarket. From time to time, the Company purchases interest rate agreements tohedge, cap or lock a portion, but not all, of its exposure to fluctuations ininterest rates, and, as such, the effects of interest rate changes are expectedto be limited. The Company’s earnings are also somewhat affected byfluctuations in the value of the U.S. dollar as compared to foreign currenciesas a result of its operations in Europe, Asia and Australia. At March 31, 2005,there have been no significant changes in the interest rate or foreign currencymarket risks since December 31, 2004. See Note 17 to the Company’sCondensed Consolidated Financial Statements for discussion regarding theCompany’s purchase of an additional stake in Savills plc in April 2005.

35

----

**ITEM 4.****           ***Controls and Procedures*

As of the end of the period covered by this report,the Company carried out an evaluation, under the supervision and with theparticipation of management, including its Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the Company’s disclosure controlsand procedures (as defined in 13a-15(e) of the Securities ExchangeAct of 1934 (the “Exchange Act”)). Based on that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the design andoperation of the Company’s disclosure controls and procedures are effective inensuring that material information relating to the Company (including itsconsolidated subsidiaries) required to be included in the Company’s periodicfilings or submissions with the Securities and Exchange Commission is recorded,processed, summarized and reported within the time periods specified in the rules andforms of the Securities and Exchange Commission. There were no changes in theCompany’s internal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act) that occurred during the Company’s last fiscal quarter thathave materially affected or are reasonably likely to materially affect theCompany’s internal control over financial reporting.

36

----

**PART II—OTHERINFORMATION**

**ITEM1.**                *Legal Proceedings*

The Company and one of itssubsidiaries are defendants in a lawsuit styled *Bank OneOklahoma, N.A., et al.*(the “Bank”)*v. TrammellCrow Services, Inc. and Trammell Crow Company*, No. 03 C3624, pending in the US District Court for the Northern District of Illinois,originally filed on April 2, 2003. The claims asserted by the plaintiffsrelate to a sale/leaseback transaction involving a property in Oklahoma Citypreviously owned by the Bank. The suit alleges breach of contract, breach offiduciary duty, negligent misrepresentation, fraudulent misrepresentation andfraudulent concealment against the Company and/or its subsidiary and allegesthat the plaintiffs have been damaged in an unspecified amount in excess of$15.0 million. The plaintiffs seek to recover actual damages, punitivedamages and reasonable attorneys’ fees. The suit is in the process ofdiscovery, and no trial date has been set. As of the date of this Form 10-Q,the outcome of the suit cannot be predicted with any certainty, and the Companycannot at this time estimate an amount or range of potential loss in the eventof an unfavorable outcome. While the Company cannot predict with any certaintythe outcome of this matter, the Company currently believes the plaintiffs’claims are without merit and is vigorously defending the lawsuit.

From time to time, theCompany is involved in other litigation matters that arise in the ordinarycourse of its business, some of which involve claims for damages which aresubstantial in amount. The ultimate liability for these matters cannot bedetermined. However, based on the information currently available, the Companydoes not believe that the resolution of any such matters to which it iscurrently a party will have a material adverse effect on the Company’s resultsof operations, financial condition or liquidity.

**ITEM 2.**Unregistered Sales of EquitySecurities and Use of Proceeds

Purchasesunder the Company’s stock repurchase programs in the first quarter of 2005 wereas follows:
| **Period**                               | ** ** | ** ** | ** ** | **Total Number of   Shares Purchased** | ** ** | **Average Price Paid   per Share** | ** ** | **Total Number of   Shares Purchased as  Part of Publicly   Announced Plans or  Programs** | ** ** | **Maximum Number  (or Approximate   Dollar Value) of  Shares that May Yet  Be Purchased Under  the Plans or  Programs** | ** ** |
|------------------------------------------|------------|------------|------------|------------------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January 1, 2005—January  31, 2005   |       |       | —     |                                                       |       |                                                   | —     |                                                                                                                                         |       |                                                                                                                                                                                          | —     |   |   |   | — |   |   |
| February 1, 2005—February  28, 2005 |       |       | —     |                                                       |       |                                                   | —     |                                                                                                                                         |       |                                                                                                                                                                                          | —     |   |   |   | — |   |   |
| March 1, 2005—March 31,  2005  |       |       | 539,300    | (1)                                                        |       |                                                   | $          | 20.57                                                                                                                                        |       |                                                                                                                                                                                          |       | 539,300 |   |   |   | $ | 8,900,000 |   |   |
| Total                                    |       |       | 539,300    |                                                       |       |                                                   | $          | 20.57                                                                                                                                        |       |                                                                                                                                                                                          |       | 539,300 |   |   |   | $ | 8,900,000 |   |   |

----

(1)          OnMarch 1, 2005, the Company announced a $20 million share repurchase programauthorizing the  purchase of theCompany’s common stock from time to time in open market purchases or inprivately negotiated transactions.

37

----

**ITEM6.**                *Exhibits*

(a)    Exhibits:
| 3.1(1)   | Certificate of Incorporation of the Company                                                                                                                                   |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2(1)   | Bylaws of the Company                                                                                                                                                         |
| 3.2.1(2) | First Amendment to the Bylaws of the Company                                                                                                                                  |
| 3.2.1(3) | Second Amendment to the Bylaws of the Company                                                                                                                                 |
| 3.2.1(4) | Third Amendment to the Bylaws of the Company                                                                                                                                  |
| 4.1(5)   | Form of Certificate for Shares of Common Stock  of the Company                                                                                                           |
| 10.1(6)  | Second Amendment of Credit Agreement dated April 22,  2005, between the Company and Bank of America, N.A.                                                                     |
| 31.1     | Certification by the Chief Executive Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                   |
| 31.2     | Certification by the Chief Financial Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                   |
| 32.1     | Certification by the Chief Executive Officer of the  Company Pursuant to 18 U.S.C. § 1350, adopted pursuant to  Section 906 of the Sarbanes- Oxley Act of 2002 |
| 32.2     | Certification by the Chief Financial Officer of the  Company Pursuant to 18 U.S.C. § 1350, adopted pursuant to  Section 906 of the Sarbanes- Oxley Act of 2002 |

----

(1)                 Previouslyfiled as an exhibit to the Company’s Registration Statement on Form S-1(File Number 333-34859) filed with the Securities and ExchangeCommission on September 3, 1997, and incorporated herein by reference.

(2)                 Previouslyfiled as an exhibit to the Company’s Form 10-Q filed with theSecurities and Exchange Commission on August 11, 2000, and incorporatedherein by reference.

(3)                 Previouslyfiled as an exhibit to the Company’s Form 10-K filed with theSecurities and Exchange Commission on March 31, 2003, and incorporatedherein by reference.

(4)                 Previouslyfiled as Exhibit 3.2.3 to the Company’s Form 10-K filed withthe Securities and Exchange Commission on March 15, 2004, and incorporatedherein by reference.

(5)                 Previouslyfiled as Exhibit 4.1 to the Company’s Registration Statement onForm S-1/A (File Number 333-34859) filed with theSecurities and Exchange Commission on October 23, 1997, and incorporatedherein by reference.

(6)                 Previouslyfiled as Exhibit 10.1 to the Company’s Form 8-K filed with theSecurities and Exchange Commission on April 26, 2005, and incorporated hereinby reference.

38

----

**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                         | TRAMMELL CROW COMPANY |
|-------------------------|-----------------------|
|                    | By:                   | /s/  DEREK R. MCCLAIN |
|                    |                  | Derek R. McClain |
| * *                | * *              | *Chief  Financial Officer* |
| * *                | * *              | *(Principal  Financial Officer and duly authorized to sign this report on behalf of the  Registrant)* |
| Date: May 10, 2005 |                  |   |

 

39

----

**Exhibit Index**
| Exhibit  Number | ** ** | ** **                                                                                                                                                                             | ** ** | **Description** |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| 3.1(1)          |       | Certificate of Incorporation of the Company                                                                                                                                            |
| 3.2(1)          |       | Bylaws of the Company                                                                                                                                                                  |
| 3.2.1(2)        |       | First Amendment to the Bylaws of the Company                                                                                                                                           |
| 3.2.1(3)        |       | Second Amendment to the Bylaws of the Company                                                                                                                                          |
| 3.2.1(4)        |       | Third Amendment to the Bylaws of the Company                                                                                                                                           |
| 4.1(5)          |       | Form of Certificate for Shares of Common Stock  of the Company                                                                                                                    |
| 10.1(6)         |       | Second Amendment of Credit Agreement dated  April 22, 2005, between the Company and Bank of America, N.A.                                                                         |
| 31.1            |       | Certification by the Chief Executive Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                            |
| 31.2            |       | Certification by the Chief Financial Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                            |
| 32.1            |       | Certification by the Chief Executive Officer of the  Company Pursuant to 18 U.S.C. § 1350, adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2            |       | Certification by the Chief Financial Officer of the  Company Pursuant to 18 U.S.C. § 1350, adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |

----

(1)                 Previouslyfiled as an exhibit to the Company’s Registration Statement on Form S-1(File Number 333-34859) filed with the Securities and ExchangeCommission on September 3, 1997, and incorporated herein by reference.

(2)                 Previouslyfiled as an exhibit to the Company’s Form 10-Q filed with theSecurities and Exchange Commission on August 11, 2000, and incorporatedherein by reference.

(3)                 Previouslyfiled as an exhibit to the Company’s Form 10-K filed with theSecurities and Exchange Commission on March 31, 2003, and incorporatedherein by reference.

(4)                 Previouslyfiled as Exhibit 3.2.3 to the Company’s Form 10-K filed withthe Securities and Exchange Commission on March 15, 2004, and incorporatedherein by reference.

(5)                 Previouslyfiled as Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A(File Number 333-34859) filed with the Securities and ExchangeCommission on October 23, 1997, and incorporated herein by reference.

(6)                 Previouslyfiled as Exhibit 10.1 to the Company’s Form 8-K filed with theSecurities and Exchange Commission on April 26, 2005, and incorporatedherein by reference.

40

----