##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from _________________ to
 Commission file number 1-13038
 CRESCENT REAL ESTATE EQUITIES COMPANY
 
  TEXAS
    
    52-1862813(State or other jurisdiction of incorporation
or organization)
    
    (I.R.S. Employer Identification Number)
  
  (817) 321-2100
  Name of Each ExchangeTitle of each class:
    
    on Which Registered:Common Shares of Beneficial Interest par value $0.01 per share
    
    New York Stock ExchangeSeries A Convertible Cumulative Preferred Shares of
Beneficial Interest par value $0.01 per share
    
    New York Stock ExchangeSeries B Cumulative Redeemable Preferred Shares of
Beneficial Interest par value $0.01 per share
    
    New York Stock Exchange
 
  þ o
  o þ
  þ o
 o
  þ o o
  o þ
  Number of Common Shares outstanding as of February 23, 2006:
    
    
    101,660,271Number of Series A Preferred Shares outstanding as of February 23, 2006:
    
    
    14,200,000Number of Series B Preferred Shares outstanding as of February 23, 2006:
    
    
    3,400,000
 DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



TABLE OF CONTENTS
 PagePART I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    12Item 1B. Unresolved Staff Comments
    
    
    23Item 2. Properties
    
    
    23Item 3. Legal Proceedings
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33PART II.Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
    
    
    34Item 6. Selected Financial Data
    
    
    36Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    37Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    71Item 8. Financial Statements and Supplementary Data
    
    
    72Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    131Item 9A. Controls and Procedures
    
    
    131Item 9B. Other Information
    
    
    135PART III.Item 10. Trust Managers and Executive Officers of the Registrant
    
    
    135Item 11. Executive Compensation
    
    
    135Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
    
    
    135Item 13. Certain Relationships and Related Transactions
    
    
    135Item 14. Principal Accountant Fees and Services
    
    
    135PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    136Fourth Amended and Restated BylawsList of SubsidiariesConsent of Ernst & Young LLPCertifications of CEO and CFO Pursuant to Section 302Certifications of CEO and CFO Pursuant to Section 906
  2




---



##### Table of Contents



PART I
 
 Item 1. Business
 References to we, us or our refer to Crescent Real Estate Equities Company and,
unless the context otherwise requires, Crescent Real Estate Equities Limited Partnership, which we
refer to as our Operating Partnership, and our other direct and indirect subsidiaries. We conduct
our business and operations through the Operating Partnership, our other subsidiaries and our joint
ventures. References to Crescent refer to Crescent Real Estate Equities Company. The sole
general partner of the Operating Partnership is Crescent Real Estate
Equities, Ltd., a wholly-owned subsidiary of Crescent Real Estate Equities Company, which we refer to as the General
Partner.
 Certain statements contained herein constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance.
Our future results, financial condition and business may differ materially from those expressed in
these forward-looking statements. You can find many of these statements by looking for words such
as plans, intends, estimates, anticipates, expects, believes or similar expressions in
this Form 10-K . These forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Many of the factors that will determine these items are beyond our ability to
control or predict. For further discussion of these factors, see Item 1A. Risk Factors in this
Form 10-K.
 For these statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned
not to place undue reliance on our forward-looking statements, which speak only as of the date of
this Form 10-K or the date of any document incorporated by reference. All subsequent written and
oral forward-looking statements attributable to us or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section.
We do not undertake any obligation to release publicly any revisions to our forward-looking
statements to reflect events or circumstances after the date of this Form 10-K .
 General
   
    
    Office Segment;
    
    Resort Residential Development Segment;
    
    Resort/Hotel Segment; and
    
    Temperature-Controlled Logistics Segment.
  
    
    Office Segmentconsisted of 75 office properties, which we refer to as the Office
Properties, located in 26 metropolitan submarkets in seven states, with an aggregate of
approximately 30.7 million net rentable square feet. Fifty-four of the Office
Properties are wholly-owned and 21 are owned through joint ventures, one of which is
consolidated in our financial statements contained in Item 8, Financial Statements and
Supplementary Data, and 20 of which are unconsolidated.
    
    Resort Residential Development Segmentconsisted of our ownership of common stock
representing interests of 98% to 100% in four Resort Residential Development
Corporations and two limited partnerships, which are consolidated. These Resort
Residential Development Corporations, through partnership arrangements, owned in whole
or in part 23 active and planned upscale resort residential development properties,
which we refer to as the Resort Residential Development Properties.
 3




---



##### Table of Contents




    
    Resort/Hotel Segmentconsisted of five luxury and destination fitness resorts and spas
with a total of 1,034 rooms/guest nights and three upscale business-class hotel
properties with a total of 1,376 rooms, which we refer to as the Resort/Hotel
Properties. Five of the Resort/Hotel Properties are wholly-owned, one is owned through
a joint venture that is consolidated and two are owned through joint ventures that are
unconsolidated.
    
    Temperature-Controlled Logistics Segmentconsisted of our 31.7% interest in
AmeriCold Realty Trust, or AmeriCold, a REIT. As of December 31, 2005, AmeriCold
operated 101 facilities, of which 84 were wholly-owned, one was partially-owned and
sixteen were managed for outside owners. The 85 owned facilities, which we refer to as
the Temperature-Controlled Logistics Properties, had an aggregate of approximately
437.2 million cubic feet (17.4 million square feet) of warehouse space. AmeriCold also
owned two quarries and the related land.
    Business Objectives and Strategies Overview
     4




---



##### Table of Contents



Available Information
  Employees
  Tax Status
   5




---



##### Table of Contents



Environmental Matters
  
    
    Comprehensive Environmental Response, Compensation, and Liability Act, as amended
(CERCLA);
    
    Resource Conservation & Recovery Act;
    
    Clean Water Act;
    
    Clean Air Act;
    
    Toxic Substances Control Act; and
    
    Occupational Safety & Health Act.
   6




---



##### Table of Contents



INDUSTRY SEGMENTS
 Office Segment
 Ownership Structure
  Market Information
    Projected Population Growth and Employment Growth for all Company Markets
 Population
    
    
    EmploymentGrowth
    
    
    GrowthMetropolitan Statistical Area
    
    2006-2008
    
    
    2006-2008United States
    
    
    3.3
    %
    
    
    4.5
    %Atlanta, GA
    
    
    6.6
    
    
    
    5.7Austin, TX
    
    
    8.6
    
    
    
    12.2Dallas, TX
    
    
    6.1
    
    
    
    7.6Denver, CO
    
    
    3.6
    
    
    
    4.8Fort Worth, TX
    
    
    6.2
    
    
    
    7.9Houston, TX
    
    
    5.6
    
    
    
    7.6Las Vegas, NV
    
    
    10.2
    
    
    
    6.7Miami, FL
    
    
    3.0
    
    
    
    2.5Orange County, CA
    
    
    3.7
    
    
    
    5.6Seattle, WA
    
    
    4.8
    
    
    
    8.3
 
 Source:
    
    Reis, Inc. Data represents total
percentage change for years 2006, 2007 and 2008. 7




---



##### Table of Contents



Unemployment Rates for Company Markets
 As of December 31,Market
    
    2005
    
    
    2004United States
    
    
    4.6
    %
    
    
    5.1
    %Texas
    
    
    4.8
    
    
    
    5.8Dallas
    
    
    4.7
    
    
    
    5.7Houston
    
    
    5.3
    
    
    
    5.9Austin
    
    
    3.9
    
    
    
    4.7Denver
    
    
    4.6
    
    
    
    5.4Miami
    
    
    3.7
    
    
    
    5.5Las Vegas
    
    
    3.5
    
    
    
    3.8
 
 Source:
    
    U.S. Bureau of Labor Statistics and Texas Workforce Commission. Not seasonally
adjusted.  Office Market Absorption and Occupancy for Major Company Markets
 Economic Net
    
    
    Economic NetAbsorption(1)
    
    
    Absorption(1)
    
    
    Economic
    
    
    EconomicAll Classes
    
    
    Class A
    
    
    Occupancy(2)
    
    

Occupancy(2)(in square feet)
    
    
    (in square feet)
    
    
    All Classes
    
    

Class AMarket
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Dallas
    
    
    (128,000
    )
    
    
    1,281,000
    
    
    
    1,111,000
    
    
    
    759,000
    
    
    
    76.7
    %
    
    
    77.0
    %
    
    
    80.6
    %
    
    
    79.5
    %Houston
    
    
    1,201,000
    
    
    
    315,000
    
    
    
    (204,000
    )
    
    
    (328,000
    )
    
    
    83.4
    
    
    
    83.0
    
    
    
    83.7
    
    
    
    84.3Austin
    
    
    1,079,000
    
    
    
    1,098,000
    
    
    
    362,000
    
    
    
    1,150,000
    
    
    
    83.8
    
    
    
    81.9
    
    
    
    83.2
    
    
    
    81.3Denver
    
    
    2,864,000
    
    
    
    580,0000
    
    
    
    799,000
    
    
    
    678,000
    
    
    
    84.1
    
    
    
    82.4
    
    
    
    84.8
    
    
    
    82.7Miami
    
    
    2,308,000
    
    
    
    1,507,000
    
    
    
    895,000
    
    
    
    1,076,000
    
    
    
    89.9
    
    
    
    89.6
    
    
    
    88.7
    
    
    
    88.1Las Vegas
    
    
    2,068,000
    
    
    
    1,892,000
    
    
    
    305,000
    
    
    
    615,000
    
    
    
    91.5
    
    
    
    88.8
    
    
    
    91.9
    
    
    
    91.1
 
 Sources: CoStar Group for non-medical and non-owner-occupied buildings greater than 15,000
square feet (Dallas, Houston, Austin, Denver and Miami); Grubb & Ellis Las Vegas (Las
Vegas). (1)
    Economic net absorption is the change in leased space from one period to
another.
 (2)
  8




---



##### Table of Contents



Office Market Construction Activity for Major Company Markets
 Office Space
    
    
    Office Space
    
    
    Office Space UnderCompletions
    
    
    Completions
    
    
    Construction(in square feet)
    
    All Classes
    
    
    Class A
    
    
    2005Market
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    All Classes
    
    
    Class ADallas
    
    
    583,000
    
    
    
    462,000
    
    
    
    335,000
    
    
    
    181,000
    
    
    
    2,676,000
    
    
    
    2,211,000Houston
    
    
    669,000
    
    
    
    460,000
    
    
    
    312,000
    
    
    
    160,000
    
    
    
    746,000
    
    
    
    439,000Austin
    
    
    340,000
    
    
    
    222,000
    
    
    
    
    
    
    
    74,000
    
    
    
    291,000
    
    
    
    148,000Denver
    
    
    487,000
    
    
    
    946,000
    
    
    
    
    
    
    
    351,000
    
    
    
    1,110,000
    
    
    
    364,000Miami
    
    
    557,000
    
    
    
    1,164,000
    
    
    
    36,000
    
    
    
    889,000
    
    
    
    694,000
    
    
    
    328,000Las Vegas
    
    
    1,043,000
    
    
    
    1,714,000
    
    
    
    326,000
    
    
    
    210,000
    
    
    
    1,865,000
    
    
    
    328,000
 
 Sources: CoStar Group (Dallas, Houston, Austin, Denver and Miami); Restrepo Consulting
Group, LLC (Las Vegas). Competition
  Diversified Tenant Base
   Resort Residential Development Segment
 Ownership Structure
  9




---



##### Table of Contents



Competition and Market Information
     Resort/Hotel Segment
 Ownership Structure
   Market Information
  10




---



##### Table of Contents



Competition
  Temperature-Controlled Logistics Segment
 Ownership Structure
  Business and Industry Information
    11




---



##### Table of Contents



Percentage of2005 SegmentRevenueH.J. Heinz Company
    
    
    15.0
    %ConAgra Foods, Inc.
    
    
    10.8U.S. Government
    
    
    10.4Altria Group Inc. (Kraft Foods)
    
    
    5.3Sara Lee Corp.
    
    
    4.5Schwan Corp.
    
    
    4.1Tyson Foods, Inc.
    
    
    3.7General Mills, Inc.
    
    
    3.4McCain Foods, Inc.
    
    
    2.6Smithfield Companies Inc.
    
    
    2.3Other
    
    
    37.9Total
    
    
    100.0
    %
 Competition
  
 Item 1A. Risk Factors
 We derive the substantial majority of our office rental revenues from geographically
concentrated markets.
  Our performance and value are subject to general risks associated with the real estate industry.
  
    
    downturns in the national, regional and local economic conditions where our properties
are located;
    
    competition from other Office, Resort Residential Development, Resort/Hotel and
Temperature-Controlled Logistics properties;
    
    adverse changes in local real estate market conditions, such as oversupply or reduction
in demand for office space, luxury residences, Resort/Hotel space or Temperature-Controlled
Logistics storage space;
    
    changes in tenant preferences that reduce the attractiveness of our properties to tenants;
    
    tenant defaults;
    
    zoning or other regulatory restrictions;
 
 12




---



##### Table of Contents




    
    decreases in market rental rates;
    
    costs associated with the need to periodically repair, renovate and re-lease space;
    
    increases in the cost of maintenance, insurance and other operating costs, including
real estate taxes, associated with one or more properties, which may occur even when
circumstances such as market factors and competition cause a reduction in revenues from one
or more properties; and
    
    illiquidity of real estate investments, which may limit our ability to vary our
portfolio promptly in response to changes in economic or other conditions.
 We depend on leasing office space to tenants on economically favorable terms and collecting rent
from our tenants, who may not be able to pay.
    Our results of operations depends on the ability of El Paso Energy to meet its obligations pursuant
to its lease termination agreement with us.
  
    
    $65 million in termination fees in periodic installments through December 31, 2007 (of
which $10.0 million was received as of December 31, 2005
and is included in restricted cash in our Consolidated Balance Sheets as it is required to be escrowed with the lender); and
    
    $62 million in rent according to original contractual lease terms from July 1, 2005,
through December 31, 2007 (of which $13.6 million was received as of December 31, 2005).
  We may experience difficulty or delay in renewing leases or re-leasing space.
  ,
 13




---



##### Table of Contents



Many real estate costs are fixed, even if income from our properties decreases.
  We may be unable to sell properties when appropriate because real estate investments are illiquid.
  The revenues from our eight Resort/Hotel properties are subject to risks associated with the
hospitality industry.
  
    
    Based on features such as access, location, quality of accommodations, room-rate
structure and, to a lesser extent, the quality and scope of other amenities such as food
and beverage facilities, our Resort/Hotel properties compete for guests with other resorts
and hotels, a number of which have greater marketing and financial resources than our
lessees or the Resort/Hotel property managers;
    
    If there is an increase in operating costs resulting from inflation or other factors, we
or the property managers may not be able to offset the increase by increasing room rates;
    
    Our Resort/Hotel properties are subject to fluctuating and seasonal demands for business
travel and tourism; and
    
    Our Resort/Hotel properties are subject to general and local economic conditions that
may affect the demand for travel in general and other factors that are beyond our control,
such as acts of terrorism.
  The revenues from our eight Resort/Hotel properties depend on third-party operators that we do not
control.
  14




---



##### Table of Contents



The performance of our Resort Residential Development properties is affected by national, regional
and local economic conditions.
  The amount of debt that we have and the restrictions imposed by that debt could adversely affect
our business and our financial condition.
   
    
    make it difficult to satisfy our debt service requirements;
    
    prevent us from making distributions on our outstanding common shares and preferred shares;
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, thereby reducing funds available for operations, property
acquisitions and other appropriate business opportunities that may arise in the future;
    
    require us to dedicate increased amounts of our cash flow from operations to payments on
our variable rate, unhedged debt if interest rates rise;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
factors that affect the profitability of our business;
    
    limit our ability to obtain additional financing, if we need it in the future for
working capital, debt refinancing, capital expenditures, acquisitions, development or other
general corporate purposes;
    
    increase the adverse effect on our available cash flow from operations that may result
from changes in conditions in the economy in general and in the areas in which our
properties are located; and
    
    limit our flexibility in conducting our business, which may place us at a disadvantage
compared to competitors with less debt.
   15




---



##### Table of Contents



We are obligated to comply with financial and other covenants in our debt that could restrict our
operating activities, and the failure to comply could result in defaults that accelerate the
payment under our debt.
  
    
    relating to the maintenance of the property securing the debt;
    
    restricting our ability to pledge assets or create other liens;
    
    restricting our ability to incur additional debt;
    
    restricting our ability to amend or modify existing leases; and
    
    restricting our ability to enter into transactions with affiliates.
  
    
    incur additional debt;
    
    incur additional secured debt and subsidiary debt;
    
    make certain distributions, investments and other restricted payments, including
distribution payments on our or our subsidiaries outstanding common and preferred equity;
    
    limit the ability of restricted subsidiaries to make payments to us;
    
    enter into transactions with affiliates;
    
    create certain liens;
    
    enter into certain sale-leaseback transactions; and
    
    consolidate, merge or sell all or substantially all of our assets.
   Many factors affect the trading price of our shares.
  
    
    the amount of distributions paid on our common and preferred shares;
    
    the market for similar securities;
    
    additional issuance of other classes or series of our shares, particularly preferred
shares, or the issuance of debt securities;
    
    our financial condition, performance and prospects;
    
    general economic and financial market conditions; and
    
    prevailing interest rates, increases in which may have a negative effect on the trading
value of our preferred shares.
 Rising interest rates could adversely affect our cash flow and the market price of our outstanding
debt securities and preferred shares.
  16




---



##### Table of Contents



In order to pay distributions to our common shareholders at current levels, we may be required to
use proceeds from a combination of asset sales and joint ventures, additional leverage on assets
and borrowings under our credit facility.
  The terms of some of our debt may prevent us from paying distributions on our shares.
  Payment of distributions on any class of our shares may be adversely affected by the level of our
debt and the terms and number of our other shares that rank on an equal basis with or senior to
that class of shares.
  We may have limited flexibility in dealing with our jointly owned investments.
   
    
    become bankrupt;
    
    have economic or other business interests or goals which are unlike or incompatible with
our business interests or goals;
    
    be in a position to take action contrary to our suggestions or instructions, or in
opposition to our policies or objectives (including actions that may be inconsistent with
our REIT status); and
    
    have different objectives from us regarding the appropriate timing and pricing of any
sale or refinancing of the properties.
  17




---



##### Table of Contents



The management and leasing agreements under which we operate our office properties owned through
joint ventures may be terminated after an initial period.
  Mezzanine loans involve greater risks of loss than senior loans secured by income producing
properties.
     In many cases, we do not develop our Resort Residential Development Properties and are dependent on
the developer of these properties.
  18




---



##### Table of Contents



Development and construction risks could adversely affect our profitability.
  
    
    We may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use,
building, occupancy and other required governmental permits and authorizations, which could
result in increased costs or our abandonment of these activities;
    
    We may incur costs for development, expansion or renovation of a property which exceed
our original estimates due to increased costs for materials or labor or other costs that
were unexpected;
    
    We may not be able to obtain financing with favorable terms, which may make us unable to
proceed with our development and other related activities on the schedule we originally
planned or at all;
    
    We may be unable to complete construction and sale or lease-up of a lot, office property
or resort residential development unit on schedule, which could result in increased debt
service expense or construction costs;
    
    We may lease, rent or sell developed properties at below expected rental rates, room
rates or unit prices; and
    
    Occupancy rates, rents or unit sales at newly completed properties may fluctuate
depending on a number of factors, including market and economic conditions, and may result
in our investment not being profitable.
  Environmental problems are possible and may be costly.
   19




---



##### Table of Contents



Compliance with the Americans with Disabilities Act could be costly.
  Our insurance coverage on our properties may be inadequate.
   Competition for acquisitions and dispositions could adversely affect us.
  
    
    reducing the number of suitable investment opportunities offered to us; and
    
    increasing the bargaining power of property owners.
  
    
    interfering with our ability to attract and retain tenants, guests or purchasers; and
    
    adversely affecting our ability to minimize expenses of operation.
 
 20




---



##### Table of Contents



Acquisitions may fail to perform as expected.
  
    
    We may not be able to identify suitable properties to acquire or may be unable to
complete the acquisition of the properties we select for acquisition;
    
    We may not be able to integrate new acquisitions into our existing operations
successfully;
    
    Our estimate of the costs of improving, repositioning or redeveloping an acquired
property may prove to be too low, and, as a result, the property may fail to meet our
estimates of the profitability of the property, either temporarily or for a longer time;
    
    Office properties, resorts or hotels we acquire may fail to achieve the occupancy and
rental or room rates we anticipate at the time we make the decision to invest in the
properties, resulting in lower profitability than we expected in analyzing the properties;
    
    Our pre-acquisition evaluation of the physical condition of each new investment may not
detect certain defects or necessary repairs until after the property is acquired, which
could significantly increase our total acquisition costs; and
    
    Our investigation of a property or building prior to its acquisition, and any
representations we may receive from the seller, may fail to reveal various liabilities,
which could effectively reduce the cash flow from the property or building, or increase our
acquisition cost.
 We are dependent on our key personnel whose continued service is not guaranteed.
  Provisions of our declaration of trust and bylaws could inhibit changes in control or discourage
takeover attempts beneficial to our shareholders.
  21




---



##### Table of Contents



Your ownership of our shares is subject to limitation for REIT tax purposes.
  The number of shares available for future sale could adversely affect the market price of our
publicly traded securities.
  22




---



##### Table of Contents



Failure to qualify as a REIT would cause us to be taxed as a corporation, which would substantially
reduce funds available for payment of distributions.
   The lower tax rate on dividends from regular corporations may cause investors to prefer to hold
stock in regular corporations instead of REITs.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties
  Office Properties
  23




---



##### Table of Contents



Office Property Table (1)
  WeightedAverageFull-ServiceRentalNet Rentable
    
    Economic
    
    Rate Per
    
    OurNo. of
    
    
    
    Year
    
    Area
    
    Occupancy
    
    Occupied
    
    Ownership(1)State, City, Property
    
    Properties
    
    Submarket
    
    Completed
    
    (Sq. Ft.)
    
    Percentage
    
    Sq. Ft.(2)
    
    PercentageTexasDallasBank One Center
    
    1
    
    CBD
    
    1987
    
    
    1,530,957
    
    
    
    81.4
    %
    
    $
    22.30
    
    
    
    50
    %The Crescent
    
    2
    
    Uptown/Turtle Creek
    
    1985
    
    
    1,299,522
    
    
    
    96.9
    
    
    
    33.62
    
    
    
    24Fountain Place
    
    1
    
    CBD
    
    1986
    
    
    1,200,266
    
    
    
    86.4

(3)
    
    
    21.44
    
    
    
    24Trammell Crow Center
    
    1
    
    CBD
    
    1984
    
    
    1,128,331
    
    
    
    93.0
    
    
    
    24.78
    
    
    
    24Stemmons Place
    
    1
    
    Stemmons Freeway
    
    1983
    
    
    634,381
    
    
    
    81.9
    
    
    
    16.96
    
    
    
    100Spectrum Center
    
    1
    
    Quorum/Bent Tree
    
    1983
    
    
    598,250
    
    
    
    85.7
    
    
    
    19.82
    
    
    
    100Waterside Commons(4)
    
    1
    
    Las Colinas
    
    1986
    
    
    458,906
    
    
    
    46.6
    
    
    
    15.33
    
    
    
    100125 E. John Carpenter Freeway
    
    1
    
    Las Colinas
    
    1982
    
    
    446,031
    
    
    
    85.1
    
    
    
    20.69
    
    
    
    100The Aberdeen
    
    1
    
    Quorum/Bent Tree
    
    1986
    
    
    319,760
    
    
    
    91.3
    
    
    
    16.49
    
    
    
    100MacArthur Center I & II
    
    1
    
    Las Colinas
    
    1982/1986
    
    
    298,161
    
    
    
    69.6

(3)
    
    
    19.03
    
    
    
    100Stanford Corporate Centre
    
    1
    
    Quorum/Bent Tree
    
    1985
    
    
    274,684
    
    
    
    96.3
    
    
    
    21.01
    
    
    
    100Palisades Central II
    
    1
    
    Richardson
    
    1985
    
    
    237,731
    
    
    
    95.2
    
    
    
    20.23
    
    
    
    1003333 Lee Parkway
    
    1
    
    Uptown/Turtle Creek
    
    1983
    
    
    233,543
    
    
    
    88.3
    
    
    
    17.70
    
    
    
    100The Addison
    
    1
    
    Quorum/Bent Tree
    
    1981
    
    
    215,016
    
    
    
    100.0
    
    
    
    23.40
    
    
    
    100Palisades Central I
    
    1
    
    Richardson
    
    1980
    
    
    180,503
    
    
    
    73.7
    
    
    
    17.23
    
    
    
    100Greenway II
    
    1
    
    Richardson
    
    1985
    
    
    154,329
    
    
    
    100.0
    
    
    
    17.85
    
    
    
    100Greenway I & IA
    
    2
    
    Richardson
    
    1983
    
    
    146,704
    
    
    
    71.3
    
    
    
    15.60
    
    
    
    100Subtotal/Weighted Average
    
    19
    
    
    
    
    
    
    9,357,075
    
    
    
    85.7
    %
    
    $
    22.77
    
    
    
    62
    %Fort WorthCarter Burgess Plaza
    
    1
    
    CBD
    
    1982
    
    
    954,895
    
    
    
    97.9
    %
    
    $
    18.59
    
    
    
    100
    %HoustonGreenway Plaza
    
    10
    
    Greenway Plaza
    
    1969-1982
    
    
    4,348,052
    
    
    
    90.9
    %
    
    $
    20.22
    
    
    
    100
    %Houston Center
    
    4
    
    CBD
    
    1974-1983
    
    
    2,960,544
    
    
    
    88.2
    
    
    
    20.29
    
    
    
    24Post Oak Central
    
    3
    
    West Loop/Galleria
    
    1974-1981
    
    
    1,279,759
    
    
    
    95.4
    
    
    
    20.23
    
    
    
    24Five Post Oak Park
    
    1
    
    West Loop/Galleria
    
    1986
    
    
    567,396
    
    
    
    85.3
    
    
    
    18.34
    
    
    
    30Four Westlake Park
    
    1
    
    Katy Freeway West
    
    1992
    
    
    561,065
    
    
    
    99.9
    
    
    
    22.39
    
    
    
    20BriarLake Plaza
    
    1
    
    Westchase
    
    2000
    
    
    502,410
    
    
    
    96.2
    
    
    
    24.20
    
    
    
    30Three Westlake Park
    
    1
    
    Katy Freeway West
    
    1983
    
    
    414,792
    
    
    
    100.0
    
    
    
    22.80
    
    
    
    20Subtotal/Weighted Average
    
    21
    
    
    
    
    
    
    10,634,018
    
    
    
    91.5
    %
    
    $
    20.59
    
    
    
    55
    %Austin816 Congress
    
    1
    
    CBD
    
    1984
    
    
    433,024
    
    
    
    72.3
    %
    
    $
    18.20
    
    
    
    100
    %301 Congress Avenue
    
    1
    
    CBD
    
    1986
    
    
    418,338
    
    
    
    59.0

(3)
    
    
    21.94
    
    
    
    50Chase Tower
    
    1
    
    CBD
    
    1974
    
    
    389,503
    
    
    
    65.4
    
    
    
    20.49
    
    
    
    20Austin Centre
    
    1
    
    CBD
    
    1986
    
    
    343,664
    
    
    
    96.1
    
    
    
    19.34
    
    
    
    100The Avallon
    
    3
    
    Northwest
    
    1993/1997
    
    
    318,217
    
    
    
    85.7
    
    
    
    19.28
    
    
    
    100Subtotal/Weighted Average
    
    7
    
    
    
    
    
    
    1,902,746
    
    
    
    74.5
    %
    
    $
    19.73
    
    
    
    73
    %ColoradoDenverJohns Manville Plaza
    
    1
    
    CBD
    
    1978
    
    
    675,400
    
    
    
    98.0
    %
    
    $
    19.87
    
    
    
    100
    %707 17th Street
    
    1
    
    CBD
    
    1982
    
    
    550,805
    
    
    
    91.3
    
    
    
    20.69
    
    
    
    100Regency Plaza
    
    1
    
    Denver Technology Center
    
    1985
    
    
    309,862
    
    
    
    92.6
    
    
    
    20.11
    
    
    
    100Peakview Tower(5)
    
    1
    
    Greenwood Village
    
    2001
    
    
    264,149
    
    
    
    87.4
    
    
    
    23.80
    
    
    
    10055 Madison
    
    1
    
    Cherry Creek
    
    1982
    
    
    137,176
    
    
    
    92.2
    
    
    
    19.19
    
    
    
    100The Citadel
    
    1
    
    Cherry Creek
    
    1987
    
    
    130,652
    
    
    
    84.2
    
    
    
    25.28
    
    
    
    10044 Cook
    
    1
    
    Cherry Creek
    
    1984
    
    
    124,174
    
    
    
    66.0
    
    
    
    19.01
    
    
    
    100Subtotal/Weighted Average
    
    7
    
    
    
    
    
    
    2,192,218
    
    
    
    91.3
    %
    
    $
    20.78
    
    
    
    100
    %Colorado SpringsBriargate Office andResearch Center
    
    1
    
    Colorado Springs
    
    1988
    
    
    260,046
    
    
    
    57.2

%(3)
    
    $
    17.51
    
    
    
    100
    %
 24




---



##### Table of Contents



WeightedAverageFull-ServiceNet
    
    
    
    
    
    
    RentalRentable
    
    
    Economic
    
    
    Rate Per
    
    
    OurNo. of
    
    
    
    Year
    
    Area
    
    
    Occupancy
    
    
    Occupied
    
    
    Ownership(1)State, City, Property
    
    Properties
    
    Submarket
    
    Completed
    
    (Sq. Ft.)
    
    
    Percentage
    
    
    Sq. Ft.(2)
    
    
    PercentageFloridaMiamiMiami Center
    
    1
    
    CBD
    
    1983
    
    
    782,211
    
    
    
    95.1
    %
    
    $
    31.36
    
    
    
    40
    %Datran Center
    
    2
    
    South Dade/Kendall
    
    1986/1988
    
    
    476,412
    
    
    
    93.6
    
    
    
    27.33
    
    
    
    100The Alhambra
    
    2
    
    Coral Gables
    
    1961/1987
    
    
    325,005
    
    
    
    85.9
    (3)
    
    
    30.47
    
    
    
    100The BAC  Colonnade Building
    
    1
    
    Coral Gables
    
    1989
    
    
    218,170
    
    
    
    88.6
    (3)
    
    
    31.62
    
    
    
    100Subtotal/Weighted Average
    
    6
    
    
    
    
    
    
    1,801,798
    
    
    
    92.3
    %
    
    $
    30.16
    
    
    
    74
    %CaliforniaIrvineDupont Centre
    
    1
    
    John Wayne Airport
    
    1986
    
    
    250,782
    
    
    
    96.4
    %
    
    $
    27.10
    
    
    
    100
    %NevadaLas VegasHughes Center(6)
    
    8
    
    Central East
    
    1986 - 1999
    
    
    1,110,890
    
    
    
    93.5
    %
    
    $
    32.35
    
    
    
    100
    %GeorgiaAtlantaOne Buckhead Plaza(5)
    
    1
    
    Buckhead
    
    1987
    
    
    461,669
    
    
    
    90.6
    %
    
    $
    28.50
    
    
    
    35
    %One Live Oak(5)
    
    1
    
    Buckhead
    
    1981
    
    
    201,488
    
    
    
    74.9
    (3)
    
    
    22.84
    
    
    
    100Subtotal/Weighted Average
    
    2
    
    
    
    
    
    
    663,157
    
    
    
    85.9
    %
    
    $
    27.01
    
    
    
    55
    %WashingtonSeattleExchange Building
    
    1
    
    CBD
    
    1929/2001
    
    
    295,515
    
    
    
    94.5
    %
    
    $
    24.38
    
    
    
    100
    %Total Office Portfolio Excluding
Properties Not Stabilized
    
    74
    
    
    
    
    
    
    29,423,140
    
    
    
    88.5
    %(3)
    
    $
    22.48
    (7)
    
    
    67
    %PROPERTIES NOT STABILIZEDTexasHoustonFulbright Tower(8)
    
    1
    
    CBD
    
    1982
    
    
    1,247,061
    
    
    
    62.5
    %
    
    $
    20.31
    
    
    
    24
    %Total Office Portfolio
    
    75
    
    
    
    
    
    
    30,670,201
    
    
    
    
    
    
    
    
    
    
    
    65
    %
 
 (1)
    
    Office Property Table data is presented without adjustments to reflect our actual
ownership percentage in joint ventured properties. Our actual ownership percentage in each
property has been included for informational purposes.(2)
    
    Calculated in accordance with GAAP based on base rent payable as of December 31,
2005, giving effect to free rent and scheduled rent increases and including adjustments for
expenses payable by or reimbursable from customers. The weighted average full-service rental
rate for the El Paso lease (Greenway Plaza, Houston, Texas) reflects weighted average
full-service rental rate over the shortened term (due to lease termination effective December
31, 2007) and excludes the impact of the net lease termination fee being amortized into
revenue through December 31, 2007.(3)
    
    Leases have been executed at certain Office Properties but had not commenced as of
December 31, 2005. If such leases had commenced as of December 31, 2005, the percent leased
for Office Properties would have been 90.8%. Properties whose percent leased exceeds economic
occupancy by 5 percentage points or more are as follows: Fountain Place  92.1%, MacArthur
Center  75.0%, 301 Congress  68.5%, Briargate Office  71.2%, The Alhambra  92.0%, The BAC
 Colonnade Building  93.6% and One Live Oak  80.1%.(4)
    
    On February 17, 2006, we completed the sale of the Waterside Commons Office Property.(5)
    
    One Buckhead Plaza stabilized as of July 2005. Peakview Tower and One Live Oak
stabilized as of December 2005.(6)
    
    In October 2005, we purchased the remaining 33% minority interest in 3770 Howard
Hughes. Hughes Center now consists of eight wholly-owned office properties.(7)
    
    The weighted average full-service cash rental rate per square foot calculated based
on base rent payable for Office Properties as of December 31, 2005, without giving effect to
free rent and scheduled rent increases that are taken into consideration under GAAP but
including adjustments for expenses paid by or reimbursed from customers is $21.86.(8)
    
    Property statistics exclude Fulbright Tower (formerly known as 1301 McKinney Street
acquired December 2004). This office property will be included in portfolio statistics once
stabilized. Stabilization is deemed to occur upon the earlier of (a) achieving 90% occupancy,
(b) one year following the acquisition date or (c) two years following the acquisition date
for properties which are being repositioned. 
 25




---



##### Table of Contents



Percent ofLeased Sq.Industry Sector
    
    Ft.Professional Services (1)
    
    
    31
    %Financial Services (2)
    
    
    21Energy(3)
    
    
    19Technology
    
    
    5Manufacturing
    
    
    4Telecommunications
    
    
    4Food Service
    
    
    3Government
    
    
    3Medical
    
    
    2Retail
    
    
    2Other (4)
    
    
    6Total Leased
    
    
    100
    %
 
 (1)
    
    Includes legal, accounting, engineering, architectural and advertising services.(2)
    
    Includes banking, title and insurance and investment services.(3)
    
    Includes oil and gas and utility companies.(4)
    
    Includes construction, real estate, transportation and other industries. Aggregate Lease Expirations of Office Properties
  26




---



##### Table of Contents



Total Office Properties (1)
 Percentage
    
    
    AnnualSquare
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    Our Share
    
    
    
    
    
    
    of
    
    
    Expiring
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    of Expiring
    
    
    Annual
    
    
    Annual
    
    
    per Square
    
    
    ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Square
    
    
    Full-Service
    
    
    Full-
    
    
    Footage
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Footage
    
    
    Rent Under
    
    
    Service
    
    
    Full-
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    (After
    
    
    Expiring
    
    
    Rent
    
    
    Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Renewals)
    
    
    Leases(3)
    
    
    Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    3,161,531
    (4)
    
    
    (1,007,503
    )
    
    
    2,154,028

(4)(5)
    
    
    8.4
    %
    
    
    1,402,466
    
    
    $
    48,345,754
    
    
    
    8.4
    %
    
    $
    22.44
    
    
    
    4502007
    
    
    2,674,868
    
    
    
    (405,799
    )
    
    
    2,269,069

(6)
    
    
    8.9
    
    
    
    1,529,289
    
    
    
    51,406,465
    
    
    
    9.0
    
    
    
    22.66
    
    
    
    2772008
    
    
    2,935,533
    
    
    
    (55,892
    )
    
    
    2,879,641
    
    
    
    11.2
    
    
    
    2,355,607
    
    
    
    66,842,083
    
    
    
    11.6
    
    
    
    23.21
    
    
    
    2992009
    
    
    2,532,229
    
    
    
    53,413
    
    
    
    2,585,642
    
    
    
    10.1
    
    
    
    1,780,359
    
    
    
    59,064,088
    
    
    
    10.3
    
    
    
    22.84
    
    
    
    2452010
    
    
    3,183,161
    
    
    
    73,942
    
    
    
    3,257,103
    
    
    
    12.7
    
    
    
    1,831,558
    
    
    
    75,712,517
    
    
    
    13.2
    
    
    
    23.25
    
    
    
    2592011
    
    
    1,727,138
    
    
    
    176,118
    
    
    
    1,903,256
    
    
    
    7.4
    
    
    
    1,202,633
    
    
    
    45,422,858
    
    
    
    7.9
    
    
    
    23.87
    
    
    
    1122012
    
    
    1,246,746
    
    
    
    26,767
    
    
    
    1,273,513
    
    
    
    5.0
    
    
    
    958,199
    
    
    
    30,455,745
    
    
    
    5.3
    
    
    
    23.91
    
    
    
    742013
    
    
    1,515,837
    
    
    
    97,620
    
    
    
    1,613,457
    
    
    
    6.3
    
    
    
    1,225,157
    
    
    
    34,496,189
    
    
    
    6.0
    
    
    
    21.38
    
    
    
    602014
    
    
    2,783,823
    
    
    
    124,474
    
    
    
    2,908,297
    
    
    
    11.4
    
    
    
    1,949,914
    
    
    
    60,148,038
    
    
    
    10.5
    
    
    
    20.68
    
    
    
    442015
    
    
    1,745,757
    
    
    
    29,531
    
    
    
    1,775,288
    
    
    
    6.9
    
    
    
    1,267,014
    
    
    
    39,510,299
    
    
    
    6.9
    
    
    
    22.26
    
    
    
    642016 and thereafter
    
    
    2,112,766
    
    
    
    887,329
    
    
    
    3,000,095
    
    
    
    11.7
    
    
    
    1,605,392
    
    
    
    62,995,006
    
    
    
    10.9
    
    
    
    21.00
    
    
    
    51Total
    
    
    25,619,389
    
    
    
    
    
    
    
    25,619,389

(7)
    
    
    100.0
    %
    
    
    17,107,588
    
    
    $
    574,399,042
    
    
    
    100.0
    %
    
    $
    22.42
    
    
    
    1,935
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties, except for the Our Share of
Expiring Square Footage (After Renewals) column.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent and scheduled
rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 1,645,712 square feet (including renewals of 1,007,503 square feet and new leases of 638,209 square feet) have
been signed and will commence during 2006. These signed leases represent approximately 52% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 900,654 square feet Q2: 440,875 square feet Q3: 387,845 square feet Q4: 424,654 square
feet.(6)
    
    Expirations by quarter are as follows: Q1: 739,288 square feet Q2: 521,167 square feet Q3: 519,348 square feet Q4: 489,266 square
feet.(7)
    
    Reconciliation of Occupied Square Feet to Net Rentable Area: Square feetOccupied Square Footage, per above:
    
    
    25,619,389Non-revenue Generating Space:
    
    
    421,302Total Occupied Office Square Footage:
    
    
    26,040,691Total Vacant Square Footage:
    
    
    3,382,449Total Stabilized Office Net Rentable Area:
    
    
    29,423,140
 Dallas Office Properties (1)
 AnnualFull-Service
    
    
    
    
    
    
    Annual Expiring per
    
    
    NumberYear of
    
    Square Footage
    
    
    
    
    
    Square Footage
    
    
    Percentage
    
    
    Rent Under
    
    
    Percentage of
    
    
    Square Footage
    
    
    of Customers WithLease
    
    of Expiring Leases
    
    
    Signed Renewals
    
    
    of Expiring Leases
    
    
    of Square Footage
    
    
    Expiring
    
    
    Annual Full-Service
    
    
    Full-Service
    
    
    ExpiringExpiration
    
    (Before Renewals)
    
    
    of Expiring Leases(2)
    
    
    (After Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Rent Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    914,110

(4)
    
    
    (273,871
    )
    
    
    640,239

(4)(5)
    
    
    8.1
    %
    
    $
    14,302,605
    
    
    
    7.9
    %
    
    $
    22.34
    
    
    
    932007
    
    
    816,562
    
    
    
    1,381
    
    
    
    817,943

(6)
    
    
    10.3
    
    
    
    18,510,625
    
    
    
    10.3
    
    
    
    22.63
    
    
    
    542008
    
    
    492,818
    
    
    
    (6,120
    )
    
    
    486,698
    
    
    
    6.1
    
    
    
    11,138,692
    
    
    
    6.2
    
    
    
    22.89
    
    
    
    752009
    
    
    440,598
    
    
    
    (9,057
    )
    
    
    431,541
    
    
    
    5.4
    
    
    
    11,204,316
    
    
    
    6.2
    
    
    
    25.96
    
    
    
    462010
    
    
    1,107,088
    
    
    
    (5,239
    )
    
    
    1,101,849
    
    
    
    13.9
    
    
    
    26,457,924
    
    
    
    14.7
    
    
    
    24.01
    
    
    
    632011
    
    
    488,871
    
    
    
    (49,660
    )
    
    
    439,211
    
    
    
    5.5
    
    
    
    10,374,803
    
    
    
    5.8
    
    
    
    23.62
    
    
    
    242012
    
    
    382,023
    
    
    
    12,113
    
    
    
    394,136
    
    
    
    5.0
    
    
    
    8,203,484
    
    
    
    4.6
    
    
    
    20.81
    
    
    
    262013
    
    
    370,738
    
    
    
    92,340
    
    
    
    463,078
    
    
    
    5.8
    
    
    
    10,585,654
    
    
    
    5.9
    
    
    
    22.86
    
    
    
    172014
    
    
    749,005
    
    
    
    
    
    
    
    749,005
    
    
    
    9.4
    
    
    
    16,322,270
    
    
    
    9.1
    
    
    
    21.79
    
    
    
    132015
    
    
    932,265
    
    
    
    17,599
    
    
    
    949,864
    
    
    
    12.0
    
    
    
    21,265,890
    
    
    
    11.8
    
    
    
    22.39
    
    
    
    242016 and thereafter
    
    
    1,245,275
    
    
    
    220,514
    
    
    
    1,465,789
    
    
    
    18.5
    
    
    
    31,690,470
    
    
    
    17.5
    
    
    
    21.62
    
    
    
    15Total
    
    
    7,939,353
    
    
    
    
    
    
    
    7,939,353
    
    
    
    100.0
    %
    
    $
    180,056,733
    
    
    
    100.0
    %
    
    $
    22.68
    
    
    
    450
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent and scheduled
rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 482,508 square feet (including renewals of 273,871 square feet and new leases of 208,637 square feet) have
been signed and will commence during 2006. These signed leases represent approximately 53% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 311,609 square feet Q2: 160,572 square feet Q3: 133,267 square feet Q4: 34,791 square
feet.(6)
    
    Expirations by quarter are as follows: Q1: 401,934 square feet Q2: 118,654 square feet Q3: 208,961 square feet Q4: 88,394 square
feet.
 27




---



##### Table of Contents



Houston Office Properties(1)
 AnnualSquare
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    
    
    
    
    Percentage
    
    
    Expiring
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    Annual
    
    
    of Annual
    
    
    per Square
    
    
    ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Full-Service
    
    
    Full-
    
    
    Footage
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Rent Under
    
    
    Service
    
    
    Full-
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    Expiring
    
    
    Rent
    
    
    Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    1,189,723

(4)
    
    
    (451,929
    )
    
    
    737,794

(4)(5)
    
    
    7.7
    %
    
    $
    13,392,820
    
    
    
    6.9
    %
    
    $
    18.15
    
    
    
    1712007
    
    
    1,085,575
    
    
    
    (365,167
    )
    
    
    720,408
    (6)
    
    
    7.5
    
    
    
    14,627,121
    
    
    
    7.5
    
    
    
    20.30
    
    
    
    822008
    
    
    1,666,887
    
    
    
    (37,854
    )
    
    
    1,629,033
    
    
    
    17.0
    
    
    
    35,771,636
    
    
    
    18.3
    
    
    
    21.96
    
    
    
    872009
    
    
    955,069
    
    
    
    18,886
    
    
    
    973,955
    
    
    
    10.2
    
    
    
    18,359,918
    
    
    
    9.4
    
    
    
    18.85
    
    
    
    762010
    
    
    1,117,221
    
    
    
    67,552
    
    
    
    1,184,773
    
    
    
    12.3
    
    
    
    24,478,283
    
    
    
    12.5
    
    
    
    20.66
    
    
    
    822011
    
    
    714,330
    
    
    
    148,924
    
    
    
    863,254
    
    
    
    9.0
    
    
    
    19,011,620
    
    
    
    9.7
    
    
    
    22.02
    
    
    
    352012
    
    
    394,758
    
    
    
    (28,071
    )
    
    
    366,687
    
    
    
    3.8
    
    
    
    8,219,384
    
    
    
    4.2
    
    
    
    22.42
    
    
    
    182013
    
    
    364,770
    
    
    
    10,013
    
    
    
    374,783
    
    
    
    3.9
    
    
    
    7,519,808
    
    
    
    3.8
    
    
    
    20.06
    
    
    
    92014
    
    
    1,334,454
    
    
    
    51,264
    
    
    
    1,385,718
    
    
    
    14.4
    
    
    
    27,827,379
    
    
    
    14.2
    
    
    
    20.08
    
    
    
    142015
    
    
    386,304
    
    
    
    
    
    
    
    386,304
    
    
    
    4.0
    
    
    
    7,566,397
    
    
    
    3.9
    
    
    
    19.59
    
    
    
    142016 and thereafter
    
    
    384,691
    
    
    
    586,382
    
    
    
    971,073
    
    
    
    10.2
    
    
    
    18,867,153
    
    
    
    9.6
    
    
    
    19.43
    
    
    
    13Total
    
    
    9,593,782
    
    
    
    
    
    
    
    9,593,782
    
    
    
    100.0
    %
    
    $
    195,641,519
    
    
    
    100.0
    %
    
    $
    20.39
    
    
    
    601
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent or scheduled
rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. The annual
full-service rent under the El Paso lease (the majority of which expires December 31, 2007) reflects weighted average full service rental revenue over the shortened term and
excludes the impact of the net termination fee being amortized into revenue through December 31, 2007.(4)
    
    As of December 31, 2005, leases totaling 632,377 square feet (including renewals of 451,929 square feet and new leases of 180,448 square feet) have been
signed and will commence during 2006. These signed leases represent approximately 53% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 302,765 square feet Q2: 114,101 square feet Q3: 118,221 square feet Q4: 202,707 square
feet.(6)
    
    Expirations by quarter are as follows: Q1: 185,084 square feet Q2: 270,669 square feet Q3: 149,464 square feet Q4: 115,191 square
feet. Austin Office Properties (1)
 AnnualSquare
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    
    
    
    
    Percentage
    
    
    Expiring
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    Annual
    
    
    of Annual
    
    
    per Square
    
    
    ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Full-Service
    
    
    Full-
    
    
    Footage
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Rent Under
    
    
    Service
    
    
    Full-
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    Expiring
    
    
    Rent
    
    
    Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    81,221

(4)
    
    
    (5,775
    )
    
    
    75,446

(4)(5)
    
    
    5.5
    %
    
    $
    1,749,930
    
    
    
    6.5
    %
    
    $
    23.19
    
    
    
    242007
    
    
    93,323
    
    
    
    (7,658
    )
    
    
    85,665

(6)
    
    
    6.3
    
    
    
    1,977,787
    
    
    
    7.4
    
    
    
    23.09
    
    
    
    212008
    
    
    91,637
    
    
    
    983
    
    
    
    92,620
    
    
    
    6.8
    
    
    
    1,685,080
    
    
    
    6.3
    
    
    
    18.19
    
    
    
    212009
    
    
    173,112
    
    
    
    12,450
    
    
    
    185,562
    
    
    
    13.6
    
    
    
    3,957,754
    
    
    
    14.7
    
    
    
    21.33
    
    
    
    202010
    
    
    204,947
    
    
    
    
    
    
    
    204,947
    
    
    
    15.0
    
    
    
    3,577,893
    
    
    
    13.3
    
    
    
    17.46
    
    
    
    292011
    
    
    52,269
    
    
    
    
    
    
    
    52,269
    
    
    
    3.8
    
    
    
    982,217
    
    
    
    3.7
    
    
    
    18.79
    
    
    
    92012
    
    
    45,599
    
    
    
    
    
    
    
    45,599
    
    
    
    3.3
    
    
    
    849,209
    
    
    
    3.2
    
    
    
    18.62
    
    
    
    52013
    
    
    53,118
    
    
    
    
    
    
    
    53,118
    
    
    
    3.9
    
    
    
    1,079,542
    
    
    
    4.0
    
    
    
    20.32
    
    
    
    62014
    
    
    241,570
    
    
    
    
    
    
    
    241,570
    
    
    
    17.7
    
    
    
    4,998,281
    
    
    
    18.6
    
    
    
    20.69
    
    
    
    32015
    
    
    171,688
    
    
    
    
    
    
    
    171,688
    
    
    
    12.6
    
    
    
    3,306,608
    
    
    
    12.3
    
    
    
    19.26
    
    
    
    132016 and thereafter
    
    
    153,826
    
    
    
    
    
    
    
    153,826
    
    
    
    11.5
    
    
    
    2,689,424
    
    
    
    10.0
    
    
    
    17.48
    
    
    
    6Total
    
    
    1,362,310
    
    
    
    
    
    
    
    1,362,310
    
    
    
    100.0
    %
    
    $
    26,853,725
    
    
    
    100.0
    %
    
    $
    19.71
    
    
    
    157
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent or
scheduled rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 42,194 square feet (including renewals of 5,775 square feet and new leases of 36,419 square feet) have been
signed and will commence during 2006. These signed leases represent approximately 52% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 38,305 square feet Q2: 23,353 square feet Q3: 4,058 square feet Q4: 9,730 square feet.(6)
    
    Expirations by quarter are as follows: Q1: 36,308 square feet Q2: 8,410 square feet Q3: 16,342 square feet Q4: 24,605 square
feet. 28




---



##### Table of Contents



Denver Office Properties (1)
 Square
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    
    
    
    
    Percentage
    
    
    Annual
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    Annual
    
    
    of Annual
    
    
    Expiring
    
    
    Ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Full-Service
    
    
    Full-
    
    
    Per Square
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Rent Under
    
    
    Service
    
    
    Footage
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    Expiring
    
    
    Rent
    
    
    Full-Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    167,256

(4)
    
    
    (35,417
    )
    
    
    131,839

(4)(5)
    
    
    6.6
    %
    
    $
    2,757,281
    
    
    
    6.7
    %
    
    $
    20.91
    
    
    
    252007
    
    
    110,198
    
    
    
    (15,948
    )
    
    
    94,250

(6)
    
    
    4.7
    
    
    
    2,169,066
    
    
    
    5.3
    
    
    
    23.01
    
    
    
    182008
    
    
    209,432
    
    
    
    (4,075
    )
    
    
    205,357
    
    
    
    10.3
    
    
    
    4,480,130
    
    
    
    10.9
    
    
    
    21.82
    
    
    
    212009
    
    
    320,562
    
    
    
    (9,941
    )
    
    
    310,621
    
    
    
    15.6
    
    
    
    6,734,500
    
    
    
    16.3
    
    
    
    21.68
    
    
    
    262010
    
    
    196,908
    
    
    
    16,081
    
    
    
    212,989
    
    
    
    10.7
    
    
    
    4,637,797
    
    
    
    11.2
    
    
    
    21.77
    
    
    
    182011
    
    
    120,993
    
    
    
    11,844
    
    
    
    132,837
    
    
    
    6.7
    
    
    
    2,969,044
    
    
    
    7.2
    
    
    
    22.35
    
    
    
    82012
    
    
    134,134
    
    
    
    37,456
    
    
    
    171,590
    
    
    
    8.6
    
    
    
    3,897,083
    
    
    
    9.4
    
    
    
    22.71
    
    
    
    82013
    
    
    134,750
    
    
    
    (73,210
    )
    
    
    61,540
    
    
    
    3.1
    
    
    
    1,216,914
    
    
    
    3.0
    
    
    
    19.77
    
    
    
    62014
    
    
    344,885
    
    
    
    73,210
    
    
    
    418,095
    
    
    
    21.0
    
    
    
    8,129,618
    
    
    
    19.7
    
    
    
    19.44
    
    
    
    42015
    
    
    18,637
    
    
    
    
    
    
    
    18,637
    
    
    
    0.9
    
    
    
    364,338
    
    
    
    0.9
    
    
    
    19.55
    
    
    
    32016 and thereafter
    
    
    230,007
    
    
    
    
    
    
    
    230,007
    
    
    
    11.8
    
    
    
    3,916,607
    
    
    
    9.4
    
    
    
    17.03
    
    
    
    7Total
    
    
    1,987,762
    
    
    
    
    
    
    
    1,987,762
    
    
    
    100.0
    %
    
    $
    41,272,378
    
    
    
    100.0
    %
    
    $
    20.76
    
    
    
    144
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent or
scheduled rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 35,644 square feet (including renewals of 35,417 square feet and new leases of 227 square feet) have been
signed and will commence during 2006. These signed leases represent approximately 21% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 74,890 square feet Q2: 21,168 square feet Q3: 21,388 square feet Q4: 14,303 square
feet.(6)
    
    Expirations by quarter are as follows: Q1: 40,405 square feet Q2: 14,652 square feet Q3: 27,315 square feet Q4: 11,878 square
feet. Miami Office Properties (1)
 Square
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    
    
    
    
    Percentage
    
    
    Annual
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    Annual
    
    
    of Annual
    
    
    Expiring
    
    
    ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Full-Service
    
    
    Full-
    
    
    Per Square
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Rent Under
    
    
    Service
    
    
    Footage
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    Expiring
    
    
    Rent
    
    
    Full-Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    284,284

(4)
    
    
    (113,543
    )
    
    
    170,741

( 4)(5)
    
    
    10.3
    %
    
    $
    5,044,729
    
    
    
    10.0
    %
    
    $
    29.55
    
    
    
    562007
    
    
    159,033
    
    
    
    (22,763
    )
    
    
    136,270

(6)
    
    
    8.3
    
    
    
    3,730,173
    
    
    
    7.4
    
    
    
    27.37
    
    
    
    362008
    
    
    147,617
    
    
    
    11,163
    
    
    
    158,780
    
    
    
    9.6
    
    
    
    4,873,806
    
    
    
    9.7
    
    
    
    30.70
    
    
    
    372009
    
    
    324,804
    
    
    
    2,992
    
    
    
    327,796
    
    
    
    19.9
    
    
    
    9,498,910
    
    
    
    18.8
    
    
    
    28.98
    
    
    
    342010
    
    
    281,266
    
    
    
    (10,368
    )
    
    
    270,898
    
    
    
    16.4
    
    
    
    8,383,921
    
    
    
    16.6
    
    
    
    30.95
    
    
    
    262011
    
    
    64,140
    
    
    
    48,497
    
    
    
    112,637
    
    
    
    6.8
    
    
    
    3,555,001
    
    
    
    7.1
    
    
    
    31.56
    
    
    
    92012
    
    
    150,546
    
    
    
    
    
    
    
    150,546
    
    
    
    9.1
    
    
    
    5,167,896
    
    
    
    10.3
    
    
    
    34.33
    
    
    
    82013
    
    
    47,684
    
    
    
    4,590
    
    
    
    52,274
    
    
    
    3.2
    
    
    
    1,703,723
    
    
    
    3.4
    
    
    
    32.59
    
    
    
    52014
    
    
    36,952
    
    
    
    
    
    
    
    36,952
    
    
    
    2.2
    
    
    
    1,042,283
    
    
    
    2.1
    
    
    
    28.21
    
    
    
    22015
    
    
    94,545
    
    
    
    11,932
    
    
    
    106,477
    
    
    
    6.5
    
    
    
    3,298,286
    
    
    
    6.5
    
    
    
    30.98
    
    
    
    32016 and thereafter
    
    
    59,285
    
    
    
    67,500
    
    
    
    126,785
    
    
    
    7.7
    
    
    
    4,120,294
    
    
    
    8.1
    
    
    
    32.50
    
    
    
    6Total
    
    
    1,650,156
    
    
    
    
    
    
    
    1,650,156
    
    
    
    100.0
    %
    
    $
    50,419,022
    
    
    
    100.0
    %
    
    $
    30.55
    
    
    
    222
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent or scheduled
rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 162,890 square feet (including renewals of 113,543 square feet and new leases of 49,347 square feet) have
been signed and will commence during 2006. These signed leases represent approximately 57% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 42,947 square feet Q2: 28,269 square feet Q3: 28,016 square feet Q4: 71,509 square
feet.(6)
    
    Expirations by quarter are as follows: Q1: 45,577 square feet Q2: 42,657 square feet Q3: 23,921 square feet Q4: 24,115 square
feet. 29




---



##### Table of Contents



Las Vegas Office Properties (1)
 Square
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    
    
    
    
    Percentage
    
    
    Annual
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    Annual
    
    
    of Annual
    
    
    Expiring
    
    
    ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Full-Service
    
    
    Full-
    
    
    Per Square
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Rent Under
    
    
    Service
    
    
    Footage
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    Expiring
    
    
    Rent
    
    
    Full-Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Expiring
    
    
    Rent(3)
    
    
    Leases2006
    
    
    235,519
    (4)
    
    
    (38,741
    )
    
    
    196,778
    (4)(5)
    
    
    19.1
    %
    
    $
    6,353,129
    
    
    
    18.9
    %
    
    $
    32.29
    
    
    
    322007
    
    
    116,689
    
    
    
    1,659
    
    
    
    118,348
    (6)
    
    
    11.5
    
    
    
    3,579,111
    
    
    
    10.7
    
    
    
    30.24
    
    
    
    272008
    
    
    180,700
    
    
    
    
    
    
    
    180,700
    
    
    
    17.5
    
    
    
    5,661,840
    
    
    
    16.9
    
    
    
    31.33
    
    
    
    252009
    
    
    117,643
    
    
    
    26,370
    
    
    
    144,013
    
    
    
    14.0
    
    
    
    4,653,505
    
    
    
    13.9
    
    
    
    32.31
    
    
    
    162010
    
    
    110,800
    
    
    
    
    
    
    
    110,800
    
    
    
    10.7
    
    
    
    3,634,233
    
    
    
    10.8
    
    
    
    32.80
    
    
    
    162011
    
    
    128,917
    
    
    
    7,127
    
    
    
    136,044
    
    
    
    13.2
    
    
    
    4,743,390
    
    
    
    14.1
    
    
    
    34.87
    
    
    
    92012
    
    
    33,278
    
    
    
    
    
    
    
    33,278
    
    
    
    3.2
    
    
    
    1,126,356
    
    
    
    3.4
    
    
    
    33.85
    
    
    
    22013
    
    
    33,317
    
    
    
    3,585
    
    
    
    36,902
    
    
    
    3.6
    
    
    
    1,272,812
    
    
    
    3.8
    
    
    
    34.49
    
    
    
    42014
    
    
    19,295
    
    
    
    
    
    
    
    19,295
    
    
    
    1.9
    
    
    
    597,339
    
    
    
    1.8
    
    
    
    30.96
    
    
    
    22015
    
    
    40,231
    
    
    
    
    
    
    
    40,231
    
    
    
    3.9
    
    
    
    1,270,540
    
    
    
    3.8
    
    
    
    31.58
    
    
    
    12016 and thereafter
    
    
    15,498
    
    
    
    
    
    
    
    15,498
    
    
    
    1.4
    
    
    
    660,315
    
    
    
    1.9
    
    
    
    42.61
    
    
    
    1Total
    
    
    1,031,887
    
    
    
    
    
    
    
    1,031,887
    
    
    
    100.0
    %
    
    $
    33,552,570
    
    
    
    100.0
    %
    
    $
    32.52
    
    
    
    135
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent or scheduled
rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 101,260 square feet (including renewals of 38,741 square feet and new leases of 62,519 square feet) have
been signed and will commence during 2006. These signed leases represent approximately 43% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 35,236 square feet Q2: 47,261 square feet Q3: 62,361 square feet Q4: 51,920 square feet.(6)
    
    Expirations by quarter are as follows: Q1: 7,342 square feet
Q2: 27,054 square feet Q3: 58,485 square feet Q4: 25,467 square feet. Other
Office Properties (1)
 Square
    
    
    
    
    
    
    Square
    
    
    
    
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Annual
    
    
    NumberFootage
    
    
    
    
    
    
    Footage
    
    
    
    
    
    
    Annual
    
    
    of Annual
    
    
    
    
    
    
    Expiring
    
    
    ofof Expiring
    
    
    Signed
    
    
    of Expiring
    
    
    Percentage
    
    
    Full-Service
    
    
    Full-
    
    
    
    
    
    
    Per Square
    
    
    CustomersYear of
    
    Leases
    
    
    Renewals
    
    
    Leases
    
    
    of Square
    
    
    Rent Under
    
    
    Service
    
    
    
    
    
    
    Footage
    
    
    WithLease
    
    (Before
    
    
    of Expiring
    
    
    (After
    
    
    Footage
    
    
    Expiring
    
    
    Rent
    
    
    
    
    
    
    Full-Service
    
    
    ExpiringExpiration
    
    Renewals)
    
    
    Leases(2)
    
    
    Renewals)
    
    
    Expiring
    
    
    Leases(3)
    
    
    Expiring
    
    
    
    
    
    
    Rent(3)
    
    
    Leases2006
    
    
    289,418

(4)
    
    
    (88,227
    )
    
    
    201,191

(4)(5)
    
    
    9.8
    %
    
    $
    4,745,260
    
    
    
    10.2
    %
    
    
    
    
    
    $
    23.59
    
    
    
    492007
    
    
    293,488

(6)
    
    
    2,697
    
    
    
    296,185

(6)
    
    
    14.4
    
    
    
    6,812,582
    
    
    
    14.6
    
    
    
    
    
    
    
    23.00
    
    
    
    392008
    
    
    146,442
    
    
    
    (19,989
    )
    
    
    126,453
    
    
    
    6.2
    
    
    
    3,230,899
    
    
    
    6.9
    
    
    
    
    
    
    
    25.55
    
    
    
    332009
    
    
    200,441
    
    
    
    11,713
    
    
    
    212,154
    
    
    
    10.3
    
    
    
    4,655,185
    
    
    
    10.0
    
    
    
    
    
    
    
    21.94
    
    
    
    272010
    
    
    164,931
    
    
    
    5,916
    
    
    
    170,847
    
    
    
    8.3
    
    
    
    4,542,466
    
    
    
    9.8
    
    
    
    
    
    
    
    26.59
    
    
    
    252011
    
    
    157,618
    
    
    
    9,386
    
    
    
    167,004
    
    
    
    8.1
    
    
    
    3,786,783
    
    
    
    8.1
    
    
    
    
    
    
    
    22.67
    
    
    
    182012
    
    
    106,408
    
    
    
    5,269
    
    
    
    111,677
    
    
    
    5.4
    
    
    
    2,992,333
    
    
    
    6.4
    
    
    
    
    
    
    
    26.79
    
    
    
    72013
    
    
    511,460
    
    
    
    60,302
    
    
    
    571,762
    
    
    
    27.8
    
    
    
    11,117,736
    
    
    
    23.9
    
    
    
    
    
    
    
    19.44
    
    
    
    132014
    
    
    57,662
    
    
    
    
    
    
    
    57,662
    
    
    
    2.8
    
    
    
    1,230,868
    
    
    
    2.6
    
    
    
    
    
    
    
    21.35
    
    
    
    62015
    
    
    102,087
    
    
    
    
    
    
    
    102,087
    
    
    
    5.0
    
    
    
    2,438,240
    
    
    
    5.2
    
    
    
    
    
    
    
    23.88
    
    
    
    62016 and thereafter
    
    
    24,184
    
    
    
    12,933
    
    
    
    37,117
    
    
    
    1.9
    
    
    
    1,050,743
    
    
    
    2.3
    
    
    
    
    
    
    
    28.31
    
    
    
    3Total
    
    
    2,054,139
    
    
    
    
    
    
    
    2,054,139
    
    
    
    100.0
    %
    
    $
    46,603,095
    
    
    
    100.0
    %
    
    
    
    
    
    $
    22.69
    
    
    
    226
 
 (1)
    
    Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties.(2)
    
    Signed renewals extend the expiration dates of in-place leases to the end of the renewed term.(3)
    
    Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals), giving effect to free rent or
scheduled rent increases taken into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels.(4)
    
    As of December 31, 2005, leases totaling 188,839 square feet (including renewals of 88,227 square feet and new leases of 100,612 square feet) have
been signed and will commence during 2006. These signed leases represent approximately 65% of gross square footage expiring during 2006.(5)
    
    Expirations by quarter are as follows: Q1: 94,812 square feet Q2: 46,151 square feet Q3: 20,534 square feet Q4: 39,694 square
feet.(6)
    
    Expirations by quarter are as follows: Q1: 22,638 square feet Q2: 39,071 square feet Q3: 34,860 square feet Q4: 199,616 square
feet. 30




---



##### Table of Contents



Resort Residential Development Properties
  ProposedPlanned
    
    
    
    
    
    
    
    Average
    
    
    AverageOur Preferred
    
    
    
    Sales
    
    Closed
    
    
    
    Physical
    
    Sales Price
    
    
    Sales PriceReturn /
    
    Product
    
    Lots/
    
    Lots/
    
    Remaining
    
    Inventory
    
    on Closed
    
    
    on RemainingCorporation / Project
    
    Location
    
    Ownership(1)
    
    Type(2)
    
    Units
    
    Units
    
    Lots/Units
    
    Lots/Units
    
    Lots/Units(3)
    
    
    Lots/UnitsDesert Mountain Development Corp.Desert Mountain (4)
    
    Scottsdale,  AZ
    
    93%
    
    SF, SH, THB
    
    2,481
    
    2,399
    
    82
    
    20
    
    $
    570
    
    
    $
    1,355Crescent Resort Development Inc.Tahoe Mountain ResortsNorthstar  Iron Horse and Great Bear
    
    Lake Tahoe, CA
    
    13% / 57%
    (5)
    COS
    
    100
    
    71
    
    29
    
    29
    
    
    1,200
    
    
    
    1,960Northstar  Big Horn and Catamount
    
    Lake Tahoe, CA
    
    13% / 57%
    (5)
    COS
    
    113
    
    
    
    113
    
    
    
    
    N/A
    
    
    
    1,430Northstar
 Remaining Phases
    
    Lake Tahoe, CA
    
    13% / 57%
    (5)
    CO, TH, TS S
    
    1,587
    
    
    
    1,587
    
    
    
    
    N/A
    
    
    
    2,600Old Greenwood-Units
    
    Lake Tahoe, CA
    
    13% / 71%
    
    TH, TS S
    
    165
    
    27.4
    
    137.6
    
    6
    
    
    1,870
    
    
    
    1,966Grays
Crossing  Lots
    
    Lake Tahoe, CA
    
    13% / 71%
    
    SF B
    
    377
    
    242
    
    135
    
    54
    
    
    310
    
    
    
    420Grays
Crossing  Units
    
    Lake Tahoe, CA
    
    13% / 71%
    
    COB
    
    169
    
    
    
    169
    
    
    
    
    N/A
    
    
    
    400Denver DevelopmentCreekside Townhomes at
Riverfront Park
    
    Denver, CO
    
    12% / 64%
    
    TH  P
    
    23
    
    16
    
    7
    
    7
    
    
    730
    
    
    
    870Brownstones (Phase I)
    
    Denver, CO
    
    12% / 64%
    
    TH  P
    
    16
    
    9
    
    7
    
    7
    
    
    1,580
    
    
    
    1,910Delgany
    
    Denver, CO
    
    12% / 64%
    
    CO P
    
    42
    
    34
    
    8
    
    8
    
    
    680
    
    
    
    740Identified Future Projects
    
    Denver, CO
    
    12%/26%-64%
    (5)
    TH, COB
    
    934
    
    
    
    934
    
    
    
    
    N/A
    
    
    
    790Mountain and Other DevelopmentHummingbird
    
    Bachelor Gulch, CO
    
    12% / 64%
    
    CO S
    
    40
    
    35
    
    5
    
    5
    
    
    2,510
    
    
    
    2,030Eagle Ranch
    
    Eagle, CO
    
    12% / 76%
    
    SF P
    
    1,395
    
    1,084
    
    311
    
    4
    
    
    90
    
    
    
    130Main Street Station Vacation Club
    
    Breckenridge, CO
    
    12% / 30%
    (5)
    TS S
    
    42
    
    29.5
    
    12.5
    
    12.5
    
    
    1,200
    
    
    
    1,060Riverbend
    
    Charlotte, NC
    
    12% / 68%
    
    SF P
    
    630
    
    442
    
    188
    
    28
    
    
    30
    
    
    
    40Three Peaks
    
    Silverthorne, CO
    
    12% / 33%
    (5)
    SF S
    
    327
    
    281
    
    46
    
    46
    
    
    210
    
    
    
    260Village Walk
    
    Beaver Creek, CO
    
    12% / 58%
    
    THB
    
    26
    
    
    
    26
    
    
    
    
    N/A
    
    
    
    5,230Beaver Creek Landing
    
    Beaver Creek, CO
    
    12% / 64%
    
    CO P
    
    52
    
    
    
    52
    
    
    
    
    N/A
    
    
    
    1,250Identified Future Projects
    
    Colorado
    
    12% / 64%
    
    TS, CO, THS
    
    392
    
    
    
    392
    
    
    
    
    N/A
    
    
    
    850Houston Area Development Corp.Spring Lakes
    
    Houston, TX
    
    98%
    
    SF P
    
    497
    
    464
    
    33
    
    17
    
    
    35
    
    
    
    44Crescent Plaza ResidentialThe Residences at the Ritz-Carlton
    
    Dallas, TX
    
    100%
    
    CO, THP
    
    171
    
    
    
    171
    
    
    
    
    N/A
    
    
    
    1,736
 
 (1)
    
    Our ownership percentage represents the profit percentage allocation after we receive
a preferred return on invested capital.(2)
    
    SF (Single-Family Lot); CO (Condominium); TH (Townhome); TS (Timeshare Equivalent
Unit) and SH (Single-Family Home). Superscript items represent P (Primary residence); S
(Secondary residence); and B (Both Primary and Secondary residence).(3)
    
    Based on lots, units and acres closed during our ownership period.(4)
    
    Average Sales Price includes golf membership, which as of December 31, 2005 is $0.3
million.(5)
    
    A joint venture partner participates in this project.
 
 31




---



##### Table of Contents



Resort/Hotel Properties (1)
  For the years ended December 31,RevenueAverage
    
    
    Average
    
    
    PerYear
    
    
    
    
    
    Occupancy
    
    
    Daily
    
    
    AvailableCompleted/
    
    
    
    
    
    Rate
    
    
    Rate
    
    
    Room/Guest NightRESORT/HOTEL PROPERTY(2)
    
    Location
    
    Renovated
    
    Rooms
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Operating PropertiesDestination Fitness Resorts and Spas:(3)Canyon Ranch-Tucson & Lenox
    
    Tucson, AZ / Lenox, MA
    
    1980/1989
    
    
    471
    (4)
    
    
    82
    %
    
    
    79
    %
    
    $
    739
    
    
    $
    713
    
    
    $
    567
    
    
    $
    521Luxury Resorts and Spas:Park Hyatt Beaver Creek Resort and Spa
    
    Avon, CO
    
    1989/2001
    
    
    275
    
    
    
    57
    %
    
    
    60
    %
    
    $
    303
    
    
    $
    277
    
    
    $
    172
    
    
    $
    167Fairmont Sonoma Mission Inn & Spa(5)
    
    Sonoma, CA
    
    1927/1987/1997/2004
    
    
    228
    
    
    
    71
    
    
    
    59
    
    
    
    292
    
    
    
    253
    
    
    
    207
    
    
    
    149Ventana Inn & Spa(6)
    
    Big Sur, CA
    
    1975/1982/1988
    
    
    60
    
    
    
    73
    
    
    
    64
    
    
    
    480
    
    
    
    430
    
    
    
    349
    
    
    
    274Total/Weighted Average
    
    
    
    
    
    
    563
    
    
    
    64
    %
    
    
    60
    %
    
    $
    319
    
    
    $
    285
    
    
    $
    206
    
    
    $
    171Total/Weighted Average for Canyon Ranch and Luxury Resorts and Spas Properties
    
    
    
    
    
    
    1,034
    
    
    
    73
    %
    
    
    69
    %
    
    $
    529
    
    
    $
    501
    
    
    $
    371
    
    
    $
    331Upscale Business Class Hotels:Denver Marriott City Center
    
    Denver, CO
    
    1982/1994
    
    
    613
    
    
    
    73
    %
    
    
    72
    %
    
    $
    130
    
    
    $
    124
    
    
    $
    95
    
    
    $
    90Renaissance Houston Hotel
    
    Houston, TX
    
    1975/2000
    
    
    388
    
    
    
    70
    
    
    
    61
    
    
    
    105
    
    
    
    103
    
    
    
    74
    
    
    
    63Omni Austin Hotel(7)
    
    Austin, TX
    
    1986
    
    
    375
    
    
    
    77
    
    
    
    73
    
    
    
    128
    
    
    
    114
    
    
    
    99
    
    
    
    83Total/Weighted Average
    
    
    
    
    
    
    1,376
    
    
    
    73
    %
    
    
    69
    %
    
    $
    123
    
    
    $
    116
    
    
    $
    90
    
    
    $
    80Total/Weighted Average for Resort/Hotel Properties
    
    
    
    
    
    
    2,410
    
    
    
    73
    %
    
    
    69
    %
    
    $
    293
    
    
    $
    277
    
    
    $
    210
    
    
    $
    188
 
 (1)
    
    Resort/Hotel Property Table is presented at 100% without any adjustment to give
effect to our actual ownership percentage in the properties.(2)
    
    We entered into agreements with Ritz-Carlton Hotel Company, L.L.C. to develop the
Ritz-Carlton hotel and residence project in Dallas, Texas. The development plans include a
Ritz-Carlton with approximately 217 hotel rooms and 70 residences.(3)
    
    On January 18, 2005, we contributed the Canyon Ranch-Tucson and Canyon Ranch-Lenox
properties to a newly formed entity, CR Operating LLC, for a 48% common member interest in
that entity. The remaining 52% of CR Operating LLC is owned by the founders of Canyon Ranch.(4)
    
    Represents available guest nights, which is the maximum number of guests the resort
can accommodate per night.(5)
    
    We have an 80.1% member interest in the limited liability company that owns Fairmont
Sonoma Mission Inn & Spa. Renovation of 97 historic inn rooms began in November 2003, at
which time those rooms were removed from service. Total cost of the renovation was
approximately $12.1 million and was completed in July 2004.(6)
    
    Renovation of 13 suites began in January 2004, at which time those suites were
removed from service. All 13 suites returned to service in September 2004. In addition, 11
suites were taken out of service in November 2004 for renovation. All 11 suites returned to
service in April 2005.(7)
    
    The Omni Austin Hotel is leased pursuant to a lease to HCD Austin Corporation. 
 32




---



##### Table of Contents



Temperature-Controlled Logistics Properties
  Total Cubic
    
    
    Total
    
    
    
    
    
    Total Cubic
    
    
    TotalNumber of
    
    Footage
    
    
    Square feet
    
    
    
    Number of
    
    Footage
    
    
    Square feetState
    
    Properties(1)
    
    (in millions)
    
    
    (in millions)
    
    State
    
    Properties(1)
    
    (in millions)
    
    
    (in millions)Alabama
    
    4
    
    
    10.7
    
    
    0.4
    
    Mississippi
    
    1
    
    
    4.7
    
    
    
    0.2Arizona
    
    1
    
    
    2.9
    
    
    0.1
    
    Missouri
    
    2
    
    
    46.8
    
    
    
    2.7Arkansas
    
    6
    
    
    33.1
    
    
    1.0
    
    Nebraska
    
    2
    
    
    4.4
    
    
    
    0.2California
    
    6
    
    
    23.7
    
    
    0.9
    
    New York
    
    1
    
    
    11.8
    
    
    
    0.4Colorado
    
    1
    
    
    2.8
    
    
    0.1
    
    North Carolina
    
    3
    
    
    10.0
    
    
    
    0.4Florida
    
    5
    
    
    6.5
    
    
    0.3
    
    Ohio
    
    1
    
    
    5.5
    
    
    
    0.2Georgia
    
    8
    
    
    49.5
    
    
    1.7
    
    Oklahoma
    
    2
    
    
    2.1
    
    
    
    0.1Idaho
    
    2
    
    
    18.7
    
    
    0.8
    
    Oregon
    
    5
    
    
    35.6
    
    
    
    1.5Illinois
    
    2
    
    
    11.6
    
    
    0.4
    
    Pennsylvania
    
    2
    
    
    27.4
    
    
    
    0.9Indiana
    
    1
    
    
    9.1
    
    
    0.3
    
    South Carolina
    
    1
    
    
    1.6
    
    
    
    0.1Iowa
    
    2
    
    
    12.5
    
    
    0.5
    
    South Dakota
    
    1
    
    
    2.9
    
    
    
    0.1Kansas
    
    2
    
    
    5.0
    
    
    0.2
    
    Tennessee
    
    3
    
    
    10.6
    
    
    
    0.4Kentucky
    
    1
    
    
    2.7
    
    
    0.1
    
    Texas
    
    2
    
    
    6.6
    
    
    
    0.2Maine
    
    1
    
    
    1.8
    
    
    0.2
    
    Utah
    
    1
    
    
    8.6
    
    
    
    0.4Massachusetts
    
    4
    
    
    10.2
    
    
    0.5
    
    Virginia
    
    2
    
    
    8.7
    
    
    
    0.3Minnesota
    
    1
    
    
    3.0
    
    
    0.1
    
    Washington
    
    6
    
    
    28.7
    
    
    
    1.1Wisconsin
    
    3
    
    
    17.4
    
    
    
    0.6TOTAL
    
    85
    
    
    437.2
    
    
    
    17.4
 
 (1)
    
    As of December 31, 2005, AmeriCold Realty Trust operated 101 facilities,
of which 84 were wholly-owned facilities, one was partially-owned and sixteen were managed for
outside owners. 
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  33




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
  PriceHigh
    
    Low
    
    Distributions2004First Quarter
    
    $
    18.75
    
    
    $
    17.31
    
    
    

$0.375Second Quarter
    
    
    17.90
    
    
    
    15.05
    
    
    
    0.375Third Quarter
    
    
    16.58
    
    
    
    15.37
    
    
    
    0.375Fourth Quarter
    
    
    19.09
    
    
    
    15.47
    
    
    
    0.3752005First Quarter
    
    $
    18.14
    
    
    $
    16.12
    
    
    

$0.375Second Quarter
    
    
    18.99
    
    
    
    16.02
    
    
    
    0.375Third Quarter
    
    
    20.65
    
    
    
    17.95
    
    
    
    0.375Fourth Quarter
    
    
    21.06
    
    
    
    19.23
    
    
    
    0.375
   
    
    the general condition of the United States economy;
    
    general leasing activity and rental rates in the markets in which the Office Properties are located;
    
    the ability of tenants to meet their rent obligations;
    
    our operating and interest expenses;
    
    consumer preferences relating to the Resort/Hotel Properties and the Resort Residential Development Properties;
    
    cash flows from unconsolidated entities;
    
    the level of our property acquisitions and dispositions;
    
    capital expenditure requirements;
    
    federal, state and local taxes payable by us; and
    
    the adequacy of cash reserves.
    34




---



##### Table of Contents



2005
    
    
    2004Ordinary dividend
    
    
    6.3
    %
    
    
    
    %Qualified dividend eligible for 15% tax rate
    
    
    2.7
    
    
    
    Capital gain
    
    
    47.2
    
    
    
    23.2Return of capital
    
    
    29.5
    
    
    
    57.4Unrecaptured Section 1250 gain
    
    
    14.3
    
    
    
    19.4100.0
    %
    
    
    100.0
    %
    Class A Preferred
    
    Class B Preferred2005
    
    2004
    
    2005
    
    2004Ordinary dividend
    
    
    8.9
    %
    
    
    
    %
    
    
    8.9
    %
    
    
    
    %Qualified dividend eligible
for 15% tax rate
    
    
    3.8
    
    
    
    
    
    
    
    3.8
    
    
    
    Capital gain
    
    
    67.1
    
    
    
    54.4
    
    
    
    67.1
    
    
    
    54.4Unrecaptured Section 1250 Gain
    
    
    20.2
    
    
    
    45.6
    
    
    
    20.2
    
    
    
    45.6100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Unregistered Sales of Equity Securities
  35




---



##### Table of Contents



Item 6. Selected Financial Data
  CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED HISTORICAL FINANCIAL DATA
 For Years Ended December 31,2005
    
    2004
    
    2003
    
    2002
    
    2001Operating Data:Total Property revenue
    
    $
    1,023,523
    
    
    $
    1,007,438
    
    
    $
    899,790
    
    
    $
    956,950
    
    
    $
    593,511Income from Property Operations
    
    $
    280,354
    
    
    $
    317,605
    
    
    $
    303,379
    
    
    $
    340,242
    
    
    $
    346,764Income (loss) from continuing operations before minority
interests and income taxes
    
    $
    24,488
    
    
    $
    189,686
    
    
    $
    57,323
    
    
    $
    74,748
    
    
    $
    (14,372
    )Net income (loss) available to common shareholders
    
    $
    63,269
    
    
    $
    141,138
    
    
    $
    (278
    )
    
    $
    65,959
    
    
    $
    (18,160
    )Basic earnings (loss) per common share:(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change
in accounting principle
    
    $
    (0.30
    )
    
    $
    1.35
    
    
    $
    (0.01
    )
    
    $
    0.36
    
    
    $
    (0.42
    )Net income (loss) available to common shareholders-basic
    
    $
    0.63
    
    
    $
    1.43
    
    
    $
    
    
    
    $
    0.63
    
    
    $
    (0.17
    )Diluted earnings (loss) per common share:(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change
in accounting principle
    
    $
    (0.30
    )
    
    $
    1.34
    
    
    $
    (0.01
    )
    
    $
    0.36
    
    
    $
    (0.42
    )Net income (loss) available to common shareholders  diluted
    
    $
    0.63
    
    
    $
    1.42
    
    
    $
    
    
    
    $
    0.63
    
    
    $
    (0.17
    )Balance Sheet Data (at period end):Total assets
    
    $
    4,141,862
    
    
    $
    4,037,764
    
    
    $
    4,314,463
    
    
    $
    4,289,433
    
    
    $
    4,142,149Total debt
    
    $
    2,259,473
    
    
    $
    2,152,255
    
    
    $
    2,558,699
    
    
    $
    2,382,910
    
    
    $
    2,214,094Total shareholders equity
    
    $
    1,241,995
    
    
    $
    1,300,250
    
    
    $
    1,221,804
    
    
    $
    1,354,813
    
    
    $
    1,405,940Other Data:Cash distribution declared per common share
    
    $
    1.50
    
    
    $
    1.50
    
    
    $
    1.50
    
    
    $
    1.50
    
    
    $
    1.85Weighted averageCommon shares and units outstanding  basic
    
    
    118,012,402
    
    
    
    116,747,408
    
    
    
    116,634,546
    
    
    
    117,523,248
    
    
    
    121,017,605Weighted averageCommon shares and units outstanding  diluted
    
    
    118,836,421
    
    
    
    116,965,897
    
    
    
    116,676,242
    
    
    
    117,725,984
    
    
    
    122,544,421Cash flow provided by (used in):Operating activities
    
    $
    139,629
    
    
    $
    89,620
    
    
    $
    126,046
    
    
    $
    280,303
    
    
    $
    210,055Investing activities
    
    
    (198,358
    )
    
    
    632,931
    
    
    
    (34,579
    )
    
    
    55,181
    
    
    
    212,752Financing activities
    
    
    52,666
    
    
    
    (708,312
    )
    
    
    (91,859
    )
    
    
    (293,325
    )
    
    
    (425,488
    )Funds from operations available to common shareholders 
diluted (1)
    
    $
    144,317
    
    
    $
    95,723
    
    
    $
    174,762
    
    
    $
    221,284
    
    
    $
    155,412
 
 (1)
    
    Funds from operations, or FFO, is a supplemental non-GAAP financial measurement
used in the real estate industry to measure and compare the operating performance of real
estate companies, although those companies may calculate funds from operations in different
ways. The National Association of Real Estate Investment Trusts (NAREIT) defines funds from
operations as Net Income (Loss) determined in accordance with generally accepted accounting
principles (GAAP), excluding gains (or losses) from sales of depreciable operating property,
excluding extraordinary items (determined by GAAP), plus depreciation and amortization of real
estate assets, and after adjustments for unconsolidated partnerships and joint ventures. We
calculate FFO available to common shareholders  diluted in the same manner, except that Net
Income (Loss) is replaced by Net Income (Loss) Available to Common Shareholders and we include
the effect of Operating Partnership unitholder minority interests. For a more detailed
definition and description of FFO and a reconciliation to net income determined in accordance
with GAAP, see Funds from Operations included in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations. 36




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Index to Managements Discussion and Analysis of Financial Condition and Results of Operations
 PageOverview
    
    
    38
    

Recent Developments
    
    
    39Results
of OperationsYears ended December 31, 2005 and 2004
    
    
    46Years ended December 31, 2004 and 2003
    
    
    50Liquidity
and Capital ResourcesOverview
    
    
    55Liquidity Requirements
    
    
    58Debt and Equity Financing
    
    
    61Unconsolidated Investments
    
    
    64Significant Accounting Policies
    
    
    65Funds from Operations
    
    
    70
 37




---



##### Table of Contents



Overview
       38




---



##### Table of Contents



Recent Developments
 Office Segment
 Joint Ventures
 Five Houston Center
  Paseo del Mar
  One Buckhead Plaza
  2211 Michelson
  Fulbright Tower
  39




---



##### Table of Contents



Significant Tenant Lease Termination
  Asset Purchases
  (in millions)
    
    
    
    
    
    PurchaseDate
    
    Property
    
    Location
    
    Price(1)February 7, 2005
    
    Exchange Building  Class A Office Property
    
    Seattle, Washington
    
    $
    52.5April 8, 2005
    
    One Buckhead Plaza  Class A Office Property(2)
    
    Atlanta, Georgia
    
    
    130.5January 23, 2006
    
    Financial Plaza  Class A Office Property
    
    Phoenix, Arizona
    
    
    55.0
 
 (1)
    
    The acquisitions were funded by draws on our credit facility and for One
Buckhead Plaza and Financial Plaza, by mortgage loans with Morgan Stanley and Allstate,
respectively.(2)
    
    In June 2005, we contributed One Buckhead Plaza to Crescent One Buckhead
Plaza L.P., as described above under Office Segment  One Buckhead Plaza. Asset Sales
  (in millions)
    
    
    
    
    
    NetDate
    
    Property
    
    Location
    
    Proceeds
    
    GainOfficeFebruary 7, 2005
    
    Albuquerque Plaza
    
    Albuquerque, NM
    
    $34.7(1)
    
    $
    1.6August 16, 2005
    
    Barton Oaks Plaza One
    
    Austin, TX
    
    14.4(1)
    
    
    5.3September 19, 2005
    
    Chancellor Park
    
    San Diego, CA
    
    55.4(2)
    
    
    31.9September 28, 2005
    
    Two Renaissance Square
    
    Phoenix, AZ
    
    116.8(1)
    
    
    67.4February 17, 2006
    
    Waterside Commons
    
    Dallas, TX
    
    24.8(2)
    



(3)
 
 (1)
    
    Proceeds were used to pay down a portion of our Bank of America Fund XII
Term Loan.(2)
    
    Proceeds were used primarily to pay down our credit facility.(3)
    
    We previously recorded an impairment charge of approximately $1.0 million
during the year ended December 31, 2005. 40




---



##### Table of Contents



Resort/Hotel Segment
 Joint Ventures
 Canyon Ranch
   41




---



##### Table of Contents



Other Segment
 Mezzanine Investments
   Interest Rate(in millions)
    
    Loan
    
    
    
    Maturity
    
    at December
    
    Fixed/Date
    
    Amount
    
    Investment
    
    Date
    
    31, 2005
    
    VariableNovember 9, 2004
    
    $22.0(1)
    
    Los Angeles Office Property
    
    
    2006
    
    
    
    13.62
    %
    
    VariableFebruary 7, 2005
    
    17.3(2)
    
    New York City Office Property
    
    
    2007
    
    
    
    12.05
    %
    
    VariableMarch 31, 2005
    
    33.0(3)
    
    Orlando Resort
    
    
    2008
    
    
    
    12.00
    %
    
    FixedMay 31, 2005
    
    20.0(4)
    
    Los Angeles Office Property
    
    
    2007
    
    
    
    12.59
    %
    
    VariableJune 9, 2005
    
    12.0(5)
    
    Dallas Office Property
    
    
    2007
    
    
    
    12.87
    %
    
    VariableAugust 31, 2005
    
    7.7(6)
    
    Three Dallas Office Properties
    
    
    2010
    
    
    
    11.04
    %
    
    FixedNovember 16, 2005
    
    15.0(7)
    
    Two Luxury Hotel Properties in California
    
    
    2007
    
    
    
    15.37
    %
    
    VariableNovember 16, 2005
    
    25.0(8)
    
    Los Angeles Office Property
    
    
    2007
    
    
    
    8.87
    %
    
    VariableDecember 30, 2005
    
    20.7(9)
    
    Office Portfolio in
Southeastern U.S.
    
    
    2007
    
    
    
    11.23
    %
    
    VariableJanuary 20, 2006
    
    15.0(10)
    
    Six Hotel Properties in Florida
    
    
    2009
    
    
    
    N/A
    
    
    Variable
 
 (1)
    
    The loan bears interest at LIBOR plus 925 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to four six-month extension options.(2)
    
    On February 1, 2006, the loan was repaid in full.(3)
    
    Outstanding amount excludes $0.1 million of unamortized premium. On
February 24, 2006, the loan was repaid in full.(4)
    
    The loan bears interest at LIBOR plus 825 basis points with an
interest-only term until maturity, subject to the right of the borrower to two six-month
extensions and a third extension ending December 1, 2008.(5)
    
    The loan bears interest at LIBOR plus 850 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options.(6)
    
    The loan has an interest-only term through September 2007. Beginning
October 2007, the borrower must make principal payments based on a 30-year amortization
schedule until maturity.(7)
    
    The loan bears interest at LIBOR plus 1100 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to five one-year extension options.(8)
    
    The loan bears interest at LIBOR plus 453 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three six-month extension options. The office property
securing our investment is the same property securing our May 31,
2005 investment.(9)
    
    The loan bears interest at LIBOR plus 685 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend pursuant
to three one-year extension options.(10)
    
    The loan bears interest at LIBOR plus 800 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. 42




---



##### Table of Contents



Redtail Capital Partners, L.P.
  2005 Operating Performance
 Office Segment
  2005
    
    2004Ending Economic Occupancy(1)
    
    
    88.5
    %
    
    
    88.6
    %Leased Occupancy(2)
    
    
    90.8
    %
    
    
    89.9
    %In-Place Weighted Average Full-Service Rental Rate(3)
    
    $
    22.48
    
    
    $
    22.63Tenant Improvement and Leasing Costs per Sq. Ft. per year
    
    $
    3.55
    
    
    $
    3.13Average Lease Term(4)

    6.2 years

 
    7.4 yearsSame-Store NOI(5) Decline
    
    
    (1.5
    )%
    
    
    (5.3
    )%Same-Store Average Economic Occupancy
    
    
    87.3
    %
    
    
    86.0
    %
 
 (1)
    
    Economic occupancy reflects the occupancy of all tenants paying rent.(2)
    
    Leased occupancy reflects the amount of contractually obligated space, whether
or not commencement has occurred.(3)
    
    The weighted average full-service rental rate for the El Paso lease reflects
weighted average full-service rental rate over the shortened term and excludes the impact
of the net lease termination fee being recognized ratably to income through December 31,
2007.(4)
    
    Reflects leases executed during the period.(5)
    
    Same-store NOI (net operating income) represents office property net income
excluding depreciation, amortization, interest expense and non-recurring items such as
lease termination fees for Office Properties owned for the entirety of the comparable
periods.  Resort Residential Development Segment
  CRDI
 For the years ended December 31,(dollars in thousands)
    
    2005
    
    2004Resort Residential Lot Sales
    
    
    545
    
    
    
    353Resort Residential Unit Sales:Townhome Sales
    
    
    25
    
    
    
    12Condominium Sales
    
    
    187
    
    
    
    41Equivalent Timeshare Sales
    
    
    15.7
    
    
    
    14.6Average Sales Price per Resort Residential Lot
    
    $
    164
    
    
    $
    152Average Sales Price per Resort Residential Unit
    
    $
    1,265
    
    
    $
    1,831
 43




---



##### Table of Contents



Desert Mountain
 For the years ended December 31,(dollars in thousands)
    
    2005
    
    2004Resort Residential Lot Sales
    
    
    40
    
    
    
    68Average Sales Price per Lot (1)
    
    $
    1,082
    
    
    $
    756
 
 (1)
    
    Includes equity golf membership  Resort/Hotel Segment
  For the years ended December 31,Average
    
    Average
    
    Revenue PerSame-Store NOI(1)
    
    Occupancy
    
    Daily
    
    Available% Change

    Rate

    Rate

    Room/Guest Night2005

    2004

    2005

    2004

    2005

    2004

    2005

    2004Canyon Ranch andLuxury Resorts and Spas
    
    
    41
    %
    
    
    (3
    )%
    
    
    73
    %
    
    
    69
    %
    
    $
    529
    
    
    $
    501
    
    
    $
    371
    
    
    $
    331Upscale Business Class
Hotels
    
    
    26
    %
    
    
    (6
    )%
    
    
    73
    %
    
    
    69
    %
    
    $
    123
    
    
    $
    116
    
    
    $
    90
    
    
    $
    80
 
 (1)
    
    Same-Store NOI (net operating income) represents net income excluding
depreciation and amortization, interest expense and rent expense for Resort/Hotel
Properties owned for the entirety of the comparable periods.  44




---



##### Table of Contents



Results of Operations
  Total variance in
    
    
    Total variance indollars between
    
    
    dollars betweenthe years ended
    
    
    the years endedDecember 31,
    
    
    December 31,(in millions)
    
    2005 and 2004
    
    
    2004 and 2003REVENUE:Office Property
    
    $
    (104.4
    )
    
    $
    9.7Resort Residential Development Property
    
    
    192.4
    
    
    
    89.5Resort/Hotel Property
    
    
    (71.9
    )
    
    
    8.5Total Property revenue
    
    $
    16.1
    
    
    $
    107.7EXPENSE:Office Property real estate taxes
    
    $
    (19.6
    )
    
    $
    (3.7
    )Office Property operating expenses
    
    
    (19.3
    )
    
    
    10.6Resort Residential Development Property expense
    
    
    160.8
    
    
    
    74.3Resort/Hotel Property expense
    
    
    (68.5
    )
    
    
    12.2Total Property expense
    
    $
    53.4
    
    
    $
    93.4Income from Property Operations
    
    $
    (37.3
    )
    
    $
    14.3OTHER INCOME (EXPENSE):Income from sale of investment in unconsolidated company, net
    
    $
    29.9
    
    
    $
    (86.2
    )Income from investment land sales, net
    
    
    (10.2
    )
    
    
    5.8(Loss) gain on joint venture of properties, net
    
    
    (268.5
    )
    
    
    265.7Gain on property sales, net
    
    
    0.1
    
    
    
    Interest and other income
    
    
    11.1
    
    
    
    10.2Corporate general and administrative
    
    
    (11.5
    )
    
    
    (6.2
    )Interest expense
    
    
    40.1
    
    
    
    (4.7
    )Amortization of deferred financing costs
    
    
    4.9
    
    
    
    (2.0
    )Extinguishment of debt
    
    
    40.5
    
    
    
    (42.6
    )Depreciation and amortization
    
    
    17.9
    
    
    
    (15.8
    )Impairment charges related to real estate assets
    
    
    3.0
    
    
    
    4.5Other expenses
    
    
    (3.2
    )
    
    
    5.2Equity in net income (loss) of unconsolidated companies:Office Properties
    
    
    5.2
    
    
    
    (4.9
    )Resort Residential Development Properties
    
    
    1.8
    
    
    
    (12.7
    )Resort/Hotel Properties
    
    
    (1.3
    )
    
    
    (6.0
    )Temperature-Controlled Logistics Properties
    
    
    (5.9
    )
    
    
    4.0Other
    
    
    18.2
    
    
    
    3.8Total other income (expense)
    
    $
    (127.9
    )
    
    $
    118.1INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES
    
    $
    (165.2
    )
    
    $
    132.4Minority interests
    
    
    22.1
    
    
    
    (31.6
    )Income tax (expense) benefit
    
    
    (20.5
    )
    
    
    40.0INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE
    
    $
    (163.6
    )
    
    $
    140.8Income from discontinued operations, net of minority interests
    
    
    (5.5
    )
    
    
    (6.4
    )Impairment charges related to real estate assets from discontinued operations,
net of minority interests
    
    
    2.9
    
    
    
    22.1Gain on real estate from discontinued operations, net of minority interests
    
    
    88.2
    
    
    
    (9.2
    )Cumulative effect of a change in accounting principle, net of minority interests
    
    
    0.4
    
    
    
    (0.4
    )NET INCOME
    
    $
    (77.6
    )
    
    $
    146.9Series A Preferred Share distributions
    
    
    (0.3
    )
    
    
    (5.5
    )Series B Preferred Share distributions
    
    
    
    
    
    
    NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
    
    $
    (77.9
    )
    
    $
    141.4
 45




---



##### Table of Contents



Comparison of the year ended December 31, 2005 to the year ended December 31, 2004
 Property Revenues
  
    
    Office Property revenues decreased $104.4 million, or 21.7%, to $377.3 million,
primarily due to:
 §
    
    a decrease of $154.6 million due to the joint ventures of The Crescent, Trammell
Crow Center, Fountain Place, Houston Center and Post Oak Central in November 2004;
partially offset by Fulbright Tower, which was acquired in December 2004 and joint
ventured in February 2005, and One Buckhead Plaza which was acquired in April 2005
and joint ventured in June 2005; partially offset by§
    
    an increase of $26.9 million from the acquisition of Hughes Center in January
through May 2004, Dupont Centre in March 2004, The Alhambra in August 2004, One
Live Oak and Peakview Tower in December 2004 and the Exchange Building in February
2005;§
    
    an increase of $17.1 million resulting from third party management and leasing
services and related direct expense reimbursements due to the joint ventures of The
Crescent, Trammell Crow Center, Fountain Place, Houston Center and Post Oak Central
in November 2004, and Fulbright Tower in February 2005 and One Buckhead Plaza in
June 2005;§
    
    an increase of $4.9 million from the 43 consolidated Office Properties
(excluding 2004 and 2005 acquisitions, dispositions and properties held for sale)
that we owned or had an interest in, primarily due to a 2.2 percentage point
increase in average occupancy (from 82.9% to 85.1%), increased expense recovery
revenue related to the increase in occupancy and increased recoverable expenses,
and increased parking revenue; partially offset by a decline in full service
weighted average rental rates; and§
    
    an increase of $2.2 million in net lease termination fees (from $9.0 million to
$11.2 million) primarily due to the El Paso lease termination.
 
    
    Resort Residential Development Property revenues increased $192.4 million, or 61.8%, to
$503.6 million, primarily due to:
 §
    
    an increase of $189.7 million in CRDI revenues related to product mix in lots
and units available for sale in 2005 versus 2004, primarily at Hummingbird Lodge in
Bachelor Gulch, Colorado, Northstar Village in Lake Tahoe, California, Creekside at
Riverfront Park in Denver, Colorado, Delgany in Denver, Colorado, Brownstones in
Denver, Colorado, and Grays Crossing in Lake Tahoe, California, which had sales in
the year ended December 31, 2005, but reduced or no sales in 2004; partially offset
by the Cresta project in Arrowhead, Colorado, Old Greenwood in Lake Tahoe,
California, and Horizon Pass in Bachelor Gulch, Colorado, which had sales in the
year ended December 31, 2004, but reduced or no sales in 2005.
 
    
    Resort/Hotel Property revenues decreased $71.9 million, or 33.5%, to $142.6 million,
primarily due to:
 §
    
    a decrease of $88.8 million due to the contribution, in January 2005, of the
Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in which we
have a 48% member interest that is accounted for as an unconsolidated investment;
partially offset by§
    
    an increase of $6.9 million in room revenue at the Luxury Resort and Spa
Properties related to a 20% increase in revenue per available room (from $171 to
$206) resulting from a 12% increase in average daily rate (from $285 to $319) and a
4 percentage point increase in occupancy (from 60% to 64%);§
    
    an increase of $4.5 million in food and beverage, spa and other revenue at the
Luxury Resort and Spa Properties primarily due to a 12 percentage point increase in
occupancy (from 59% to 71%) at the Sonoma Mission Inn primarily related to the
renovation of the 97 historic inn rooms which were out of service during the first
two quarters of 2004;§
    
    an increase of $2.8 million in room revenue at the Upscale Business Class Hotel
Properties primarily due to a 13% increase in revenue per available room (from $80
to $90) resulting from an increase of 6% in average daily rate (from $116 to $123)
and 4 percentage point increase in occupancy (from 69% to 73%); and§
    
    an increase of $2.6 million in food and beverage and other revenue at the
Upscale Business Class Hotel Properties primarily related to the 4 percentage point
increase in occupancy (from 69% to 73%) in conjunction with increased group volume.
 46




---



##### Table of Contents



Property Expenses
  
    
    Office Property expenses decreased $38.9 million, or 16.3%, to $199.3 million, primarily
due to:
 §
    
    a decrease of $73.3 million due to the joint ventures of The Crescent, Trammell
Crow Center, Fountain Place, Houston Center and Post Oak Central in November 2004,
partially offset by Fulbright Tower, which was acquired in December 2004 and joint
ventured in February 2005 and One Buckhead Plaza, which was acquired in April 2005
and joint ventured in June 2005; partially offset by§
    
    an increase of $14.4 million related to the cost of providing third-party
management services due to the joint venture of The Crescent, Trammell Crow Center,
Fountain Place, Houston Center and Post Oak Central in November 2004, and Fulbright
Tower in February 2005 and One Buckhead Plaza in June 2005, which are recouped by
increased third party fee income and direct expense reimbursements;§
    
    an increase of $10.7 million from the acquisition of Hughes Center in January
through May 2004, Dupont Centre in March 2004, The Alhambra in August 2004, One
Live Oak and Peakview Tower in December 2004 and the Exchange Building in February
2005;§
    
    an increase of $4.7 million in operating expenses of the 43 consolidated Office
Properties (excluding 2004 and 2005 acquisitions, dispositions and properties held
for sale) that we owned or had an interest in primarily due to increased
administrative costs, utilities, general building and property taxes; and§
    
    an increase of $4.5 million due to increased payroll and benefit costs and
Sarbanes-Oxley compliance costs.
 
    
    Resort Residential Development Property expenses increased $160.8 million, or 59.2%, to
$432.6 million, primarily due to:
 §
    
    an increase of $160.5 million in CRDI cost of sales related to product mix in
lots and units available for sale in 2005 versus 2004, primarily at the Hummingbird
Lodge in Bachelor Gulch, Colorado, Northstar Village in Lake Tahoe, California,
Creekside at Riverfront Park in Denver, Colorado, Delgany in Denver, Colorado,
Brownstones in Denver, Colorado, and Grays Crossing in Lake Tahoe, California,
which had sales in the year ended December 31, 2005, but reduced or no sales in
2004; partially offset by the Cresta project in Arrowhead, Colorado, Old Greenwood
in Lake Tahoe, California, and Horizon Pass in Bachelor Gulch, Colorado, which had
sales in the year ended December 31, 2004, but reduced or no sales in 2005.
 
    
    Resort/Hotel Property expenses decreased $68.5 million, or 38.1%, to $111.3 million,
primarily due to:
 §
    
    a decrease of $76.5 million due to the contribution, in January 2005, of the
Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in which we
have a 48% member interest that is accounted for as an unconsolidated investment;
partially offset by§
    
    an increase of $5.2 million in operating expenses at the Luxury Resort and Spa
Properties primarily due to a 12 percentage point increase in occupancy at Sonoma
Mission Inn (from 59% to 71%) primarily related to the renovation of the 97
historic inn rooms which were out of service during the first two quarters of 2004;
and§
    
    an increase of $2.7 million in operating expenses at the Upscale Business Class
Hotel Properties primarily related to a 9 percentage point increase in occupancy at
Houston Renaissance (from 61% to 70%).
 Other Income/Expense
  47




---



##### Table of Contents



Other Income
  
    
    Gain on joint venture of properties, net decreased $268.5 million, due primarily to:
 §
    
    $265.8 million decrease due to the gain on the joint venture of The Crescent,
Fountain Place, Trammell Crow Center, Houston Center and Post Oak Central Office
Properties in 2004; and§
    
    $4.9 million decrease due to the write-off of capitalized internal leasing costs
related to prior year joint venture of properties; partially offset by§
    
    $1.9 million increase due to the gain on the joint venture of Fullbright Tower
and One Buckhead in 2005.
 
    
    Income from investment land sales, net decreased $10.2 million due to the gain of $8.6
million on sales of two parcels of undeveloped investment land in 2005 compared to $18.8
million gain on sales of five parcels of undeveloped investment land in 2004.
    
    Income from sale of investment in unconsolidated company, net increased $29.9 million
due to the sale of our interests in the entity that owned the 5 Houston Center Office
Property in 2005.
    
    Interest and other income increased $11.1 million to $29.1 million primarily due to:
 §
    
    $10.5 million interest from mezzanine loans;§
    
    $3.7 million interest from U.S. Treasury and government sponsored agency
securities purchased in December 2004 and January 2005 related to debt defeasance
in order to release the lien on properties securing the LaSalle Note I and Nomura
Funding VI Note; and§
    
    $1.7 million increase in other income from legal settlement proceeds received in
connection with certain deed transfer taxes; partially offset by§
    
    $3.7 million received in 2004 from COPI pursuant to the COPI bankruptcy plan for
notes receivable previously written off in 2001.
 
    
    Equity in net income of unconsolidated companies increased $18.0 million to $27.6
million primarily due to:
 §
    
    an increase of $18.2 million in Other equity in net income primarily
attributable to an increase of $6.1 million of income from the G2 investment and an
increase of $11.5 million of income from the SunTx investment; and§
    
    an increase of $5.2 million in Office equity in net income primarily
attributable to the joint ventures of The Crescent, Fountain Place, Trammell Crow
Center, Houston Center and Post Oak Central Office Properties; partially offset by§
    
    a decrease of $5.9 million in Temperature-Controlled Logistics equity in net
income primarily attributable to the gain on the sale of a portion of our interests
in AmeriCold to The Yucaipa Companies in 2004.
 Other Expenses
  
    
    Extinguishment of debt expense decreased $40.5 million, or 94.8%, to $2.2 million due
to:
 §
    
    $17.5 million related to the securities purchased in excess of the debt balance
to defease LaSalle Note I in connection with the joint venture of Office Properties
in 2004;§
    
    $17.5 million prepayment penalty associated with the payoff of the JP Morgan
Chase Mortgage Loan in connection with the joint venture of Office Properties in
2004;§
    
    $1.0 million mortgage prepayment fee associated with the payoff of the Lehman
Brothers Holdings, Inc. Loan in connection with the joint venture of Office
Properties in 2004; and§
    
    $6.6 million write-off of deferred financing costs, of which $3.1 million
related to the joint venture or sale of real estate assets in 2004; partially
offset by§
    
    $2.1 million write-off of deferred financing costs, of which $0.7 million
related to the joint venture or sale of real estate assets in 2005.
 48




---



##### Table of Contents




    
    Interest expense decreased $40.1 million, or 22.7%, to $136.7 million due to a decrease
of $392 million in the weighted average debt balance (from $2,664 billion to $2,272
billion), partially offset by a .03 percentage point increase in the hedged weighted
average interest rate (from 6.95% to 6.98%) and $3.0 million cash flow payments recorded as
interest expense related to the Fountain Place transaction in June 2004.
    
    Depreciation and amortization costs decreased $17.9 million, or 10.1%, to $146.2 million due to:
 §
    
    $19.3 million decrease in Office Property depreciation expense, primarily due to:
 °
    
    $36.7 million decrease attributable to the joint ventures of
The Crescent, Fountain Place, Trammell Crow Center, Houston Center and Post Oak
Central in November 2004, partially offset by Fulbright Tower which was
acquired in December 2004 and subsequently joint ventured in February 2005 and
One Buckhead Plaza which was acquired in April 2005 and subsequently joint
ventured in June 2005; partially offset by°
    
    $13.2 million increase from the acquisitions of Hughes Center
in January through May 2004, Dupont Centre in March 2004, The Alhambra in
August 2004, One Live Oak, Fulbright Tower and Peakview Tower in December 2004
and the Exchange Building in February 2005; and°
    
    $3.5 million increase primarily due to increased building and
leasehold improvements; and
 §
    
    $5.2 million decrease in Resort/Hotel Property depreciation expense primarily
related to the joint venture of the Canyon Ranch Properties, partially offset by
the reclassification of the Denver City Marriott Hotel Property from held for sale
to held and used; partially offset by§
    
    $6.6 million increase in Resort Residential Development Property depreciation
expense primarily related to club amenities and golf course improvements at CRDI
and DMDC.
 
    
    Amortization of deferred financing costs decreased $4.9 million, or 37.7%, to $8.1
million primarily due to the refinancing and modification of the Credit Facility in
February 2005 and December 2005, partially offset by the reduction of the Fleet Fund I and
II Term Loan in January 2004 and the payoff of the Lehman Capital Note in November 2004.
    
    Impairment charges related to real estate assets decreased $3.0 million due to the
impairment of $4.1 million related to the demolition of the old clubhouse at the Sonoma
Club in the third quarter 2004 in order to construct a new clubhouse, partially offset by
$1.1 million impairment of the Waterside Commons Office Property
in the fourth quarter 2005.
    
    Corporate general and administrative costs increased $11.5 million, or 29.6%, to $50.4
million due primarily to an increase in compensation expense associated with restricted
units granted under our long-term incentive compensation plans in December 2004 and May 2005.
 Income Tax Expense/Benefit
  
    
    $8.3 million decreased tax benefit on the Resort Residential Development Properties
primarily attributable to the results of operations at CRDI;
    
    $5.8 million decreased tax benefit on the Resort/Hotel Properties due to the
contribution of the Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in
which we have a 48% member interest that is accounted for as an unconsolidated investment
and reduced taxable losses at the other properties;
    
    $4.0 million tax expense related to income from our investment in SunTx; and
    
    $2.8 million tax expense related to income from our investment in G2.
 49




---



##### Table of Contents



Discontinued Operations
  
    
    an increase of $88.2 million, net of minority interest, primarily due to the $89.2
million gain on the sale of four properties in 2005; and
    
    an increase of $2.9 million, net of minority interest, due to an aggregate $3.0 million
impairment on three office properties in 2004; partially offset by
    
    a decrease of $5.5 million, net of minority interest, due to the reduction of net income
associated with properties held for sale in 2005 compared to 2004.
 Comparison of the year ended December 31, 2004 to the year ended December 31, 2003
 Property Revenues
  
    
    Office Property revenues increased $9.7 million, or 2.1%, to $481.7 million, primarily
due to:
 §
    
    an increase of $48.1 million from the acquisitions of The Colonnade in August
2003, the Hughes Center Properties in December 2003 through May 2004, the Dupont
Centre in March 2004 , The Alhambra in August 2004, and One Live Oak and Peakview
Tower in December 2004; and§
    
    an increase of $3.3 million resulting from third party management services and
related direct expense reimbursements; partially offset by§
    
    a decrease of $22.8 million due to the joint venture of The Crescent, Trammell
Crow Center, Fountain Place, Houston Center and Post Oak Central in November 2004;§
    
    a decrease of $17.4 million from the 40 consolidated Office Properties
(excluding 2003 and 2004 acquisitions, dispositions and properties held for sale)
that we owned or had an interest in, primarily due to a decrease in full service
weighted average rental rates, a 0.5 percentage point decline in average occupancy
(from 83.1% to 82.6%), a decrease in recoveries due to expense reductions and base
year rollover of significant customers, and a decline in net parking revenues;§
    
    a decrease of $1.1 million due to nonrecurring revenue earned in 2003; and§
    
    a decrease of $0.7 million in net lease termination fees (from $9.7 million to $9.0 million).
 
    
    Resort Residential Development Property revenues increased $89.5 million, or 40.4%, to
$311.2 million, primarily due to:
 §
    
    an increase of $65.6 million in CRDI revenues related to product mix in lots and
units available for sale in 2004 versus 2003, primarily at the Old Greenwood
timeshare project and Grays Crossing lot project in Tahoe, California, and the
Horizon Pass project in Bachelor Gulch, Colorado, which had sales in 2004 but none
for the year ended December 31, 2003 as the projects were not available for sale;
partially offset by the Old Greenwood lot project in Tahoe, California, the Cresta
project in Arrowhead, Colorado, the Creekside at Riverfront Park project in Denver,
Colorado, and the One Vendue project in Charleston, South Carolina, which had
reduced or no sales in 2004;§
    
    an increase of $13.4 million in DMDC revenues related to increased lots sales
(from 60 to 68) and increased average price per lot;§
    
    an increase of $8.2 million in other revenue at DMDC and CRDI. The increase at
DMDC is primarily due to a settlement for partial reimbursement of construction
remediation costs and an increase in membership transfer fees, and at CRDI is
primarily due to restaurant revenues in Denver, Colorado, beginning in the fourth
quarter of 2003; and§
    
    an increase of $4.8 million in club revenue at DMDC and CRDI. The increase at
DMDC is primarily due to increased membership levels and an increase in dues, and
at CRDI is primarily due to the addition of a golf course in Truckee, California,
and the full impact in 2004 of the sale of club memberships at the Tahoe Mountain
Resorts property, which began selling memberships in mid-2003; partially offset by§
    
    a decrease of $1.7 million in other revenue due to interest income recorded in
2003 for our note receivable with the Woodlands entities which was sold in December
2003.
 50




---



##### Table of Contents




    
    Resort/Hotel Property revenues increased $8.5 million, or 4.1%, to $214.5 million,
primarily due to:
 §
    
    an increase of $8.7 million at the Destination Fitness Resort
Properties related to a 10% increase in revenue per available room (from $475 to
$521) as a result of an 8% increase in average daily rate (from $661 to $713) and a
3 percentage point increase in occupancy (from 76% to 79%); and§
    
    an increase of $1.1 million at the Luxury Resort and Spa Properties primarily related to an
increase in food and beverage and spa revenue of $1.7 million, partially offset by
a 2% decrease in revenue per available room (from $174 to $171) as a result of a 2
percentage point decrease in occupancy (from 62% to 60%) related to the renovation
of 97 historic inn rooms at the Sonoma Mission Inn, which were out of service for
the first six months of 2004, and the renovation of 13 suites at the Ventana Inn,
which were out of service from January through September 2004; partially offset by§
    
    a decrease of $1.3 million at the Upscale Business Class Hotel Properties
related to a 5% decrease in revenue per available room (from $84 to $80) as a
result of a 3% decrease in average daily rate (from $119 to $116) and a 1
percentage point decrease in occupancy (from 70% to 69%).
 Property Expenses
  
    
    Office Property expenses increased $6.9 million, or 3.0%, to $238.2 million, primarily
due to:
 §
    
    an increase of $15.8 million from the acquisition of The Colonnade in August
2003, Hughes Center Properties in December 2003 through May 2004, the Dupont Centre
in March 2004, the Alhambra in August 2004, One Live Oak and Peakview Tower in
December 2004; and§
    
    an increase of $3.1 million related to the cost of providing third party
management services to joint venture properties, which are recouped by increased
third party fee income and direct expense reimbursements; partially offset by§
    
    a decrease of $10.3 million due to the joint venture of The Crescent, Trammell
Crow Center, Fountain Place, Houston Center and Post Oak Central in November 2004;
and§
    
    a decrease of $2.2 million from the 40 consolidated Office properties (excluding
2003 and 2004 acquisitions, dispositions and properties held for sale) that we
owned or had an interest in, primarily due to:
 °
    
    $3.1 million decrease in property taxes and insurance; and°
    
    $0.3 million decrease in utilities; partially offset by°
    
    $0.4 million increase in building repairs and maintenance; and°
    
    $0.9 million increase in administrative expenses.
 
    
    Resort Residential Development Property expenses increased $74.3 million, or 37.6%, to
$271.8 million, primarily due to:
 §
    
    an increase of $47.8 million in CRDI cost of sales related to product mix in
lots and units available for sale in 2004 versus 2003, primarily at the Old
Greenwood timeshare project and Grays Crossing lot project in Tahoe, California,
and the Horizon Pass project in Bachelor Gulch, Colorado, which had sales in 2004
but none for the year ended December 31, 2003 as the projects were not available
for sale; partially offset by the Old Greenwood lot project in Tahoe, California,
the Cresta project in Arrowhead, Colorado, the Creekside at Riverfront Park
project in Denver, Colorado, and the One Vendue project in Charleston, South
Carolina, which had reduced or no sales in 2004;§
    
    an increase of $10.6 million in marketing and other expenses at certain CRDI
projects and the Ritz Carlton condominium Dallas residence project;§
    
    an increase of $8.3 million in DMDC cost of sales due to increased lot sales
and higher priced lots sold in 2004 compared to 2003;§
    
    an increase of $6.3 million in club operating expenses due to increased
membership levels at CRDI and DMDC, a restaurant addition at CRDI and golf course
and clubhouse additions at DMDC and CRDI; and§
    
    an increase of $0.8 million in other expense categories.
 51




---



##### Table of Contents




    
    Resort/Hotel Property expenses increased $12.2 million, or 7.3%, to $179.8 million, primarily due to:
 §
    
    an increase of $8.7 million primarily resulting from a $4.6 million increase in
operating expenses at the  Destination Fitness Resort Properties related
to increased expenses associated with the medical service segment and the increase
in average occupancy of 3 percentage points (from 76% to 79%), and a $3.7 million
increase primarily in general and administrative, marketing and employee benefit
costs;§
    
    an increase of $2.3 million in operating expenses primarily related to food and
beverage and spa operating costs at Park Hyatt Beaver Creek resulting from
increased volume; and§
    
    an increase of $1.9 million in other expense categories, primarily related to
an increase in Sarbanes-Oxley compliance costs and management fees at the Destination Fitness Resort Properties as a result of higher revenues; partially
offset by§
    
    a decrease of $0.7 million in operating expense at the Upscale Business Class
Hotel Properties primarily related to the decrease in average occupancy of 1
percentage point (from 70% to 69%).
 Other Income/Expense
  Other Income
  
    
    Gain on joint venture of properties, net increased $265.7 million, due to the joint
venture of The Crescent, Fountain Place, Trammell Crow Center, Houston Center and Post Oak
Central Office Properties.
    
    Income from sales of investments in unconsolidated company, net decreased $86.2 million
due to the sale of our interest in the Woodlands entities in December 2003.
    
    Income from investment land sales, net increased $5.8 million due to the gain of $18.8
million on sales of five parcels of undeveloped investment land in 2004 as compared to the
gain of $13.1 million on sales of three parcels of undeveloped investment land in 2003.
    
    Interest and other income increased $10.2 million, or 130.8%, primarily due to:
 §
    
    $3.7 million received from COPI pursuant to the COPI bankruptcy plan for notes
receivable previously written off in 2001;§
    
    $2.8 million of interest on U.S. Treasury and government sponsored agency
securities purchased in December 2003 and January 2004 related to debt defeasance;§
    
    $1.6 million of interest and dividends received on other marketable securities;§
    
    $1.1 million increase in interest on certain notes resulting from note amendments
in December 2003; and§
    
    $0.4 million of interest on a mezzanine loan secured by an ownership interest in
an entity that owns an office property in Los Angeles, California.
 52




---



##### Table of Contents




    
    Equity in net income of unconsolidated companies decreased $15.8 million, or 62.2%, to $9.6
million, primarily due to:
 §
    
    a decrease of $13.8 million in Office Properties, Resort Residential Development
Properties and Other equity in net income primarily due to:
 °
    
    a decrease of $14.4 million in net income recorded in
2003 related to our interests in the Woodlands entities which were sold in
December 2003; partially offset by°
    
    an increase of $1.2 million in income recorded on Main
Street Partners, L.P.; and°
    
    an increase of $1.0 million in income recorded from the
joint venture of The Crescent, Fountain Place, Trammell Crow Center,
Houston Center and Post Oak Central Office Properties.
 §
    
    a decrease of $6.0 million in Resort/Hotel Properties equity in net income
primarily due to net income recorded in 2003 for our interest in the Ritz-Carlton
Hotel, which was sold in November 2003, and included a $1.1 million payment which
we received from the operator of the property pursuant to the terms of the
operating agreement because the property did not achieve a specified net operating
income level; partially offset by§
    
    an increase of $4.0 million in AmeriCold Realty Trust equity in net income
primarily due to the $12.3 million gain, net of transaction costs, on the sale of a
portion of our interests in AmeriCold to The Yucaipa Companies; partially offset by
 °
    
    a $3.6 million increase in interest expense primarily
attributable to the $254.0 million mortgage financing with Morgan Stanley
in February 2004;°
    
    a $1.9 million impairment recorded in connection with
the business combination of the tenant and landlord entities; and°
    
    a $1.5 million decrease associated with a decrease in
rental income.
 Other Expenses
  
    
    Extinguishment of debt increased $42.6 million, primarily due to:
 §
    
    $17.5 million related to the securities purchased in excess of the debt balance
to defease LaSalle Note I in connection with the joint venture of Office
Properties;§
    
    $17.5 million prepayment penalty associated with the payoff of the JP Morgan
Chase Mortgage Loan in connection with the joint venture of Office Properties;§
    
    $1.0 million mortgage prepayment fee associated with the payoff of the Lehman
Brothers Holdings, Inc. Loan in connection with the joint venture of Office
Properties;§
    
    $6.6 million write-off of deferred financing costs, of which $3.1 million
related to the joint venture or sale of real estate assets.
 
    
    Depreciation and amortization costs increased $15.8 million, or 10.7%, to $164.1 million primarily due to:
 §
    
    $10.4 million increase in Office Property depreciation expense attributable to:
 °
    
    $16.1 million increase from the acquisitions of The
Colonnade in August 2003, Hughes Center in December 2003 through May 2004,
Dupont Centre in March 2004, and The Alhambra in August 2004; partially
offset by°
    
    $3.3 million decrease due to accelerated depreciation
for lease terminations in 2003; and°
    
    $2.3 million decrease due to the joint venture of The
Crescent, Fountain Place, Trammell Crow Center, Houston Center and Post Oak
Central in November 2004;
 §
    
    $4.1 million increase in Resort Residential Development Property depreciation
and amortization costs; and§
    
    $1.7 million increase in Resort/Hotel Property depreciation and amortization
costs.
 
    
    Corporate general and administrative costs increased $6.2 million, or 19.0%, to $38.9
million due to Sarbanes-Oxley compliance related costs, increased legal and external audit
costs, as well as costs associated with salary merit increases and employee benefits.
 53




---



##### Table of Contents




    
    Interest expense increased $4.7 million, or 2.7%, to $176.8 million primarily due to:
 §
    
    $4.2 million related to the Fountain Place Office Property transaction;§
    
    $2.9 million related to an increase of $175.0 million in the weighted average
debt balance (from $2,498 million to $2,673 million) partially offset by a 0.3%
decrease in the hedged weighted average interest rate (from 7.1% to 6.8%);
partially offset by§
    
    $2.4 million decrease related to amortization of above average interest rate on
obligations assumed in the acquisition of Hughes Center.
 
    
    Amortization of deferred financing costs increased $2.0 million, or 18.0%, to $13.1
million due to debt restructuring and refinancing activities, primarily related to the new
Bank of America Fund XII Term Loan.
    
    Other expenses decreased $5.2 million, or 88.1%, to $0.7 million primarily due to:
 §
    
    $2.8 million decrease due to impairment and disposals of marketable securities in 2003; and§
    
    $2.6 million decrease due to reduction of the reserve for the COPI bankruptcy
pursuant to the settlement terms in 2004; partially offset by§
    
    $1.0 million increase due to the impairment of a marketable security in 2004.
 
    
    Impairment charges related to real estate assets decreased $4.5 million, or 52.3%, to $4.1 million due to:
 §
    
    a decrease of $6.5 million due to the impairment associated with the settlement
of a real estate note obligation in 2003 with an unconsolidated investment that
primarily held real estate investments and marketable securities;§
    
    a decrease of $1.2 million due to the impairment of the North Dallas Athletic
Club in 2003; partially offset by§
    
    an increase of $4.1 million due to the impairment related to the demolition of
the old clubhouse at the Sonoma Club in the third quarter 2004 in order to
construct a new clubhouse.
 Income Tax Expense/Benefit
  Discontinued Operations
  
    
    an increase of $13.9 million, net of minority interest, due to the impairment of the
1800 West Loop South Office Property in 2003;
    
    an increase of $4.1 million, net of minority interest, due to the $7.1 million
impairment of three properties in 2003 compared to the $3.0 million impairment of three
properties in 2004; and
    
    an increase of $4.1 million, net of minority interest, due to impairments recorded in
2003 on the behavioral healthcare properties; partially offset by
    
    a decrease of $9.2 million, net of minority interest, due to a $10.3 million aggregate
gain on the sale of two Office Properties in 2003 compared to a $1.1 million aggregate gain
on the sale of nine properties in 2004; and
    
    a decrease of $6.4 million, net of minority interest, due to the reduction of net income
associated with properties held for sale in 2004 compared to 2003.
 54




---



##### Table of Contents



Liquidity and Capital Resources
 Overview
  Short-Term Liquidity
   Long-Term Liquidity
  Cash Flows
   55




---



##### Table of Contents



For the year ended(in millions)
    
    December 31, 2005Cash provided by Operating Activities
    
    $
    139.6Cash used in Investing Activities
    
    
    (198.3
    )Cash provided by Financing Activities
    
    
    52.6Decrease in Cash and Cash Equivalents
    
    $
    (6.1
    )Cash and Cash Equivalents, Beginning of Period
    
    
    92.3Cash and Cash Equivalents, End of Period
    
    $
    86.2
 Operating Activities
  Investing Activities
  
    
    $192.2 million for the acquisition of investment properties, primarily due to
the acquisition of the Exchange Building and One Buckhead Plaza Office Properties;
    
    $116.8 million increase in notes receivables, primarily due to mezzanine loans,
partially offset by the early repayment of loans secured by a Resort Residential
Development management business;
    
    $115.7 million purchase of U.S. Treasury and government sponsored agency
securities in connection with the defeasance of LaSalle Note I;
    
    $84.0 million for development of properties, due to the
development of the JPI Multi-family Investments luxury apartments, Paseo del
Mar, Ritz-Carlton Residences and Hotel and 3883 Hughes Parkway;
    
    $65.5 million for non-revenue enhancing tenant improvement and leasing costs for
Office Properties;
    
    $32.9 million for development of amenities at the Resort Residential Development Properties;
    
    $24.8 million of property improvements for Office and Resort/Hotel Properties; and
    
    $17.1 million additional investment in unconsolidated Office Properties,
primarily related to our investment in the 2211 Michelson Office Development,
Redtail Capital Partners, L.P. and Fresh Choice, LLC; and
    
    $4.5 million increase in restricted cash.
  
    
    $236.7 million proceeds from property sales, primarily due the sale of Two
Renaissance Square, Chancellor Park, Barton Oaks Plaza One and Albuquerque Plaza
Office Properties and the sale of undeveloped land in Houston, Texas;
    
    $144.2 million proceeds from joint ventures, primarily due to the Canyon Ranch
transaction and the joint venture of Fulbright Tower and One Buckhead Plaza Office
Properties;
    
    $32.2 million proceeds from sale of investment in unconsolidated company related
to the sale of our interests in Crescent 5 Houston Center, L.P.;
    
    $23.3 million proceeds from defeasance investment maturities; and
    
    $18.8 million return of investment in unconsolidated other companies, primarily
due to the distribution received from our G2 investment in
February 2005.
 56




---



##### Table of Contents



Financing Activities
 Our cash provided by financing activities of $52.6 million is primarily
attributable to:
 
    
    $758.3 million proceeds from borrowings under our credit facility;
    
    $387.2 million proceeds from other borrowings, primarily due to the GACC Note
secured by Funding One assets, the Column Financial Note secured by Peakview Tower
and the JP Morgan Chase III Note secured by Datran Center;
    
    $257.4 million proceeds from borrowings for construction costs for
infrastructure developments at the Resort Residential Development Properties;
    
    $77.3 million proceeds from the issuance of junior subordinated notes;
    
    $22.0 million proceeds from the exercise of share and unit options; and
    
    $7.8 million proceeds from capital contributions from our joint venture partners.
  
    
    $666.8 million payments under our credit facility;
    
    $347.0 million payments under other borrowings, primarily due to the pay off of
the Bank of America Funding XII Term Loan, the pay off of the Fleet Term Loan, the
pay off of the Texas Capital Bank Loan and the pay off of the Metropolitan Life
Note V;
    
    $198.5 million Resort Residential Development Property note payments;
    
    $178.9 million distributions to common shareholders and unitholders;
    
    $32.0 million distributions to preferred shareholders;
    
    $18.5 million capital distributions to joint venture partners; and
    
    $15.7 million debt financing costs, primarily due to the new credit facility,
the GACC Note and the JP Morgan Chase III Note.
 57




---



##### Table of Contents



Liquidity Requirements
 Contractual Obligations
  Payments Due by Period(in millions)
    
    Total
    
    
    Less than 1 yr
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yrsLong-term debt(1)Principal payments
    
    $
    2,259.5
    
    
    $
    257.1
    
    
    $
    912.1
    
    
    $
    749.3
    
    
    $
    341.0Interest payments
    
    
    600.1
    
    
    
    148.8
    
    
    
    216.5
    
    
    
    78.6
    
    
    
    156.2Share of unconsolidated debt
    
    
    646.9
    
    
    
    78.7
    
    
    
    98.8
    
    
    
    103.2
    
    
    
    366.2Operating lease obligations (ground leases)
    
    
    148.9
    
    
    
    1.9
    
    
    
    3.8
    
    
    
    3.9
    
    
    
    139.3Purchase obligations:Office Properties(2)
    
    
    55.0
    
    
    
    55.0
    
    
    
    
    
    
    
    
    
    
    
    Significant capital expenditure obligations
(3)
    
    
    283.0
    
    
    
    220.5
    
    
    
    62.5
    
    
    
    
    
    
    
    Letters of credit
    
    
    13.8
    
    
    
    13.8
    
    
    
    
    
    
    
    
    
    
    
    Redtail Capital Partners, L.P.(4)
    
    
    22.7
    
    
    
    22.7
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations (5)
    
    $
    4,029.9
    
    
    $
    798.5
    
    
    $
    1,293.7
    
    
    $
    935.0
    
    
    $
    1,002.7
 
 (1)
    
    Amounts include scheduled principal and interest payments for consolidated
debt. We estimate variable rate debt interest payments using the interest rate as of
December 31, 2005.(2)
    
    In December 2005, we entered into a contract to purchase Financial Plaza, a
16-story, 309,983 square-foot Class A Office Property located in the Mesa/Superstition
submarket of Phoenix, Arizona. On January 23, 2006, we completed the purchase.(3)
    
    For further detail of significant capital expenditure obligations, see table
under Significant Capital Expenditures in this Item 7.(4)
    
    In May 2005, we entered into an agreement with Capstead Mortgage Corporation
pursuant to which we formed a joint venture to invest up to $100.0 million in equity. The
joint venture will invest in select mezzanine loans on commercial real estate over a
two-year period. Capstead is committed to 75% of the equity capital and we are committed
to 25%. Total contributions from Crescent were $2.3 million in 2005.(5)
    
    As part of our ongoing operations, we execute operating lease agreements which
generally provide tenants with leasehold improvement allowances. Committed leasehold
improvement allowances for leases executed over the past three years have averaged
approximately $80.4 million per year. Tenant leasehold improvement amounts are not
included in the above table.  Debt Financing Summary
  Share ofSecured
    
    
    Defeased
    
    
    Unsecured
    
    
    Consolidated
    
    
    Unconsolidated(in thousands)
    
    Debt
    
    
    Debt
    
    
    Debt
    
    
    Debt
    
    
    Debt
    
    
    Total2006
    
    $
    99,922
    
    
    $
    157,131
    
    
    $
    
    
    
    $
    257,053
    
    
    $
    78,712
    
    
    $
    335,7652007
    
    
    252,719
    
    
    
    100,279
    
    
    
    250,000
    
    
    
    602,998
    
    
    
    50,475
    
    
    
    653,4732008
    
    
    74,817
    
    
    
    289
    
    
    
    234,000
    (1)
    
    
    309,106
    
    
    
    48,323
    
    
    
    357,4292009
    
    
    271,544
    
    
    
    320
    
    
    
    375,000
    
    
    
    646,864
    
    
    
    80,302
    
    
    
    727,1662010
    
    
    96,125
    
    
    
    6,337
    
    
    
    
    
    
    
    102,462
    
    
    
    22,996
    
    
    
    125,458Thereafter
    
    
    263,669
    
    
    
    
    
    
    
    77,321
    
    
    
    340,990
    
    
    
    366,184
    
    
    
    707,174$
    1,058,796
    
    
    $
    264,356
    
    
    $
    936,321
    
    
    $
    2,259,473
    
    
    $
    646,992
    
    
    $
    2,906,465
 
 (1)
    
    Borrowings under the credit facility. 58




---



##### Table of Contents



Significant Capital Expenditures
  Capital ExpendituresAmountTotal
    
    
    Funded as of
    
    
    Amount
    
    
    Short-Term
    
    
    Long-TermProject
    
    
    December 31,
    
    
    Remaining
    
    
    (Next 12
    
    
    (12+(in millions)           Project
    
    Cost(1)
    
    
    2005
    
    
    To Fund
    
    
    Months)(2)
    
    
    Months)(2)Consolidated:Office Segment3883 Hughes Center (3)
    
    $
    73.9
    
    
    $
    10.7
    
    
    $
    63.2
    
    
    $
    57.4
    
    
    $
    5.8Paseo del Mar (4)
    
    
    65.3
    
    
    
    37.6
    
    
    
    27.7
    
    
    
    27.7
    
    
    
    Resort Residential Development SegmentTahoe Mountain Club(5)
    
    
    94.4
    
    
    
    72.0
    
    
    
    22.4
    
    
    
    22.4
    
    
    
    JPI Multi-family Investments Luxury Apartments(6)
    
    
    54.3
    
    
    
    37.8
    
    
    
    16.5
    
    
    
    16.5
    
    
    
    Resort/Hotel SegmentCanyon Ranch  Tucson Land Construction Loan(7)
    
    
    2.4
    
    
    
    1.5
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    OtherThe Ritz-Carlton  Phase I(8)
    
    
    202.7
    
    
    
    50.4
    
    
    
    152.3
    
    
    
    95.6
    
    
    
    56.7Total
    
    $
    493.0
    
    
    $
    210.0
    
    
    $
    283.0
    
    
    $
    220.5
    
    
    $
    62.5
 
 (1)
    
    All amounts are approximate.(2)
    
    Reflects our estimate of the breakdown between short-term and long-term capital
expenditures.(3)
    
    We have committed to a first phase office development of 239,000 square feet on land
that we own within the Hughes Center complex. We broke ground in the third quarter of 2005
and expect to complete the building in the first quarter of 2007. We closed a $52.3 million
construction loan in the third quarter of 2005.(4)
    
    On September 21, 2005, we entered into a joint venture agreement with JMI Realty.
The joint venture has committed to develop a 233,000 square-foot, three building office
complex in the Del Mar Heights submarket of San Diego, California. On September 21, 2005, we
secured a $53.1 million construction loan from Guaranty Bank for the construction of this
project. The loan is fully guaranteed by an affiliate of our partner. Amounts in the table
represent our portion (80%) of total project costs. The development, which is currently
underway, is scheduled for delivery in the third quarter of 2006.(5)
    
    As of December 31, 2005, we had invested $72.0 million in Tahoe Mountain Club, which
includes the acquisition of land and development of golf courses and club amenities. Table
includes the development planned for 2006 only. We anticipate collecting membership deposits
which will be utilized to fund a portion of the development costs and will fund the remaining
through construction loans.(6)
    
    In October 2004, we entered into an agreement with JPI Multi-family Investments,
L.P. to develop a multi-family apartment project in Dedham, Massachusetts. We have also
entered into a construction loan with a maximum borrowing of
$41.0 million, which our partner guarantees, to fund
construction.(7)
    
    We have a $2.4 million construction loan with the purchaser of the land, which is
secured by eight developed lots and a $0.4 million letter of credit.(8)
    
    We entered into agreements with Ritz-Carlton Hotel Company, L.L.C. to develop the
first Ritz-Carlton hotel and condominium project in Dallas, Texas. The development plans
include a Ritz-Carlton with approximately 217 hotel rooms and 70 residences. Construction on
the development began in the second quarter of 2005 and anticipated for delivery in the fourth
quarter of 2007. On July 26, 2005, we secured a $175.0 million construction line of credit
from Key Bank for the construction of this project. 59




---



##### Table of Contents



Off-Balance Sheet Arrangements  Guarantee Commitments
  Guaranteed
    
    
    MaximumAmount
    
    
    Guaranteed(in thousands)
    
    Outstanding at
    
    
    Amount atDebtor
    
    December 31, 2005
    
    
    December 31, 2005CRDI  Eagle Ranch Metropolitan District  Letter of Credit (1)
    
    $
    7,845
    
    
    $
    7,845Main Street Partners, L.P.  Letter of Credit (2) (3)
    
    
    4,250
    
    
    
    4,250Fresh Choice, LLC(4)
    
    
    1,000
    
    
    
    1,000Total Guarantees
    
    $
    13,095
    
    
    $
    13,095
 
 (1)
    
    We provide a $7.9 million letter of credit to support the payment of interest and
principal of the Eagle Ranch Metropolitan District Revenue Development Bonds.(2)
    
    See Note 10, Investments in Unconsolidated Companies, for a description of the
terms of this debt.(3)
    
    We and our joint venture partner each obtained separate letters of credit to
guarantee the repayment of up to $4.3 million each of the Main Street Partners, L.P. loan.(4)
    
    We provide a guarantee of up to $1.0 million to GE Capital Franchise Financing
Corporation as part of Fresh Choices bankruptcy reorganization. Other Commitments
    60




---



##### Table of Contents



Debt and Equity Financing
 Debt Financing
  Balance
    
    
    InterestOutstanding at
    
    
    Rate atSecured
    
    Maximum
    
    
    December 31,
    
    
    December
    
    
    MaturityDescription(1)
    
    Asset
    
    Borrowings
    
    
    2005
    
    
    31, 2005
    
    
    Date(dollars in thousands)Secured Fixed Rate Debt:AEGON Partnership Note
    
    Greenway Plaza
    
    $
    248,678
    
    
    $
    248,678
    
    
    
    7.53
    %
    
    July 2009Prudential Note
    
    707
17th
Street/Denver Marriott
    
    
    70,000
    
    
    
    70,000
    
    
    
    5.22
    
    
    June 2010JP Morgan Chase III
    
    Datran Center
    
    
    65,000
    
    
    
    65,000
    
    
    
    4.88
    
    
    October 2015Morgan Stanley I
    
    Alhambra
    
    
    50,000
    
    
    
    50,000
    
    
    
    5.06
    
    
    October 2011Bank of America Note
    
    Colonnade
    
    
    37,922
    
    
    
    37,922
    
    
    
    5.53
    
    
    May 2013Metropolitan Life Note VII
    
    Dupont Center
    
    
    35,500
    
    
    
    35,500
    
    
    
    4.31
    
    
    May 2011Mass Mutual Note (2)
    
    3800 Hughes
    
    
    34,177
    
    
    
    34,177
    
    
    
    7.75
    
    
    August 2006Column Financial
    
    Peakview Tower
    
    
    33,000
    
    
    
    33,000
    
    
    
    5.59
    
    
    April 2015Northwestern Life Note
    
    301 Congress
    
    
    26,000
    
    
    
    26,000
    
    
    
    4.94
    
    
    November 2008Allstate Note (2)
    
    3993 Hughes
    
    
    24,781
    
    
    
    24,781
    
    
    
    6.65
    
    
    September 2010JP Morgan Chase II
    
    3773 Hughes
    
    
    24,755
    
    
    
    24,755
    
    
    
    4.98
    
    
    September 2011Metropolitan Life Note VI (2)
    
    3960 Hughes
    
    
    23,011
    
    
    
    23,011
    
    
    
    7.71
    
    
    October 2009Construction, Acquisition and other obligations
    
    Various Office and Resort Residential Assets
     
    
    36,526
    
    
    
    36,526
    
    
    2.9 to 13.75
    
    
    July 2007 to Sept. 2011Secured Fixed Rate Defeased Debt(3):LaSalle Note II
    
    Funding II Defeasance
    
    
    155,188
    
    
    
    155,188
    
    
    
    7.79
    
    
    March 2006LaSalle Note I
    
    Funding I Defeasance
    
    
    101,723
    
    
    
    101,723
    
    
    
    7.83
    
    
    August 2007Nomura Funding VI Note
    
    Funding VI Defeasance
    
    
    7,445
    
    
    
    7,445
    
    
    
    10.07
    
    
    July 2010Subtotal/Weighted Average
    
    
    
    $
    973,706
    
    
    $
    973,706
    
    
    
    6.71
    %Unsecured Fixed Rate Debt:The 2009 Notes(4)
    
    
    
    $
    375,000
    
    
    $
    375,000
    
    
    
    9.25
    %
    
    April 2009The 2007 Notes (4)
    
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    7.50
    
    
    September 2007Subtotal/Weighted Average
    
    
    
    $
    625,000
    
    
    $
    625,000
    
    
    
    8.55
    %Secured Variable Rate Debt:GACC Note(5)
    
    Funding One Assets
    
    $
    165,000
    
    
    $
    165,000
    
    
    
    5.84
    %
    
    June 2007Key Bank Construction Loan(5)
    
    Ritz Construction Project
    
    
    175,000
    
    
    
    15,162
    
    
    
    6.62
    
    
    July 2008JPMorgan Chase
    
    Northstar Big Horn Construction
Project
    
    
    121,000
    
    
    
    17,164
    
    
    
    6.75
    
    
    October 2007First Bank of Vail
    
    Village Walk Construction Project
    
    
    63,000
    
    
    
    
    
    
    
    6.25
    
    
    February 2008Guaranty
Bank (6)
(7)
    
    Paseo Del Mar Construction Project
    
    
    53,100
    
    
    
    14,606
    
    
    
    6.00
    
    
    September 2008Societe Generale(6)
    
    3883 Hughes Construction Project
    
    
    52,250
    
    
    
    314
    
    
    
    6.17
    
    
    September 2008Bank One
    
    Northstar Ironhorse
Construction Project
    
    
    51,485
    
    
    
    42,671
    
    
    
    7.75
    
    
    October 2006Bank of America (6)(7)
    
    Jefferson Station
Apartments Project
    
    
    41,009
    
    
    
    24,526
    
    
    
    6.33
    
    
    November 2007Construction, Acquisition and other obligations
    
    Various Office and Resort Residential Assets
    
 

    131,697
 
 
    

    70,003
    
    
    5.57 to 8.81
       
    
    Jan. 2006 to Dec. 2012Subtotal/Weighted Average
    
    
    
    $
    853,541
    
    
    $
    349,446
    
    
    
    6.43
    %Unsecured Variable Rate Debt:Credit Facility (8)
    
    
    
    $
    371,455
    
    
    $
    234,000
    
    
    
    5.92
    %
    
    February 2008Junior Subordinated Notes (9)
    
    
    
    
    51,547
    
    
    
    51,547
    
    
    
    6.24
    
    
    June 2035Junior Subordinated Notes (9)
    
    
    
    
    25,774
    
    
    
    25,774
    
    
    
    6.24
    
    
    July 2035Subtotal/Weighted Average
    
    
    
    $
    448,776
    
    
    $
    311,321
    
    
    
    6.00
    %Total/Weighted Average
    
    
    
    $
    2,901,023
    
    
    $
    2,259,473
    
    
    
    7.08
    %(10)Average remaining term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.9 years
 
 (1)
    
    For more information regarding the terms of our debt financing arrangements and
the method of calculation of the interest rate for our variable rate debt, see Note 12, Notes
Payable and Borrowings under the Credit Facility, included in Item 8, Financial Statements
and Supplementary Data.(2)
    
    Includes a portion of total premiums of $4.0 million reflecting market value of debt
acquired with the purchase of Hughes Center portfolio.(3)
    
    We purchased U.S. Treasuries and government sponsored agency securities, or
defeasance investments, to substitute as collateral for these loans. The cash flow from
defeasance investments (principal and interest) matches the total debt service payment of the
loans.(4)
    
    To incur any additional debt, the indenture requires us to meet thresholds for a
number of customary financial and other covenants, including maximum leverage ratios, minimum
debt service coverage ratios, maximum secured debt as a percentage of total undepreciated
assets, and ongoing maintenance of unencumbered assets. Additionally, as long as the 2009
Notes are not rated investment grade, there are restrictions on our ability to make certain
payments including distributions to shareholders, and investments.(5)
    
    This loan has three one-year extension options.(6)
    
    This loan has two one-year extension options.(7)
    
    Our partner provides a full guarantee of this loan.(8)
    
    The Credit Facility has a maximum potential capacity of $400.0 million. The $234.0
million outstanding at December 31, 2005, excludes letters of credit issued under the facility
of $13.8 million. We are also subject to financial covenants, which include minimum debt
service ratios, maximum leverage ratios and, in the case of the Operating Partnership, a
minimum tangible net worth limitation and a fixed charge coverage ratio.(9)
    
    These notes are callable at our option at par beginning in June and July 2010.(10)
    
    The overall weighted average interest rate does not include the effect of our cash
flow hedge agreements. Including the effect of these agreements, the overall weighted average
interest rate would have been 6.93%. 61




---



##### Table of Contents



Debt Financing
  Defeasance of LaSalle Note I
  Junior Subordinated Notes
   62




---



##### Table of Contents



Unconsolidated Debt Arrangements
  Derivative Instruments and Hedging Activities
   Additional
    
    
    Change inNotional
    
    
    Maturity
    
    
    Reference
    
    
    Fair Market
    
    
    (Reduction) Interest
    
    
    Unrealized GainsEffective Date
    
    Amount
    
    
    Date
    
    
    Rate
    
    
    Value
    
    
    Expense
    
    
    (Losses) in OCI(in thousands)Interest rate swaps2/15/03
    
    $
    100,000
    
    
    
    2/15/06
    
    
    
    3.26
    %
    
    $
    139
    
    
    $
    (37
    )
    
    $
    3702/15/03
    
    
    100,000
    
    
    
    2/15/06
    
    
    
    3.25
    %
    
    
    139
    
    
    
    (38
    )
    
    
    3689/02/03
    
    
    200,000
    
    
    
    9/01/06
    
    
    
    3.72
    %
    
    
    1,263
    
    
    
    807
    
    
    
    2,7841/17/05
    
    
    17,700
    
    
    
    10/16/06
    
    
    
    3.74
    %
    
    
    213
    
    
    
    
    
    
    
    205$
    1,754
    
    
    $
    732
    
    
    $
    3,727Interest rate caps1/07/05
    
    $
    7,800
    
    
    
    2/01/08
    
    
    
    6.00
    %
    
    
    6
    
    
    
    
    
    
    
    (15
    )$
    1,760
    
    
    $
    732
    
    
    $
    3,712
  Share Repurchase Program
  Shelf Registration Statement
  63




---



##### Table of Contents



Unconsolidated Investments
  Our Ownershipas of DecemberEntity
    
    Classification
    
    31, 2005Main Street Partners, L.P.
    
    Office (Bank One Center  Dallas)
    
    50.0 %(1)Crescent Irvine, LLC
    
    Office (2211 Michelson Development  Irvine)
    
    40.0 %(2)Crescent Miami Center, LLC
    
    Office (Miami Center  Miami)
    
    40.0%(3) (4)Crescent One Buckhead Plaza, L.P.
    
    Office (One Buckhead Plaza  Atlanta)
    
    35.0%(5) (4)Crescent POC Investors, L.P.
    
    Office (Post Oak Central  Houston)
    
    23.9%(6) (4)Crescent HC Investors, L.P.
    
    Office (Houston Center  Houston)
    
    23.9%(6) (4)Crescent TC Investors, L.P.
    
    Office (The Crescent  Dallas)
    
    23.9%(6) (4)Crescent Ross Avenue Mortgage Investors, L.P.
    
    Office (Trammell Crow Center, Mortgage  Dallas)
    
    23.9%(7) (4)Crescent Ross Avenue Realty Investors, L.P.
    
    Office (Trammell Crow Center, Ground Lessor  Dallas)
    
    23.9%(7) (4)Crescent Fountain Place, L.P.
    
    Office (Fountain Place  Dallas)
    
    23.9%(7) (4)Crescent Five Post Oak Park L.P.
    
    Office (Five Post Oak  Houston)
    
    30.0%(8) (4)Crescent One BriarLake Plaza, L.P.
    
    Office (BriarLake Plaza  Houston)
    
    30.0%(9) (4)Crescent 1301 McKinney, L.P.
    
    Office (Fulbright Tower  Houston)
    
    23.9%(10)(4)Austin PT BK One Tower Office Limited Partnership
    
    Office (Bank One Tower  Austin)
    
    20.0%(11) (4)Houston PT Three Westlake Office Limited Partnership
    
    Office (Three Westlake Park  Houston)
    
    20.0%(11) (4)Houston PT Four Westlake Office Limited Partnership
    
    Office (Four Westlake Park  Houston)
    
    20.0%(11) (4)AmeriCold Realty Trust
    
    Temperature-Controlled Logistics
    
    31.7 %(12)CR Operating, LLC
    
    Resort/Hotel
    
    48.0 %(13)CR Spa, LLC
    
    Resort/Hotel
    
    48.0 %(13)Blue River Land Company, L.L.C.
    
    Other
    
    50.0 %(14)EW Deer Valley, L.L.C.
    
    Other
    
    41.7 %(15)SunTx Fulcrum Fund, L.P. (SunTx)
    
    Other
    
    28.7 %(16)Redtail Capital Partners, L.P. (Redtail)
    
    Other
    
    25.0%(17) (4)Fresh Choice, LLC
    
    Other
    
    40.0 %(18)G2 Opportunity Fund, L.P. (G2)
    
    Other
    
    12.5 %(19)
 
 (1)
    
    The remaining 50% interest is owned by Trizec Properties, Inc.(2)
    
    The remaining 60% interest is owned by an affiliate of Hines. Crescent Irvine, LLC
acquired a parcel of land to develop a 260,000 square foot Class A Office Property.(3)
    
    The remaining 60% interest is owned by an affiliate of a fund managed by JPM.(4)
    
    We have negotiated performance based incentives, which we refer to as promoted
interests, that allow for additional equity to be earned if return targets are exceeded.(5)
    
    The remaining 65% interest is owned by Metzler US Real Estate Fund, L.P.(6)
    
    Each limited partnership is owned by Crescent Big Tex I, L.P., which is owned 60% by
a fund advised by JPM and 16.1% by affiliates of GE.(7)
    
    Each limited partnership is owned by Crescent Big Tex II, L.P., which is owned 76.1%
by a fund advised by JPM.(8)
    
    The remaining 70% interest is owned by an affiliate of GE.(9)
    
    The remaining 70% interest is owned by affiliates of JPM.(10)
    
    The partnership is owned by Crescent Big Tex III L.P., which is owned 60% by a fund
advised by JPM and 16.1% by affiliates of GE.(11)
    
    The remaining 80% interest is owned by an affiliate of GE.(12)
    
    Of the remaining 68.3% interest, 47.6% is owned by Vornado Realty, L.P. and 20.7%
is owned by The Yucaipa Companies.(13)
    
    The remaining 52% interest is owned by the founders of Canyon Ranch. CR Spa,
L.L.C. operates three resort spas which offer guest programs and services and sells Canyon
Ranch branded skin care products exclusively at the destination health resorts and the resort
spas. CR Operating, LLC operates and manages the two Canyon Ranch destination health resorts,
Tucson and Lenox, and collaborates with select real estate developers in developing
residential lifestyle communities.(14)
    
    The remaining 50% interest is owned by parties unrelated to us. Blue River Land
Company, L.L.C. was formed to acquire, develop and sell certain real estate property in Summit
County, Colorado.(15)
    
    The remaining 58.3% interest is owned by parties unrelated to us. EW Deer Valley,
L.L.C. was formed to acquire, hold and dispose of its 3.3% ownership interest in Empire
Mountain Village, L.L.C. Empire Mountain Village, L.L.C. was formed to acquire, develop and
sell certain real estate property at Deer Valley Ski Resort next to Park City, Utah.(16)
    
    Of the remaining 71.3%, approximately 39.6% is owned by SunTx Capital Partners,
L.P. and the remaining 31.7% is owned by a group of individuals unrelated to us. Of our
limited partnership interest in SunTx, 6.5% is through an unconsolidated investment in SunTx
Capital Partners, L.P.; the general partner of SunTx. SunTx Fulcrum Fund, L.P.s objective is
to invest in a portfolio of entities that offer the potential for substantial capital
appreciation.(17)
    
    The remaining 75% interest is owned by Capstead Mortgage Corporation. Redtail was
formed to invest up to $100 million in equity in select mezzanine loans on commercial real
estate over a two-year period.(18)
    
    The remaining 60% interest is owned by Cedarlane Natural Foods, Inc. Fresh Choice
is a restaurant owner, operator and developer.(19)
    
    G2 was formed for the purpose of investing in commercial mortgage backed securities
and other commercial real estate investments. The remaining 87.5% interest is owned by
Goff-Moore Strategic Partners, L.P., or GMSPLP, and by parties unrelated to us. G2 is managed
and controlled by an entity that is owned equally by GMSPLP and GMAC Commercial Mortgage
Corporation, or GMACCM. The ownership structure of GMSPLP consists of an approximately 86%
limited partnership interest owned directly and indirectly by Richard E. Rainwater, Chairman
of our Board of Trust Managers, and an approximately 14% general partnership interest, of
which approximately 6% is owned by Darla Moore, who is married to Mr. Rainwater, and
approximately 6% is owned by John C. Goff, Vice-Chairman of our Board of Trust Managers and
our Chief Executive Officer. The remaining approximately 2% general partnership interest is
owned by unrelated parties. Our investment balance at December 31, 2005 was approximately
$0.9 million. In 2005 we received cash distributions of approximately $19.4 million, bringing
total distributions to approximately $41.8 million on an initial investment of $24.2 million. 64




---



##### Table of Contents



Significant Accounting Policies
 Critical Accounting Policies
   
    
    Impairments,
    
    Acquisition of operating properties,
    
    Relative sales method and percentage of completion (Resort Residential Development entities),
    
    Gain recognition on sale of real estate assets,
    
    Consolidation of variable interest entities, and
    
    Allowance for doubtful accounts.
 Impairments.
  Acquisition of operating properties.
  65




---



##### Table of Contents



Relative sales method and percentage of completion.
 66




---



##### Table of Contents



Gain recognition on sale of real estate assets. Accounting
for Sales of Real Estate,
 Consolidation of Variable Interest Entities.
   Allowance for doubtful accounts/credit losses.
  67




---



##### Table of Contents



Adoption of New Accounting Standards
 SFAS No. 123R. Share-Based
Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 SFAS No. 154. Accounting Changes and Error
Corrections. Accounting Changes, Reporting Accounting Changes in Interim Financial Statements.
 EITF 04-5. Determining Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights Consolidation of Variable
Interest Entities Investors Accounting for an Investee When the Investor has a
Majority of the Voting Interest but the Minority Shareholder or Shareholders have Certain Approval
or Veto Rights Accounting for Investments in Real Estate Ventures,
 EITF 05-6. Determining the Amortization Period for Leasehold Improvements
 68




---



##### Table of Contents



Funds from Operations
  
    
    Net Income (Loss)  determined in accordance with GAAP;
    
    excluding gains (or losses) from sales of depreciable operating property;
    
    excluding extraordinary items (as defined by GAAP);
    
    plus depreciation and amortization of real estate assets; and
    
    after adjustments for unconsolidated partnerships and joint ventures.
    69




---



##### Table of Contents



Consolidated Statements of Funds from Operations
 For the years ended December 31,(in thousands)
    
    2005
    
    
    2004Net income
    
    $
    95,307
    
    
    $
    172,936Adjustments to reconcile net income to
funds from operations available to common shareholders  diluted:Depreciation and amortization of real estate assets
    
    
    131,391
    
    
    
    156,766Gain on
property sales, net
    
    
    (102,803

)
    
    
    (267,053
    )Adjustment for investments in unconsolidated companies:Office Properties
    
    
    18,872
    
    
    
    11,601Resort Residential Development Properties
    
    
    (5,467
    )
    
    
    (228
    )Resort/Hotel Properties
    
    
    3,881
    
    
    
    Temperature-Controlled Logistics Properties
    
    
    18,210
    
    
    
    22,549Unitholder minority interest
    
    
    16,964
    
    
    
    30,950Series A Preferred Share distributions
    
    
    (23,963
    )
    
    
    (23,723
    )Series B Preferred Share distributions
    
    
    (8,075
    )
    
    
    (8,075
    )Funds from
operations available to common shareholders 
diluted(1)(2)
    
    $
    144,317
    (3)
    
    $
    95,723Investment Segments:Office Properties
    
    $
    236,663


    
    $
    265,977Resort Residential Development Properties
    
    
    43,868
    
    
    
    28,719Resort/Hotel Properties
    
    
    34,440
    
    
    
    44,978Temperature-Controlled Logistics Properties
    
    
    18,444
    
    
    
    28,702Other:Corporate general and administrative
    
    
    (50,363
    )
    
    
    (38,889
    )Interest expense
    
    
    (136,664
    )
    
    
    (176,771
    )Series A Preferred Share distributions
    
    
    (23,963
    )
    
    
    (23,723
    )Series B Preferred Share distributions
    
    
    (8,075
    )
    
    
    (8,075
    )Other(4)
    
    
    29,967
    
    
    
    (25,195
    )Funds from
operations available to common shareholders 
diluted(1)(2)
    
    $
    144,317
    (3)
    
    $
    95,723Basic weighted average shares outstanding
    
    
    100,179
    
    
    
    99,025Diluted
weighted average shares and units outstanding (5)
    
    
    118,836
    
    
    
    116,966
 
 (1)
    
    To calculate basic funds from operations available to common shareholders,
deduct unitholder minority interest.(2)
    
    Impairment charges and debt extinguishment charges related to the sale of real
estate assets were $1.8 million and
$47.5 million for the years ended December 31, 2005 and 2004, respectively. Funds from
operations available to common shareholders  diluted, as adjusted to exclude impairment
charges and debt extinguishment charges related to the sale of real
estate assets was
$146.1 million and $143.2 million for the years ended December 31, 2005 and 2004. We
provide this additional information because management utilizes it, in addition to FFO
available to common shareholders  diluted, in making operating decisions and assessing
performance, and because we believe that it also is useful to investors in assessing our
operating performance.(3)
    
    Amount includes $26.9 million gain on sale of developed
property inclusive of $13.6 million attributable to a promoted
interest.(4)
    
    Includes income from investment land sales, net, interest and other income,
extinguishment of debt, income/loss from other unconsolidated companies, other expenses,
depreciation and amortization of non-real estate assets, and amortization of deferred
financing costs.(5)
    
    See calculations for the amounts presented in the reconciliation following this
table. 70




---



##### Table of Contents



For the yearsended December 31,(shares/units in thousands)
    
    2005
    
    
    2004Basic weighted average shares:
    
    
    100,179
    
    
    
    99,025Add: Weighted average units
    
    
    17,833
    
    
    
    17,722Restricted shares and share and unit options
    
    
    824
    
    
    
    219Diluted weighted average shares and units
    
    
    118,836
    
    
    
    116,966
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
   Interest Rate Risk
 Debt
  Mezzanine Investments
  Cash Flow Hedges
  71




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    73Consolidated Balance Sheets at December 31, 2005 and 2004
    
    
    74Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003
    
    
    75Consolidated Statements of Shareholders Equity for the years ended December 31, 2005, 2004,
and 2003
    
    
    76Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
    
    
    77Notes to Consolidated Financial Statements
    
    
    78Schedule III Consolidated Real Estate Investments and Accumulated Depreciation
    
    
    137Schedule IV Mortgage Loans on Real Estate Investments
    
    
    138
 72




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     ERNST & YOUNG LLPDallas, Texas
March 9, 2006
 73




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
 
 CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,2005
    
    
    2004ASSETS:Investments in real estate:Land
    
    $
    186,878
    
    
    $
    206,164Land improvements, net of accumulated depreciation of $29,784 and $23,592
at December 31, 2005 and 2004, respectively
    
    
    70,494
    
    
    
    69,086Buildings and improvements, net of accumulated depreciation of $464,049 and
$411,634 at December 31, 2005 and 2004, respectively
    
    
    1,781,015
    
    
    
    1,811,305Furniture, fixtures and equipment, net of accumulated depreciation of $34,129 and
$48,304 at December 31, 2005 and 2004, respectively
    
    
    37,236
    
    
    
    49,561Land held for investment or development
    
    
    574,527
    
    
    
    501,379Properties held for disposition, net
    
    
    4,137
    
    
    
    117,399Net investment in real estate
    
    $
    2,654,287
    
    
    $
    2,754,894Cash and cash equivalents
    
    $
    86,228
    
    
    $
    92,291Restricted cash and cash equivalents
    
    
    84,699
    
    
    
    93,739Defeasance investments
    
    
    274,134
    
    
    
    175,853Accounts receivable, net
    
    
    56,356
    
    
    
    60,004Deferred rent receivable
    
    
    70,201
    
    
    
    56,295Investments in unconsolidated companies
    
    
    393,535
    
    
    
    362,643Notes receivable, net
    
    
    219,016
    
    
    
    102,173Income tax asset  current and deferred, net
    
    
    8,291
    
    
    
    13,839Other assets, net
    
    
    295,115
    
    
    
    326,033Total assets
    
    $
    4,141,862
    
    
    $
    4,037,764LIABILITIES:Borrowings under Credit Facility
    
    $
    234,000
    
    
    $
    142,500Notes payable
    
    
    1,948,152
    
    
    
    2,009,755Junior subordinated notes
    
    
    77,321
    
    
    
    Accounts payable, accrued expenses and other liabilities
    
    
    471,920
    
    
    
    422,348Deferred tax liability
    
    
    1,093
    
    
    
    Total liabilities
    
    $
    2,732,486
    
    
    $
    2,574,603COMMITMENTS AND CONTINGENCIESMINORITY INTERESTS:Operating partnership, 11,416,173 and 10,535,139 units, at December 31, 2005
and 2004, respectively
    
    $
    113,819
    
    
    $
    113,572Consolidated real estate partnerships
    
    
    53,562
    
    
    
    49,339Total minority interests
    
    $
    167,381
    
    
    $
    162,911SHAREHOLDERS EQUITY:Preferred shares, $0.01 par value, authorized 100,000,000 shares:Series A Convertible Cumulative Preferred Shares,
liquidation preference of $25.00 per share, 14,200,000 shares issued and
outstanding at December 31, 2005 and 2004 respectively
    
    $
    319,166
    
    
    $
    319,166Series B Cumulative Preferred Shares,
liquidation preference of $25.00 per share, 3,400,000 shares issued and
outstanding at December 31, 2005 and 2004
    
    
    81,923
    
    
    
    81,923Common shares, $0.01 par value, authorized 250,000,000 shares, 126,562,980 and
124,542,018 shares issued and outstanding at December 31, 2005 and 2004,
respectively
    
    
    1,266
    
    
    
    1,245Additional paid-in capital
    
    
    2,271,888
    
    
    
    2,246,335Deferred compensation on restricted shares
    
    
    (1,182
    )
    
    
    (2,233
    )Accumulated deficit
    
    
    (972,319
    )
    
    
    (885,016
    )Accumulated other comprehensive income (loss)
    
    
    1,385
    
    
    
    (1,022
    )$
    1,702,127
    
    
    $
    1,760,398Less  shares held in treasury, at cost, 25,120,917 and 25,121,861 common shares
at December 31, 2005 and 2004, respectively
    
    
    (460,132
    )
    
    
    (460,148
    )Total shareholders equity
    
    $
    1,241,995
    
    
    $
    1,300,250Total liabilities and shareholders equity
    
    $
    4,141,862
    
    
    $
    4,037,764
  74




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
 For the Years Ended December 31,2005
    
    
    2004
    
    
    2003REVENUE:Office Property
    
    $
    377,337
    
    
    $
    481,710
    
    
    $
    472,003Resort Residential Development Property
    
    
    503,568
    
    
    
    311,197
    
    
    
    221,713Resort/Hotel Property
    
    
    142,618
    
    
    
    214,531
    
    
    
    206,074Total Property Revenue
    
    $
    1,023,523
    
    
    $
    1,007,438
    
    
    $
    899,790EXPENSE:Office Property real estate taxes
    
    $
    39,195
    
    
    $
    58,776
    
    
    $
    62,448Office Property operating expenses
    
    
    160,077
    
    
    
    179,413
    
    
    
    168,806Resort Residential Development Property expense
    
    
    432,620
    
    
    
    271,819
    
    
    
    197,491Resort/Hotel Property expense
    
    
    111,277
    
    
    
    179,825
    
    
    
    167,666Total Property Expense
    
    $
    743,169
    
    
    $
    689,833
    
    
    $
    596,411Income from Property Operations
    
    $
    280,354
    
    
    $
    317,605
    
    
    $
    303,379OTHER INCOME (EXPENSE):Income from sale of investment in unconsolidated company, net
    
    $
    29,934
    
    
    $
    
    
    
    $
    86,186Income from investment land sales
    
    
    8,622
    
    
    
    18,879
    
    
    
    13,038(Loss) gain on joint venture of properties, net
    
    
    (2,743
    )
    
    
    265,772
    
    
    
    100Gain on property sales
    
    
    141
    
    
    
    
    
    
    
    Interest and other income
    
    
    29,109
    
    
    
    18,005
    
    
    
    7,766Corporate general and administrative
    
    
    (50,363
    )
    
    
    (38,889
    )
    
    
    (32,661
    )Interest expense
    
    
    (136,664
    )
    
    
    (176,771
    )
    
    
    (172,116
    )Amortization of deferred financing costs
    
    
    (8,108
    )
    
    
    (13,056
    )
    
    
    (11,053
    )Extinguishment of debt
    
    
    (2,161
    )
    
    
    (42,608
    )
    
    
    Depreciation and amortization
    
    
    (146,173
    )
    
    
    (164,056
    )
    
    
    (148,242
    )Impairment charges related to real estate assets
    
    
    (1,047
    )
    
    
    (4,094
    )
    
    
    (8,624
    )Other expenses
    
    
    (3,964
    )
    
    
    (725
    )
    
    
    (5,946
    )Equity in net income (loss) of unconsolidated companies:Office Properties
    
    
    11,464
    
    
    
    6,262
    
    
    
    11,190Resort Residential Development Properties
    
    
    (491
    )
    
    
    (2,266
    )
    
    
    10,427Resort/Hotel Development Properties
    
    
    (1,541
    )
    
    
    (245
    )
    
    
    5,760Temperature-Controlled Logistics Properties
    
    
    234
    
    
    
    6,153
    
    
    
    2,172Other
    
    
    17,885
    
    
    
    (280
    )
    
    
    (4,053
    )Total other income (expense)
    
    $
    (255,866
    )
    
    $
    (127,919
    )
    
    $
    (246,056
    )INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES
    
    $
    24,488
    
    
    $
    189,686
    
    
    $
    57,323Minority interests
    
    
    (15,239
    )
    
    
    (37,294
    )
    
    
    (5,757
    )Income tax (expense) benefit
    
    
    (7,378
    )
    
    
    13,078
    
    
    
    (26,915
    )INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE
    
    $
    1,871
    
    
    $
    165,470
    
    
    $
    24,651Income from discontinued operations, net of minority interests
    
    
    4,266
    
    
    
    9,755
    
    
    
    16,136Impairment charges related to real estate assets from discontinued operations,
net of minority interests
    
    
    (64
    )
    
    
    (2,978
    )
    
    
    (25,052
    )Gain on real estate from discontinued operations, net of minority interests
    
    
    89,234
    
    
    
    1,052
    
    
    
    10,287Cumulative effect of a change in accounting principle, net of minority interests
    
    
    
    
    
    
    (363
    )
    
    
    NET INCOME
    
    $
    95,307
    
    
    $
    172,936
    
    
    $
    26,022Series A Preferred Share distributions
    
    
    (23,963
    )
    
    
    (23,723
    )
    
    
    (18,225
    )Series B Preferred Share distributions
    
    
    (8,075
    )
    
    
    (8,075
    )
    
    
    (8,075
    )NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
    
    $
    63,269
    
    
    $
    141,138
    
    
    $
    (278
    )BASIC EARNINGS PER SHARE DATA:(Loss) income available to common shareholders before discontinued operations
and cumulative effect of a change in accounting principle
    
    $
    (0.30
    )
    
    $
    1.35
    
    
    $
    (0.01
    )Income from discontinued operations, net of minority interests
    
    
    0.04
    
    
    
    0.10
    
    
    
    0.16Impairment charges related to real estate assets from discontinued operations,
net of minority interests
    
    
    
    
    
    
    (0.03
    )
    
    
    (0.25
    )Gain on real estate from discontinued operations, net of minority interests
    
    
    0.89
    
    
    
    0.01
    
    
    
    0.10Cumulative effect of a change in accounting principle, net of minority interests
    
    
    
    
    
    
    
    
    
    
    Net income
(loss) available to common shareholders  basic
    
    $
    0.63
    
    
    $
    1.43
    
    
    $
    DILUTED EARNINGS PER SHARE DATA:(Loss) income available to common shareholders before discontinued operations
and cumulative effect of a change in accounting principle
    
    $
    (0.30
    )
    
    $
    1.34
    
    
    $
    (0.01
    )Income from discontinued operations, net of minority interests
    
    
    0.04
    
    
    
    0.10
    
    
    
    0.16Impairment charges related to real estate assets from discontinued operations,
net of minority interests
    
    
    
    
    
    
    (0.03
    )
    
    
    (0.25
    )Gain on real estate from discontinued operations, net of minority interests
    
    
    0.89
    
    
    
    0.01
    
    
    
    0.10Cumulative effect of a change in accounting principle, net of minority interests
    
    
    
    
    
    
    
    
    
    
    Net income
(loss) available to common shareholders  diluted
    
    $
    0.63
    
    
    $
    1.42
    
    
    $
    
  75




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(dollars in thousands, except share data)
 Deferred
    
    
    
    
    
    
    AccumulatedSeries A
    
    
    Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Compensation
    
    
    
    
    
    
    OtherPreferred Shares
    
    
    Preferred Shares
    
    
    Treasury Shares
    
    
    Common Shares
    
    
    Paid-in
    
    
    on Restricted
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Net Value
    
    
    Shares
    
    
    Net Value
    
    
    Shares
    
    
    Net Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Shares
    
    
    (Deficit)
    
    
    (Loss) Income
    
    
    TotalSHAREHOLDERS EQUITY, December 31, 2002
    
    
    10,800,000
    
    
    $
    248,160
    
    
    
    3,400,000
    
    
    $
    81,923
    
    
    
    25,068,759
    
    
    $
    (459,360
    )
    
    
    124,280,867
    
    
    $
    1,236
    
    
    $
    2,243,419
    
    
    $
    (5,253
    )
    
    $
    (728,060
    )
    
    $
    (27,252
    )
    
    $
    1,354,813Issuance of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,911
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157Exercise of Common Share Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,400
    
    
    
    1
    
    
    
    1,436
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,437Accretion of Discount on Employee Stock Option Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )Issuance of Shares in Exchange for Operating
Partnership Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,990
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Preferred Equity Issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915Stock Option Grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,102
    
    
    
    (788
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (788
    )Amortization of Deferred Compensation on Restricted Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,151
    
    
    
    
    
    
    
    
    
    
    
    1,151Dividends Paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148,782
    )
    
    
    
    
    
    
    (148,782
    )Net Loss Available to Common Shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    
    
    
    
    (278
    )Change in Unrealized Gain on Marketable Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,761
    
    
    
    3,761Change in Unrealized Net Gain on Cash Flow Hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,662
    
    
    
    9,662SHAREHOLDERS EQUITY, December 31, 2003
    
    
    10,800,000
    
    
    $
    248,160
    
    
    
    3,400,000
    
    
    $
    81,923
    
    
    
    25,121,861
    
    
    $
    (460,148
    )
    
    
    124,396,168
    
    
    $
    1,237
    
    
    $
    2,245,683
    
    
    $
    (4,102
    )
    
    $
    (877,120
    )
    
    $
    (13,829
    )
    
    $
    1,221,804Issuance of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,954
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130Exercise of Common Share Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,980
    
    
    
    1
    
    
    
    821
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    822Accretion of Discount on Employee Stock Option Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )Issuance of Shares in Exchange for Operating
Partnership Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,916
    
    
    
    7
    
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Preferred Equity Issuance
    
    
    3,400,000
    
    
    
    71,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,006Stock Option Grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Amortization of Deferred Compensation on Restricted Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869
    
    
    
    
    
    
    
    
    
    
    
    1,869Dividends Paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,034
    )
    
    
    
    
    
    
    (149,034
    )Net Income Available to Common Shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,138
    
    
    
    
    
    
    
    141,138Change in Unrealized Gain on Marketable Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,036
    
    
    
    1,036Change in Unrealized Net Gain on Cash Flow Hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,771
    
    
    
    11,771SHAREHOLDERS EQUITY, December 31, 2004
    
    
    14,200,000
    
    
    $
    319,166
    
    
    
    3,400,000
    
    
    $
    81,923
    
    
    
    25,121,861
    
    
    $
    (460,148
    )
    
    
    124,542,018
    
    
    $
    1,245
    
    
    $
    2,246,335
    
    
    $
    (2,233
    )
    
    $
    (885,016
    )
    
    $
    (1,022
    )
    
    $
    1,300,250Issuance of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,358
    
    
    
    2
    
    
    
    3,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,077Exercise of Common Share Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267,972
    
    
    
    3
    
    
    
    4,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,286Accretion of Discount on Employee Stock Option Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (253
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (253
    )Issuance of Shares in Exchange for Operating
Partnership Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,564,632
    
    
    
    16
    
    
    
    18,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,400Reissuance of Treasury Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (944
    )
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Stock Option Grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64Amortization of Deferred Compensation on Restricted Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,051
    
    
    
    
    
    
    
    
    
    
    
    1,051Dividends Paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150,572
    )
    
    
    
    
    
    
    (150,572
    )Net Income Available to Common Shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,269
    
    
    
    
    
    
    
    63,269Change in Unrealized Net Gain on Marketable Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (468
    )
    
    
    (468
    )Change in Unrealized Net Gain on Cash Flow Hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,730
    
    
    
    3,730Change in Pension Liability at Unconsolidated Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (855
    )
    
    
    (855
    )SHAREHOLDERS EQUITY, December 31, 2005
    
    
    14,200,000
    
    
    $
    319,166
    
    
    
    3,400,000
    
    
    $
    81,923
    
    
    
    25,120,917
    
    
    $
    (460,132
    )
    
    
    126,562,980
    
    
    $
    1,266
    
    
    $
    2,271,888
    
    
    $
    (1,182
    )
    
    $
    (972,319
    )
    
    $
    1,385
    
    
    $
    1,241,995
  76




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 For the Years Ended December 31,2005
    
    
    2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    95,307
    
    
    $
    172,936
    
    
    $
    26,022Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    156,870
    
    
    
    183,873
    
    
    
    176,274Extinguishment of debt
    
    
    2,271
    
    
    
    6,459
    
    
    
    Resort Residential Development cost of sales
    
    
    311,050
    
    
    
    161,853
    
    
    
    107,163Resort Residential Development capital expenditures
    
    
    (356,603
    )
    
    
    (202,767
    )
    
    
    (130,692
    )Impairment charges related to real estate assets
    
    
    1,122
    
    
    
    7,605
    
    
    
    38,173Income from investment land sales, net
    
    
    (8,622
    )
    
    
    (18,879
    )
    
    
    (13,038
    )Loss (gain) on joint venture of properties, net
    
    
    2,743
    
    
    
    (265,772
    )
    
    
    (100
    )Gain on property sales, net
    
    
    (105,258
    )
    
    
    (1,241
    )
    
    
    (12,133
    )Income from sale of investment in unconsolidated company, net
    
    
    (29,934
    )
    
    
    
    
    
    
    (51,556
    )Minority interests
    
    
    31,870
    
    
    
    38,688
    
    
    
    6,137Cumulative effect of a change in accounting principle, net of minority interests
    
    
    
    
    
    
    363
    
    
    
    Non-cash compensation
    
    
    13,236
    
    
    
    1,737
    
    
    
    1,093Amortization of debt premiums
    
    
    (2,452
    )
    
    
    (2,386
    )
    
    
    Equity in earnings from unconsolidated companies
    
    
    (27,551
    )
    
    
    (9,624
    )
    
    
    (25,496
    )Ownership
portion of management fees from unconsolidated companies
    
    
    6,609
    
    
    
    1,833
    
    
    
    1,246Distributions received from unconsolidated companies
    
    
    30,992
    
    
    
    7,982
    
    
    
    26,000Change in assets and liabilities, net of effect of consolidations, acquisitions and dispositions:Restricted cash and cash equivalents
    
    
    (1,626
    )
    
    
    54,889
    
    
    
    (10,574
    )Accounts receivable
    
    
    886
    
    
    
    (17,924
    )
    
    
    4,436Deferred rent receivable
    
    
    (14,562
    )
    
    
    (16,246
    )
    
    
    (2,728
    )Income tax asset -current and deferred, net
    
    
    5,548
    
    
    
    (21,657
    )
    
    
    (430
    )Other assets
    
    
    (25,580
    )
    
    
    (23,983
    )
    
    
    (5,770
    )Accounts payable, accrued expenses and other
liabilities
    
    
    53,313
    
    
    
    34,828
    
    
    
    (7,981
    )Net cash provided by operating activities
    
    $
    139,629
    
    
    $
    92,567
    
    
    $
    126,046CASH FLOWS FROM INVESTING ACTIVITIES:Net cash
impact of consolidation of previously unconsolidated entities
    
    $
    
    
    
    $
    334
    
    
    $
    11,574Proceeds from property sales
    
    
    236,725
    
    
    
    174,881
    
    
    
    43,155Proceeds from sale of investment in unconsolidated company and related property sales
    
    
    32,237
    
    
    
    3,229
    
    
    
    178,667Proceeds from joint venture partners
    
    
    144,193
    
    
    
    1,028,913
    
    
    
    Acquisition of investment properties
    
    
    (192,154
    )
    
    
    (381,672
    )
    
    
    (44,732
    )Development of investment properties
    
    
    (83,961
    )
    
    
    (7,089
    )
    
    
    (6,613
    )Property
improvements  Office Properties
    
    
    (20,131
    )
    
    
    (14,297
    )
    
    
    (18,023
    )Property
improvements  Resort/Hotel Properties
    
    
    (4,707
    )
    
    
    (27,739
    )
    
    
    (13,574
    )Tenant
improvement and leasing costs  Office Properties
    
    
    (65,540
    )
    
    
    (92,876
    )
    
    
    (77,279
    )Resort Residential Development Properties investments
    
    
    (32,876
    )
    
    
    (35,428
    )
    
    
    (42,631
    )(Increase) decrease in restricted cash and cash equivalents
    
    
    (4,531
    )
    
    
    75,395
    
    
    
    (100,313
    )Purchases of defeasance investments and other securities
    
    
    (115,710
    )
    
    
    (203,643
    )
    
    
    (11,880
    )Proceeds from defeasance investment maturities and other securities
    
    
    23,273
    
    
    
    14,560
    
    
    
    300Return of investment in unconsolidated companies
    
    
    18,785
    
    
    
    129,693
    
    
    
    42,779Investment in unconsolidated companies
    
    
    (17,118
    )
    
    
    (19,047
    )
    
    
    (18,566
    )(Increase) decrease in notes receivable
    
    
    (116,843
    )
    
    
    (15,230
    )
    
    
    22,557Net cash (used in) provided by investing activities
    
    $
    (198,358
    )
    
    $
    629,984
    
    
    $
    (34,579
    )CASH FLOWS FROM FINANCING ACTIVITIES:Debt financing costs
    
    $
    (15,659
    )
    
    $
    (12,918
    )
    
    $
    (9,321
    )Borrowings under Credit Facility
    
    
    758,300
    
    
    
    530,000
    
    
    
    320,500Payments under Credit Facility
    
    
    (666,800
    )
    
    
    (626,500
    )
    
    
    (245,500
    )Notes payable proceeds
    
    
    387,200
    
    
    
    577,146
    
    
    
    177,958Notes payable payments
    
    
    (346,968
    )
    
    
    (1,027,661
    )
    
    
    (118,852
    )Junior subordinated notes
    
    
    77,321
    
    
    
    
    
    
    
    Resort Residential Development Properties note payable borrowings
    
    
    257,411
    
    
    
    111,672
    
    
    
    79,834Resort Residential Development Properties note payable payments
    
    
    (198,540
    )
    
    
    (118,495
    )
    
    
    (85,434
    )Capital distributions  joint venture partner
    
    
    (18,516
    )
    
    
    (8,565
    )
    
    
    (11,699
    )Capital contributions  joint venture partner
    
    
    7,834
    
    
    
    2,833
    
    
    
    2,028Proceeds from exercise of share and unit options
    
    
    21,995
    
    
    
    829
    
    
    
    1,205Common share repurchases held in Treasury
    
    
    
    
    
    
    
    
    
    
    (788
    )Reissuance of Treasury Shares
    
    
    16
    
    
    
    
    
    
    
    Issuance of preferred shares-Series A
    
    
    
    
    
    
    71,006
    
    
    
    Series A Preferred Share distributions
    
    
    (23,963
    )
    
    
    (23,963
    )
    
    
    (18,225
    )Series B Preferred Share distributions
    
    
    (8,075
    )
    
    
    (8,075
    )
    
    
    (8,075
    )Dividends and unitholder distributions
    
    
    (178,890
    )
    
    
    (175,621
    )
    
    
    (175,490
    )Net cash provided by (used in) financing activities
    
    $
    52,666
    
    
    $
    (708,312
    )
    
    $
    (91,859
    )(DECREASE ) INCREASE IN CASH AND CASH EQUIVALENTS
    
    $
    (6,063
    )
    
    $
    14,239
    
    
    $
    (392
    )CASH AND CASH EQUIVALENTS, Beginning of period
    
    
    92,291
    
    
    
    78,052
    
    
    
    78,444CASH AND CASH EQUIVALENTS, End of period
    
    $
    86,228
    
    
    $
    92,291
    
    
    $
    78,052
  77




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION
 References to we, us or our refer to Crescent Real Estate Equities Company and,
unless the context otherwise requires, Crescent Real Estate Equities Limited Partnership, which we
refer to as our Operating Partnership, and our other direct and indirect subsidiaries. We conduct
our business and operations through the Operating Partnership, our other subsidiaries and our joint
ventures. References to Crescent refer to Crescent Real Estate Equities Company. The sole
general partner of the Operating Partnership is Crescent Real Estate Equities, Ltd., a wholly-owned
subsidiary of Crescent Real Estate Equities Company, which we refer to as the General Partner.
   Operating Partnership
    
    Wholly-owned assets  The Avallon I, II, III and
IV, Dupont Centre and Waterside Commons,
included in our Office Segment.Non wholly-owned assets, consolidated  301
Congress Avenue (50% interest) is included in
our Office Segment. Sonoma Mission Inn
(80.1% interest) is included in our Resort/Hotel
Segment.Non wholly-owned assets, unconsolidated  Bank
One Center (50% interest), 2211 Michelson Office
Development  Irvine (40% interest), Bank One
Tower (20% interest), Three Westlake Park (20%
interest), Four Westlake Park (20% interest),
Miami Center (40% interest), BriarLake Plaza
(30% interest), Five Post Oak Park (30%
interest), Houston Center (23.85% interest in
three office properties and the Houston Center
Shops), The Crescent Atrium (23.85% interest),
The Crescent Office Towers (23.85% interest),
Trammell Crow Center(1)(23.85%
interest), Post Oak Central (23.85% interest in
three Office Properties), Fountain Place (23.85%
interest), Fulbright Tower (23.85% interest) and
One Buckhead Plaza (35% interest). These
properties are included in our Office Segment.
AmeriCold Realty Trust (31.7% interest in 85
properties), included in our
Temperature-Controlled Logistics Segment.
Canyon Ranch Tucson and Canyon Ranch Lenox (48%
interest), included in our Resort/Hotel
Segment.
 Crescent Real Estate Funding One,
L.P. (Funding One)
    
    Wholly-owned assets  Carter Burgess Plaza, 125 E. John Carpenter Freeway, The Aberdeen, Regency Plaza
One and The Citadel. These properties are included in our Office Segment.Hughes Center Entities(2)
    
    Wholly-owned assets  Hughes Center Properties (eight office properties each in a separate limited
liability company), 3883 Hughes Parkway (Office Development). These properties are included in our
Office Segment.Crescent Real Estate Funding III,
IV and V, L.P. (Funding III, IV and
V)(3)
    
    Non wholly-owned assets, consolidated  Greenway Plaza Office Properties (ten Office Properties, 99.9%
interest). These properties are included in our Office Segment. Renaissance Houston Hotel, included
in our Resort/Hotel Segment.Crescent Real Estate Funding VIII, L.P.
(Funding VIII)
    
    Wholly-owned assets  The Addison, Austin Centre, The Avallon V, Exchange Building, 816 Congress,
Greenway I & IA (two office properties), Greenway II, Johns Manville Plaza, One Live Oak, Palisades
Central I, Palisades Central II, Stemmons Place, 3333 Lee Parkway, 44 Cook and 55 Madison. These
properties are included in our Office Segment. The Omni Austin Hotel and Ventana Inn & Spa, included
in our Resort/Hotel Segment.Crescent Real Estate Funding XII, L.P.
(Funding XII)
    
    Wholly-owned assets  Briargate Office and Research Center, MacArthur Center I & II and Stanford
Corporate Center. These properties are included in our Office Segment. The Park Hyatt Beaver Creek
Resort & Spa, included in our Resort/Hotel Segment.Crescent 707 17th Street, LLC
    
    Wholly-owned assets  707 17th Street, included in our Office Segment, and the Denver
Marriott City Center, included in our Resort/Hotel Segment.Crescent Peakview Tower, LLC
    
    Wholly-owned asset  Peakview Tower, included in our Office Segment.Crescent Alhambra, LLC
    
    Wholly-owned asset  Alhambra Plaza (two Office Properties), included in our Office Segment.Crescent Datran Center, LLC
    
    Wholly-owned asset  Datran Center (two Office Properties), included in our Office Segment.Crescent Spectrum Center, L.P.
(through Funding VIII)
    
    Non wholly-owned asset, consolidated  Spectrum Center (99.9% interest), included in our Office Segment.Crescent-JMIR Paseo Del Mar, LLC
    
    Non wholly-owned asset, consolidated  Paseo Del Mar Office Development (80% interest), included in our
Office Segment.Crescent Colonnade, LLC
    
    Wholly-owned asset  The BAC-Colonnade Building, included in our Office Segment.
 78




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Mira Vista Development
Corp. (MVDC)
    
    Non wholly-owned asset, consolidated
 Mira Vista (98% interest),
included in our Resort Residential
Development Segment.Jefferson Station, L.P.
    
    Non wholly-owned asset, consolidated  JPI (50% interest), included in our Resort Residential
Development Segment.Crescent Plaza
Residential, L.P.
    
    Wholly-owned asset  the Residences at the Ritz-Carlton Development, included in our Resort
Residential Development Segment.Crescent Plaza Hotel
Owner, L.P.
    
    Wholly-owned asset  the Ritz-Carlton Hotel Development, included in our Resort/Hotel Segment.Houston Area
Development Corp.
(HADC)
    
    Non wholly-owned assets, consolidated  Falcon Point (98% interest) and Spring Lakes (98%
interest). These properties are included in our Resort Residential Development Segment.Desert Mountain
Development
Corporation (DMDC)
    
    Non wholly-owned assets, consolidated  Desert Mountain (93% interest), included in our
Resort Residential Development Segment.Crescent Resort
Development Inc.
(CRDI)
    
    Non wholly-owned assets, consolidated  Brownstones (64% interest), Creekside at Riverfront
(64% interest), Delgany (64% interest), Beaver Creek Landing (64% interest), Eagle Ranch (76%
interest), Grays Crossing (71% interest), Hummingbird (64% interest), Main Street Vacation
Club (30% interest), Northstar Highlands (57% interest), Northstar Village (57% interest),
Old Greenwood (71% interest), Riverbend (68% interest), Village Walk (58% interest), Tahoe
Mountain Club (71% interest). These properties are included in our Resort Residential
Development Segment.Non wholly-owned assets, unconsolidated  Blue River Land Company, L.L.C.  Three Peaks (33%
interest) and EW Deer Valley, L.L.C. (37.1% interest), included in our Resort Residential
Development Segment.
 
 (1)
    
    We own 23.85% of the economic interest in Trammell Crow Center through our
ownership of a 23.85% interest in the joint venture that holds fee simple title to the
Office Property (subject to a ground lease and a leasehold estate regarding the building)
and two mortgage notes encumbering the leasehold interests in the land and the building.(2)
    
    In addition, we own nine retail parcels located in Hughes Center.(3)
    
     Funding III owns nine of the ten office properties in the Greenway Plaza office
portfolio and the Renaissance Houston Hotel; Funding IV owns the central heated and chilled
water plant building located at Greenway Plaza; and Funding V owns 9 Greenway, the
remaining office property in the Greenway Plaza office portfolio.   Segments
  
    
    Office Segment;
    
    Resort Residential Development Segment;
    
    Resort/Hotel Segment; and
    
    Temperature-Controlled Logistics Segment.
  
    
    Office Segmentconsisted of 75 office properties, which we refer to as the Office
Properties, located in 26 metropolitan submarkets in seven states, with an aggregate of
approximately 30.7 million net rentable square feet. Fifty-four of the Office
Properties are wholly-owned and 21 are owned through joint ventures, one of which is
consolidated and 20 of which are unconsolidated.
 79




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
    
    Resort Residential Development Segmentconsisted of our ownership of common stock
representing interests of 98% to 100% in four Resort Residential Development
Corporations and two limited partnerships which are consolidated. These Resort
Residential Development Corporations, through partnership arrangements, owned in whole
or in part 23 active and planned upscale resort residential development properties,
which we refer to as the Resort Residential Development Properties.
    
    Resort/Hotel Segmentconsisted of five luxury and destination fitness resorts and
spas with a total of 1,034 rooms/guest nights and three upscale business-class hotel
properties with a total of 1,376 rooms, which we refer to as the Resort/Hotel
Properties. Five of the Resort/Hotel Properties are wholly-owned, one is owned through
a joint venture that is consolidated and two are owned through joint ventures that are
unconsolidated.
    
    Temperature-Controlled Logistics Segmentconsisted of our 31.7% interest in
AmeriCold Realty Trust, or AmeriCold, a REIT which is unconsolidated. As of December
31, 2005, AmeriCold operated 101 facilities, of which 84 were wholly-owned, one was
partially-owned and sixteen were managed for outside owners. The 85 owned facilities,
which we refer to as the Temperature-Controlled Logistics Properties, had an aggregate
of approximately 437.2 million cubic feet (17.4 million square feet) of warehouse
space. AmeriCold also owned two quarries and the related land.
 Basis of Presentation
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Adoption of New Accounting Standards
 SFAS No. 123R. Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 80




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SFAS No. 154. Accounting Changes and Error
Corrections. Accounting Changes, Reporting Accounting Changes in Interim Financial Statements.
 EITF 04-5. Determining Whether a General Partner, or the
General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited
Partners Have Certain Rights Consolidation of Variable Interest Entities Investors Accounting for an
Investee When the Investor has a Majority of the Voting Interest but the Minority Shareholder or
Shareholders have Certain Approval or Veto Rights Accounting for Investments in Real Estate Ventures,
 EITF 05-6. Determining the Amortization Period for Leasehold Improvements
 Significant Accounting Policies
 Consolidation of Variable Interest Entities. Consolidation of Variable Interest Entities
 81




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Acquisition of operating properties.
      82




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Net Investments in Real Estate.
 Buildings and Improvements
    
    2 to 46 yearsTenant Improvements
    
    Terms of leases, which approximates the
useful life of the assetFurniture, Fixtures and Equipment
    
    2 to 5 years
 Accounting for Costs and Initial Rental
Operations of Real Estate Projects Capitalization of Interest Cost
 Accounting
for the Impairment or Disposal of Long-Lived Assets
 Concentration of Real Estate Investments.
 Cash and Cash Equivalents.
 Restricted Cash and Cash Equivalents.
 83




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Allowance for Doubtful Accounts/Credit Losses.
  Investments in Unconsolidated Companies.
 Other Assets.
 Business Combinations
  84




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value of Financial Instruments.
 Derivative Financial Instruments. Accounting for Derivative Instruments and
Hedging Activities
      Gain recognition on sale of real estate assets. Accounting
for Sales of Real Estate,
 85




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Revenue Recognition  Office Properties.
 Revenue Recognition  Resort Residential Development Properties.
  Revenue Recognition  Resort/Hotel Properties.
 Revenue Recognition  Mezzanine Investments.
 86




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Income Taxes .
  Use of Estimates.
 Stock-Based Compensation . Accounting for Stock-Based Compensation  Transition and Disclosure
 For the years ended December 31,(in thousands, except per share amounts)
    
    2005
    
    
    2004
    
    
    2003Net income (loss) available to common
shareholders, as reported
    
    $
    63,269
    
    
    $
    141,138
    
    
    $
    (278
    )Add: stock-based employee compensation
expense included in reported net income
    
    
    13,548
    
    
    
    2,340
    
    
    
    1,188Deduct: total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of minority interest
    
    
    (15,153
    )
    
    
    (4,270
    )
    
    
    (2,916
    )Pro forma net income (loss) available
to common shareholders
    
    $
    61,664
    
    
    $
    139,208
    
    
    $
    (2,006
    )Earnings (loss) per share:Basic  as reported
    
    $
    0.63
    
    
    $
    1.43
    
    
    $
    Basic  pro forma
    
    $
    0.62
    
    
    $
    1.41
    
    
    $
    (0.02
    )Diluted  as reported
    
    $
    0.63
    
    
    $
    1.42
    
    
    $
    Diluted  pro forma
    
    $
    0.62
    
    
    $
    1.40
    
    
    $
    (0.02
    )
 Earnings Per Share. Earnings Per Share
   87




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31,2005
    
    2004
    
    2003Wtd.
    
    Per
    
    
    
    
    
    Wtd.
    
    Per
    
    
    
    
    
    Wtd.
    
    PerIncome
    
    Avg.
    
    Share
    
    Income
    
    Avg.
    
    Share
    
    Income
    
    Avg.
    
    Share(in thousands, except per share amounts)
    
    (Loss)
    
    Shares
    
    Amount
    
    (Loss)
    
    Shares
    
    Amount
    
    (Loss)
    
    Shares
    
    AmountBasic EPS -Income before discontinued operations
and cumulative effect of a change in
accounting principle
    
    $
    1,871
    
    
    
    100,179
    
    
    
    
    
    
    $
    165,470
    
    
    
    99,025
    
    
    
    
    
    
    $
    24,651
    
    
    
    98,886Series A Preferred Share distributions
    
    
    (23,963
    )
    
    
    
    
    
    
    
    
    
    
    (23,723
    )
    
    
    
    
    
    
    
    
    
    
    (18,225
    )Series B Preferred Share distributions
    
    
    (8,075
    )
    
    
    
    
    
    
    
    
    
    
    (8,075
    )
    
    
    
    
    
    
    
    
    
    
    (8,075
    )(Loss) income available to common shareholders
before discontinued operations and
cumulative effect of a change in accounting
principle
    
    $
    (30,167
    )
    
    
    100,179
    
    
    $
    (0.30
    )
    
    $
    133,672
    
    
    
    99,025
    
    
    $
    1.35
    
    
    $
    (1,649
    )
    
    
    98,886
    
    
    $
    (0.01
    )Income from discontinued operations, net
of minority interests
    
    
    4,266
    
    
    
    
    
    
    
    0.04
    
    
    
    9,755
    
    
    
    
    
    
    
    0.10
    
    
    
    16,136
    
    
    
    
    
    
    
    0.16Impairment charges related to real estate
assets from discontinued operations, net of
minority interests
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    (2,978
    )
    
    
    
    
    
    
    (0.03
    )
    
    
    (25,052
    )
    
    
    
    
    
    
    (0.25
    )Gain on real estate from discontinued
operations, net of minority interests
    
    
    89,234
    
    
    
    
    
    
    
    0.89
    
    
    
    1,052
    
    
    
    
    
    
    
    0.01
    
    
    
    10,287
    
    
    
    
    
    
    
    0.10Cumulative effect of a change in accounting
principle, net of minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common
shareholders
    
    $
    63,269
    
    
    
    100,179
    
    
    $
    0.63
    
    
    $
    141,138
    
    
    
    99,025
    
    
    $
    1.43
    
    
    $
    (278
    )
    
    
    98,886
    
    
    $
    
 For the years ended December 31,2005
    
    2004
    
    2003Wtd.
    
    
    
    
    
    
    
    
    
    Wtd.
    
    Per
    
    
    
    
    
    Wtd.
    
    PerIncome
    
    Avg.
    
    Per Share
    
    Income
    
    Avg.
    
    Share
    
    Income
    
    Avg.
    
    Share(in thousands, except per share amounts)
    
    (Loss)
    
    Shares
    
    Amount
    
    (Loss)
    
    Shares
    
    Amount
    
    (Loss)
    
    Shares
    
    AmountDiluted EPS -Income before discontinued operations
and cumulative effect of a change in
accounting principle
    
    $
    1,871
    
    
    
    100,179
    
    
    
    
    
    
    $
    165,470
    
    
    
    99,025
    
    
    
    
    
    
    $
    24,651
    
    
    
    98,886Series A Preferred Share distributions
    
    
    (23,963
    )
    
    
    
    
    
    
    
    
    
    
    (23,723
    )
    
    
    
    
    
    
    
    
    
    
    (18,225
    )Series B Preferred Share distributions
    
    
    (8,075
    )
    
    
    
    
    
    
    
    
    
    
    (8,075
    )
    
    
    
    
    
    
    
    
    
    
    (8,075
    )Effect of dilutive securities:Share and unit options
    
    
    
    
    
    
    
    (1)
    
    
    
    
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    
    
    
    
    
    (1)(Loss) income available to common shareholders
before discontinued operations and cumulative
effect of a change in accounting principle
    
    $
    (30,167
    )
    
    
    100,179
    
    
    $
    (0.30
    )
    
    $
    133,672
    
    
    
    99,244
    
    
    $
    1.34
    
    
    $
    (1,649
    )
    
    
    98,886
    
    
    $
    (0.01
    )Income from discontinued operations, net
of minority interests
    
    
    4,266
    
    
    
    
    
    
    
    0.04
    
    
    
    9,755
    
    
    
    
    
    
    
    0.10
    
    
    
    16,136
    
    
    
    
    
    
    
    0.16Impairment charges related to real estate
assets from discontinued operations, net of
minority interests
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    (2,978
    )
    
    
    
    
    
    
    (0.03
    )
    
    
    (25,052
    )
    
    
    
    
    
    
    (0.25
    )Gain on real estate from discontinued
operations, net of minority interests
    
    
    89,234
    
    
    
    
    
    
    
    0.89
    
    
    
    1,052
    
    
    
    
    
    
    
    0.01
    
    
    
    10,287
    
    
    
    
    
    
    
    0.10Cumulative effect of a change in accounting
principle, net of minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common
shareholders
    
    $
    63,269
    
    
    
    100,179
    
    
    $
    0.63
    
    
    $
    141,138
    
    
    
    99,244
    
    
    $
    1.42
    
    
    $
    (278
    )
    
    
    98,886
    
    
    $
    
 
 (1)
    
    Share and unit options are not included because the effect
of their conversion would be antidilutive to loss available to common
shareholders before discontinued operations and cumulative effect of
a change in accounting principle. 88




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Supplemental Disclosure to Statements of Cash Flows
 Supplemental disclosures of cash flow information:
    
    For the years ended December 31,(in thousands)
    
    2005
    
    
    2004
    
    
    2003Interest paid on debt
    
    $
    137,472
    
    
    $
    169,056
    
    
    $
    153,916Interest capitalized  Resort Residential Development
    
    
    19,375
    
    
    
    15,556
    
    
    
    18,233Interest capitalized  Resort/Hotel
    
    
    898
    
    
    
    294
    
    
    
    34Interest capitalized  Office
    
    
    921
    
    
    
    
    
    
    
    Additional interest paid in conjunction with cash flow hedges
    
    
    1,292
    
    
    
    10,608
    
    
    
    19,278Total interest paid
    
    $
    159,958
    
    
    $
    195,514
    
    
    $
    191,461Cash paid (received) for income taxes
    
    $
    738
    
    
    $
    8,364
    
    
    $
    (7,215
    )Supplemental schedule of non cash activities:Joint venture of Office Properties debt
    
    $
    158,350
    
    
    $
    
    
    
    $
    Assumption of debt in conjunction with acquisitions of Office Property
    
    
    
    
    
    
    139,807
    
    
    
    48,713Financed sale of land parcel
    
    
    
    
    
    
    4,878
    
    
    
    11,800Financed purchase of land parcel
    
    
    
    
    
    
    7,500
    
    
    
    Supplemental schedule of 2004 consolidation of Elijah and 2003
consolidations of DBL, MVDC, HADC and GDW:Net investment in real estate
    
    
    
    
    
    $
    
    
    
    $
    (40,178
    )Restricted cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    Accounts receivable, net
    
    
    
    
    
    
    (848
    )
    
    
    (3,067
    )Investments in unconsolidated companies
    
    
    
    
    
    
    (2,478
    )
    
    
    33,123Notes receivable, net
    
    
    
    
    
    
    4,363
    
    
    
    (25
    )Income tax asset  current and deferred, net
    
    
    
    
    
    
    (274
    )
    
    
    (3,564
    )Other assets, net
    
    
    
    
    
    
    
    
    
    
    (820
    )Notes payable
    
    
    
    
    
    
    
    
    
    
    312Accounts payable, accrued expenses and other liabilities
    
    
    
    
    
    
    
    
    
    
    14,047Minority interest  consolidated real estate partnerships
    
    
    
    
    
    
    (140
    )
    
    
    11,746Other comprehensive income, net of tax
    
    
    
    
    
    
    139
    
    
    
    Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (428
    )
    
    
    Increase in cash
    
    
    N/A
    
    
    $
    334
    
    
    $
    11,574
 3. SEGMENT REPORTING
   
    
    Net Income (Loss)  determined in accordance with GAAP;
    
    excluding gains (losses) from sales of depreciable operating property;
    
    excluding extraordinary items (as defined by GAAP);
    
    plus depreciation and amortization of real estate assets; and
    
    after adjustments for unconsolidated partnerships and joint ventures.
  89




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Selected Financial Information:
    
    For the year ended December 31, 2005Resort
    
    
    
    
    
    
    Temperature-Residential
    
    
    
    
    
    
    ControlledOffice
    
    
    Development
    
    
    Resort/Hotel
    
    
    Logistics
    
    
    Corporate(in thousands)
    
    Segment(1)
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    and Other(2)
    
    
    TotalTotal Property revenue
    
    $
    377,337
    
    
    $
    503,568
    
    
    $
    142,618
    
    
    $
    
    
    
    $
    
    
    
    $
    1,023,523Total Property expense
    
    
    199,272
    
    
    
    432,620
    
    
    
    111,277
    
    
    
    
    
    
    
    
    
    
    
    743,169Income from Property Operations
    
    $
    178,065
    
    
    $
    70,948
    
    
    $
    31,341
    
    
    $
    
    
    
    $
    
    
    
    $
    280,354Total other income (expense)
    
    
    (67,710
    )
    
    
    (17,626
    )
    
    
    (20,603
    )
    
    
    234
    
    
    
    (150,161
    )
    
    
    (255,866
    )Minority interests and income taxes
    
    
    (4,058
    )
    
    
    (13,399
    )
    
    
    1,941
    
    
    
    
    
    
    
    (7,101
    )
    
    
    (22,617
    )Discontinued operations income, gain on real estate and impairment charges
related to real estate assets, net of minority interests
    
    
    109,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,473
    )
    
    
    93,436Net income (loss)
    
    $
    216,206
    
    
    $
    39,923
    
    
    $
    12,679
    
    
    $
    234
    
    
    $
    (173,735
    )
    
    $
    95,307Depreciation and amortization of real estate assets
    
    $
    103,958
    
    
    $
    9,412
    
    
    $
    18,021
    
    
    $
    
    
    
    $
    
    
    
    $
    131,391Gain on property sales, net
    
    
    (102,373
    )
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    (289
    )
    
    
    (102,803
    )Adjustments for investment in unconsolidated companies
    
    
    18,872
    
    
    
    (5,467
    )
    
    
    3,881
    
    
    
    18,210
    
    
    
    
    
    
    
    35,496Unitholder minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,964
    
    
    
    16,964Series A Preferred share distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,963
    )
    
    
    (23,963
    )Series B Preferred share distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,075
    )
    
    
    (8,075
    )Adjustments to reconcile net income (loss) to funds from operations available to
common shareholders  diluted
    
    $
    20,457
    
    
    $
    3,945
    
    
    $
    21,761
    
    
    $
    18,210
    
    
    $
    (15,363
    )
    
    $
    49,010Funds from operations available to common shareholdersdiluted
    
    $
    236,663
    
    
    $
    43,868
    
    
    $
    34,440
    
    
    $
    18,444
    
    
    $
    (189,098
    )
    
    $
    144,317

(3)
  90




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Selected Financial Information:
    

For the year ended December 31, 2004Resort
    
    
    
    
    
    
    Temperature-Residential
    
    
    
    
    
    
    ControlledOffice
    
    
    Development
    
    
    Resort/Hotel
    
    
    Logistics
    
    
    Corporate(in thousands)
    
    Segment(1)
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    and Other(2)
    
    
    TotalTotal Property revenue
    
    $
    481,710
    
    
    $
    311,197
    
    
    $
    214,531
    
    
    $
    
    
    
    $
    
    
    
    $
    1,007,438Total Property expense
    
    
    238,189
    
    
    
    271,819
    
    
    
    179,825
    
    
    
    
    
    
    
    
    
    
    
    689,833Income from Property Operations
    
    $
    243,521
    
    
    $
    39,378
    
    
    $
    34,706
    
    
    $
    
    
    
    $
    
    
    
    $
    317,605Total other income (expense)
    
    
    147,986
    
    
    
    (17,826
    )
    
    
    (24,777
    )
    
    
    6,153
    
    
    
    (239,455
    )
    
    
    (127,919
    )Minority interests and income taxes
    
    
    (1,789
    )
    
    
    (703
    )
    
    
    8,306
    
    
    
    
    
    
    
    (30,030
    )
    
    
    (24,216
    )Discontinued operations income, gain on real estate and impairment charges
related to real estate assets, net of minority interests
    
    
    3,109
    
    
    
    (95
    )
    
    
    7,177
    
    
    
    
    
    
    
    (2,362
    )
    
    
    7,829Cumulative effect of a change in accounting principle, net of minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    (363
    )Net income (loss)
    
    $
    392,827
    
    
    $
    20,754
    
    
    $
    25,412
    
    
    $
    6,153
    
    
    $
    (272,210
    )
    
    $
    172,936Depreciation and amortization of real estate assets
    
    $
    124,857
    
    
    $
    8,078
    
    
    $
    23,775
    
    
    $
    
    
    
    $
    56
    
    
    $
    156,766(Gain) loss on property sales, net
    
    
    (263,308
    )
    
    
    115
    
    
    
    (4,209
    )
    
    
    
    
    
    
    349
    
    
    
    (267,053
    )Adjustments for investment in unconsolidated companies
    
    
    11,601
    
    
    
    (228
    )
    
    
    
    
    
    
    22,549
    
    
    
    
    
    
    
    33,922Unitholder minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,950
    
    
    
    30,950Series A Preferred share distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,723
    )
    
    
    (23,723
    )Series B Preferred share distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,075
    )
    
    
    (8,075
    )Adjustments to reconcile net income (loss) to funds from operations available to
common shareholders  diluted
    
    $
    (126,850
    )
    
    $
    7,965
    
    
    $
    19,566
    
    
    $
    22,549
    
    
    $
    (443
    )
    
    $
    (77,213
    )Funds from operations available to common shareholdersdiluted
    
    $
    265,977
    
    
    $
    28,719
    
    
    $
    44,978
    
    
    $
    28,702
    
    
    $
    (272,653
    )
    
    $
    95,723
    (3)
  Selected Financial Information:
    

For the year ended December 31, 2003Resort
    
    
    
    
    
    
    Temperature-Residential
    
    
    
    
    
    
    ControlledOffice
    
    
    Development
    
    
    Resort/Hotel
    
    
    Logistics
    
    
    Corporate(in thousands)
    
    Segment(1)
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    and Other(2)
    
    
    TotalTotal Property revenue
    
    $
    472,003
    
    
    $
    221,713
    
    
    $
    206,074
    
    
    $
    
    
    
    $
    
    
    
    $
    899,790Total Property expense
    
    
    231,254
    
    
    
    197,491
    
    
    
    167,666
    
    
    
    
    
    
    
    
    
    
    
    596,411Income from Property Operations
    
    $
    240,749
    
    
    $
    24,222
    
    
    $
    38,408
    
    
    $
    
    
    
    $
    
    
    
    $
    303,379Total other income (expense)
    
    
    (102,499
    )
    
    
    91,716
    
    
    
    (16,981
    )
    
    
    2,172
    
    
    
    (220,464
    )
    
    
    (246,056
    )Minority interests and income taxes
    
    
    (344
    )
    
    
    (36,182
    )
    
    
    5,870
    
    
    
    
    
    
    
    (2,016
    )
    
    
    (32,672
    )Discontinued operations income, gain on real estate and impairment charges
related to real estate assets, net of minority interests
    
    
    4,166
    
    
    
    (705
    )
    
    
    2,704
    
    
    
    
    
    
    
    (4,794
    )
    
    
    1,371Net income (loss)
    
    $
    142,072
    
    
    $
    79,051
    
    
    $
    30,001
    
    
    $
    2,172
    
    
    $
    (227,274
    )
    
    $
    26,022Depreciation and amortization of real estate assets
    
    $
    122,302
    
    
    $
    4,820
    
    
    $
    23,666
    
    
    $
    
    
    
    $
    
    
    
    $
    150,788(Gain) loss on property sales, net
    
    
    (11,890
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,971
    
    
    
    (8,919
    )Adjustments for investment in unconsolidated companies
    
    
    6,254
    
    
    
    3,573
    
    
    
    (2,544
    )
    
    
    21,136
    
    
    
    206
    
    
    
    28,625Unitholder minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,546
    
    
    
    4,546Series A Preferred share distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,225
    )
    
    
    (18,225
    )Series B Preferred share distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,075
    )
    
    
    (8,075
    )Adjustments to reconcile net income (loss) to funds from operations available to
common shareholders -diluted
    
    $
    116,666
    
    
    $
    8,393
    
    
    $
    21,122
    
    
    $
    21,136
    
    
    $
    (18,577
    )
    
    $
    148,740Funds from operations available to common
shareholders  diluted
    
    $
    258,738
    
    
    $
    87,444
    
    
    $
    51,123
    
    
    $
    23,308
    
    
    $
    (245,851
    )
    
    $
    174,762
    (3)
  91




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Resort
    
    
    
    
    
    Temperature-Residential
    
    
    
    
    
    Controlled
    
    CorporateOffice
    
    Development
    
    Resort/Hotel
    
    Logistics
    
    and(in millions)
    
    Segment
    
    Segment
    
    Segment
    
    Segment
    
    Other
    
    TotalTotal
Assets by Segment:(4)Balance at
December 31,
2005(5)
    
    $
    2,024
    
    
    $
    969
    
    
    $
    338
    
    
    $
    162
    
    
    $
    649
    (6)
    
    $
    4,142Balance at
December 31,
2004(5)
    
    
    2,142
    
    
    
    820
    
    
    
    469
    
    
    
    181
    
    
    
    426
    (6)
    
    
    4,038Consolidated Property Level Financing:Balance at December 31, 2005
    
    
    (851
    )
    
    
    (143
    )
    
    
    (59
    )
    
    
    
    
    
    
    (1,206

)(7)
    
    
    (2,259
    )Balance at December 31, 2004
    
    
    (942
    )
    
    
    (84
    )
    
    
    (111
    )
    
    
    
    
    
    
    (1,015

)(7)
    
    
    (2,152
    )Consolidated Other Liabilities:Balance at December 31, 2005
    
    
    (117
    )
    
    
    (287
    )
    
    
    (28
    )
    
    
    
    
    
    
    (41
    )
    
    
    (473
    )Balance at December 31, 2004
    
    
    (108
    )
    
    
    (196
    )
    
    
    (47
    )
    
    
    (2
    )
    
    
    (69
    )
    
    
    (422
    )Minority Interests:Balance at December 31, 2005
    
    
    (15
    )
    
    
    (32
    )
    
    
    (6
    )
    
    
    
    
    
    
    (114
    )
    
    
    (167
    )Balance at December 31, 2004
    
    
    (9
    )
    
    
    (34
    )
    
    
    (7
    )
    
    
    
    
    
    
    (113
    )
    
    
    (163
    )
 
 (1)
    
    The property revenue includes lease termination fees (net of the write-off of
deferred rent receivables) of approximately $11.2 million, $9.0 million and $9.7 million for
the years ended December 31, 2005, 2004 and 2003, respectively.(2)
    
    For purposes of this Note, Corporate and Other includes the total of: income from
investment land sales, net, interest and other income, corporate general and administrative
expense, interest expense, amortization of deferred financing costs, extinguishment of debt,
other expenses and equity in net income of unconsolidated companies-other and mezzanine
investments.(3)
    
    Amount includes $26.9 million gain on sale of developed
property inclusive of $13.6 million attributable to a promoted
interest. Impairment charges and debt extinguishment charges related to the sale of real
estate assets were
$1.8 million, $47.5
million and $37.8 million for the years ended December 31, 2005, 2004 and 2003, respectively.
Funds from operations available to common shareholders  diluted, as adjusted to exclude
impairment charges and debt extinguishment charges related to the
sale of real estate assets was $146.1 million, $143.2 million and $212.6 million for the years ended December 31, 2005,
2004 and 2003, respectively. We provide this additional information because management
utilizes it, in addition to FFO available to common shareholders  diluted, in making
operating decisions and assessing performance, and because we believe that it also is useful
to investors in assessing our operating performance.(4)
    
    Total assets by segment are inclusive of investments in unconsolidated companies.(5)
    
    Non-income producing land held for investment or development of $84.4 million and
$67.5 million at December 31, 2005 and 2004, respectively, by segment is as follows: Office
$24.3 million and $0.0 million, Resort Residential Development $9.6 million and $9.9 million,
Resort/Hotel $7.3 million and $7.0 million and Corporate $43.2 million and $50.6 million,
respectively.(6)
    
    Includes defeasance investments of $274.1 million and $175.9 million and mezzanine
investments of $172.6 million and $22.0 million at December 31, 2004, respectively.(7)
    
    Inclusive of Corporate bonds, credit facility, Junior Subordinated Notes, the
Funding I defeased debt, the Funding II defeased debt and Nomura Funding VI defeased debt. 92




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. ACQUISITIONS
 Asset Acquisitions
  Date
    
    
    
    
    
    Purchase(in millions)
    
    Property
    
    Location
    
    Price2005February 7, 2005
    
    Exchange Building  Class A Office Property
    
    Seattle, Washington
    
    $52.5 (1)April 8, 2005
    
    One Buckhead Plaza  Class A Office
Property
    
    Atlanta, Georgia
    
    130.5 (2)2004Jan  May 2004
    
    Hughes Center  Six Class A Office
Properties, Seven Retail Parcels and
12.85 acres undeveloped land
    
    Las Vegas, Nevada
    
    203.6 (3)March 31, 2004
    
    Dupont Centre  Class A Office Property
    
    Irvine, California
    
    54.3 (4)August 6, 2004
    
    The Alhambra  Two Class A Office
Properties
    
    Miami, Florida
    
    72.3 (5)December 15, 2004
    
    One Live Oak  Class A Office Property
    
    Atlanta, Georgia
    
    31.0 (1)December 21, 2004
    
    Fulbright Tower  Class A Office Property
    
    Houston, Texas
    
    101.0
(6)December 29, 2004
    
    Peakview Tower  Class A Office Property
    
    Denver, Colorado
    
    47.5 (1)
 
 (1)
    
    The acquisition was funded by a draw on our credit facility.(2)
    
    The acquisition was funded by an $85.0 million loan from Morgan Stanley and
a draw on our credit facility. In June 2005, we contributed One Buckhead Plaza to Crescent
One Buckhead Plaza, L.P., a limited partnership in which we have a 35% interest and Metzler US
Real Estate Fund L.P. has a 65% interest.(3)
    
    The acquisition of the Office Properties was funded by the assumption of
$85.4 million in mortgage loans and a portion of proceeds from the 2003 sale of the Woodlands
entities. One of the Office Properties was owned through a joint venture in which we owned a
67% interest. In October 2005, we purchased the remaining 33% interest for approximately $3.1
million. The remaining Office Properties are wholly-owned.(4)
    
    The acquisition was funded by a draw on our credit facility. We
subsequently placed a $35.5 million non-recourse first mortgage loan on the Property. The
property is wholly-owned.(5)
    
    The acquisition was funded by the assumption of a $45.0 million loan from
Wachovia Securities and a draw on our credit facility. The properties are wholly-owned.(6)
    
    The acquisition was funded by a $70.0 million loan from Morgan Stanley and a
draw on our credit facility. In February 2005, we contributed Fulbright Tower to Crescent
1301 McKinney, L.P., a limited partnership in which we have a 23.85% interest, a fund advised
by JP Morgan Fleming Asset Management has a 60% interest, and GE Asset Management has a 16.15%
interest. 5. DISCONTINUED OPERATIONS
  93




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Asset
Dispositions
 Office Segment
  Net(in millions)
    
    
    
    
    
    Net
    
    
    
    
    
    GainDate
    
    Property
    
    Location
    
    Proceeds
    
    Impairment
    
    (Loss)(1)2005February 7, 2005
    
    Albuquerque Plaza
    
    Albuquerque, New Mexico
    
    $
    34.7
    (2)
    
    $
    
    
    
    $
    1.4August 16, 2005
    
    Barton Oaks Plaza One
    
    Austin, Texas
    
    
    14.4
    (2)
    
    
    
    
    
    
    4.5September 19, 2005
    
    Chancellor Park
    
    San Diego, California
    
    
    55.4
    (3)
    
    
    
    
    
    
    27.0September 28, 2005
    
    Two Renaissance Square
    
    Phoenix, Arizona
    
    
    116.8
    (2)
    
    
    
    
    
    
    57.22004March 23, 2004
    
    1800 West Loop South
    
    Houston, Texas
    
    
    28.2
    (3)
    
    
    13.9
    (4)
    
    
    0.2April 13, 2004
    
    Liberty Plaza
    
    Dallas, Texas
    
    
    10.8
    (3)
    
    
    3.6
    (4)
    
    
    (0.2
    )June 17, 2004
    
    Ptarmigan Place
    
    Denver, Colorado
    
    
    25.3
    (2)
    
    
    0.5
    (5)
    
    
    (2.0
    )June 29, 2004
    
    Addison Tower
    
    Dallas, Texas
    
    
    8.8
    (3)
    
    
    
    
    
    
    0.2July 2, 2004
    
    5050 Quorum
    
    Dallas, Texas
    
    
    8.9
    (3)
    
    
    0.8
    (5)
    
    
    (0.1
    )July 29, 2004
    
    12404 Park Central
    
    Dallas, Texas
    
    
    9.3
    (2)
    
    
    4.0
    (6)
    
    
    2003December 15, 2003
    
    Las Colinas Plaza
    
    Dallas, Texas
    
    
    20.6
    
    
    
    
    
    
    
    14.5December 31, 2003
    
    Woodlands Office
    
    Houston, Texas(7)
    
    
    15.0
    
    
    
    
    
    
    
    (2.3
    )
 
 (1)
    
    Amounts are net of operating partnership minority interests. The line item
Gain on real estate from discontinued operations, net of minority interests for the year
ended December 31, 2005 includes $0.9 million of expense related to the write-off of
capitalized internal leasing costs related to prior period dispositions.(2)
    
    Proceeds were used to pay down a portion of the Bank of America Fund XII Term Loan.(3)
    
    Proceeds were used primarily to pay down our credit facility.(4)
    
    Impairment was recognized during the year ended December 31, 2003.(5)
    
    Impairment was recognized during the year ended December 31, 2004.(6)
    
    Of the $4.0 million in impairment recorded, $2.9 million was recorded during the
year ended December 31, 2003 and $1.1 million was recorded during the year ended December 31,
2004.(7)
    
    The sale included our four remaining Office Properties in The Woodlands. These
properties were held through Woodlands Office Equities  95 Limited Partnership, or WOE,
which was owned 75% by us and 25% by the Woodlands Commercial Properties Company, L.P. Resort Residential Development Segment
  Resort / Hotel Segment
  94




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Properties Held for Disposition
 Resort/Hotel Segment
  Summary of Assets Held for Sale
  December 31,
    
    
    December 31,(in thousands)
    
    2005(1)
    
    
    2004(2)Land
    
    $
    
    
    
    $
    3,330Buildings and improvements
    
    
    4,123
    
    
    
    138,523Furniture, fixtures and equipment
    
    
    
    
    
    
    15Accumulated depreciation
    
    
    (44
    )
    
    
    (32,676
    )Other assets, net
    
    
    58
    
    
    
    8,207Net investment in real estate
    
    $
    4,137
    
    
    $
    117,399
 
 (1)
    
    Includes other assets.(2)
    
    Includes four Office Properties and other assets.  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Total revenues
    
    $
    13,343
    
    
    $
    44,602
    
    
    $
    74,659Operating and other expenses
    
    
    (5,728
    )
    
    
    (26,340
    )
    
    
    (38,647
    )Depreciation and amortization
    
    
    (2,589
    )
    
    
    (6,761
    )
    
    
    (16,979
    )Unitholder minority interests
    
    
    (760
    )
    
    
    (1,746
    )
    
    
    (2,897
    )Income from discontinued operations, net of minority interests
    
    $
    4,266
    
    
    $
    9,755
    
    
    $
    16,136
 (in thousands)
    
    2005
    
    
    2004
    
    
    2003Impairment charges related to real estate assets
    
    $
    (75
    )
    
    $
    (3,511
    )
    
    $
    (29,549
    )Unitholder minority interests
    
    
    11
    
    
    
    533
    
    
    
    4,497Impairment charges related to real estate
assets from discontinued operations, net of
minority interests
    
    $
    (64
    )
    
    $
    (2,978
    )
    
    $
    (25,052
    )
 (in thousands)
    
    2005
    
    
    2004
    
    
    2003Realized gain on sale of properties
    
    $
    105,117
    
    
    $
    1,241
    
    
    $
    12,134Unitholder minority interests
    
    
    (15,883
    )
    
    
    (189
    )
    
    
    (1,847
    )Gain on real estate from discontinued operations, net of minority
interests
    
    $
    89,234
    
    
    $
    1,052
    
    
    $
    10,287
 95




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6. OTHER TRANSACTIONS
 Office Segment
 Significant Tenant Lease Termination
  Fountain Place Transaction
   Resort Residential Development Segment
   
    
    a 52.5% economic interest, including a 10% earned promotional interest, in the Woodlands
Land Development Company, L.P., or WLDC, the partnership through which we owned our
interest in The Woodlands residential development property, and a promissory note due in
2007 in the original principal amount of $10.6 million from WLDC;
    
    a 75% interest in Woodlands Office Equities  95 Limited Partnership, the partnership
through which we owned our interests in four office properties located in The Woodlands;
    
    a 52.5% economic interest, including a 10% earned promotional interest, in Woodlands
CPC; and
    
    a 52.5% economic interest, including a 10% earned promotional interest, in The Woodlands
Operating Company, L.P.
 96




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Undeveloped Land Sales
  (dollars in millions)
    
    
    
    
    
    
    
    
    
    NetDate
    
    Location
    
    Acreage
    
    Proceeds
    
    
    
    
    
    Net Gain2005March 31, 2005
    
    Houston, Texas
    
    
    1.58
    
    
    $
    5.8
    
    
    
    (1)
    
    
    $
    3.5June 30, 2005
    
    Houston, Texas
    
    
    1.43
    
    
    
    6.1
    
    
    
    (1)
    
    
    
    4.12004June 17, 2004
    
    Denver, Colorado
    
    
    3.0
    
    
    
    2.9
    
    
    
    
    
    
    
    0.9August 16, 2004
    
    Houston, Texas
    
    
    2.5
    
    
    
    6.4
    
    
    
    (2)
    
    
    
    7.6November 12, 2004
    
    Monterey, California
    
    
    72.7
    
    
    
    1.0
    
    
    
    
    
    
    
    0.7December 17, 2004
    
    Houston, Texas
    
    
    5.3
    
    
    
    22.3
    
    
    
    
    
    
    
    8.3December 23, 2004
    
    Houston, Texas
    
    
    5.7
    
    
    
    4.0
    
    
    
    
    
    
    
    1.42003April 24, 2003
    
    Dallas, Texas
    
    
    0.5
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3May 15, 2003
    
    Coppell, Texas
    
    
    24.8
    
    
    
    3.0
    
    
    
    
    
    
    
    1.1June 27, 2003
    
    Houston, Texas
    
    
    3.5
    
    
    
    2.1
    
    
    
    (3)
    
    
    
    8.9September 30, 2003
    
    Houston, Texas
    
    
    3.1
    
    
    
    5.3
    
    
    
    
    
    
    
    2.8
 
 (1)
    
    The proceeds were used primarily to pay down our credit facility.(2)
    
    In addition to the $6.4 million net cash proceeds, we also received a note
receivable of $5.6 million. The note provides for payments of principal of $0.5 million due
in December 2004, annual installments of $1.0 million each due August 2005 through August
2008 and $1.1 million due at maturity in August 2009 and does not bear interest.(3)
    
    This sale also generated a note receivable in the amount of $11.8 million, with
annual installments of principal and interest payments June 27, 2004, through maturity on
June 27, 2010. The principal payment amounts are calculated based upon a 20-year
amortization and the interest rate is 4% for the first two years and thereafter the prime
rate, as defined in the note, through maturity. 97




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7. JOINT VENTURES
 Office Segment
 2005 Transactions
 Fulbright Tower
  2211 Michelson
  One Buckhead Plaza
  Paseo del Mar
  Five Houston Center
  98




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2004 Transactions
 The Crescent, Houston Center and Post Oak Central
  Fountain Place and Trammell Crow Center
   Resort Residential Development Segment
  99




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Resort/Hotel Segment
 Canyon Ranch
   Manalapan Hotel Partners
  Other Segment
 Redtail Capital Partners, L.P.
  100




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8. MEZZANINE INVESTMENTS
  InterestOutstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rate at(in millions)
    
    Loan
    
    
    
    
    
    
    
    
    
    Maturity
    
    December
    
    Fixed/Date
    
    Amount
    
    
    
    
    
    Investment
    
    Date
    
    31, 2005
    
    VariableNovember 9, 2004
    
    $
    22.0
    
    
    
    (1)
    
    
    Los Angeles Office Property
    
    
    2006
    
    
    
    13.62
    %
    
    VariableFebruary 7, 2005
    
    
    17.3
    
    
    
    (2)
    
    
    New York City Office Property
    
    
    2007
    
    
    
    12.05
    %
    
    VariableMarch 31, 2005
    
    
    33.0
    
    
    
    (3)
    
    
    Orlando Resort
    
    
    2008
    
    
    
    12.00
    %
    
    FixedMay 31, 2005
    
    
    20.0
    
    
    
    (4)
    
    
    Los Angeles Office Property
    
    
    2007
    
    
    
    12.59
    %
    
    VariableJune 9, 2005
    
    
    12.0
    
    
    
    (5)
    
    
    Dallas Office Property
    
    
    2007
    
    
    
    12.87
    %
    
    VariableAugust 31, 2005
    
    
    7.7
    
    
    
    (6)
    
    
    Three Dallas Office Properties
    
    
    2010
    
    
    
    11.04
    %
    
    FixedNovember 16, 2005
    
    
    25.0
    
    
    
    (7)
    
    
    Los Angeles Office Property
    
    
    2007
    
    
    
    8.87
    %
    
    VariableNovember 16, 2005
    
    
    15.0
    
    
    
    (8)
    
    
    Two Luxury Hotel Properties in California
    
    
    2007
    
    
    
    15.37
    %
    
    VariableDecember 30, 2005
    
    
    20.7
    
    
    
    (9)
    
    
    Office Portfolio in Southeastern U.S.
    
    
    2007
    
    
    
    11.23
    %
    
    Variable
 
 (1)
    
    The loan bears interest at LIBOR plus 925 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to four six-month extension options.(2)
    
    On February 1, 2006, the loan was repaid in full.(3)
    
    Outstanding amount excludes $0.1 million of unamortized premium. On
February 24, 2006, the loan was repaid in full.(4)
    
    The loan bears interest at LIBOR plus 825 basis points with an
interest-only term until maturity, subject to the right of the borrower to two six-month
extensions and a third extension ending December 1, 2008.(5)
    
    The loan bears interest at LIBOR plus 850 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options.(6)
    
    The loan has an interest-only term through September 2007. Beginning
October 2007, the borrower must make principal payments based on a 30-year amortization
schedule until maturity. We determined that the entity to which the loan was funded is a
VIE under FIN 46R of which we are not the primary beneficiary; therefore, we do not
consolidate the entity. Our maximum exposure to loss is limited to the amount of the loan.(7)
    
    The loan bears interest at LIBOR plus 453 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three six-month extension options. The office property
securing our investment is the same property securing our May 31,
2005 investment. We determined that the entity to which the loan was funded is a VIE under FIN
46R of which we are not the primary beneficiary; therefore, we do not consolidate the
entity. Our maximum exposure to loss is limited to the amount of the combined loans.(8)
    
    The loan bears interest at LIBOR plus 1100 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to five one-year extension options.(9)
    
    The loan bears interest at LIBOR plus 685 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options. 101




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. TEMPERATURE-CONTROLLED LOGISTICS
       102




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. INVESTMENTS IN UNCONSOLIDATED COMPANIES
  Our Ownershipas of December 31,Entity
    
    Classification
    
    2005Main Street Partners, L.P.
    
    Office (Bank One Center  Dallas)
    
    50.0%(1)Crescent Irvine, LLC
    
    Office (2211 Michelson Office Development  Irvine)
    
    40.0%(2)Crescent Miami Center, LLC
    
    Office (Miami Center  Miami)
    
    40.0%(3) (4)Crescent One Buckhead Plaza, L.P.
    
    Office (One Buckhead Plaza  Atlanta)
    
    35.0%(5) (4)Crescent POC Investors, L.P.
    
    Office (Post Oak Central  Houston)
    
    23.9%(6) (4)Crescent HC Investors, L.P.
    
    Office (Houston Center  Houston)
    
    23.9%(6) (4)Crescent TC Investors, L.P.
    
    Office (The Crescent  Dallas)
    
    23.9%(6) (4)Crescent Ross Avenue Mortgage Investors, L.P.
    
    Office (Trammell Crow Center, Mortgage  Dallas)
    
    23.9%(7) (4)Crescent Ross Avenue Realty Investors, L.P.
    
    Office (Trammell Crow Center, Ground Lessor  Dallas)
    
    23.9%(7) (4)Crescent Fountain Place, L.P.
    
    Office (Fountain Place  Dallas)
    
    23.9%(7) (4)Crescent Five Post Oak Park L.P.
    
    Office (Five Post Oak  Houston)
    
    30.0%(8) (4)Crescent One BriarLake Plaza, L.P.
    
    Office (BriarLake Plaza  Houston)
    
    30.0%(9) (4)Crescent 1301 McKinney, L.P.
    
    Office (Fulbright Tower  Houston)
    

23.9%(10) (4)Austin PT BK One Tower Office Limited Partnership
    
    Office (Bank One Tower  Austin)
    
    20.0%(11) (4)Houston PT Three Westlake Office Limited Partnership
    
    Office (Three Westlake Park  Houston)
    
    20.0%(11) (4)Houston PT Four Westlake Office Limited Partnership
    
    Office (Four Westlake Park  Houston)
    
    20.0%(11) (4)AmeriCold Realty Trust
    
    Temperature-Controlled Logistics
    
    31.7%(12)CR Operating, LLC
    
    Resort/Hotel
    
    48.0%(13)CR Spa, LLC
    
    Resort/Hotel
    
    48.0%(13)Blue River Land Company, L.L.C.
    
    Other
    
    50.0%(14)EW Deer Valley, L.L.C.
    
    Other
    
    41.7%(15)SunTx Fulcrum Fund, L.P. (SunTx)
    
    Other
    
    28.7%(16)Redtail Capital Partners, L.P. (Redtail)
    
    Other
    
    25.0%(17) (4)Fresh Choice, LLC
    
    Other
    
    40.0%(18)G2 Opportunity Fund, L.P. (G2)
    
    Other
    
    12.5%(19)
 
 (1)
    
    The remaining 50% interest is owned by Trizec Properties, Inc.(2)
    
    The remaining 60% interest is owned by an affiliate of Hines. Crescent Irvine, LLC
acquired a parcel of land to develop a 260,000 square foot Class A Office Property.(3)
    
    The remaining 60% interest is owned by an affiliate of a fund managed by JPM.(4)
    
    We have negotiated performance based incentives, which we refer to as promoted
interests, that allow for additional equity to be earned if return targets are exceeded.(5)
    
    The remaining 65% interest is owned by Metzler US Real Estate Fund, L.P.(6)
    
    Each limited partnership is owned by Crescent Big Tex I, L.P., which is owned 60% by
a fund advised by JPM and 16.1% by affiliates of GE.(7)
    
    Each limited partnership is owned by Crescent Big Tex II, L.P., which is owned 76.1%
by a fund advised by JPM.(8)
    
    The remaining 70% interest is owned by an affiliate of GE.(9)
    
    The remaining 70% interest is owned by affiliates of JPM.(10)
    
    The partnership is owned by Crescent Big Tex III L.P., which is owned 60% by a fund
advised by JPM and 16.1% by affiliates of GE.(11)
    
    The remaining 80% interest is owned by an affiliate of GE.(12)
    
    Of the remaining 68.3% interest, 47.6% is owned by Vornado Realty, L.P. and 20.7%
is owned by The Yucaipa Companies.(13)
    
    The remaining 52% interest is owned by the founders of Canyon Ranch. CR Spa, LLC
operates three resort spas which offer guest programs and services and sells Canyon Ranch
branded skin care products exclusively at the destination health resorts and the resort spas.
CR Operating, LLC operates and manages the two Canyon Ranch destination health resorts, Tucson
and Lenox, and collaborates with select real estate developers in developing residential
lifestyle communities.(14)
    
    The remaining 50% interest is owned by parties unrelated to us. Blue River Land
Company, L.L.C. was formed to acquire, develop and sell certain real estate property in Summit
County, Colorado.(15)
    
    The remaining 58.3% interest is owned by parties unrelated to us. EW Deer Valley,
L.L.C. was formed to acquire, hold and dispose of its 3.3% ownership interest in Empire
Mountain Village, L.L.C. Empire Mountain Village, L.L.C. was formed to acquire, develop and
sell certain real estate property at Deer Valley Ski Resort next to Park City, Utah.(16)
    
    Of the remaining 71.3%, approximately 39.6% is owned by SunTx Capital Partners,
L.P. and the remaining 31.7% is owned by a group of individuals unrelated to us. Of our
limited partnership interest in SunTx, 6.5% is through an unconsolidated investment in SunTx
Capital Partners, L.P., the general partner of SunTx. SunTx Fulcrum Fund, L.P.s objective is
to invest in a portfolio of entities that offer the potential for substantial capital
appreciation.(17)
    
    The remaining 75% interest is owned by Capstead Mortgage Corporation. Redtail was
formed to invest up to $100 million in equity in select mezzanine loans on commercial real
estate over a two-year period.(18)
    
    The remaining 60% interest is owned by Cedarlane Natural Foods, Inc. Fresh Choice
is a restaurant owner, operator and developer.(19)
    
    G2 was formed for the purpose of investing in commercial mortgage backed securities
and other commercial real estate investments. The remaining 87.5% interest is owned by
Goff-Moore Strategic Partners, L.P., or GMSPLP, and by parties unrelated to us. G2 is managed
and controlled by an entity that is owned equally by GMSPLP and GMAC Commercial Mortgage
Corporation, or GMACCM. The ownership structure of GMSPLP consists of an approximately 86%
limited partnership interest owned directly and indirectly by Richard E. Rainwater, Chairman
of our Board of Trust Managers, and an approximately 14% general partnership interest, of
which approximately 6% is owned by Darla Moore, who is married to Mr. Rainwater, and
approximately 6% is owned by John C. Goff, Vice-Chairman of our Board of Trust Managers and
our Chief Executive Officer. The remaining approximately 2% general partnership interest is
owned by unrelated parties. Our investment balance at December 31, 2005 was approximately
$0.9 million. In 2005 we received cash distributions of approximately $19.4 million, bringing
total distributions to approximately $41.8 million on an initial investment of $24.2 million. 103




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fresh Choice
  Impairment of Unconsolidated Investment
 HBCLP, Inc .
  Summary Financial Information
   
    
    Office  This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P., Main
Street Partners, L.P., Crescent Irvine, LLC, Houston PT Three Westlake Office
Limited Partnership, Houston PT Four Westlake Office Limited Partnership, Austin PT
BK One Tower Office Limited Partnership, Crescent Miami Center, LLC, Crescent Five
Post Oak Park L.P., Crescent One BriarLake Plaza, L.P., Crescent Big Tex III, L.P.
and Crescent One Buckhead Plaza, L.P.;
    
    Temperature-Controlled Logistics  This includes AmeriCold Realty Trust;
    
    Resort/Hotel  This includes CR Operating, LLC and CR Spa, LLC ; and
    
    Other  This includes Blue River Land Company, L.L.C., EW Deer Valley, L.L.C.,
SunTx, SunTx Capital Partners, L.P., Redtail, Fresh Choice, LLC and G2.
  
    
    Office  This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P., Main
Street Partners, L.P., Houston PT Three Westlake Office Limited Partnership,
Houston PT Four Westlake Office Limited Partnership, Austin PT BK One Tower Office
Limited Partnership, Crescent 5 Houston Center, L.P., Crescent Miami Center, LLC,
Crescent Five Post Oak Park L.P. and Crescent One BriarLake Plaza, L.P.;
    
    Temperature-Controlled Logistics  This includes AmeriCold Realty Trust; and
    
    Other  This includes Blue River Land Company, L.L.C., EW Deer Valley, L.L.C.,
CR License, L.L.C., CR License II, L.L.C., Canyon Ranch Las Vegas, L.L.C., SunTx
Fulcrum Fund, L.P., SunTx Capital Partners, L.P. and G2.
 104




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
    
    Office  This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
Main Street Partners, L.P., Crescent Irvine, LLC, Houston PT Three Westlake Office
Limited Partnership, Houston PT Four Westlake Office Limited Partnership, Austin PT
BK One Tower Office Limited Partnership, Crescent 5 Houston Center, L.P., Crescent
Miami Center, LLC, Crescent Five Post Oak Park L.P., Crescent One BriarLake Plaza,
L.P., Crescent Big Tex III, L.P. and Crescent One Buckhead Plaza, L.P.;
    
    Temperature-Controlled Logistics  This includes AmeriCold Realty Trust;
    
    Resort/Hotel  This includes CR Operating, LLC and CR Spa, LLC; and
    
    Other  This includes Blue River Land Company, L.L.C., EW Deer Valley, L.L.C.,
SunTx, SunTx Capital Partners, L.P., Redtail, Fresh Choice, LLC and G2.
  
    
    Office  This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
Main Street Partners, L.P., Houston PT Three Westlake Office Limited Partnership,
Houston PT Four Westlake Office Limited Partnership, Austin PT BK One Tower Office
Limited Partnership, Crescent 5 Houston Center, L.P., Crescent Miami Center, LLC,
Crescent Five Post Oak Park L.P. and Crescent One BriarLake Plaza, L.P.;
    
    Temperature-Controlled Logistics  This includes AmeriCold Reality Trust,
Vornado Crescent Portland Partnership and VCQ; and
    
    Other  This includes Blue River Land Company, L.L.C., EW Deer Valley, L.L.C.,
CR License, L.L.C., CR License II, L.L.C., Canyon Ranch Las Vegas, L.L.C., SunTx
Fulcrum Fund, L.P., SunTx Capital Partners, L.P. and G2.
  
    
    Office  This includes Main Street Partners, L.P., Houston PT Three Westlake
Office Limited Partnership, Houston PT Four Westlake Office Limited Partnership,
Austin PT BK One Tower Office Limited Partnership, Crescent 5 Houston Center, L.P.,
Crescent Miami Center, LLC, Crescent Five Post Oak Park L.P., Crescent One
BriarLake Plaza, L.P. and Woodlands Commercial Properties Company, L.P.;
    
    Temperature-Controlled Logistics  This includes the Vornado Crescent Portland
Partnership and VCQ;
    
    The Woodlands Land Development Company, L.P.; and
    
    Other  This includes Manalapan Hotel Partners, L.L.C., Blue River Land Company,
L.L.C., EW Deer Valley, L.L.C., CR License, L.L.C., CR License II, L.L.C., the
Woodlands Operating Company, L.P., Canyon Ranch Las Vegas, L.L.C., SunTx Fulcrum
Fund, L.P. and G2.
 Balance Sheets:
 As of December 31, 2005Temperature-Controlled(in thousands)
    
    Office
    
    
    Logistics
    
    
    Resort/Hotel
    
    
    Other(1)
    
    
    TotalReal estate, net
    
    $
    1,995,719
    
    
    $
    1,122,155
    
    
    $
    106,898
    
    
    $
    Cash
    
    
    71,361
    
    
    
    25,418
    
    
    
    52,688
    
    
    
    2,206Restricted Cash
    
    
    36,120
    
    
    
    61,367
    
    
    
    
    
    
    
    392Other assets
    
    
    148,136
    
    
    
    163,925
    
    
    
    11,643
    
    
    
    117,358Total assets
    
    $
    2,251,336
    
    
    $
    1,372,865
    
    
    $
    171,229
    
    
    $
    119,956Notes payable
    
    $
    1,244,499
    
    
    $
    765,640
    
    
    $
    95,000
    
    
    $
    Other liabilities
    
    
    104,892
    
    
    
    109,161
    
    
    
    27,781
    
    
    
    289Preferred membership units
    
    
    
    
    
    
    
    
    
    
    104,192
    
    
    
    Equity
    
    
    901,945
    
    
    
    498,064
    
    
    
    (55,744
    )
    
    
    119,667Total liabilities and equity
    
    $
    2,251,336
    
    
    $
    1,372,865
    
    
    $
    171,229
    
    
    $
    119,956Our share of unconsolidated debt
    
    $
    348,663
    
    
    $
    242,708
    
    
    $
    45,600
    
    
    $
    9,942
    
    
    $
    646,913Our investments in
unconsolidated companies
    
    $
    178,440
    
    
    $
    162,439
    
    
    $
    6,200
    
    
    $
    46,456
    
    
    $
    393,535
 
 (1)
    
    Summarized financial information for G2 and SunTx is based on the latest
financial statements that were practicable to obtain. As of December 31, 2005, our
investments in unconsolidated companies includes $27.8 million for SunTx and $0.9
million for G2. 105




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Balance Sheets:
 As of December 31, 2004Temperature-Controlled(in thousands)
    
    Office
    
    
    Logistics
    
    
    Other(1)
    
    
    TotalReal estate, net
    
    $
    1,866,697
    
    
    $
    1,177,190
    
    
    $
    Cash
    
    
    90,801
    
    
    
    21,694
    
    
    
    2,251Other assets
    
    
    103,990
    
    
    
    233,153
    
    
    
    577,482Total assets
    
    $
    2,061,488
    
    
    $
    1,432,037
    
    
    $
    579,733Notes payable
    
    $
    1,180,177
    
    
    $
    801,042
    
    
    
    369,974Other liabilities
    
    
    76,542
    
    
    
    100,555
    
    
    
    21,414Equity
    
    
    804,769
    
    
    
    530,440
    
    
    
    188,345Total liabilities and equity
    
    $
    2,061,488
    
    
    $
    1,432,037
    
    
    $
    579,733Our share of unconsolidated debt
    
    $
    325,418
    
    
    $
    253,931
    
    
    $
    
    
    
    $
    579,349Our investments in
unconsolidated companies
    
    $
    146,065
    
    
    $
    172,609
    
    
    $
    43,969
    
    
    $
    362,643
 
 (1)
    
    Summarized financial information for G2 and SunTx was based on the
latest financial statements that were practicable to obtain. As of December 31,
2004, our investments in unconsolidated companies includes $14.2 million for
SunTx and $13.0 million for G2. Summary Statements of Operations:
 For the year ended December 31, 2005Temperature-Controlled(in thousands)
    
    Office
    
    
    Logistics(1)
    
    
    Resort/Hotel
    
    
    Other(2)
    
    
    TotalTotal revenues
    
    $
    337,449
    
    
    $
    846,881
    
    
    $
    138,491
    
    
    $
    71,016Operating expense
    
    
    161,934
    
    
    
    699,701
    
    
    
    114,269
    
    
    
    Net operating income
    
    $
    175,515
    
    
    $
    147,180
    
    
    $
    24,222
    
    
    $
    71,016Interest expense
    
    $
    68,654
    
    
    $
    56,273
    
    
    $
    5,542
    
    
    $
    8Depreciation and amortization
    
    
    81,634
    
    
    
    73,776
    
    
    
    10,367
    
    
    
    Preferred dividends
    
    
    
    
    
    
    
    
    
    
    12,003
    
    
    
    Taxes and other (income) expense
    
    
    (704
    )
    
    
    243
    
    
    
    2,754
    
    
    
    1,104Total expenses
    
    $
    149,584
    
    
    $
    130,292
    
    
    $
    30,666
    
    
    $
    1,112Net income (loss)
    
    $
    25,931
    
    
    $
    16,888
    
    
    $
    (6,444
    )
    
    $
    69,904Our equity in net income (loss)
of unconsolidated companies
    
    $
    11,464
    
    
    $
    234
    
    
    $
    (1,541
    )
    
    $
    17,394
    (3)
    
    $
    27,551
 
 (1)
    
    In connection with the dissolution of Vornado Crescent Portland
Partnership, we agreed to pay Vornado Realty, L.P. an annual management fee of $4.5
million, payable only out of dividends or sale proceeds on the shares of AmeriCold that
we own. Our share of equity in net income (loss) for Temperature-Controlled Logistics
includes management fees payable to Vornado Realty, L.P. totaling $4.5 million for the
year ended December 31, 2005.(2)
    
    Summarized financial information for G2 and SunTx is based on the latest
financial statements that were practicable to obtain. For the year ended December 31,
2005, our equity in net income (loss) of unconsolidated companies includes $10.9 million
for SunTx and $7.3 million for G2.(3)
    
    Includes approximately $5.1 million of income recorded in the second quarter
of 2005 resulting from an increase in 2004 actual results from previously estimated
results related to SunTx. 106




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Summary Statements of Operations:
 For the year ended December 31, 2004Temperature-Controlled(in thousands)
    
    Office
    
    
    Logistics
    
    
    Other(1)
    
    
    TotalTotal revenues
    
    $
    156,670
    
    
    $
    223,990
    
    
    $
    46,321Operating expense
    
    
    77,684
    
    
    
    121,935
    (2)
    
    
    Net operating income
    
    $
    78,986
    
    
    $
    102,055
    
    
    $
    46,321Interest expense
    
    
    34,368
    
    
    
    52,069
    
    
    
    17,958Depreciation and amortization
    
    
    35,916
    
    
    
    59,813
    
    
    
    Preferred dividends
    
    
    
    
    
    
    
    
    
    
    Taxes and other (income) expense
    
    
    113
    
    
    
    1,509
    
    
    
    4,459Total expenses
    
    $
    70,397
    
    
    $
    113,391
    
    
    $
    22,417Gain (loss) on sale of assets
    
    $
    
    
    
    $
    32,975
    
    
    $
    Net income
    
    $
    8,589
    
    
    $
    21,639
    
    
    $
    23,904Our equity in net income (loss) of
unconsolidated companies
    
    $
    6,262
    
    
    $
    6,153
    
    
    $
    (2,791
    )
(3)
    
    $
    9,624
 
 (1)
    
    Summarized financial information for G2 and SunTx was based on the latest
financial statements that were practicable to obtain. For the year ended December 31,
2004, our equity in net income (loss) of unconsolidated companies includes $(0.6)
million for SunTx and $1.2 million for G2.(2)
    
    Inclusive of the preferred return paid to Vornado Realty, L.P. (1% per annum
of the total combined assets through November 18, 2004).(3)
    
    Does not include approximately $5.1 million of income recorded in the second
quarter 2005 resulting from an increase in 2004 actual results from previously estimated
results related to SunTx. Summary Statements of Operations:
 For the year ended December 31, 2003Temperature-
    
    
    The WoodlandsControlled
    
    
    Land Development(in thousands)
    
    Office
    
    
    Logistics
    
    
    Company, L.P.(1)
    
    
    Other(2)
    
    
    TotalTotal revenues
    
    $
    141,994
    
    
    $
    124,413
    
    
    $
    135,411
    
    
    $
    46,999Operating expense
    
    
    62,009
    
    
    
    24,158
    (3)
    
    
    100,005
    
    
    
    Net operating income
    
    $
    79,985
    
    
    $
    100,255
    
    
    $
    35,406
    
    
    $
    46,999Interest expense
    
    
    29,976
    
    
    
    41,727
    
    
    
    6,991
    
    
    
    29,892Depreciation and amortization
    
    
    35,986
    
    
    
    58,014
    
    
    
    6,735
    
    
    
    Taxes and other (income) expense
    
    
    
    
    
    
    (5,166
    )
    
    
    
    
    
    
    6,502Total expenses
    
    $
    65,962
    
    
    $
    94,575
    
    
    $
    13,726
    
    
    $
    36,394Gain on sale of assets
    
    
    
    
    
    
    810
    
    
    
    
    
    
    
    Net income, impairments and gain
(loss) on real estate from
discontinued operations
    
    
    10,533
    
    
    
    
    
    
    
    (727
    )
    
    
    Net income
    
    $
    24,556
    
    
    $
    6,490
    
    
    $
    20,953
    
    
    $
    10,605Our equity in net income (loss) of
unconsolidated companies
    
    $
    11,190
    
    
    $
    2,172
    
    
    $
    11,000
    
    
    $
    1,134
    
    
    $
    25,496
 
 (1)
    
    We sold our interest in The Woodlands Land Development Company, L.P. on December
31, 2003.(2)
    
    Summarized financial information for G2 and SunTx was based on the latest
financial statements that were practicable to obtain. For the year ended December 31,
2003, our equity in net income (loss) of unconsolidated companies includes $1.2 million
for SunTx and $1.2 million for G2.(3)
    
    Inclusive of the preferred return paid to Vornado Realty, L.P. (1% per annum of the
total combined assets). 107




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Unconsolidated Debt Analysis
  Balance
    
    
    Our Share ofOutstanding at
    
    
    Balance at
    
    
    Interest Rate atOur
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,Description
    
    Ownership
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    Maturity Date
    
    
    Fixed/Variable(1)(in thousands)
    
    
    (in thousands)Temperature-Controlled Logistics Segment:AmeriCold Realty Trust
    
    
    31.70
    %Goldman Sachs (2)
    
    
    
    
    
    $
    469,853
    
    
    $
    148,943
    
    
    
    6.89
    %
    
    
    5/11/2023
    
    
    FixedMorgan Stanley (3)
    
    
    
    
    
    
    245,207
    
    
    
    77,731
    
    
    
    7.32
    %
    
    
    4/9/2009
    
    
    VariableOther
    
    
    
    
    
    
    50,580
    
    
    
    16,034
    
    
    3.48% to 13.63%
    
    6/1/2006 to 4/1/2017
    
    Fixed$
    765,640
    
    
    $
    242,708Office Segment:Crescent HC Investors, L.P.
    
    
    23.85
    %
    
    
    269,705
    
    
    
    64,325
    
    
    
    5.03
    %
    
    
    11/7/2011
    
    
    FixedCrescent TC Investors, L.P.
    
    
    23.85
    %
    
    
    214,770
    
    
    
    51,223
    
    
    
    5.00
    %
    
    
    11/1/2011
    
    
    FixedMain Street Partners, L.P. (4) (5)
    
    
    50.00
    %
    
    
    106,889
    
    
    
    53,444
    
    
    
    7.18
    %
    
    
    12/1/2006
    
    
    VariableCrescent Fountain Place, L.P.
    
    
    23.85
    %
    
    
    105,932
    
    
    
    25,265
    
    
    
    4.95
    %
    
    
    12/1/2011
    
    
    FixedCrescent POC Investors, L.P.
    
    
    23.85
    %
    
    
    97,504
    
    
    
    23,255
    
    
    
    4.98
    %
    
    
    12/1/2011
    
    
    FixedCrescent One Buckhead Plaza, L.P.
    
    
    35.00
    %
    
    
    85,000
    
    
    
    29,750
    
    
    
    5.47
    %
    
    
    4/8/2015
    
    
    FixedCrescent Miami Center, LLC
    
    
    40.00
    %
    
    
    81,000
    
    
    
    32,400
    
    
    
    5.04
    %
    
    
    9/25/2007
    
    
    FixedCrescent 1301 McKinney, L.P. (6)(7)
    
    
    23.85
    %
    
    
    73,350
    
    
    
    17,494
    
    
    
    4.73
    %
    
    
    1/9/2008
    
    
    VariableCrescent One BriarLake Plaza, L.P.
    
    
    30.00
    %
    
    
    50,000
    
    
    
    15,000
    
    
    
    5.40
    %
    
    
    11/1/2010
    
    
    FixedHouston PT Four Westlake Office Limited Partnership
    
    
    20.00
    %
    
    
    46,674
    
    
    
    9,335
    
    
    
    7.13
    %
    
    
    8/1/2006
    
    
    FixedCrescent Five Post Oak Park, L.P.
    
    
    30.00
    %
    
    
    44,373
    
    
    
    13,312
    
    
    
    4.82
    %
    
    
    1/1/2008
    
    
    FixedAustin PT BK One Tower Office Limited Partnership
    
    
    20.00
    %
    
    
    36,302
    
    
    
    7,260
    
    
    
    7.13
    %
    
    
    8/1/2006
    
    
    FixedHouston PT Three Westlake Office Limited Partnership
    
    
    20.00
    %
    
    
    33,000
    
    
    
    6,600
    
    
    
    5.61
    %
    
    
    9/1/2007
    
    
    Fixed$
    1,244,499
    
    
    $
    348,663Resort/Hotel Segment:CR Resort, LLC
    
    
    48.00
    %
    
    $
    95,000
    
    
    $
    45,600
    
    
    
    5.94
    %
    
    
    2/1/2015
    
    
    FixedOther Segment:Redtail Capital Partners One, LLC (8)
    
    
    25.00
    %
    
    $
    25,368
    
    
    $
    6,342
    
    
    
    6.22
    %
    
    
    8/9/2008
    
    
    VariableFresh Choice, LLC
    
    
    40.00
    %GE Capital Franchise Finance Corporation (9)
    
    
    
    
    
    
    5,000
    
    
    
    2,000
    
    
    
    9.12
    %
    
    
    1/1/2011
    
    
    VariableVarious Loans and Capital Leases
    
    
    
    
    
    
    4,198
    
    
    
    1,679
    
    
    0.00% to 12.00%
    
    4/1/2006 to 12/31/2029
    
    Fixed$
    34,566
    
    
    $
    10,021Total Unconsolidated Debt
    
    
    
    
    
    $
    2,139,705
    
    
    $
    646,992Fixed Rate/Weighted Average
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.95
    %
    
    9.4 yearsVariable Rate/Weighted Average
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.97
    %
    
    2.4 yearsTotal Weighted Average
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.20
    %
    
    7.7 years
 
 (1)
    
    All unconsolidated debt is secured.(2)
    
    URS Real Estate, L.P. and AmeriCold Real Estate, L.P. expect to repay the notes on
the Optional Prepayment Date of April 11, 2008.(3)
    
    The loan bears interest at LIBOR plus 295 basis points (with a LIBOR floor of 1.5%
with respect to $54.4 million of the loan) and requires principal payments of $5.0 million
annually. In connection with this loan, a subsidiary of AmeriCold Realty Trust entered into
an interest-rate cap agreement with a maximum LIBOR of 6.50% on the entire amount of the loan.(4)
    
    Senior Note  Note A: $79.0 million at variable interest rate, LIBOR plus 189 basis
points, $4.6 million at variable interest rate, LIBOR plus 250 basis points with a LIBOR floor
of 2.50%. Note B: $23.2 million at variable interest rate, LIBOR plus 650 basis points with
a LIBOR floor of 2.50%. In connection with this loan, we entered into an interest-rate cap
agreement with a maximum LIBOR of 4.52% on all notes. All notes are amortized based on a
25-year schedule.(5)
    
    We and our JV partner each obtained a separate letter of credit to guarantee the
repayment of up to $4.3 million each of principal of the Main Street Partners, L.P. loan.(6)
    
    This loan has two one-year extension options.(7)
    
    On January 9, 2006, Crescent 1301 McKinney, L.P. purchased a one-year 7.0% interest
rate cap on 1-month LIBOR with a notional amount of $73.4 million. We will be required to
purchase a new cap in January 2007 that limits the interest rate to 1:1 debt service coverage.(8)
    
    This loan has one one-year extension option. Redtail Capital Partners One, LLC is
owned 100% by Redtail Capital Partners, L.P.(9)
    
    We guarantee $1.0 million of this loan. 108




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. OTHER ASSETS AND OTHER LIABILITIES
 Other Assets
 December 31,(in thousands)
    
    2005
    
    
    2004Leasing costs
    
    $
    115,828
    
    
    $
    112,637Other intangibles
    
    
    119,766
    
    
    
    115,036Intangible office leases
    
    
    77,239
    
    
    
    99,853Deferred financing costs
    
    
    47,590
    
    
    
    43,458Marketable securities
    
    
    21,580
    
    
    
    34,690
    (1)Prepaid expenses
    
    
    20,954
    
    
    
    19,416Other
    
    
    22,837
    
    
    
    16,821$
    425,794
    
    
    $
    441,911Less  accumulated amortization
    
    
    (130,679
    )
    
    
    (115,878
    )$
    295,115
    
    
    $
    326,033
 
 (1)
    
    Includes securities reported at cost of approximately $4.6 million for
Fresh Choice at December 31, 2004. Identified Intangible Assets
  December 31,(in thousands)
    
    2005
    
    
    2004Identified intangible assets (included in other assets):Resort Residential Development Segment:Intangibles (1)
    
    $
    119,766
    
    
    $
    115,036Accumulated amortization
    
    
    (50,956
    )
    
    
    (46,302
    )Net intangibles
    
    $
    68,810
    
    
    $
    68,734Office Segment:Intangibles (2)
    
    $
    77,239
    
    
    $
    99,853Accumulated amortization
    
    
    (15,520
    )
    
    
    (7,253
    )Net intangibles
    
    $
    61,719
    
    
    $
    92,600Identified intangible liabilities (included in accounts payable, accrued
expenses and other liabilities):Office Segment:Intangibles (3)
    
    $
    9,876
    
    
    $
    5,775Accumulated amortization
    
    
    (2,026
    )
    
    
    (706
    )Net intangibles
    
    $
    7,850
    
    
    $
    5,069
 
 (1)
    
    Consists of deferred memberships and water rights.(2)
    
    Consists of acquired in-place leases and above market leases.(3)
    
    Consists of acquired below market leases.  (in thousands)2006
    
    $
    1,7722007
    
    
    1,2862008
    
    
    3962009
    
    
    1152010
    
    
    (167
    )
 109




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  ResortResidential(in thousands)
    
    Development
    
    
    Office
    
    
    Total2006
    
    $
    5,523
    
    
    $
    5,772
    
    
    $
    11,2952007
    
    
    4,559
    
    
    
    5,772
    
    
    
    10,3312008
    
    
    5,064
    
    
    
    5,772
    
    
    
    10,8362009
    
    
    6,957
    
    
    
    5,772
    
    
    
    12,7292010
    
    
    15,200
    
    
    
    5,705
    
    
    
    20,905
 Marketable Securities
  As of December 31, 2005
    
    
    As of December 31, 2004(in thousands)
    
    
    
    
    
    Fair
    
    
    Unrealized
    
    
    
    
    
    
    Fair
    
    
    UnrealizedType of Security
    
    Cost
    
    
    Value
    
    
    Gain/(Loss)
    
    
    Cost
    
    
    Value
    
    
    Gain/(Loss)Held to maturity (1)
    
    $
    274,134
    
    
    $
    271,659
    
    
    $
    (2,475
    )
    
    $
    175,853
    
    
    $
    173,650
    
    
    $
    (2,203
    )Trading (2)
    
    
    690
    
    
    
    728
    
    
    
    N/A
    
    
    
    3,535
    
    
    
    3,814
    
    
    
    N/AAvailable for
sale (3)
    
    
    20,284
    
    
    
    20,852
    
    
    
    568
    
    
    
    25,191
    
    
    
    26,227
    
    
    
    1,036Total
    
    $
    295,108
    
    
    $
    293,239
    
    
    $
    (1,907
    )
    
    $
    204,579
    
    
    $
    203,691
    
    
    $
    (1,167
    )
 For the year ended
    
    
    For the year ended
    
    
    For the year endedDecember 31, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003(in thousands)
    
    Realized
    
    
    Change
    
    
    Realized
    
    
    Change
    
    
    Realized
    
    
    ChangeType of Security
    
    Gain/(Loss)
    
    
    In OCI
    
    
    Gain/(Loss)
    
    
    In OCI
    
    
    Gain/(Loss)
    
    
    In OCIHeld to maturity (1)
    
    $
    
    
    
    
    N/A
    
    
    $
    
    
    
    
    N/A
    
    
    $
    
    
    
    $
    N/ATrading (2)
    
    
    139
    
    
    
    N/A
    
    
    
    1,149
    
    
    
    N/A
    
    
    
    76
    
    
    
    N/AAvailable for sale (3)
    
    
    (19
    )
    
    
    468
    
    
    
    6
    
    
    
    1,036
    
    
    
    (502
    )
    
    
    514Total
    
    $
    120
    
    
    $
    468
    
    
    $
    1,155
    
    
    $
    1,036
    
    
    $
    (426
    )
    
    $
    514
 
 (1)
    
    Held to maturity securities are carried at amortized cost and consist of U.S.
Treasury and government sponsored agency securities purchased for the sole purpose of funding
debt service payments on the LaSalle Note I, LaSalle Note II and the Nomura Funding VI note.
See Note 12, Notes Payable and Borrowings Under Credit Facility, for additional information
on the defeasance of these notes.(2)
    
    Trading securities primarily consist of marketable securities purchased in
connection with our dividend incentive unit program. These securities are included in Other
assets, net in the accompanying Consolidated Balance Sheets and are marked to market value on
a monthly basis with the change in fair value recognized in earnings.(3)
    
    Available for sale securities consist of marketable securities that we intend to
hold for an indefinite period of time. These securities consist of $15.0 million of bonds and
$5.9 million of preferred stock which are included in Other assets, net in the accompanying
Consolidated Balance Sheets and are marked to market value on a monthly basis with the
corresponding unrealized gain or loss recorded in OCI. Accounts Payable, Accrued Expenses and Other Liabilities
 December 31,(in thousands)
    
    2005
    
    
    2004Deferred revenue
    
    $
    121,308
    
    
    $
    117,257Accounts payable
    
    
    72,150
    
    
    
    71,496Resort Residential contract deposits
    
    
    70,491
    
    
    
    26,903Accrued property taxes
    
    
    34,180
    
    
    
    32,935Accrued interest
    
    
    21,179
    
    
    
    19,483Resort/Hotel deposits
    
    
    8,621
    
    
    
    21,820Office security deposits
    
    
    5,945
    
    
    
    5,634Other accrued expenses
    
    
    138,046
    
    
    
    126,820$
    471,920
    
    
    $
    422,348
 110




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY
  Interest Rate atDecember 31,Secured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaturityDescription
    
    Asset
    
    
    2005
    
    
    2004
    
    
    Interest Rate
    
    
    2005
    
    
    2004
    
    
    
    
    
    
    Date(dollars in thousands)Secured Fixed Rate Debt:AEGON Partnership Note (1)
    
    Greenway Plaza
    
    $
    248,678
    
    
    $
    254,604
    
    
    
    
    
    
    
    7.53
    %
    
    
    
    
    
    
    
    
    
    July 2009Prudential Note
    
    707 17th Street/Denver Marriott
    
    
    70,000
    
    
    
    70,000
    
    
    
    
    
    
    
    5.22
    
    
    
    
    
    
    
    
    
    
    June 2010JP Morgan Chase III
    
    Datran Center
    
    
    65,000
    
    
    
    
    
    
    
    
    
    
    
    4.88
    
    
    
    
    
    
    
    
    
    
    October 2015Morgan Stanley I
    
    Alhambra
    
    
    50,000
    
    
    
    50,000
    
    
    
    
    
    
    
    5.06
    
    
    
    
    
    
    
    
    
    
    October 2011Bank of America Note (2)
    
    Colonnade
    
    
    37,922
    
    
    
    38,000
    
    
    
    
    
    
    
    5.53
    
    
    
    
    
    
    
    
    
    
    May 2013Metropolitan Life Note VII
    
    Dupont Centre
    
    
    35,500
    
    
    
    35,500
    
    
    
    
    
    
    
    4.31
    
    
    
    
    
    
    
    
    
    
    May 2011Mass Mutual Note (3)
    
    3800 Hughes
    
    
    34,177
    
    
    
    36,692
    
    
    
    
    
    
    
    7.75
    
    
    
    
    
    
    
    
    
    
    August 2006Column Financial
    
    Peakview Tower
    
    
    33,000
    
    
    
    
    
    
    
    
    
    
    
    5.59
    
    
    
    
    
    
    
    
    
    
    April 2015Northwestern Life Note
    
    301 Congress
    
    
    26,000
    
    
    
    26,000
    
    
    
    
    
    
    
    4.94
    
    
    
    
    
    
    
    
    
    
    November 2008Allstate Note (3)
    
    3993 Hughes
    
    
    24,781
    
    
    
    25,509
    
    
    
    
    
    
    
    6.65
    
    
    
    
    
    
    
    
    
    
    September 2010JP Morgan Chase II
    
    3773 Hughes
    
    
    24,755
    
    
    
    24,755
    
    
    
    
    
    
    
    4.98
    
    
    
    
    
    
    
    
    
    
    September 2011Metropolitan Life Note VI (3)
    
    3960 Hughes
    
    
    23,011
    
    
    
    23,919
    
    
    
    
    
    
    
    7.71
    
    
    
    
    
    
    
    
    
    
    October 2009Construction, Acquisition and other obligations
    
    Various Office and Resort Residential Assets
    
    
    36,526
    
    
    
    74,099
(4)
    
    
    
    
    
    
    2.9 to 13.75

    
    
    
    
    
    
    
    
    
    July 2007 to Sept. 2011Secured Fixed Rate Defeased Debt(5):LaSalle Note II
    
    
    Funding II Defeasance
    
    
    155,188
    
    
    
    157,477
    
    
    
    
    
    
    
    7.79
    
    
    
    
    
    
    
    
    
    
    March 2006LaSalle Note I
    
    
    Funding I Defeasance
    
    
    101,723
    
    
    
    103,300
    
    
    
    
    
    
    
    7.83
    
    
    
    
    
    
    
    
    
    
    August 2007Nomura Funding VI Note
    
    
    Funding VI Defeasance
    
    
    7,445
    
    
    
    7,659
    
    
    
    
    
    
    
    10.07
    
    
    
    
    
    
    
    
    
    
    July 2010Subtotal/Weighted Average
    
    
    
    
    
    $
    973,706
    
    
    $
    927,514
    
    
    
    
    
    
    
    6.71
    %
    
    
    6.96
    %Unsecured Fixed Rate Debt:The 2009
Notes (6) (7)
    
    
    
    
    
    $
    375,000
    
    
    $
    375,000
    
    
    
    
    
    
    
    9.25
    %
    
    
    
    
    
    
    
    
    
    April 2009The 2007
Notes (6)
    
    
    
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    
    
    
    
    7.50
    
    
    
    
    
    
    
    
    
    
    September 2007Subtotal/Weighted Average
    
    
    
    
    
    $
    625,000
    
    
    $
    625,000
    
    
    
    
    
    
    
    8.55
    %
    
    
    8.55
    %Secured Variable Rate Debt:GACC Note
(8)
    
    Funding One Assets
    
    $
    165,000
    
    
    $
    
    
    
    LIBOR + 147 bps
    
    
    5.84
    %
    
    
    
    
    
    
    
    
    
    June 2007Key Bank
Construction Loan (9)
    
    Ritz Construction
    
    
    15,162
    
    
    
    
    
    
    LIBOR + 225 bps
    
    
    6.62
    
    
    
    
    
    
    
    
    
    
    July 2008JPMorgan
Chase (10)
    
    Northstar Big Horn Construction
    
    
    17,164
    
    
    
    
    
    
    Prime  50 bps
    
    
    6.75
    
    
    
    
    
    
    
    
    
    
    October 2007Guaranty
Bank (11)
    
    Paseo Del Mar Construction
    
    
    14,606
    
    
    
    
    
    
    LIBOR + 175 bps
    
    
    6.00
    
    
    
    
    
    
    
    
    
    
    September 2008Societe
Generale (12)
    
    3883 Hughes Construction
    
    
    314
    
    
    
    
    
    
    LIBOR + 180 bps
    
    
    6.17
    
    
    
    
    
    
    
    
    
    
    September 2008Bank One
    
    Northstar Ironhorse Construction
    
    
    42,671
    
    
    
    
    
    
    Prime + 50 bps
    
    
    7.75
    
    
    
    
    
    
    
    
    
    
    October 2006Bank of
America (13)
    
    Jefferson Station Apartments Construction
    
    
    24,526
    
    
    
    4,300
    
    
    LIBOR + 200 bps
    
    
    6.33
    
    
    
    
    
    
    
    
    
    
    November 2007Bank of America Term Loan
    
    Fund XII
    
    
    
    
    
    
    199,995Fleet Term Loan
    
    Distributions from Fund III, IV & V
    
    
    
    
    
    
    75,000Morgan Stanley II
    
    Fulbright Tower
    
    
    
    
    
    
    70,000Construction, Acquisition and other obligations
    
    Various Office and Resort Residential Assets
    
    
    70,003
    
    
    
    107,946
    
    
    LIBOR + 125 to450
bpsor Prime  75 to+ 100 bps
    
    
    5.57 to 8.81
    
    
    
    
    
    
    
    
    
    
    Jan. 2006 to Dec. 2012Subtotal/Weighted Average
    
    
    
    
    
    $
    349,446
    
    
    $
    457,241
    
    
    
    
    
    
    
    6.43
    %
    
    
    4.96
    %Unsecured Variable Rate Debt:Credit
Facility (14)
    
    
    
    
    
    $
    234,000
    
    
    $
    142,500
    
    
    LIBOR + 160 bps
    
    
    5.92
    %
    
    
    
    
    
    
    
    
    
    February 2008Junior
Subordinated Notes (15)
    
    
    
    
    
    
    51,547
    
    
    
    
    
    
    LIBOR + 200 bps
    
    
    6.24
    
    
    
    
    
    
    
    
    
    
    June 2035Junior
Subordinated Notes (15)
    
    
    
    
    
    
    25,774
    
    
    
    
    
    
    LIBOR + 200 bps
    
    
    6.24
    
    
    
    
    
    
    
    
    
    
    July 2035Subtotal/Weighted Average
    
    
    
    
    
    $
    311,321
    
    
    $
    142,500
    
    
    
    
    
    
    
    6.00
    %
    
    
    4.61
    %Total/Weighted Average
    
    
    
    
    
    $
    2,259,473
    
    
    $
    2,152,255
    
    
    
    
    
    
    

7.08(16)
    %
    
    
    6.84
    %Average remaining term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.9 years
 111




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (1)
    
    The remaining outstanding balance of this note at maturity will be approximately
$223.4 million.(2)
    
    The outstanding principal balance of this loan at maturity will be approximately
$33.7 million.(3)
    
    We assumed these loans in connection with the Hughes Center acquisitions. The
following table lists the unamortized premium associated with the assumption of above market
interest rate debt which is included in the balance outstanding at December 31, 2005, the
effective interest rate of the debt including the premium and the outstanding principal
balance at maturity: (dollars in thousands)Unamortized
    
    
    
    
    
    
    Balance atLoan
    
    Premium
    
    
    Effective Rate
    
    
    MaturityMass Mutual Note
    
    $
    826
    
    
    
    3.47
    %
    
    $
    32,692Allstate Note
    
    
    1,196
    
    
    
    5.19
    %
    
    
    20,771Metropolitan Life Note VI
    
    
    1,507
    
    
    
    5.68
    %
    
    
    19,239Northwestern Life Note II
    
    
    478
    
    
    
    3.80
    %
    
    
    8,663Total
    
    $
    4,007
    
    
    
    
    
    
    $
    81,365
  (4)
    
    Amount includes a $36.8 million loan served by Datran
Center(5)
    
    We have purchased U.S. Treasuries and government sponsored agency securities, or
defeasance investments, to substitute as collateral for these loans. The cash flow from the
defeasance investments matches the debt service payments for each loan.(6)
    
    To incur any additional debt, the indenture requires us to meet thresholds for a
number of customary financial and other covenants including maximum leverage ratios, minimum
debt service coverage ratios, maximum secured debt as a percentage of total undepreciated
assets, and ongoing maintenance of unencumbered assets. Additionally, as long as the 2009
Notes are not rated investment grade, there are restrictions on our ability to make certain
payments, including distributions to shareholders and investments.(7)
    
    At our option, these notes can be called beginning in April 2006 for 104.6%, in
April 2007 for 102.3% and beginning in April 2008 and thereafter for par.(8)
    
    This note consists of a $110.0 million senior loan, a $40.0 million first mezzanine
loan and a $15.0 million second mezzanine loan. This loan has three one-year extension
options.(9)
    
    The maximum facility amount is $175.0 million. This loan has three one-year
extension options.(10)
    
    The maximum facility amount is $121.0 million.(11)
    
    The maximum facility amount is $53.1 million and the loan has two one-year
extension options. Our partner provides a full guarantee of this loan.(12)
    
    The maximum facility amount is $52.3 million and the loan has two one-year
extension options.(13)
    
    The maximum facility amount is $41.0 million and the loan has two one-year
extension options. Our partner provides a full guarantee of this loan.(14)
    
    In 2005, we entered into a $400.0 million credit facility as modified, with Key
Bank, which replaced the previous facility. All outstanding amounts under the previous
facility were repaid in full using cash on hand and proceeds from an initial borrowing under
the new facility. Availability under the line of credit is subject to certain covenants
including limitations on total leverage, fixed charge ratio, debt service coverage ratio,
minimum tangible net worth, and a specific mix of office and hotel assets and average
occupancy of Office Properties. At December 31, 2005, the maximum borrowing capacity under
the credit facility was $371.5 million. The outstanding balance excludes letters of credit
issued under our credit facility of $13.8 million which reduces our maximum borrowing
capacity.(15)
    
    See Junior Subordinated Notes below.(16)
    
    The overall weighted average interest rate does not include the effect of our cash
flow hedge agreements. Including the effect of these agreements, the overall weighted average
interest rate would have been 6.93%.
  Weighted
    
    WeightedPercentage
    
    
    Average
    
    Weighted Average(in thousands)
    
    Balance
    
    
    of Debt(1)
    
    
    Rate
    
    MaturityFixed Rate Debt
    
    $
    1,598,706
    
    
    
    71
    %
    
    
    7.43
    %
    
    3.3  yearsVariable Rate Debt
    
    
    660,767
    
    
    
    29
    
    
    
    6.23
    
    
    5.1  yearsTotal Debt
    
    $
    2,259,473
    
    
    
    100
    %
    
    
    7.08
    %(2)
    
    3.9  years
 
 (1)
    
    Balance excludes hedges. The percentages for fixed rate debt and variable
rate debt, including the $425.5 million of hedged variable rate debt, are 90% and 10%,
respectively.(2)
    
    Including the effect of hedge arrangements, the overall weighted average
interest rate would have been 6.93%. 112




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Secured
    
    
    Defeased(in thousands)
    
    Debt
    
    
    Debt
    
    
    Unsecured Debt
    
    
    Total(1)2006
    
    $
    99,922
    
    
    $
    157,131
    
    
    $
    
    
    
    $
    257,0532007
    
    
    252,719
    
    
    
    100,279
    
    
    
    250,000
    
    
    
    602,9982008
    
    
    74,817
    
    
    
    289
    
    
    
    234,000
    
    
    
    309,1062009
    
    
    271,544
    
    
    
    320
    
    
    
    375,000
    
    
    
    646,8642010
    
    
    96,125
    
    
    
    6,337
    
    
    
    
    
    
    
    102,462Thereafter
    
    
    263,669
    
    
    
    
    
    
    
    77,321
    
    
    
    340,990$
    1,058,796
    
    
    $
    264,356
    
    
    $
    936,321
    
    
    $
    2,259,473
 
 (1)
    
    Based on contractual maturity and does not include extension options on Bank
of America Loan, Societe Generale Loan, Guaranty Bank Loan, Key Bank Construction Loan or
GACC Note.   113




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Defeasance of LaSalle Note I
   Defeasance of Nomura Funding VI
  Defeasance of LaSalle Note II
  Junior Subordinated Notes
    114




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13. INTEREST RATE SWAPS AND CAPS
 Accounting for Derivative Instruments and Hedging Activities, Accounting for Certain Derivative Instruments and Certain Hedging
Activities  an Amendment of FASB Statement No. 133 Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.
  Additional
    
    
    Change inNotional
    
    
    Maturity
    
    
    Reference
    
    
    Fair Market
    
    
    (Reduction) Interest
    
    
    Unrealized GainsEffective Date
    
    Amount
    
    
    Date
    
    
    Rate
    
    
    Value
    
    
    Expense
    
    
    (Losses) in OCI(in thousands)Interest rate swaps2/15/03
    
    $
    100,000
    
    
    
    2/15/06
    
    
    
    3.26
    %
    
    $
    139
    
    
    $
    (37
    )
    
    $
    3702/15/03
    
    
    100,000
    
    
    
    2/15/06
    
    
    
    3.25
    %
    
    
    139
    
    
    
    (38
    )
    
    
    3689/02/03
    
    
    200,000
    
    
    
    9/01/06
    
    
    
    3.72
    %
    
    
    1,263
    
    
    
    807
    
    
    
    2,7841/17/05
    
    
    17,700
    
    
    
    10/16/06
    
    
    
    3.74
    %
    
    
    213
    
    
    
    
    
    
    
    205$
    1,754
    
    
    $
    732
    
    
    $
    3,727Interest rate caps1/07/05
    
    
    7,800
    
    
    
    2/01/08
    
    
    
    6.00
    %
    
    
    6
    
    
    
    
    
    
    
    (15
    )$
    1,760
    
    
    $
    732
    
    
    $
    3,712
    115




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Undesignated Caps
   14. RENTALS UNDER OPERATING LEASES
     FutureMinimum(in millions)
    
    Rentals2006
    
    $
    290.62007
    
    
    281.52008
    
    
    206.12009
    
    
    176.92010
    
    
    154.6Thereafter
    
    
    473.9$
    1,583.6
  116




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15. COMMITMENTS, CONTINGENCIES AND LITIGATION
 Lease Commitments
  Future Minimum(in millions)
    
    Lease Payments2006
    
    $
    1.92007
    
    
    1.92008
    
    
    1.92009
    
    
    1.92010
    
    
    2.0Thereafter
    
    
    139.3$
    148.9
 Guarantee Commitments
 Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others
 Guaranteed
    
    
    MaximumAmount
    
    
    Guaranteed(in thousands)
    
    Outstanding at
    
    
    Amount atDebtor
    
    December 31, 2005
    
    
    December 31, 2005CRDI  Eagle Ranch Metropolitan District  Letter of Credit
(1)
    
    $
    7,845
    
    
    $
    7,845Main Street Partners, L.P.  Letter of Credit (2) (3)
    
    
    4,250
    
    
    
    4,250Fresh Choice, LLC(4)
    
    
    1,000
    
    
    
    1,000Total Guarantees
    
    $
    13,095
    
    
    $
    13,095
 
 (1)
    
    We provide a $7.9 million letter of credit to support the payment of interest and
principal of the Eagle Ranch Metropolitan District Revenue Development Bonds.(2)
    
    See Note 10, Investments in Unconsolidated Companies, for a description of the
terms of this debt.(3)
    
    We and our joint venture partner each obtained separate letters of credit to
guarantee the repayment of up to $4.3 million each of the Main Street Partners, L.P. loan.(4)
    
    We provide a guarantee of up to $1.0 million to GE Capital Franchise Financing
Corporation as part of Fresh Choices bankruptcy reorganization. Other Commitments
   117




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Contingencies
 Environmental Matters
  Litigation
  16. STOCK AND UNIT BASED COMPENSATION
 Stock Option Plans
   118




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2005
    
    
    2004
    
    
    2003Shares
    
    
    Wtd. Avg.
    
    
    Shares
    
    
    Wtd. Avg.
    
    
    Shares
    
    
    Wtd. Avg.Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    ExerciseUnit
    
    
    Price Per
    
    
    Unit
    
    
    Price Per
    
    
    Unit
    
    
    Price Per(share amounts in thousands)
    
    Options
    
    
    Share
    
    
    Options
    
    
    Share
    
    
    Options
    
    
    ShareOutstanding as of January 1,
    
    
    5,885
    
    
    $
    21
    
    
    
    7,127
    
    
    $
    21
    
    
    
    7,455
    
    
    $
    21Granted
    
    
    102
    
    
    
    18
    
    
    
    220
    
    
    
    16
    
    
    
    70
    
    
    
    16Exercised
    
    
    (268
    )
    
    
    16
    
    
    
    (54
    )
    
    
    15
    
    
    
    (95
    )
    
    
    15Forfeited
    
    
    (39
    )
    
    
    18
    
    
    
    (36
    )
    
    
    18
    
    
    
    (303
    ) (1)
    
    
    29Canceled
    
    
    (536
    )
    
    
    32
    
    
    
    (1,372
    )
    
    
    22
    
    
    
    
    
    
    
    Outstanding/Wtd. Avg. as of Dec. 31,
    
    
    5,144
    
    
    $
    20
    
    
    
    5,885
    
    
    $
    21
    
    
    
    7,127
    
    
    $
    21Exercisable/Wtd. Avg. as of Dec. 31,
    
    
    4,586
    
    
    $
    20
    
    
    
    5,033
    
    
    $
    21
    
    
    
    4,794
    
    
    $
    22
 
 (1)
  (share amounts in thousands)
    
    Options Outstanding
    
    Options ExercisableNumber
    
    Wtd. Avg. Years
    
    
    
    
    
    NumberRange of
    
    Outstanding at
    
    Remaining Before
    
    Wtd. Avg.
    
    Exercisable at
    
    Wtd. Avg.Exercise Prices
    
    12/31/05
    
    Expiration
    
    Exercise Price
    
    12/31/05
    
    Exercise Price$14 to 16
    
    
    1,340
    
    
    
    4.2
    
    
    
    $16
    
    
    
    1,270
    
    
    
    $16$16 to 21
    
    
    2,288
    
    
    
    5.1
    
    
    
    18
    
    
    
    1,864
    
    
    
    18$21 to 26
    
    
    935
    
    
    
    3.9
    
    
    
    22
    
    
    
    871
    
    
    
    22$26 to 39
    
    
    581
    
    
    
    2.1
    
    
    
    31
    
    
    
    581
    
    
    
    31$14 to 39
    
    
    5,144
    
    
    
    4.3
    
    
    
    $20
    
    
    
    4,586
    
    
    
    $20
 Unit Option Plans
    119




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2005
    
    
    2004
    
    
    2003Shares
    
    
    Wtd. Avg.
    
    
    Shares
    
    
    Wtd. Avg.
    
    
    Shares
    
    
    Wtd. Avg.Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    ExerciseUnit
    
    
    Price Per
    
    
    Unit
    
    
    Price Per
    
    
    Unit
    
    
    Price Per(share amounts in thousands)
    
    Options
    
    
    Share
    
    
    Options
    
    
    Share
    
    
    Options
    
    
    ShareOutstanding as of January 1,
    
    
    2,681
    
    
    $
    17
    
    
    
    3,144
    
    
    $
    18
    
    
    
    2,837
    
    
    $
    17Granted
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    17
    
    
    
    307
    (1)
    
    
    28Exercised
    
    
    (1,003
    )
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    (494
    )
    
    
    24
    
    
    
    
    
    
    
    Outstanding/Wtd. Avg. as of
Dec. 31,
    
    
    1,678
    
    
    $
    17
    
    
    
    2,681
    
    
    $
    17
    
    
    
    3,144
    
    
    $
    18Exercisable/Wtd. Avg. as of
Dec. 31,
    
    
    1,604
    
    
    $
    17
    
    
    
    2,581
    
    
    $
    17
    
    
    
    2,942
    
    
    $
    19
 
 (1)
  (share amounts in thousands)
    
    
    Options Outstanding
    
    
    Options ExercisableWtd. Avg. YearsNumber
    
    
    Remaining
    
    
    
    
    
    
    NumberRange of
    
    Outstanding at
    
    
    Before
    
    
    Wtd. Avg.
    
    
    Exercisable
    
    
    Wtd. Avg.Exercise Prices
    
    12/31/05
    
    
    Expiration
    
    
    Exercise Price
    
    
    at 12/31/05
    
    
    Exercise Price$14 to 16
    
    
    232
    
    
    
    4.4
    
    
    $
    16
    
    
    
    213
    
    
    $
    16$16 to 21
    
    
    1,446
    
    
    
    2.7
    
    
    
    18
    
    
    
    1,391
    
    
    
    18$14 to 21
    
    
    1,678
    
    
    
    2.9
    
    
    $
    17
    
    
    
    1,604
    
    
    $
    17
 Unit Options Granted Under Operating Partnership Agreement
  120




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2005
    
    
    2004
    
    
    2003Shares
    
    
    Wtd. Avg.
    
    
    Shares
    
    
    Wtd. Avg.
    
    
    Shares
    
    
    Wtd. Avg.Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    ExerciseUnit
    
    
    Price Per
    
    
    Unit
    
    
    Price Per
    
    
    Unit
    
    
    Price Per(share amounts in thousands)
    
    Options
    
    
    Share
    
    
    Options
    
    
    Share
    
    
    Options
    
    
    ShareOutstanding as of January 1,
    
    
    5,254
    
    
    $
    18
    
    
    
    5,697
    
    
    $
    18
    
    
    
    5,357
    
    
    $
    18Granted
    
    
    330
    
    
    
    18
    
    
    
    125
    
    
    
    18
    
    
    
    340
    
    
    
    16Exercised
    
    
    (20
    )
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (22
    )
    
    
    16
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    (548
    )
    
    
    18
    
    
    
    
    
    
    
    Outstanding/Wtd. Avg. as of
Dec. 31,
    
    
    5,542
    
    
    $
    18
    
    
    
    5,254
    
    
    $
    18
    
    
    
    5,697
    
    
    $
    18Exercisable/Wtd. Avg. as of
Dec. 31,
    
    
    3,081
    
    
    $
    18
    
    
    
    1,911
    
    
    $
    18
    
    
    
    777
    
    
    $
    18
  (share amounts in thousands)
    
    Options Outstanding
    
    Options ExercisableWtd. Avg. YearsNumber
    
    Remaining
    
    
    
    
    
    NumberRange of
    
    Outstanding at
    
    Before
    
    Wtd. Avg.
    
    Exercisable
    
    Wtd. Avg.Exercise Prices
    
    12/31/05
    
    Expiration
    
    Exercise Price
    
    at 12/31/05
    
    Exercise Price$14 to 16
    
    
    108
    
    
    
    7.4
    
    
    
    $15
    
    
    
    48
    
    
    
    $15$16 to 21
    
    
    5,284
    
    
    
    6.4
    
    
    
    17
    
    
    
    2,913
    
    
    
    17$21 to 26
    
    
    150
    
    
    
    5.2
    
    
    
    22
    
    
    
    120
    
    
    
    22$26 to 39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $14 to 39
    
    
    5,542
    
    
    
    6.4
    
    
    
    $18
    
    
    
    3,081
    
    
    
    $18
 Stock and Unit Option Plans
    For the years ended December 31,2005

    
    2004
    
    2003Life of options
    

10 years

    
    10 years
    
    10 yearsRisk-free interest rates
    
    4.2%

    
    4.3%
    
    3.6%Dividend yields
    
    8.8%

    
    8.8%
    
    9.9%Stock price volatility
    
    25.0%

    
    24.9%
    
    25.1%
 121




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Restricted Unit Plans
 2004 Unit Plan
    2005 Unit Plan
  122




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   17. MINORITY INTERESTS
     (in thousands)
    
    2005
    
    
    2004Limited partners in the Operating Partnership
    
    $
    85,338
    
    
    $
    113,572Limited
partners in the Operating Partnership  Units subject to
redemption at fair market value
    
    
    28,481
    
    
    
    Development
joint venture partners  Resort Residential Development Segment
    
    
    32,228
    
    
    
    33,760Joint
venture partners  Office Segment
    
    
    15,354
    
    
    
    9,308Joint
venture partners  Resort/Hotel Segment
    
    
    5,853
    
    
    
    6,513Other
    
    
    127
    
    
    
    (242
    )$
    167,381
    
    
    $
    162,911
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Limited partners in the Operating Partnership
    
    $
    333
    
    
    $
    29,613
    
    
    $
    4,302Development joint venture partners  Resort Residential Development Segment
    
    
    15,336
    
    
    
    9,041
    
    
    
    2,933Joint
venture partners  Office Segment
    
    
    (138
    )
    
    
    (163
    )
    
    
    (576
    )Joint
venture partners  Resort/Hotel Segment
    
    
    (661
    )
    
    
    (1,131
    )
    
    
    (902
    )Other
    
    
    369
    
    
    
    (66
    )
    
    
    $
    15,239
    
    
    $
    37,294
    
    
    $
    5,757
 123




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. SHAREHOLDERS EQUITY
 Share Repurchase Program
  Series A Preferred Offerings
   Distributions
    Common Shares
  2005
    
    2004
    
    2003Ordinary dividend
    
    
    6.3
    %
    
    
    
    %
    
    
    2.0
    %Qualified dividend eligible for 15% tax rate
    
    
    2.7
    
    
    
    
    
    
    
    7.1Capital gain
    
    
    47.2
    
    
    
    23.2
    
    
    
    1.2Return of capital
    
    
    29.5
    
    
    
    57.4
    
    
    
    88.7Unrecaptured Section 1250 gain
    
    
    14.3
    
    
    
    19.4
    
    
    
    1.0100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 124




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Preferred Shares
  Class A Preferred
    
    
    Class B Preferred2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003Ordinary dividend
    
    
    8.9
    %
    
    
    
    %
    
    
    17.9
    %
    
    
    8.9
    %
    
    
    
    %
    
    
    17.9
    %Qualified dividend eligible
for 15% tax rate
    
    
    3.8
    
    
    
    
    
    
    
    62.4
    
    
    
    3.8
    
    
    
    
    
    
    
    62.4Capital gain
    
    
    67.1
    
    
    
    54.4
    
    
    
    10.9
    
    
    
    67.1
    
    
    
    54.4
    
    
    
    10.9Unrecaptured Section 1250 Gain
    
    
    20.2
    
    
    
    45.6
    
    
    
    8.8
    
    
    
    20.2
    
    
    
    45.6
    
    
    
    8.8100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 19. INCOME TAXES
 Taxable Consolidated Entities
    December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Deferred tax liabilities:Resort Residential development costs
    
    $
    (27,234
    )
    
    $
    (23,926
    )Minority interests
    
    
    (4,834
    )
    
    
    (4,934
    )Land value adjustments
    
    
    (11,273
    )
    
    
    (14,891
    )Total deferred tax liabilities:
    
    $
    (43,341
    )
    
    $
    (43,751
    )Deferred tax assets:Deferred revenue
    
    $
    26,492
    
    
    $
    28,678Hotel lease acquisition costs
    
    
    85
    
    
    
    1,404Depreciation and amortization
    
    
    1,495
    
    
    
    6,227Net operating loss carryforwards
    
    
    10,784
    
    
    
    7,655Impairment of assets
    
    
    1,464
    
    
    
    5,383Related party interest expense not currently deductible
    
    
    8,999
    
    
    
    13,056Other
    
    
    2,617
    
    
    
    7,449Total deferred tax assets
    
    $
    51,936
    
    
    $
    69,852Valuation allowance for deferred tax assets
    
    
    (9,688
    )
    
    
    (12,710
    )Deferred tax assets, net of valuation allowance
    
    $
    42,248
    
    
    $
    57,142Net deferred tax (liabilities) assets
    
    $
    (1,093
    )
    
    $
    13,391
  125




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Accounting for Income Taxes
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003(in thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentTax at U.S. statutory rates on
consolidated benefit (expense) subject
to tax
    
    $
    (6,981
    )
    
    
    (35.0
    )%
    
    $
    11,742
    
    
    
    35.0
    %
    
    $
    (24,158
    )
    
    
    (35.0
    )%State income tax, net of federal income
tax benefit
    
    
    (869
    )
    
    
    (4.4
    )
    
    
    1,341
    
    
    
    4.0
    
    
    
    (3,031
    )
    
    
    (4.4
    )Other
    
    
    41
    
    
    
    0.2
    
    
    
    701
    
    
    
    2.1
    
    
    
    274
    
    
    
    0.4Change in valuation allowance
    
    
    431
    
    
    
    2.2
    
    
    
    (706
    )
    
    
    (2.1
    )
    
    
    
    
    
    
    $
    (7,378
    )
    
    
    (37.0
    )%
    
    $
    13,078
    
    
    
    39.0
    %
    
    $
    (26,915
    )
    
    
    (39.0
    )%
 (in thousands)
    
    2005
    
    2004
    
    2003Current tax benefit (expense)
    
    $
    7,106
    
    
    $
    401
    
    
    $
    (12,055
    )Deferred tax benefit (expense)
    
    
    (14,484
    )
    
    
    12,677
    
    
    
    (14,860
    )Federal income tax benefit (expense)
    
    $
    (7,378
    )
    
    $
    13,078
    
    
    $
    (26,915
    )
  126




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 20. RELATED PARTY TRANSACTIONS
 DBL Holdings, Inc.
    Loans to Employees and Trust Managers of the Company for Exercise of Stock Options and Unit
Options
  Other
  127




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  21. QUARTERLY FINANCIAL INFORMATION
  For the 2005 Quarter Ended(in thousands)
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Total Property revenues
    
    $
    184,667
    
    
    $
    209,827
    
    
    $
    211,291
    
    
    $
    417,738Total Property expenses
    
    
    127,996
    
    
    
    145,592
    
    
    
    146,228
    
    
    
    323,353(Loss)
income from continuing operations before minority interests and income taxes
    
    
    (6,070
    )
    
    
    (6,360
    )
    
    
    (12,688
    )
    
    
    49,606
    (1)Minority interests
    
    
    498
    
    
    
    (1,042
    )
    
    
    709
    
    
    
    (15,404
    )Income tax benefit (expense)
    
    
    1,216
    
    
    
    329
    
    
    
    754
    
    
    
    (9,677
    )Income (loss) from discontinued operations, net of minority interests
    
    
    1,564
    
    
    
    1,531
    
    
    
    1,198
    
    
    
    (27
    )Impairment charges related to real estate assets from discontinued
operations, net of minority interests
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    Gain (loss) on real estate from discontinued operations, net of
minority interests
    
    
    1,504
    
    
    
    
    
    
    
    89,735
    
    
    
    (2,005
    )(1)Net (loss) income available to common shareholders
    
    $
    (9,296
    )
    
    $
    (13,552
    )
    
    $
    71,634
    
    
    $
    14,483Per share data:Basic Earnings Per Common Share-(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change in
accounting principle
    
    $
    (0.12
    )
    
    $
    (0.16
    )
    
    $
    (0.19
    )
    
    $
    0.16- Income from discontinued operations, net of minority interests
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.01
    
    
    
    - Impairment charges related to real estate assets from
discontinued operations, net of minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Gain (loss) on real estate from discontinued operations, net of
minority interests
    
    
    0.01
    
    
    
    
    
    
    
    0.89
    
    
    
    (0.02
    )- Net (loss) income available to common shareholders  Basic
    
    $
    (0.09
    )
    
    $
    (0.14
    )
    
    $
    0.71
    
    
    $
    0.14Diluted Earnings Per Common Share-(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change in
accounting principle
    
    $
    (0.12
    )
    
    $
    (0.16
    )
    
    $
    (0.19
    )
    
    $
    0.16- Income from discontinued operations, net of minority interests
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.01
    
    
    
    - Impairment charges related to real estate assets from
discontinued operations, net of minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Gain (loss) on real estate from discontinued operations, net
of minority interests
    
    
    0.01
    
    
    
    
    
    
    
    0.89
    
    
    
    (0.02
    )- Net (loss) income available to common shareholders  Diluted
    
    $
    (0.09
    )
    
    $
    (0.14
    )
    
    $
    0.71
    
    
    $
    0.14
 
 (1)
 128




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the 2004 Quarter Ended(in thousands)
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Total Property revenues
    
    $
    225,500
    
    
    $
    233,842
    
    
    $
    242,019
    
    
    $
    306,077Total Property expenses
    
    
    145,646
    
    
    
    154,463
    
    
    
    162,630
    
    
    
    227,094(Loss) income from continuing operations before minority interests
and income taxes
    
    
    (14,881
    )
    
    
    (17,674
    )
    
    
    (19,434
    )
    
    
    241,675Minority interests
    
    
    2,102
    
    
    
    2,130
    
    
    
    676
    
    
    
    (42,202
    )Income tax benefit (expense)
    
    
    1,510
    
    
    
    5,358
    
    
    
    6,634
    
    
    
    (424
    )Income from discontinued operations, net of minority interests
    
    
    2,846
    
    
    
    3,200
    
    
    
    1,780
    
    
    
    1,929Impairment charges related to real estate assets from discontinued
operations, net of minority interests
    
    
    (1,994
    )
    
    
    (424
    )
    
    
    (297
    )
    
    
    (263
    )(Loss) gain on real estate from discontinued operations, net of
minority interests
    
    
    (47
    )
    
    
    (2,073
    )
    
    
    (32
    )
    
    
    3,204Cumulative effect of a change in accounting principle, net of
minority interests
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    Net (loss) income available to common shareholders  Basic
    
    $
    (18,597
    )
    
    $
    (17,493
    )
    
    $
    (18,682
    )
    
    $
    195,910Net (loss) income available to common shareholders  Diluted
    
    $
    (18,597
    )
    
    $
    (17,493
    )
    
    $
    (18,682
    )
    
    $
    202,149Per share data:Basic Earnings Per Common Share-(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change in
accounting principle
    
    $
    (0.19
    )
    
    $
    (0.18
    )
    
    $
    (0.21
    )
    
    $
    1.93- Income from discontinued operations, net of minority interests
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.02- Impairment charges related to real estate assets from
discontinued operations, net of minority interests
    
    
    (0.02
    )
    
    
    
    
    
    
    
    
    
    
    - (Loss) gain on real estate from discontinued operations, net of
minority interests
    
    
    
    
    
    
    (0.02
    )
    
    
    
    
    
    
    0.03- Net (loss) income available to common shareholders  Basic
    
    $
    (0.19
    )
    
    $
    (0.18
    )
    
    $
    (0.19
    )
    
    $
    1.98Diluted Earnings Per Common Share-(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change in
accounting principle
    
    $
    (0.19
    )
    
    $
    (0.18
    )
    
    $
    (0.21
    )
    
    $
    1.81- Income from discontinued operations, net of minority interests
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.02- Impairment charges related to real estate assets from
discontinued operations, net of minority interests
    
    
    (0.02
    )
    
    
    
    
    
    
    
    
    
    
    - (Loss) gain on real estate from discontinued operations, net
of minority interests
    
    
    
    
    
    
    (0.02
    )
    
    
    
    
    
    
    0.03- Net (loss) income available to common shareholders  Diluted
    
    $
    (0.19
    )
    
    $
    (0.18
    )
    
    $
    (0.19
    )
    
    $
    1.86
 22. COPI
   129




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  23. SUBSEQUENT EVENTS
 Office Acquisition
  Assets Held for Sale
  (in thousands)
    
    2005
    
    
    2004Land
    
    $
    3,650
    
    
    $
    3,650Buildings and improvements
    
    
    27,032
    
    
    
    26,549Accumulated depreciation
    
    
    (7,043
    )
    
    
    (6,161
    )Other assets, net
    
    
    1,105
    
    
    
    1,138Net investment in real estate
    
    $
    24,744
    
    
    $
    25,176
  Debt Financing
  Mezzanine Investments
   130




---



##### Table of Contents






Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  Item 9A.
    
    Controls and Procedures
 Disclosure Controls and Procedures.
 Internal Control Over Financial Reporting.
 
    
    pertain to the maintenance of records that accurately and fairly
reflect the transactions and dispositions of our assets in
reasonable detail;
    
    provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
our receipts and expenditures are made only in accordance with the
authorization procedures we have established; and
    
    provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of any
of our assets in circumstances that could have a material adverse
effect on our financial statements.
 Limitations on the Effectiveness of Controls.
  131




---



##### Table of Contents



Scope of the Evaluation . Internal Control 
Integrated Framework.
  Periodic Evaluation and Conclusion of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting.
 132




---



##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal Control  
Integrated Framework
     133




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       ERNST & YOUNG LLPDallas, TexasMarch 9, 2006
 134




---



##### Table of Contents



Item 9B. Other Information
  
 PART III
  
 Item 10. Trust Managers and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  135




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)(1)
    
    Financial Statements
       (a)(2)
    
    Financial Statement Schedules and Financial Statements of Subsidiaries Not Consolidated
and Fifty-Percent-or-Less-Owned Persons
      (a)(3)
    
    Exhibits
  (b)
    
    Exhibits
  (c)
    
    Financial Statement Schedules and Financial Statements of Subsidiaries Not Consolidated and
Fifty-Percent-or-Less-Owned Persons
  136




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
 
 CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
 CostsCapitalized
    
    
    ImpairmentSubsequent to
    
    
    to Carrying
    
    
    
    
    
    
    Gross Amount CarriedInitial Costs(1)
    
    
    Acquisition
    
    
    Value
    
    
    
    
    
    
    at Close of Period 12/31/05Land, Buildings,
    
    
    Buildings,
    
    
    
    
    
    
    Buildings,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life on WhichImprovements,
    
    
    Improvements,
    
    
    
    
    
    
    Improvements,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation inFurniture,
    
    
    Furniture,
    
    
    
    
    
    
    Furniture,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Latest IncomeBuildings and
    
    
    Fixtures and
    
    
    Fixtures and
    
    
    
    
    
    
    Fixtures and
    
    
    
    
    
    
    Accumulated
    
    
    Date of
    
    Acquisition
    
    Statement IsDescription
    
    Land
    
    
    Improvements
    
    
    Equipment
    
    
    Equipment
    
    
    Land
    
    
    Equipment
    
    

Total
(2)
    
    
    Depreciation
    
    
    Construction
    
    Date
    
    ComputedThe Citadel, Denver, CO
    
    $
    1,803
    
    
    $
    17,259
    
    
    $
    2,062
    
    
    $
    
    
    
    $
    1,803
    
    
    $
    19,321
    
    
    $
    21,124
    
    
    $
    (13,885
    )
    
    1987
    
    1987
    
    (3)Carter Burgess Plaza, Fort Worth, TX
    
    
    1,375
    
    
    
    66,649
    
    
    
    27,248
    
    
    
    
    
    
    
    1,375
    
    
    
    93,897
    
    
    
    95,272
    
    
    
    (43,784
    )
    
    1982
    
    1990
    
    (3)MacArthur Center I & II, Irving, TX
    
    
    704
    
    
    
    17,247
    
    
    
    2,199
    
    
    
    
    
    
    
    880
    
    
    
    19,270
    
    
    
    20,150
    
    
    
    (6,900
    )
    
    1982/1986
    
    1993
    
    (3)125. E. John Carpenter Freeway, Irving, TX
    
    
    2,200
    
    
    
    48,744
    
    
    
    9,847
    
    
    
    
    
    
    
    2,200
    
    
    
    58,591
    
    
    
    60,791
    
    
    
    (17,943
    )
    
    1982
    
    1994
    
    (3)Regency Plaza One, Denver, CO
    
    
    950
    
    
    
    31,797
    
    
    
    5,119
    
    
    
    
    
    
    
    950
    
    
    
    36,916
    
    
    
    37,866
    
    
    
    (10,366
    )
    
    1985
    
    1994
    
    (3)The Avallon, Austin, TX
    
    
    475
    
    
    
    11,207
    
    
    
    11,733
    
    
    
    
    
    
    
    1,069
    
    
    
    22,346
    
    
    
    23,415
    
    
    
    (5,368
    )
    
    1986
    
    1994
    
    (3)Waterside Commons, Irving, TX
    
    
    3,650
    
    
    
    20,135
    
    
    
    8,428
    
    
    
    (1,047
    )
    
    
    3,650
    
    
    
    27,516
    
    
    
    31,166
    
    
    
    (7,422
    )
    
    1986
    
    1994
    
    (3)Two
Renaissance Square, Phoenix, AZ (4)
    
    
    
    
    
    
    54,412
    
    
    
    (54,412
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1990
    
    1994
    
    (3)Denver Marriott City Center, Denver, CO
    
    
    
    
    
    
    50,364
    
    
    
    9,122
    
    
    
    
    
    
    
    
    
    
    
    59,486
    
    
    
    59,486
    
    
    
    (19,116
    )
    
    1982
    
    1995
    
    (3)707 17th Street, Denver, CO
    
    
    
    
    
    
    56,593
    
    
    
    19,522
    
    
    
    
    
    
    
    
    
    
    
    76,115
    
    
    
    76,115
    
    
    
    (19,495
    )
    
    1982
    
    1995
    
    (3)Spectrum Center, Dallas, TX
    
    
    2,000
    
    
    
    41,096
    
    
    
    19,233
    
    
    
    
    
    
    
    2,000
    
    
    
    60,329
    
    
    
    62,329
    
    
    
    (15,993
    )
    
    1983
    
    1995
    
    (3)Stanford Corporate Centre, Dallas, TX
    
    
    
    
    
    
    16,493
    
    
    
    8,869
    
    
    
    (1,200
    )
    
    
    
    
    
    
    24,162
    
    
    
    24,162
    
    
    
    (8,184
    )
    
    1985
    
    1995
    
    (3)Barton Oaks
Plaza One, Austin, TX (4)
    
    
    900
    
    
    
    8,207
    
    
    
    (9,107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1986
    
    1995
    
    (3)The Aberdeen, Dallas, TX
    
    
    850
    
    
    
    25,895
    
    
    
    2,084
    
    
    
    
    
    
    
    850
    
    
    
    27,979
    
    
    
    28,829
    
    
    
    (6,491
    )
    
    1986
    
    1995
    
    (3)Briargate Office and
Research Center, Colorado Springs, CO
    
    
    2,000
    
    
    
    18,044
    
    
    
    3,571
    
    
    
    
    
    
    
    2,000
    
    
    
    21,615
    
    
    
    23,615
    
    
    
    (5,385
    )
    
    1988
    
    1995
    
    (3)Park Hyatt Beaver Creek, Avon, CO
    
    
    10,882
    
    
    
    40,789
    
    
    
    18,568
    
    
    
    
    
    
    
    10,882
    
    
    
    59,357
    
    
    
    70,239
    
    
    
    (18,236
    )
    
    1989
    
    1995
    
    (3)Albuquerque
Plaza, Albuquerque, NM (4)
    
    
    
    
    
    
    36,667
    
    
    
    (36,667
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1990
    
    1995
    
    (3)Sonoma Mission Inn & Spa, Sonoma, CA
    
    
    10,000
    
    
    
    44,922
    
    
    
    42,720
    
    
    
    
    
    
    
    10,000
    
    
    
    87,642
    
    
    
    97,642
    
    
    
    (16,175
    )
    
    1927
    
    1996
    
    (3)Canyon
Ranch, Tucson, AZ (5)
    
    
    10,609
    
    
    
    43,038
    
    
    
    (53,647
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1980
    
    1996
    
    (3)3333 Lee Parkway, Dallas, TX
    
    
    1,450
    
    
    
    13,177
    
    
    
    6,522
    
    
    
    
    
    
    
    1,468
    
    
    
    19,681
    
    
    
    21,149
    
    
    
    (4,166
    )
    
    1983
    
    1996
    
    (3)Greenway I & IA, Richardson, TX
    
    
    1,701
    
    
    
    15,312
    
    
    
    2,837
    
    
    
    
    
    
    
    1,701
    
    
    
    18,149
    
    
    
    19,850
    
    
    
    (3,976
    )
    
    1983
    
    1996
    
    (3)Frost Bank Plaza, Austin, TX
    
    
    
    
    
    
    36,019
    
    
    
    5,080
    
    
    
    
    
    
    
    
    
    
    
    41,099
    
    
    
    41,099
    
    
    
    (9,406
    )
    
    1984
    
    1996
    
    (3)301 Congress Avenue, Austin, TX
    
    
    2,000
    
    
    
    41,735
    
    
    
    12,389
    
    
    
    
    
    
    
    2,000
    
    
    
    54,124
    
    
    
    56,124
    
    
    
    (13,078
    )
    
    1986
    
    1996
    
    (3)Chancellor
Park, San Diego, CA(4)
    
    
    8,028
    
    
    
    23,430
    
    
    
    (31,458
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1988
    
    1996
    
    (3)Canyon
Ranch, Lenox, MA (5)
    
    
    4,200
    
    
    
    25,218
    
    
    
    (29,418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1989
    
    1996
    
    (3)Greenway Plaza Office & Hotel Portfolios,
Houston, TX
    
    
    29,232
    
    
    
    184,765
    
    
    
    124,710
    
    
    
    
    
    
    
    27,228
    
    
    
    311,479
    
    
    
    338,707
    
    
    
    (93,443
    )
    
    1969-1982
    
    1996
    
    (3)55 Madison, Denver, CO
    
    
    1,451
    
    
    
    13,253
    
    
    
    2,465
    
    
    
    
    
    
    
    1,451
    
    
    
    15,718
    
    
    
    17,169
    
    
    
    (4,233
    )
    
    1982
    
    1997
    
    (3)44 Cook, Denver, CO
    
    
    1,451
    
    
    
    13,253
    
    
    
    3,161
    
    
    
    
    
    
    
    1,451
    
    
    
    16,414
    
    
    
    17,865
    
    
    
    (4,447
    )
    
    1984
    
    1997
    
    (3)Greenway II, Richardson, TX
    
    
    1,823
    
    
    
    16,421
    
    
    
    6,380
    
    
    
    
    
    
    
    1,823
    
    
    
    22,801
    
    
    
    24,624
    
    
    
    (4,848
    )
    
    1985
    
    1997
    
    (3)Ventana Country Inn, Big Sur, CA
    
    
    2,782
    
    
    
    26,744
    
    
    
    7,749
    
    
    
    
    
    
    
    2,064
    
    
    
    35,211
    
    
    
    37,275
    
    
    
    (8,589
    )
    
    1975-1988
    
    1997
    
    (3)Palisades Central I, Dallas, TX
    
    
    1,300
    
    
    
    11,797
    
    
    
    2,357
    
    
    
    
    
    
    
    1,300
    
    
    
    14,154
    
    
    
    15,454
    
    
    
    (3,441
    )
    
    1980/1986
    
    1997
    
    (3)Palisades Central II, Dallas, TX
    
    
    2,100
    
    
    
    19,176
    
    
    
    4,103
    
    
    
    
    
    
    
    2,100
    
    
    
    23,279
    
    
    
    25,379
    
    
    
    (5,934
    )
    
    1980/1986
    
    1997
    
    (3)Stemmons Place, Dallas, TX
    
    
    
    
    
    
    37,537
    
    
    
    5,520
    
    
    
    
    
    
    
    
    
    
    
    43,057
    
    
    
    43,057
    
    
    
    (10,616
    )
    
    1980/1986
    
    1997
    
    (3)The Addison, Dallas, TX
    
    
    1,990
    
    
    
    17,998
    
    
    
    2,328
    
    
    
    
    
    
    
    1,990
    
    
    
    20,326
    
    
    
    22,316
    
    
    
    (4,644
    )
    
    1980/1986
    
    1997
    
    (3)Sonoma Golf Course, Sonoma, CA
    
    
    14,956
    
    
    
    
    
    
    
    20,853
    
    
    
    (4,354
    )
    
    
    15,936
    
    
    
    15,519
    
    
    
    31,455
    
    
    
    (759
    )
    
    1929
    
    1998
    
    (3)Austin Centre, Austin, TX
    
    
    1,494
    
    
    
    36,475
    
    
    
    5,220
    
    
    
    
    
    
    
    1,494
    
    
    
    41,695
    
    
    
    43,189
    
    
    
    (8,800
    )
    
    1986
    
    1998
    
    (3)Omni Austin Hotel, Austin, TX
    
    
    2,409
    
    
    
    56,670
    
    
    
    3,612
    
    
    
    
    
    
    
    2,409
    
    
    
    60,282
    
    
    
    62,691
    
    
    
    (14,194
    )
    
    1986
    
    1998
    
    (3)Datran Center, Miami, FL
    
    
    
    
    
    
    71,091
    
    
    
    10,119
    
    
    
    
    
    
    
    
    
    
    
    81,210
    
    
    
    81,210
    
    
    
    (17,213
    )
    
    1986-1992
    
    1998
    
    (3)Avallon Phase II, Austin, TX
    
    
    1,102
    
    
    
    23,401
    
    
    
    (11,381
    )
    
    
    
    
    
    
    640
    
    
    
    12,482
    
    
    
    13,122
    
    
    
    (1,426
    )
    
    1997
    
    
    
    (3)Plaza Park Garage, Fort Worth, TX
    
    
    2,032
    
    
    
    14,125
    
    
    
    613
    
    
    
    
    
    
    
    2,032
    
    
    
    14,738
    
    
    
    16,770
    
    
    
    (2,983
    )
    
    1998
    
    
    
    (3)Johns Manville Plaza, Denver, CO
    
    
    9,128
    
    
    
    74,937
    
    
    
    3,895
    
    
    
    
    
    
    
    9,128
    
    
    
    78,832
    
    
    
    87,960
    
    
    
    (7,125
    )
    
    1978
    
    2002
    
    (3)The Colonnade, Coral Gables, FL
    
    
    2,600
    
    
    
    39,557
    
    
    
    516
    
    
    
    
    
    
    
    2,600
    
    
    
    40,073
    
    
    
    42,673
    
    
    
    (2,678
    )
    
    1989
    
    2003
    
    (3)Hughes Center, Las Vegas, NV
    
    
    29,802
    
    
    
    178,705
    
    
    
    9,665
    
    
    
    
    
    
    
    29,804
    
    
    
    188,368
    
    
    
    218,172
    
    
    
    (12,950
    )
    
    1986-1999
    
    2003-2004
    
    (3)Desert
Mountain Development Corp.(7)
    
    
    120,907
    
    
    
    60,487

    
    
    
    (3,608
    )
    
    
    
    
    
    
    103,456
    
    
    
    74,330
    
    
    
    177,786
    
    
    
    (45,599
    )
    
    
    
    2002
    
    (3)Crescent
Resort Development, Inc. (7)
    
    
    367,647
    
    
    
    23,357
    
    
    
    121,883
    
    
    
    
    
    
    
    451,174
    
    
    
    61,713
    
    
    
    512,887
    
    
    
    (8,399
    )
    
    
    
    2002
    
    (3)Mira Vista
Development Company (7)
    
    
    3,059
    
    
    
    2,234
    
    
    
    1,793
    
    
    
    
    
    
    
    2,093
    
    
    
    4,993
    
    
    
    7,086
    
    
    
    (1,631
    )
    
    
    
    2003
    
    (3)Houston Area
Development Corporation (7)
    
    
    2,740
    
    
    
    
    
    
    
    (2,216
    )
    
    
    
    
    
    
    524
    
    
    
    
    
    
    
    524
    
    
    
    
    
    
    
    
    2003
    
    (3)Crescent
Plaza Phase I & II, Dallas, TX (7)
    
    
    10,997
    
    
    
    
    
    
    
    34,603
    
    
    
    
    
    
    
    11,305
    
    
    
    34,295
    
    
    
    45,600
    
    
    
    
    
    
    
    
    2002
    
    (3)JPI Multi-family Investment Luxury Apartments,
Deedham, MA
    
    
    17,095
    
    
    
    
    
    
    
    23,610
    
    
    
    
    
    
    
    40,487
    
    
    
    218
    
    
    
    40,705
    
    
    
    
    
    
    
    
    2004
    
    (3)Dupont Centre, Irvine, CA
    
    
    10,000
    
    
    
    34,668
    
    
    
    1,043
    
    
    
    
    
    
    
    10,000
    
    
    
    35,711
    
    
    
    45,711
    
    
    
    (2,047
    )
    
    1986
    
    2004
    
    (3)The Alhambra, Miami, FL
    
    
    5,500
    
    
    
    52,276
    
    
    
    3,127
    
    
    
    
    
    
    
    5,500
    
    
    
    55,403
    
    
    
    60,903
    
    
    
    (2,280
    )
    
    1961-1987
    
    2004
    
    (3)Paseo Del
Mar, San Diego, CA (6)
    
    
    21,000
    
    
    
    
    
    
    
    26,789
    
    
    
    
    
    
    
    21,000
    
    
    
    26,789
    
    
    
    47,789
    
    
    
    
    
    
    
    
    2005
    
    (3)3883 Hughes
Office Development, Las Vegas, NV (5)
    
    
    3,304
    
    
    
    
    
    
    
    7,387
    
    
    
    
    
    
    
    3,304
    
    
    
    7,387
    
    
    
    10,691
    
    
    
    
    
    
    
    
    2005
    
    (3)The Exchange
Building, Seattle, WA (6)
    
    
    7,050
    
    
    
    40,442
    
    
    
    1,968
    
    
    
    
    
    
    
    7,050
    
    
    
    42,410
    
    
    
    49,460
    
    
    
    (1,633
    )
    
    1929
    
    2005
    
    (3)One Live Oak, Atlanta, GA
    
    
    3,380
    
    
    
    23,323
    
    
    
    1,873
    
    
    
    
    
    
    
    3,380
    
    
    
    25,196
    
    
    
    28,576
    
    
    
    (795
    )
    
    1981
    
    2004
    
    (3)Fulbright
Tower, Houston, TX (9)
    
    
    5,600
    
    
    
    73,187
    
    
    
    (78,787
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1982
    
    2004
    
    (3)Peakview Tower, Denver, CO
    
    
    2,724
    
    
    
    36,411
    
    
    
    1,266
    
    
    
    
    
    
    
    2,724
    
    
    
    37,677
    
    
    
    40,401
    
    
    
    (1,542
    )
    
    2001
    
    2004
    
    (3)Land held for development or sale, Houston,
TX (8)
    
    
    49,420
    
    
    
    
    
    
    
    (30,786
    )
    
    
    
    
    
    
    18,634
    
    
    
    
    
    
    
    18,634
    
    
    
    
    
    
    
    
    
    
    (3)Land held for development or sale, Dallas, TX
    
    
    27,288
    
    
    
    
    
    
    
    (9,516
    )
    
    
    
    
    
    
    17,772
    
    
    
    
    
    
    
    17,772
    
    
    
    
    
    
    
    
    
    
    (3)Land held for development or sale, Las Vegas, NV
    
    
    10,000
    
    
    
    
    
    
    
    (3,149
    )
    
    
    
    
    
    
    6,851
    
    
    
    
    
    
    
    6,851
    
    
    
    
    
    
    
    
    2004
    
    (3)Crescent Real Estate Equities L.P.
    
    
    
    
    
    
    
    
    
    
    22,337
    
    
    
    (227
    )
    
    
    
    
    
    
    22,110
    
    
    
    22,110
    
    
    
    (6,896
    )
    
    
    
    
    
    (3)Other
    
    
    18,588
    
    
    
    11,351
    
    
    
    9,299
    
    
    
    
    
    
    
    10,150
    
    
    
    29,088
    
    
    
    39,238
    
    
    
    (3,492
    )
    
    
    
    
    
    (3)Total
    
    $
    857,728
    
    
    $
    1,998,090
    
    
    $
    333,245
    
    
    $
    (6,828
    )
    
    $
    861,682
    
    
    $
    2,320,553
    
    
    $
    3,182,235
    
    
    $
    (528,006
    )
 
 (1)
    
    Initial costs include purchase price, excluding any purchase price adjustments related to SFAS 141 intangibles, and any costs associated with closing of the Property.(2)
    
    The aggregate cost for Federal income tax purposes as of
December 31, 2005, was approximately $3.3 billion.(3)
    
    Depreciation of the real estate assets is calculated over the following estimated useful lives using the straight-line method:Building and improvements                  2 to 46 yearsTenant improvements
                         
Terms of leases, which approximates the useful life of the asset.Furniture, fixtures, and equipment       2 to 5 years(4)
    
    This Office Property was sold during the year ended December 31, 2005.(5)
    
    We contributed this property into a limited partnership in which we retained a 48% equity interest during the year ended December 31, 2005.(6)
    
    This Office Property was acquired during the year ended December 31, 2005.(7)
    
    Land and cost capitalized subsequent to acquisition includes property under development and is net of residential development cost of sales.(8)
    
    We sold 3.01 acres of land located in Houston, TX during the year ended December 31, 2005.(9)
    
    We contributed this property into a limited partnership in which we retained a 23.85% equity interest during the year ended December 31, 2005. 137




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Real estate investments:Balance, beginning of year
    
    $
    3,262,894
    
    
    $
    3,862,286
    
    
    $
    3,859,552Acquisitions
    
    
    192,024
    
    
    
    437,359
    
    
    
    93,239Improvements
    
    
    239,040
    
    
    
    154,300
    
    
    
    189,661Dispositions
    
    
    (510,601
    )
    
    
    (1,183,185
    )
    
    
    (250,102
    )Impairments
    
    
    (1,122
    )
    
    
    (7,866
    )
    
    
    (30,064
    )Balance, end of year
    
    $
    3,182,235
    
    
    $
    3,262,894
    
    
    $
    3,862,286Accumulated Depreciation:Balance, beginning of year
    
    $
    516,205
    
    
    $
    697,813
    
    
    $
    750,014Depreciation
    
    
    116,156
    
    
    
    145,210
    
    
    
    141,743Dispositions
    
    
    (104,355
    )
    
    
    (326,818
    )
    
    
    (193,944
    )Balance, end of year
    
    $
    528,006
    
    
    $
    516,205
    
    
    $
    697,813
 138




---



##### Table of Contents



CRESCENT REAL ESTATE EQUITIES COMPANY
SCHEDULE IV
 
 MORTGAGE LOANS ON REAL ESTATE INVESTMENTS
 DECEMBER 31, 2005
 (dollars in thousands)
 Interest Rate
    
    
    Original
    
    
    
    
    
    Periodic
    
    
    
    
    
    
    Face
    
    
    Carryingat December 31,
    
    
    Maturity
    
    
    Loan
    
    
    Payment
    
    
    Prior
    
    
    Amount of
    
    
    Amount ofType of Investment
    
    2005
    
    
    Date
    
    

Extensions
    
    

Term(1)
    
    
    Liens
    
    
    Mortgages
    
    

Mortgages(2)Mezzanine InvestmentsLos Angeles Office Property
    
    
    13.62
    %
    
    
    2006
    
    
    Four 6-Months
    
    Interest Only
    
    $
    236,000
    
    
    $
    22,000
    
    
    $
    21,943New
York City Office Property (3)
    
    
    12.05
    %
    
    
    2007
    
    
    N/A

    
    Interest Only
    
    
    150,000
    (4)
    
    
    17,250
    
    
    
    17,154Orlando
Resort (5)
    
    
    12.00
    %
    
    
    2008
    
    
    N/A

    
    Interest Only
    
    
    400,000
    
    
    
    32,972
    
    
    
    33,111
    (6)Los Angeles Office Property (7)
    
    
    8.87%/12.59
    %
    
    
    2007
    
    
    Three 6-Months
    
    Interest Only
    
    
    180,000
    
    
    
    45,000
    
    
    
    44,923Dallas Office Property
    
    
    12.87
    %
    
    
    2007
    
    
    Three 1-Year
    
    Interest Only
    
    
    65,750
    
    
    
    12,000
    
    
    
    11,969Three Dallas Office Properties
    
    
    11.04
    %
    
    
    2010
    
    
    N/A
    
    Principal and Interest
(8)
    
    
    80,000
    
    
    
    7,660
    
    
    
    7,589Two Luxury Hotel Properties in California
    
    
    15.37
    %
    
    
    2007
    
    
    Five 1-Year
    
    Interest Only
    
    
    250,000
    
    
    
    15,000
    
    
    
    14,892Office Portfolio in Southeastern U.S.
    
    
    11.23
    %
    
    
    2007
    
    
    Three 1-Year

    
    Interest Only
    
    
    290,000
    
    
    
    20,700
    
    
    
    20,545$
    1,651,750
    
    
    $
    172,582
    (9)
    
    $
    172,126
    (9)
 
 (1)
    
    Interest only payments are due monthly, principal is due at maturity except as otherwise noted in footnote (3).(2)
    
    The carrying amounts approximate the Federal income tax basis. Also, as of December 31, 2005, there were no loans delinquent.(3)
    
    On February 1, 2006, this loan was repaid in full.(4)
    
    We share priority with another entity at the
same face amount. A total of $34.5 million would need to be collected
in order for us to recover our entire face amount.(5)
    
    On February 24, 2006, this loan was
repaid in full.(6)
    
    Includes $0.1 million of unamortized premium.(7)
    
    Los Angeles office property includes two mezzanine loans
with face amounts of $20.0 million and $25.0 million.(8)
    
    Interest only payments are due monthly through September 2007. Beginning October 2007, principal payments are due monthly until maturity.(9)
    
    The following is a summary of changes in the carrying amount of investments for the years ended December 31, 2005 and 2004: 2005
    
    
    2004Balance at beginning of period
    
    $
    21,877
    
    
    $
    Additions during period:Investments in mezzanine loans
    
    
    150,582
    
    
    
    22,000Cost of acquiring mezzanine investments
    
    
    402
    
    
    
    87Accretion of unearned revenue
    
    
    303
    
    
    
    16Deductions during period:Collection of principal
    
    
    
    
    
    
    Amortization of premium and cost to acquire mezzanine investments
    
    
    (152
    )
    
    
    (6
    )Unearned revenue
    
    
    (886
    )
    
    
    (220
    )Balance at close of period
    
    $
    172,126
    
    
    $
    21,877
 139




---



##### Table of Contents



SIGNATURES
 th
 CRESCENT REAL ESTATE EQUITIES COMPANY(Registrant)By
    
    /s/ John C. GoffJohn C. GoffTrust Manager and Chief Executive Officer




---



##### Table of Contents



SIGNATURES
  Signature
    
    Title
    
    Date/s/ Richard E. Rainwater
    
    Trust Manager and Chairman of the Board
    
    March 10, 2006Richard E. Rainwater/s/ John C. Goff
    
    Trust Manager and Chief Executive Officer
    
    March 10, 2006John C. Goff
    
    (Principal Executive Officer)/s/ Jerry R. Crenshaw Jr.
    
    Managing Director and Chief Financial Officer
    
    March 10, 2006Jerry R. Crenshaw Jr.
    
    (Principal Financial and Accounting Officer)/s/Dennis H. Alberts
    
    Trust Manager, President and Chief Operating Officer
    
    March 10, 2006Dennis H. Alberts/s/ Anthony M. Frank
    
    Trust Manager
    
    March 10, 2006Anthony M. Frank/s/ William F. Quinn
    
    Trust Manager
    
    March 10, 2006William F. Quinn/s/ Paul E. Rowsey, III
    
    Trust Manager
    
    March 10, 2006Paul E. Rowsey, III/s/ Robert W. Stallings
    
    Trust Manager
    
    March 10, 2006Robert W. Stallings/s/ Terry N. Worrell
    
    Trust Manager
    
    March 10, 2006Terry N. Worrell




---



##### Table of Contents



INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT3.01
    
    
    Restated Declaration of Trust of Crescent Real Estate Equities
Company, as amended (filed as Exhibit No. 3.1 to the Registrants
Current Report on Form
8-K filed April 25, 2002 (the April 2002 8-K) and incorporated
herein by reference)3.02
    
    
    Fourth Amended and Restated Bylaws of Crescent Real Estate
Equities Company (filed herewith)4.01
    
    
    Form of Common Share Certificate (filed as Exhibit No. 4.03 to the
Registrants Registration Statement on Form S-3 (File No.
333-21905) and incorporated herein by reference)4.02
    
    
    Statement of Designation of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company dated
February 13, 1998 (filed as Exhibit No. 4.07 to the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31,
1997 (the 1997 10-K) and incorporated herein by reference)4.03
    
    
    Form of Certificate of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company (filed
as Exhibit No. 4 to the Registrants Registration Statement on
Form 8-A/A filed on February 18, 1998 and incorporated by
reference)4.04
    
    
    Statement of Designation of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company dated
April 25, 2002 (filed as Exhibit No. 4.1 to the April 2002 8-K and
incorporated herein by reference)4.05
    
    
    Statement of Designation of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company dated
January 14, 2004 (filed as Exhibit No. 4.1 to the Registrants
Current Report on Form 8-K filed January 15, 2004 (the January
2004 8-K) and incorporated herein by reference)4.06
    
    
    Form of Global Certificate of 6-3/4% Series A Convertible
Cumulative Preferred Shares of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.2 to the January 2004 8-K and
incorporated herein by reference)4.07
    
    
    Statement of Designation of 9.50% Series B Cumulative Redeemable
Preferred Shares of Crescent Real Estate Equities Company dated
May 13, 2002 (filed as Exhibit No. 2 to the Registrants Form 8-A
dated May 14, 2002 (the Form 8-A) and incorporated herein by
reference)4.08
    
    
    Form of Certificate of 9.50% Series B Cumulative Redeemable
Preferred Shares of Crescent Real Estate Equities Company (filed
as Exhibit No. 4 to the Form 8-A and incorporated herein by
reference)4
    *
    
    Pursuant to Regulation S-K Item 601 (b) (4) (iii), the Registrant
by this filing agrees, upon request, to furnish to the Securities
and Exchange Commission a copy of instruments defining the rights
of holders of long-term debt of the Registrant




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT10.01
    
    
    Third Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of
January 2, 2003, as amended (filed as Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 (the 3Q 2005 10-Q) and incorporated herein by
reference).10.02
    
    
    Noncompetition Agreement of Richard E. Rainwater, as assigned to
Crescent Real Estate Equities Limited Partnership on May 5, 1994
(filed as Exhibit No. 10.02 to the 1997 10-K and incorporated
herein by reference)10.03
    
    
    Noncompetition Agreement of John C. Goff, as assigned to Crescent
Real Estate Equities Limited Partnership on May 5, 1994 (filed as
Exhibit No. 10.03 to the 1997 10-K and incorporated herein by
reference)10.04*
    
    
    Employment Agreement by and between Crescent Real Estate Equities
Limited Partnership, Crescent Real Estate Equities Company and John
C. Goff, dated as of February 19, 2002 (filed as Exhibit No. 10.01
to the Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2002 (the 1Q 2002 10-Q) and incorporated herein by
reference)10.05
    
    
    Form of Officers and Trust Managers Indemnification Agreement as
entered into between the Registrant and each of its executive
officers and trust managers (filed as Exhibit No. 10.07 to the
Registration Statement on Form S-4 (File No. 333-42293) of Crescent
Real Estate Equities Limited Partnership and incorporated herein by
reference)10.06*
    
    
    Crescent Real Estate Equities Company 1994 Stock Incentive Plan
(filed as Exhibit No. 10.07 to the Registrants Registration
Statement on Form S-11 (File No. 33-75188) (the Form S-11) and
incorporated herein by reference)10.07*
    
    
    Third Amended and Restated 1995 Crescent Real Estate Equities
Company Stock Incentive Plan (filed as Exhibit No. 10.01 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 and incorporated herein by reference)10.08*
    
    
    Amendment dated as of November 4, 1999 to the Crescent Real Estate
Equities Company 1994 Stock Incentive Plan (filed as Exhibit No.
10.10 to the Registrants Annual Report on Form 10-K for the fiscal
year ended December 31, 2000 (the 2000 10-K) and incorporated
herein by reference)10.09*
    
    
    Amendment dated as of November 1, 2001 to the Crescent Real Estate
Equities Company 1994 Stock Incentive Plan and the Third Amended
and Restated 1995 Crescent Real Estate Equities Company Stock
Incentive Plan (filed as Exhibit No. 10.11 to the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31,
2001 and incorporated herein by reference)10.10*
    
    
    Second Amended and Restated 1995 Crescent Real Estate Equities
Limited Partnership Unit Incentive Plan (filed as Exhibit No. 10.10
to the Registrants Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 and incorporated herein by reference)10.11*
    
    
    1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan, as amended (filed as Exhibit No. 10.14 to the
Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 and incorporated herein by reference)




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT10.12*
    
    
    Amendment dated as of November 5, 1999 to the 1996 Crescent Real
Estate Equities Limited Partnership Unit Incentive Plan (filed as
Exhibit No. 10.13 to the 2000 10-K and incorporated herein by
reference)10.13*
    
    
    Crescent Real Estate Equities, Ltd. Dividend Incentive Unit Plan
(filed as Exhibit No. 10.14 to the 2000 10-K and incorporated
herein by reference)10.14*
    
    
    Annual Incentive Compensation Plan for select Employees of
Crescent Real Estate Equities, Ltd. (filed as Exhibit No. 10.15 to
the 2000 10-K and incorporated herein by reference)10.15
    
    
    Form of Registration Rights, Look-Up and Pledge Agreement (filed
as Exhibit No. 10.05 to the Form S-11 and incorporated herein by
reference)10.16*
    
    
    Restricted Stock Agreement by and between Crescent Real Estate
Equities Company and John C. Goff, dated as of February 19, 2002
(filed as Exhibit No. 10.02 to the 1Q 2002 10-Q and incorporated
herein by reference)10.17*
    
    
    Unit Option Agreement Pursuant to the 1996 Plan by and between
Crescent Real Estate Equities Limited Partnership and John C.
Goff, dated as of February 19, 2002 (filed as Exhibit No. 10.01 to
the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 and incorporated herein by reference)10.18*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and John C. Goff, dated as of February 19,
2002 (filed as Exhibit No. 10.04 to the 1Q 2002 10-Q and
incorporated herein by reference)10.19*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Dennis H. Alberts, dated as of February
19, 2002 (filed as Exhibit No. 10.05 to the 1Q 2002 10-Q and
incorporated herein by reference)10.20*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Kenneth S. Moczulski, dated as of February
19, 2002 (filed as Exhibit No. 10.06 to the 1Q 2002 10-Q and
incorporated herein by reference)10.21*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and David M. Dean, dated as of February 19,
2002 (filed as Exhibit No. 10.07 to the 1Q 2002 10-Q and
incorporated herein by reference)10.22*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Jane E. Mody, dated as of February 19,
2002 (filed as Exhibit No. 10.08 to the 1Q 2002 10-Q and
incorporated herein by reference)10.23*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Jerry R. Crenshaw, Jr., dated as of
February 19, 2002 (filed as Exhibit No. 10.09 to the 1Q 2002 10-Q
and incorporated herein by reference)10.24*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Jane B. Page, dated as of February 19,
2002 (filed as Exhibit No. 10.10 to the 1Q 2002 10-Q and
incorporated herein by reference)




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT10.25*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and John L. Zogg, Jr., dated as of February
19, 2002 (filed as Exhibit No. 10.11 to the 1Q 2002 10-Q and
incorporated herein by reference)10.26*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Dennis H. Alberts, dated as of March 5,
2001 (filed as Exhibit No. 10.12 to the 1Q 2002 10-Q and
incorporated herein by reference)10.27*
    
    
    Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnerships and Paul R. Smith, dated as of May 16, 2005
(filed as Exhibit No. 10.03 to the Registrants Quarterly Report
on Form 10-Q for the quarter ended June 30, 2005 (the 2Q 2005
10-Q) and incorporated herein by reference)10.28*
    
    
    2004 Crescent Real Estate Equities Limited Partnership Long-Term
Incentive Plan (filed as Exhibit 10.27 to the Registrants Annual
Report on Form 10-K for the fiscal year ended December 31, 2004
(the 2004 10-K) and incorporated herein by reference)10.29
    
    
    2005 Crescent Real Estate Equities Limited Partnership Long-Term
Incentive Plan (filed as Exhibit 10.02 to the 2Q 2005 10-Q and
incorporated herein by reference)10.30
    
    
    Revolving Credit Agreement of Crescent Real Estate Funding VIII,
L.P., dated February 8, 2005, and Unconditional Guaranty of
Payment and Performance of Crescent Real Estate Equities Limited
Partnership (filed as Exhibit 10.28 to the 2004 10-K and
incorporated herein by reference)10.31
    
    
    Contribution Agreement effective as of November 10, 2004, relating
to the contribution by Crescent Real Estate Funding I, L.P. of The
Crescent Office Property to Crescent Big Tex I, L.P. (filed as
Exhibit 10.29 to the 2004 10-K and incorporated herein by
reference)10.32
    
    
    Purchase and Sale Agreement effective as of November 10, 2004,
relating to the sale by Crescent Real Estate Equities Limited
Partnership of Houston Center Office Property to Crescent Big Tex
I, L.P. (filed as Exhibit 10.30 to the 2004 10-K and incorporated
herein by reference)10.33
    
    
    Purchase and Sale Agreement effective as of November 10, 2004,
relating to the sale by Crescent Real Estate Funding X, L.P. of
Post Oak Central Office Property to Crescent Big Tex I, L.P.
(filed as Exhibit 10.31 to the 2004 10-K and incorporated herein
by reference)21.01
    
    
    List of Subsidiaries (filed herewith)23.01
    
    
    Consent of Ernst & Young LLP (filed herewith)31.01
    
    
    Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a  14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)32.01
    
    
    Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)