<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-K/A
(Mark One)
   [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.
                                       OR
   [ ]   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 333-42293
                                               ---------

                CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          DELAWARE                                      75-2531304
------------------------------           ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

              777 Main Street, Suite 2100, Fort Worth, Texas 76102
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)

        Registrant's telephone number, including area code (817) 321-2100
                                                          ---------------

Securities registered pursuant to Section 12(b) of the Act:    None
Securities registered pursuant to Section 12(g) of the Act:    None

--------------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past ninety (90) days.
                         YES  X        NO
                            -----         -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 25, 2002, the aggregate market value of the 2,883,863 units of
limited partnership interest held by non-affiliates of the registrant was
approximately $113.6 million, based upon the closing price on the New York Stock
Exchange of $19.70 for common shares of beneficial interest of Crescent Real
Estate Equities Company. Each unit is exchangeable for two common shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission for Crescent Real Estate Equities Company's 2002 Annual Meeting of
Shareholders to be held in June 2002 are incorporated by reference into Part
III.

<PAGE>




         The Form 10-K of Crescent Real Estate Equities Limited Partnership (the
"Operating Partnership") for the year ended December 31, 2001 is being amended
to (i) amend the cover page to reflect certain additional and updated
information relating to the Operating Partnership's capital (ii) amend and
restate in its entirety Item 1. Business to update internal cross references to
amended Items (iii) amend and restate in its entirety Item 6. Selected Financial
Data to conform to financial statement changes in Item 8. Financial Statements
and Supplementary Data (iv) amend and restate in its entirety Item 7.
Management's Discussion and Analysis of Financial Condition and Historical
Results of Operations to include certain additional information in response to a
comment letter received from the Securities and Exchange Commission ("SEC")
related to another filing, (v) amend and restate in its entirety Item 7A.
Quantitative and Qualitative Disclosures about Market Risk to include certain
additional information in response to a comment letter received from the SEC
related to another filing and (vi) to amend and restate in its entirety Item 8.
Financial Statements and Supplementary Data to include certain additional
information in response to a comment letter received from the SEC related to
another filing.



                                       1

<PAGE>



                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                         PAGE
<S>                                                                                                      <C>
                                                 PART I.

Item 1.    Business................................................................................        3


                                                PART II.

Item 6.    Selected Financial Data.................................................................       16
Item 7.    Management's Discussion and Analysis of Financial Condition and Results
           of Operations...........................................................................       17
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk..............................       51
Item 8.    Financial Statements and Supplementary Data.............................................       53
</Table>



                                        2






<PAGE>


                                     PART I

ITEM 1. BUSINESS

                                   THE COMPANY

         Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership ("CREELP" and, together with its direct and indirect ownership
interests in limited partnerships, corporations and limited liability companies,
the "Operating Partnership"), was formed under the terms of a limited
partnership agreement dated February 9, 1994. The Operating Partnership is
controlled by Crescent Real Estate Equities Company, a Texas real estate
investment trust (the "Company"), through the Company's ownership of all of the
outstanding stock of Crescent Real Estate Equities, Ltd., a Delaware corporation
("the General Partner"), which owns an approximately 1% general partner interest
in the Operating Partnership. In addition, the Company owns an approximately 89%
limited partner interest in the Operating Partnership, with the remaining
approximately 10% limited partner interest held by other limited partners.

         All of the limited partners of the Operating Partnership, other than
the Company, own, in addition to limited partner interests, units. Each unit
entitles the holder to exchange the unit (and the related limited partner
interest) for two common shares of the Company or, at the Company's option, an
equivalent amount of cash. For purposes of this report, the term "unit" or "unit
of partnership interest" refers to the limited partner interest and, if
applicable, related units held by a limited partner. Accordingly, the Company's
approximately 89% limited partner interest has been treated as equivalent, for
purposes of this report, to 58,892,623 units, and the remaining approximately
10% limited partner interest has been treated as equivalent, for purposes of
this report, to 6,594,521 units. In addition, the Company's 1% general partner
interest has been treated as equivalent, for purposes of this report, to 661,486
units.

         The Company owns its assets and carries on its operations and other
activities through the Operating Partnership and its other subsidiaries. The
limited partnership agreement of the Operating Partnership acknowledges that all
of the Company's operating expenses are incurred for the benefit of the
Operating Partnership and provides that the Operating Partnership will reimburse
the Company for all such expenses. Accordingly, expenses of the Company are
reimbursed by the Operating Partnership.

         As of December 31, 2001, the Operating Partnership's assets and
operations were composed of four investment segments:

         o        Office Segment;

         o        Resort/Hotel Segment;

         o        Residential Development Segment; and

         o        Temperature-Controlled Logistics Segment.

         Within these segments, the Operating Partnership owned or had an
interest in the following real estate assets (the "Properties") as of December
31, 2001:

         o        OFFICE SEGMENT consisted of 74 office properties (collectively
                  referred to as the "Office Properties"), located in 26
                  metropolitan submarkets in six states, with an aggregate of
                  approximately 28.0 million net rentable square feet.

         o        RESORT/HOTEL SEGMENT consisted of five luxury and destination
                  fitness resorts and spas with a total of 1,028 rooms/guest
                  nights and four upscale business-class hotel properties with a
                  total of 1,769 rooms (collectively referred to as the
                  "Resort/Hotel Properties").

         o        RESIDENTIAL DEVELOPMENT SEGMENT consisted of the Operating
                  Partnership's ownership of real estate mortgages and
                  non-voting common stock representing interests ranging from
                  90% to 95% in five unconsolidated residential development
                  corporations (collectively referred to as the "Residential
                  Development



                                       3



<PAGE>

                  Corporations"), which in turn, through joint venture or
                  partnership arrangements, owned 21 upscale residential
                  development properties (collectively referred to as the
                  "Residential Development Properties").

         o        TEMPERATURE-CONTROLLED LOGISTICS SEGMENT consisted of the
                  Operating Partnership's 40% interest in a general partnership
                  (the "Temperature-Controlled Logistics Partnership"), which
                  owns all of the common stock, representing substantially all
                  of the economic interest, of AmeriCold Corporation (the
                  "Temperature-Controlled Logistics Corporation"), a REIT,
                  which, as of December 31, 2001, directly or indirectly owned
                  89 temperature-controlled logistics properties (collectively
                  referred to as the "Temperature-Controlled Logistics
                  Properties") with an aggregate of approximately 445.2 million
                  cubic feet (17.7 million square feet) of warehouse space.

         See "Note 1. Organization and Basis of Presentation" included in "Item
8. Financial Statements and Supplementary Data" for a table that lists the
principal subsidiaries of the Operating Partnership and the Properties owned by
such subsidiaries.

         See "Note 4. Investments in Real Estate Mortgages and Equity of
Unconsolidated Companies" included in "Item 8. Financial Statements and
Supplementary Data" for a table that lists the Operating Partnership's ownership
in significant unconsolidated companies or equity investments and the four
Office Properties in which the Operating Partnership owned an interest through
these unconsolidated companies or equity investments and the Operating
Partnership's ownership interests in the Residential Development Segment and the
Temperature-Controlled Logistics Segment.

         On February 14, 2002, the Operating Partnership executed an agreement
with Crescent Operating, Inc. ("COPI"), pursuant to which COPI transferred to
the Operating Partnership, in lieu of foreclosure, COPI's lessee interests in
the eight Resort/Hotel Properties leased to subsidiaries of COPI and the voting
common stock in three of the Operating Partnership's Residential Development
Corporations. The Operating Partnership will fully consolidate the operations of
the eight Resort/Hotel Properties and the three Residential Development
Corporations, beginning on the date of the transfers of these assets. See "Note
22. Subsequent Events" included in "Item 8. Financial Statements and
Supplementary Data" for additional information regarding the Operating
Partnership's agreement with COPI.

         For purposes of investor communications, the Operating Partnership
classifies its luxury and destination fitness resorts and spas and upscale
Residential Development Properties as a single group referred to as the "Resort
and Residential Development Sector" due to their similar targeted customer
characteristics. This group does not contain the four upscale business-class
hotel properties. Additionally, for investor communications, the Operating
Partnership classifies its Temperature-Controlled Logistics Properties and its
upscale business-class hotel properties as the "Investment Sector." However, for
purposes of segment reporting as defined in Statement of Financial Accounting
Standard ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and
Related Information" and this Annual Report on Form 10-K, the Resort/Hotel
Properties, including the upscale business-class hotel properties, the
Residential Development Properties and the Temperature-Controlled Logistics
Properties are considered three separate reportable segments.

         See "Note 3. Segment Reporting" included in "Item 8. Financial
Statements and Supplementary Data" for a table showing total revenues, funds
from operations, and equity in net income of unconsolidated companies for each
of these investment segments for the years ended December 31, 2001, 2000 and
1999 and identifiable assets for each of these investment segments at December
31, 2001 and 2000.



                                       4

<PAGE>

                       BUSINESS OBJECTIVES AND STRATEGIES

BUSINESS OBJECTIVES

         The Operating Partnership's primary business objective is to provide
its unitholders with an attractive yet predictable growth in cash flow and
underlying asset value. Additionally, the Operating Partnership is focused on
increasing funds from operations and cash available for distribution, while
optimizing the corresponding growth rates. The Operating Partnership also
strives to attract and retain the best talent available and to empower
management through the development and implementation of a cohesive set of
operating, investing and financing strategies that will align their interests
with the interests of the Operating Partnership's unitholders.

OPERATING STRATEGIES

         The Operating Partnership seeks to enhance its operating performance by
distinguishing itself as the leader in its core investment segments through
customer service and asset quality.

         The Operating Partnership's operating strategies include:

         o        operating the Office Properties as long-term investments;

         o        providing exceptional customer service;

         o        increasing occupancies, rental rates and same-store net
                  operating income; and

         o        emphasizing brand recognition of the Operating Partnership's
                  premier Class A Office Properties and luxury and destination
                  fitness resorts and spas.

INVESTING STRATEGIES

         The Operating Partnership focuses on assessing investment opportunities
and markets considered "demand-driven," or to have high levels of in-migration
by corporations, affordable housing costs, moderate costs of living, and the
presence of centrally located travel hubs, primarily within the Office Segment.
These investment opportunities are evaluated in light of the Operating
Partnership's long-term investment strategy of acquiring properties at a
significant discount to replacement cost in an environment in which the
Operating Partnership believes values will appreciate and equal or exceed
replacement costs. Investment opportunities are expected to provide growth in
cash flow after applying management skills, renovation and expansion capital and
strategic vision.

         The Operating Partnership's investment strategies include:

         o        capitalizing on strategic acquisition opportunities, primarily
                  within the Operating Partnership's Office Segment;

         o        evaluating the expected returns on acquisition opportunities
                  in relation to the Operating Partnership's cost of capital;

         o        selectively developing the Operating Partnership's commercial
                  land inventory, primarily in its Office and Resort/Hotel
                  Segments in order to meet the needs of customers;

         o        selectively developing luxury and destination fitness resorts
                  and spas;

         o        monetizing the current investments of the Operating
                  Partnership in the five Residential Development Corporations
                  and reinvesting returned capital from the Residential
                  Development Segment primarily into the Office Segment where
                  the Operating Partnership expects to achieve favorable rates
                  of return; and



                                       5
<PAGE>


         o        evaluating future repurchases of the Company's common shares,
                  considering stock price, cost of capital, alternative
                  investment options and growth implications.

FINANCING STRATEGIES

         The Operating Partnership implements a disciplined set of financing
strategies in order to fund its operating and investing activities.

         The Operating Partnership's financing strategies include:

         o        funding operating expenses, debt service payments and
                  distributions to unitholders primarily through cash flow from
                  operations;

         o        taking advantage of market opportunities to refinance existing
                  debt and reduce interest cost, replace secured debt with
                  unsecured debt, manage the Operating Partnership's debt
                  maturity schedule and expand the Operating Partnership's
                  lending group;

         o        actively managing the Operating Partnership's exposure to
                  variable-rate debt;

         o        utilizing a combination of the debt, equity, joint venture
                  capital and selected asset disposition alternatives available
                  to the Operating Partnership to finance acquisition and
                  development opportunities; and

         o        recycling capital within the Operating Partnership through
                  strategic sales of non-core assets and through joint ventures
                  of selected Office Properties within the Operating
                  Partnership's portfolio while maintaining a minority interest
                  and continuing to lease and manage the Properties.

                                    EMPLOYEES

         As of February 25, 2002, the Operating Partnership had 794 employees.
None of these employees are covered by collective bargaining agreements. The
Operating Partnership considers its employee relations to be good.

                              ENVIRONMENTAL MATTERS

         The Operating Partnership and its Properties are subject to a variety
of federal, state and local environmental, health and safety laws, including:

         o        Comprehensive Environmental Response, Compensation, and
                  Liability Act, as amended ("CERCLA");

         o        Resource Conservation & Recovery Act;

         o        Clean Water Act;

         o        Clean Air Act;

         o        Toxic Substances Control Act; and

         o        Occupational Safety & Health Act.

         The application of these laws to a specific property that the Operating
Partnership owns will be dependent on a variety of property-specific
circumstances, including the former uses of the property and the building
materials used at each property. Under certain environmental laws, principally
CERCLA and comparable state laws, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous or
toxic substances, asbestos-containing materials, or petroleum product releases
at the property. They may also be held liable to a governmental entity or third
parties for property damage and for investigation and clean up costs such
parties incur in connection with the contamination, whether or not the owner or
operator knew of, or was responsible for, the contamination. In addition, some
environmental laws



                                       6
<PAGE>
create a lien on the contaminated site in favor of the government for damages
and costs it incurs in connection with the contamination. The owner or operator
of a site also may be liable under certain environmental laws and common law to
third parties for damages and injuries resulting from environmental
contamination emanating from the site. Such costs or liabilities could exceed
the value of the affected real estate. The presence of contamination or the
failure to remediate contamination may adversely affect the owner's ability to
sell or lease real estate or to borrow using the real estate as collateral.

         Compliance by the Operating Partnership with existing environmental,
health and safety laws has not had a material adverse effect on the Operating
Partnership's financial condition and results of operations, and management does
not believe it will have such an impact in the future. In addition, the
Operating Partnership has not incurred, and does not expect to incur any
material costs or liabilities due to environmental contamination at Properties
it currently owns or has owned in the past. However, the Operating Partnership
cannot predict the impact of new or changed laws or regulations on its current
Properties or on properties that it may acquire in the future. The Operating
Partnership has no current plans for substantial capital expenditures with
respect to compliance with environmental, health and safety laws.

                                INDUSTRY SEGMENTS

                                 OFFICE SEGMENT

OWNERSHIP STRUCTURE

         As of December 31, 2001, the Operating Partnership owned or had an
interest in 74 Office Properties located in 26 metropolitan submarkets in six
states, with an aggregate of approximately 28.0 million net rentable square
feet. The Operating Partnership, as lessor, has retained substantially all of
the risks and benefits of ownership of the Office Properties and accounts for
its leases as operating leases. Additionally, the Operating Partnership provides
management and leasing services for some of its Office Properties.

         See "Item 2. Properties" for more information about the Operating
Partnership's Office Properties. In addition, see "Note 1. Organization and
Basis of Presentation" included in "Item 8. Financial Statements and
Supplementary Data" for a table that lists the principal subsidiaries of the
Operating Partnership and the Properties owned by such subsidiaries and "Note 4.
Investments in Real Estate Mortgages and Equity of Unconsolidated Companies"
included in "Item 8. Financial Statements and Supplementary Data" for a table
that lists the Operating Partnership's ownership in significant unconsolidated
companies or equity investments and the four Office Properties in which the
Operating Partnership owned an interest through these unconsolidated companies
or equity investments.

JOINT VENTURE ARRANGEMENTS

5 Houston Center

         On June 4, 2001, the Operating Partnership entered into a joint venture
arrangement with a pension fund advised by JP Morgan Investment Management, Inc.
("JPM") to construct the 5 Houston Center Office Property within the Operating
Partnership's Houston Center mixed-use Office Property complex in Houston,
Texas. The Class A Office Property will consist of 577,000 net rentable square
feet. The joint venture is structured such that the fund holds a 75% equity
interest, and the Operating Partnership holds a 25% equity interest in the
Property. In addition, the Operating Partnership is developing, and will manage
and lease the Property on a fee basis.

Four Westlake Park and Bank One Tower

         On July 30, 2001, the Operating Partnership entered into joint venture
arrangements with an affiliate of General Electric Pension Fund ("GE") for two
Office Properties, Four Westlake Park in Houston, Texas, and Bank One Tower in
Austin, Texas. The joint ventures are structured such that GE holds an 80%
equity interest in each of the Office Properties, Four Westlake Park, a 560,000
square foot Class A Office Property located in the Katy Freeway submarket of
Houston, and Bank One Tower, a 390,000 square foot Class A Office Property
located in downtown Austin. The Operating Partnership



                                       7

<PAGE>

continues to hold the remaining 20% equity interests in each Office Property. In
addition, the Operating Partnership manages and leases the Office Properties on
a fee basis.



                                       8
<PAGE>



MARKET INFORMATION

         The Office Properties reflect the Operating Partnership's strategy of
investing in premier assets within markets that have significant potential for
rental growth. Within its selected submarkets, the Operating Partnership has
focused on premier locations that management believes are able to attract and
retain the highest quality customers and command premium rents. Consistent with
its long-term investment strategies, the Operating Partnership has sought
transactions where it was able to acquire properties that have strong economic
returns based on in-place tenancy and also have a dominant position within the
submarket due to quality and/or location. Accordingly, management's long-term
investment strategy not only demands acceptable current cash flow return on
invested capital, but also considers long-term cash flow growth prospects. In
selecting the Office Properties, the Operating Partnership analyzed demographic
and economic data to focus on markets expected to benefit from significant
long-term employment growth as well as corporate relocations.

         The Operating Partnership's Office Properties are located primarily in
the Dallas/Fort Worth and Houston, Texas, metropolitan areas, both of which are
projected to benefit from strong population and employment growth over the next
10 years. As indicated in the table below entitled "Projected Population Growth
and Employment Growth for all Operating Partnership Markets," these core
Operating Partnership markets are projected to outperform the 10-year averages
for the United States. In addition, the Operating Partnership considers these
markets "demand-driven" markets due to high levels of in-migration by
corporations, affordable housing costs, moderate cost of living, and the
presence of centrally located travel hubs, making all areas of the country
easily accessible.

Texas

         As of December 2001, the Texas unemployment rate was 5.7%, slightly
better than the national unemployment rate of 5.8%. According to the Texas
Economic Update, Texas weathered the 2001 economic slowdown better than the
nation as a whole.

Dallas/Fort Worth ("DFW")

         As of December 2001, the DFW unemployment rate was 5.6%, compared with
the Texas unemployment rate of 5.7% and the national unemployment rate of 5.8%.
As for DFW's 2001 commercial office market, according to CoStar data, citywide
net economic absorption, excluding space available for sublease, was
approximately 1.0 million square feet, primarily represented by a positive 1.0
million square feet of absorption in Class A space. The city's total net
absorption, including space available for sublease, was approximately (3.0)
million square feet for 2001; however, Class A space represented only
approximately (700,000) square feet of the (3.0) million total square feet.

Houston

         Houston's employment data held steady through much of 2001, despite the
slowdown in the economy. Approximately 23,000 jobs were created in 2001, an
increase of approximately 1.1% over 2000. As of December 2001, the Houston
unemployment rate was 4.4%, compared with the Texas unemployment rate of 5.7%
and the national unemployment rate of 5.8%. As for Houston's 2001 commercial
office market, according to CoStar data, citywide net economic absorption,
excluding space available for sublease, was 2.0 million square feet, with 2.75
million square feet in Class A space. The city's total net absorption, including
space available for sublease, was a (200,000) square feet for 2001; however,
Class A space had a positive total net absorption of 1.4 million square feet.



                                       9
<PAGE>


         The demographic conditions, economic conditions and trends (population
growth and employment growth) favoring the markets in which the Operating
Partnership has invested are projected to continue to exceed the national
averages, as illustrated in the following table.

             PROJECTED POPULATION GROWTH AND EMPLOYMENT GROWTH FOR
                       ALL OPERATING PARTNERSHIP MARKETS

<Table>
<Caption>
                                                      Population            Employment
                                                       Growth                Growth
     Metropolitan Statistical Area                    2002-2011             2002-2011
     -------------------------------                  ----------            ----------
<S>                                                   <C>                   <C>
     Albuquerque, NM                                     22.05%               14.15%
     Austin, TX                                          26.02                36.61
     Colorado Springs, CO                                27.48                15.83
     Dallas, TX                                          15.89                20.92
     Denver, CO                                          11.34                19.76
     Fort Worth, TX                                      19.03                22.31
     Houston, TX                                         15.61                22.43
     Miami, FL                                            9.03                15.90
     Phoenix, AZ                                         27.24                33.41
     San Diego, CA                                       17.35                17.29
     UNITED STATES                                        8.49                12.01
</Table>

----------
Source:  Compiled from information published by Economy.com, Inc.

         The Operating Partnership does not depend on a single customer or a few
major customers within the Office Segment, the loss of which would have a
material adverse effect on the Operating Partnership's financial condition or
results of operations. Based on rental revenues from office leases in effect as
of December 31, 2001, no single customer accounted for more than 5% of the
Operating Partnership's total Office Segment rental revenues for 2001.

         The Operating Partnership applies a well-defined leasing strategy in
order to capture the potential rental growth in the Operating Partnership's
portfolio of Office Properties as occupancy and rental rates increase within the
markets and the submarkets in which the Operating Partnership has invested. The
Operating Partnership's strategy is based, in part, on identifying and focusing
on investments in submarkets in which weighted average full-service rental rates
(representing base rent after giving effect to free rent and scheduled rent
increases that would be taken into account under generally accepted accounting
principles ("GAAP") and including adjustments for expenses payable by or
reimbursed from customers) are significantly less than weighted average
full-service replacement cost rental rates (the rate management estimates to be
necessary to provide a return to a developer of a comparable, multi-tenant
building sufficient to justify construction of new buildings) in that submarket.
In calculating replacement cost rental rates, management relies on available
third-party data and its own estimates of construction costs (including
materials and labor in a particular market) and assumes replacement cost rental
rates are achieved at a 95% occupancy level. The Operating Partnership believes
that the difference between the two rates is a useful measure of the additional
revenue that the Operating Partnership may be able to obtain from a property,
because the difference should represent the amount by which rental rates would
be required to increase in order to justify construction of new properties. For
the Operating Partnership's Office Properties, the weighted average full-service
rental rate as of December 31, 2001 was $22.42 per square foot, compared to an
estimated weighted average full-service replacement cost rental rate of $30.23
per square foot.

COMPETITION

         The Operating Partnership's Office Properties, primarily Class A
properties located within the southwest, individually compete against a wide
range of property owners and developers, including property management companies
and other REITs, that offer space in similar classes of office properties (for
example, Class A and Class B properties.) A number of these owners and
developers may own more than one property. The number and type of competing
properties in a particular market or submarket could have a material effect on
the Operating Partnership's ability to lease space and maintain or increase
occupancy or rents in its existing Office Properties. Management believes,
however, that the quality services and individualized attention that the
Operating Partnership offers its customers, together with its active preventive



                                       10
<PAGE>

maintenance program and superior building locations within markets, enhance the
Operating Partnership's ability to attract and retain customers for its Office
Properties. In addition, as of December 31, 2001, on a weighted average basis,
the Operating Partnership owned 16% of the Class A office space in the 26
submarkets in which the Operating Partnership owned Class A office properties,
and 24% of the Class B office space in the two submarkets in which the Operating
Partnership owned Class B office properties. Management believes that ownership
of a significant percentage of office space in a particular market reduces
property operating expenses, enhances the Operating Partnership's ability to
attract and retain customers and potentially results in increases in Operating
Partnership operating income.

DISPOSITIONS

         During the year ended December 31, 2001, five of the Operating
Partnership's fully consolidated Office Properties were disposed of. On
September 18, 2001, the Operating Partnership completed the sale of the two
Washington Harbour Office Properties. The Washington Harbour Office Properties
were the Operating Partnership's only Office Properties in Washington, D.C. On
September 28, 2001, the Woodlands Office Equities - '95 Limited ("WOE"), owned
by the Operating Partnership and the Woodlands Commercial Properties Company,
L.P. ("Woodlands CPC"), sold two Office Properties located within The Woodlands,
Texas. On December 20, 2001, WOE sold another Office Property located within The
Woodlands, Texas.

         During the year ended December 31, 2001, two of the unconsolidated
companies in which the Operating Partnership has an equity interest, sold three
office properties and one retail property. On September 27, 2001, the Woodlands
CPC, owned by the Operating Partnership and an affiliate of Morgan Stanley, sold
one office/venture tech property located within The Woodlands, Texas. On
November 9, 2001, The Woodlands Land Development Company, L.P., owned by the The
Woodlands Land Company, Inc. and an affiliate of Morgan Stanley, sold two office
properties and one retail property located within The Woodlands, Texas.

DEVELOPMENT

Avallon IV Office Property

         In May 2001, the Operating Partnership completed the construction of
the Avallon IV Office Property in Austin, Texas. The property is a Class A
Office Property with 86,315 net rentable square feet. Construction of this
property commenced in September 2000.

5 Houston Center Office Property

         The Operating Partnership is currently developing the 5 Houston Center
Office Property in Houston, Texas. Construction of the planned 27-story, Class A
Office Property consisting of 577,000 net rentable square feet commenced in
November 2000, and is expected to be completed in the fourth quarter of 2002. In
June 2001, the Operating Partnership entered into a joint venture arrangement
with a pension fund advised by JPM to construct this Office Property. The joint
venture is structured such that the fund holds a 75% equity interest, and the
Operating Partnership holds a 25% equity interest in the Property.

                              RESORT/HOTEL SEGMENT

OWNERSHIP STRUCTURE

         Prior to the enactment of REIT Modernization Act, the Company's status
as a REIT for federal income tax purposes prohibited the Operating Partnership
from operating the Resort/Hotel Properties. As of December 31, 2001, the
Operating Partnership owned nine Resort/Hotel Properties, all of which, other
than the Omni Austin Hotel, were leased to subsidiaries of COPI pursuant to
eight separate leases. The Omni Austin Hotel was leased, under a separate lease,
to HCD Austin Corporation.



                                       11

<PAGE>

         Under the leases, each having a term of 10 years, the Resort/Hotel
Property lessees assumed the rights and obligations of the property owner under
the respective management agreements with the hotel operators, as well as the
obligation to pay all property taxes and other costs related to the Properties.

         The leases provided for the payment by the Resort/Hotel Property
lessees of all or a combination of the following:

         o        base rent, with periodic rent increases if applicable;

         o        percentage rent based on a percentage of gross hotel receipts
                  or gross room revenues, as applicable, above a specified
                  amount; and

         o        a percentage of gross food and beverage revenues above a
                  specified amount.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to subsidiaries of the Operating
Partnership, in lieu of foreclosure, COPI's lessee interests in the eight
Resort/Hotel Properties leased to subsidiaries of COPI. As a result, these
subsidiaries of the Operating Partnership became the lessees of the eight
Resort/Hotel Properties.

         See "Note 22. Subsequent Events" included in "Item 8. Financial
Statements and Supplemental Data" for additional information regarding the
Operating Partnership's agreement with COPI.

CR LICENSE, LLC AND CRL INVESTMENTS, INC.

         As of December 31, 2001, the Operating Partnership had a 28.5% interest
in CR License, LLC, the entity which owns the right to the future use of the
"Canyon Ranch" name. The Operating Partnership also had a 95% economic interest,
representing all of the non-voting common stock, in CRL Investments, Inc., which
has an approximately 65% economic interest in the Canyon Ranch Spa Club in the
Venetian Hotel in Las Vegas, Nevada.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which the Operating Partnership acquired, in lieu of
foreclosure, COPI's 1.5% interest in CR License, LLC and 5.0% interest,
representing all of the voting stock, in CRL Investments, Inc.

MARKET INFORMATION

         Lodging demand is highly dependent upon the global economy and volume
of business travel. The uncertainty surrounding the weak global economy and the
costs and fear resulting from the events of September 11, 2001 are expected to
result in weak performance for much of 2002. This is evidenced by declines in
both business and leisure travel in the United States. Although the hospitality
industry will be negatively impacted to the extent demand is less than expected
for much of 2002, management expects a recovery in 2003.

COMPETITION

         Most of the Operating Partnership's upscale business class Resort/Hotel
Properties in Denver, Albuquerque, Austin and Houston are business and
convention center hotels that compete against other business and convention
center hotels. The Operating Partnership believes, however, that its luxury and
destination fitness resorts and spas are unique properties that have no
significant direct competitors due either to their high replacement cost or
unique concept and location. However, the luxury and destination fitness resorts
and spas do compete against business-class hotels or middle-market resorts in
their geographic areas, as well as against luxury resorts nationwide and around
the world.

                         RESIDENTIAL DEVELOPMENT SEGMENT

OWNERSHIP STRUCTURE

         As of December 31, 2001, the Operating Partnership owned economic
interests in five Residential Development Corporations through the Residential
Development Property mortgages and the non-voting common stock of these



                                       12

<PAGE>

Residential Development Corporations. The Residential Development Corporations
in turn, through joint ventures or partnership arrangements, own interests in 21
Residential Development Properties. The Residential Development Corporations are
responsible for the continued development and the day-to-day operations of the
Residential Development Properties.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to subsidiaries of the Operating
Partnership, in lieu of foreclosure, COPI's voting interests in three of the
Residential Development Corporations. These three Residential Development
Corporations, (Desert Mountain Development Corporation ("Desert Mountain"), The
Woodlands Land Company, Inc., ("The Woodlands") and Crescent Resort Development,
Inc. ("CRD")) own interests in 16 Residential Development Properties.

         See "Note 22. Subsequent Events" included in "Item 8. Financial
Statements and Supplemental Data" for additional information regarding the
Operating Partnership's agreement with COPI.

MARKET INFORMATION

         A slowing economy, combined with the events of September 11, 2001
contributed to the reduction in lot absorption, primarily at Desert Mountain.
CRD (formerly "Crescent Development Management Corp.") was not significantly
impacted because most of its products were pre-sold. However, CRD did change its
strategy by delaying the commencement of certain projects, which will impact its
performance in 2002. In addition, The Woodlands experienced a reduction in lot
absorption of its higher priced lots, including Carlton Woods, The Woodlands'
new upscale gated residential development. However, The Woodlands was not
significantly impacted due to the higher prices of the lots sold offsetting
lower lot sales.

COMPETITION

         The Operating Partnership's Residential Development Properties compete
against a variety of other housing alternatives in each of their respective
areas. These alternatives include other planned developments, pre-existing
single-family homes, condominiums, townhouses and non-owner occupied housing,
such as luxury apartments. Management believes that the Properties owned by The
Woodlands, CRD and Desert Mountain, representing the Operating Partnership's
most significant investments in Residential Development Properties, contain
certain features that provide competitive advantages to these developments.

         The Woodlands, which is an approximately 27,000-acre, master-planned
residential and commercial community north of Houston, Texas, is unique among
developments in the Houston area, because it functions as a self-contained
community. Amenities contained in the development, which are not contained
within most other local developments, include a shopping mall, retail centers,
office buildings, a hospital, a community college, places of worship, a
conference center, 85 parks, 117 holes of golf, including a Tournament Players
Course and signature courses by Jack Nicklaus, Arnold Palmer, and Gary Player,
two man-made lakes and a performing arts pavilion. The Woodlands competes with
other master planned communities in the surrounding Houston market.

         Desert Mountain, a luxury residential and recreational community in
Scottsdale, Arizona, which also offers five 18-hole Jack Nicklaus signature golf
courses and tennis courts, has few direct competitors due in part to the
superior environmental attributes and the types of amenities that it offers.

         CRD invests primarily in mountain resort residential real estate in
Colorado and California, and residential real estate in downtown Denver,
Colorado. Management believes CRD does not have any direct competitors because
the projects and project locations are unique and the land is limited in most of
these locations.



                                       13
<PAGE>


                    TEMPERATURE-CONTROLLED LOGISTICS SEGMENT

OWNERSHIP STRUCTURE

         Effective March 12, 1999, the Operating Partnership, Vornado Realty
Trust, COPI, the Temperature-Controlled Logistics Partnership and the
Temperature-Controlled Logistics Corporation (including all affiliated entities
that owned any portion of the business operations of the Temperature-Controlled
Logistics Properties at that time) sold all of the non-real estate assets,
encompassing the business operations, for approximately $48.7 million to a
subsidiary of a newly formed partnership ("AmeriCold Logistics"), owned 60% by
Vornado Operating L.P. and 40% by a subsidiary of COPI. The Operating
Partnership has no interest in AmeriCold Logistics.

         As of December 31, 2001, the Operating Partnership held a 40% interest
in the Temperature-Controlled Logistics Partnership, which owns the
Temperature-Controlled Logistics Corporation, which directly or indirectly owns
the 89 Temperature-Controlled Logistics Properties, with an aggregate of
approximately 445.2 million cubic feet (17.7 million square feet) of warehouse
space.

         AmeriCold Logistics, as sole lessee of the Temperature-Controlled
Logistics Properties, leases the Temperature-Controlled Logistics Properties
from the Temperature-Controlled Logistics Corporation under three triple-net
master leases, as amended on January 23, 2002. On February 22, 2001, the
Temperature-Controlled Logistics Corporation and AmeriCold Logistics agreed to
restructure certain financial terms of the leases, including the adjustment of
the rental obligation for 2001 to $146.0 million, the adjustment of the rental
obligation for 2002 to $150.0 million (plus contingent rent in certain
circumstances), the increase of the Temperature-Controlled Logistics
Corporation's share of capital expenditures for the maintenance of the
properties from $5.0 million to $9.5 million (effective January 1, 2000) and the
extension of the date on which deferred rent was required to be paid to December
31, 2003.

         AmeriCold Logistics' same-store earnings before interest, taxes,
depreciation and amortization, and rent declined 11% for the year ended December
31, 2001, compared to the same period in 2000. These declines are attributable
to a reduction in total customer inventory stored at the warehouses and a
reduction in the frequency of customer inventory turnover. AmeriCold Logistics
deferred $25.5 million of rent for the year ended December 31, 2001, of which
the Operating Partnership's share was $10.2 million. AmeriCold Logistics also
deferred $19.0 million and $5.4 million of rent for the years ended December 31,
2000 and 1999, respectively, of which the Operating Partnership's share was $7.5
million and $2.1 million, respectively. In December 2001, the
Temperature-Controlled Logistics Corporation waived its rights to collect $39.8
million of the total $49.9 million of deferred rent, of which the Operating
Partnership's share was $15.9 million. The Temperature-Controlled Logistics
Corporation had recorded adequate valuation allowances related to the waived
deferred rental revenue during the years ended December 31, 2000, and 2001;
therefore, there was no financial statement impact to the Temperature-Controlled
Logistics Corporation or to the Operating Partnership related to the
Temperature-Controlled Logistics Corporation's decision to waive collection of
the deferred rent.

BUSINESS AND INDUSTRY INFORMATION

         AmeriCold Logistics provides frozen food manufacturers with
refrigerated warehousing and transportation management services. The
Temperature-Controlled Logistics Properties consist of production and
distribution facilities. Production facilities differ from distribution
facilities in that they typically serve one or a small number of customers
located nearby. These customers store large quantities of processed or partially
processed products in the facility until they are further processed or shipped
to the next stage of production or distribution. Distribution facilities
primarily serve customers who store a wide variety of finished products to
support shipment to end-users, such as food retailers and food service
companies, in a specific geographic market.

         AmeriCold Logistics' transportation management services include freight
routing, dispatching, freight rate negotiation, backhaul coordination, freight
bill auditing, network flow management, order consolidation and distribution
channel assessment. AmeriCold Logistics' temperature-controlled logistics
expertise and access to both the frozen food



                                       14
<PAGE>

warehouses and distribution channels enable the customers of AmeriCold Logistics
to respond quickly and efficiently to time-sensitive orders from distributors
and retailers.

         AmeriCold Logistics' customers consist primarily of national, regional
and local frozen food manufacturers, distributors, retailers and food service
organizations. A breakdown of AmeriCold Logistics' largest customers include:

<Table>
<Caption>
                                                                        PERCENTAGE OF
                                                                        2001 REVENUE
                                                                        -------------
<S>                                                                     <C>
H.J. Heinz & Co. ........................................................     16%
Con-Agra, Inc. ..........................................................      8
Sara Lee Corp. ..........................................................      5
McCain Foods, Inc. ......................................................      5
Tyson Foods, Inc. .......................................................      4
General Mills ...........................................................      4
J.R. Simplot ............................................................      3
Flowers Food, Inc. ......................................................      3
Pro-Fac Cooperative, Inc. ...............................................      2
Farmland Industries, Inc. ...............................................      2
Other ...................................................................     48
                                                                            ----
TOTAL ...................................................................    100%
                                                                            ====
</Table>

          Consolidation among retail and food service channels has limited the
ability of manufacturers to pass along cost increases by raising prices. Because
of this, manufacturers have been forced in the recent past to focus more
intensely on supply chain cost (such as inventory management, transportation and
distribution) reduction initiatives in an effort to improve operating
performance. As the economy continues to recover from the current recession and
stabilize, AmeriCold Logistics will continue to examine key areas of its
operations to maximize long-term growth potential. These initiatives include
customer profitability, reductions of energy and labor costs and providing
complete supply chain solutions complemented by information systems to its
customers. In addition, to the extent that socioeconomic events create spikes in
demand and upset the planning balance between manufacturers and retailers,
AmeriCold Logistics will experience variability in its short-term revenues.
However, as AmeriCold Logistics focuses on its key initiatives, it intends to
forge alliances with existing and new customers that will encourage movement of
product into its facilities and strengthen long-term revenues.

COMPETITION

         AmeriCold Logistics is the largest operator of public refrigerated
warehouse space in North America and has more than twice the cubic feet of the
second largest operator. AmeriCold Logistics operated an aggregate of
approximately 18% of total cubic feet of public refrigerated warehouse space as
of December 31, 2001. No other person or entity operated more than 8% of total
public refrigerated warehouse space as of December 31, 2001. As a result,
AmeriCold Logistics does not have any competitors of comparable size. AmeriCold
Logistics operates in an environment in which competition is national, regional
and local in nature and in which the range of service, temperature-controlled
logistics facilities, customer mix, service performance and price are the
principal competitive factors.

DEVELOPMENT

         The Temperature-Controlled Logistics Corporation completed the
acquisition of one facility in the first quarter of 2001 for $10.0 million and
completed the construction of one facility in the third quarter of 2001 for
$15.8 million, representing in aggregate approximately 8.5 million cubic feet
(0.2 million square feet) of additional warehouse space.



                                       15
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

         The following table includes certain financial information for the
Operating Partnership on a consolidated historical basis. You should read this
section in conjunction with "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Item 8. Financial Statements
and Supplementary Data."

                CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                     CONSOLIDATED HISTORICAL FINANCIAL DATA
                  (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)

<Table>
<Caption>
                                                                                  YEAR ENDED DECEMBER 31,
                                                          ------------------------------------------------------------------------
                                                              2001           2000           1999           1998           1997
                                                          ------------   ------------   ------------   ------------   ------------
<S>                                                       <C>            <C>            <C>            <C>            <C>
Operating Data(1):
   Total revenue .......................................  $    725,326   $    739,697   $    746,279   $    698,343   $    447,373
   Operating income (loss) .............................         1,188        111,176        (54,954)       143,893        111,281
   Income before minority
      interests and extraordinary
      item .............................................        56,844        324,344         13,343        183,210        135,024
   Basic earnings per unit of partnership interest:
     Income (loss) before extraordinary
      item .............................................  $       0.33   $       4.24   $      (0.09)  $       2.52   $       2.50
    Net income (loss) ..................................          0.15           4.18          (0.09)          2.52           2.50
   Diluted earnings per unit of partnership interest:
     Income (loss) before extraordinary
      item .............................................  $       0.33   $       4.21   $      (0.09)  $       2.42   $       2.41
    Net income (loss) ..................................          0.15           4.15          (0.09)          2.42           2.41
BALANCE SHEET DATA
   (AT PERIOD END):
   Total assets(1) .....................................  $  4,422,826   $  4,827,999   $  4,951,420   $  5,045,949   $  4,182,875
   Total debt ..........................................     2,214,094      2,271,895      2,598,929      2,318,156      1,710,125
   Total partners' capital .............................     1,759,190      2,116,594      2,156,863      2,551,624      2,317,353
OTHER DATA:
   Funds from Operations(2) ............................  $    206,389   $    348,189   $    340,777   $    341,713   $    214,396
   Earnings before interest, taxes,
      depreciation and amortization(1)(3) ..............  $    488,427   $    541,294   $    526,154   $    459,992   $    299,390
   Cash distribution declared per
    unit of partnership interest .......................  $       3.70   $       4.40   $       4.40   $       3.72   $       2.74
   Weighted average
    units outstanding - basic ..........................    67,814,802     67,859,823     67,977,021     66,214,702     53,417,789
   Weighted average
    units outstanding - diluted ........................    68,578,210     68,458,230     68,945,780     70,194,031     55,486,729
   Cash flow provided by
    (used in):
    Operating activities ...............................  $    238,621   $    297,227   $    335,829   $    299,514   $    211,550
    Investing activities ...............................       210,356        144,843       (204,345)      (820,429)    (2,294,766)
    Financing activities ...............................      (455,976)      (475,529)      (169,210)       564,680      2,123,744
</Table>

----------

     (1)  The selected consolidated historical financial data, including the
          operating data and total assets, have been prepared in accordance with
          GAAP. Because of the manner in which certain subsidiaries of the
          Company and the Operating Partnership are consolidated for purposes of
          GAAP, an intracompany loan is reflected as an asset, and the
          associated interest income is included in the operating data, in the
          Operating Partnership's financial statements for the years ended
          December 31, 2001 and 2000. If this intracompany loan and the
          associated interest income were eliminated, all items under "Operating
          Data," and total assets would be reduced, as shown in "Note 12. Sale
          of Preferred Equity Interests in Subsidiary and Intracompany Loan"
          included in "Item 8. Financial Statements and Supplementary Data." In
          addition, earnings before interest, taxes, depreciation and
          amortization would be reduced to $459,155 for the year ended December
          31, 2001 and $520,002 for the year ended December 31, 2000.

     (2)  Funds from Operations ("FFO"), based on the revised definition adopted
          by the Board of Governors of the National Association of Real Estate
          Investment Trusts ("NAREIT"), effective January 1, 2000, and as used
          herein, means 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. For a
          more detailed definition and description of FFO, and the reduction in
          FFO that would result for the years ended December 31, 2001 and 2000
          if the intracompany loan and the resulting interest income were
          eliminated, see "Item 7. Management's Discussion and Analysis of
          Financial Condition and Results of Operations."


                                       16
<PAGE>

     (3)  Earnings before Interest, Taxes, Depreciation and Amortization
          ("EBITDA"), is computed as the sum of (i) net income before minority
          interests and extraordinary item, interest expense, depreciation and
          amortization, amortization of deferred financing costs, impairment and
          other charges related to COPI and impairment and other charges related
          to the real estate assets (ii) less gain on property sales, net.
          EBITDA is presented because it provides useful information regarding
          the Operating Partnership's ability to service debt. EBITDA should not
          be considered as an alternative measure of operating results or cash
          flow from operations as determined in accordance with GAAP. EBITDA as
          presented may not be comparable to other similarly titled measures
          used by other companies.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         You should read this section in conjunction with the selected financial
data and the consolidated financial statements and the accompanying notes in
"Item 6. Selected Financial Data" and "Item 8. Financial Statements and
Supplementary Data," respectively, of this report. Historical results and
percentage relationships set forth in these Items and this section should not be
taken as indicative of future operations of the Operating Partnership.
Capitalized terms used but not otherwise defined in this section have the
meanings given to them in Items 1 - 6 of this Form 10-K.

         The limited partnership agreement of the Operating Partnership
acknowledges that all of the Company's operating expenses are incurred for the
benefit of the Operating Partnership and provides that the Operating Partnership
will reimburse the Company for all such expenses. Accordingly, expenses of the
Company are reimbursed by the Operating Partnership.

         This Form 10-K contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
characterized by terms such as "believe," "expect" and "may."

         Although the Operating Partnership believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Operating Partnership's actual results could differ materially
from those described in the forward-looking statements.

         The following factors might cause such a difference:

     o    The Operating Partnership's inability to obtain the confirmation of a
          prepackaged bankruptcy plan of COPI binding all creditors and COPI
          stockholders;

     o    The inability of the Operating Partnership to successfully integrate
          the lessee interests in the Resort/Hotel Properties and the voting
          interests in the Residential Development Corporations and related
          entities into its current business and operations;

     o    The inability of the Operating Partnership and the Company to complete
          the distribution to unitholders of the Operating Partnership and
          shareholders of the Company of the shares of a new entity to purchase
          COPI's interest in AmeriCold Logistics;

     o    Further deterioration in the resort/business-class hotel markets or in
          the market for residential land or luxury residences, including
          single-family homes, townhomes and condominiums, or in the economy
          generally;

     o    The Operating Partnership's ability, at its Office Properties, to
          timely lease unoccupied square footage and timely re-lease occupied
          square footage upon expiration on favorable terms, which may be
          adversely affected by changes in real estate conditions (including
          rental rates and competition from other properties and new development
          of competing properties or a general downturn in the economy);

     o    Financing risks, such as the ability to generate revenue sufficient to
          service and repay existing or additional debt, the ability to meet
          applicable debt covenants, the Operating Partnership's ability to fund
          the share repurchase



                                       17
<PAGE>
          program, increases in debt service associated with increased debt and
          with variable-rate debt, and the ability to consummate financings and
          refinancings on favorable terms and within any applicable time frames;

     o    Further adverse conditions in the temperature-controlled logistics
          business (including both industry-specific conditions and a general
          downturn in the economy) which may further jeopardize the ability of
          AmeriCold Logistics to pay rent;

     o    Adverse changes in the financial condition of existing customers;

     o    The concentration of a significant percentage of the Operating
          Partnership's assets in Texas;

     o    The Operating Partnership's ability to find acquisition and
          development opportunities which meet the Operating Partnership's
          investment strategy;

     o    The existence of complex regulations relating to the Company's status
          as a REIT, the effect of future changes in REIT requirements as a
          result of new legislation and the adverse consequences of the failure
          to qualify as a REIT; and

     o    Other risks detailed from time to time in the Operating Partnership's
          filings with the SEC.

         Given these uncertainties, readers are cautioned not to place undue
reliance on such statements. The Operating Partnership is not obligated to
update these forward-looking statements to reflect any future events or
circumstances.

         The following sections include information for each of the Operating
Partnership's investment segments for the year ended December 31, 2001.

         The economic slowdown in the third quarter of 2001 combined with the
events of September 11, 2001 have had an adverse impact on Resort/Hotel
operations and lot sales primarily at the Desert Mountain Residential
Development Property. However, the Office Property portfolio, which represents
approximately 66% of total assets, continues to be stable with same-store
weighted average occupancy in excess of 92% and average remaining lease term of
approximately five years at December 31, 2001. Although management does not
expect full recovery of these investment segments in the near-term, the
Operating Partnership remains committed to its fundamental investment segments.

OFFICE SEGMENT

         As of December 31, 2001, the Operating Partnership owned or had an
interest in 74 Office Properties.

         The following table shows the same-store net operating income growth
for the approximately 25.4 million square feet of Office Property space owned as
of December 31, 2001, which excludes approximately 1.5 million square feet of
Office Property space at Bank One Center, in which the Operating Partnership
owns a 50% equity interest, approximately 1.0 million square feet of Office
Property space at Four Westlake Park and Bank One Tower, in each of which the
Operating Partnership has a 20% equity interest, and 0.1 million square feet of
Office Property space at Avallon IV, which was completed during the year ended
December 31, 2001.

<Table>
<Caption>
                                                        FOR THE YEAR ENDED DECEMBER 31,
                                               -------------------------------------------------
                                                                                   PERCENTAGE/
                                                   2001              2000         POINT INCREASE
                                               ------------      ------------     --------------
<S>                                            <C>               <C>              <C>
         (IN MILLIONS)
         Same-store Revenues                   $      552.5      $      519.9             6.3%
         Same-store Expenses                         (250.1)           (229.3)            9.1%
                                               ------------      ------------
         Net Operating Income                  $      302.4      $      290.6             4.1%
                                               ============      ============

         Weighted Average Occupancy                    92.3%             91.8%            0.5 pt
</Table>



                                       18
<PAGE>

         The following table shows renewed or re-leased leasing activity and the
percentage increase of leasing rates for signed leases compared to expiring
leases at the Operating Partnership's Office Properties owned as of December 31,
2001.

<Table>
<Caption>
                                                              FOR THE YEAR ENDED DECEMBER 31, 2001
                                               -------------------------------------------------------------------
                                                  SIGNED                   EXPIRING                 PERCENTAGE
                                                  LEASES                    LEASES                   INCREASE
                                               ------------              -----------            ------------------
<S>                                            <C>                       <C>                    <C>

         Renewed or re-leased (1)                 1,890,000 sq. ft.         N/A                             N/A
         Weighted average full-
              service rental rate (2)          $      23.67 per sq. ft.     $20.21 per sq. ft.               17%
         FFO annual net effective
              rental rate (3)                  $      14.70 per sq. ft.     $11.21 per sq. ft.               31%
</Table>

----------

(1)  All of which have commenced or will commence during the next 12 months.

(2)  Including free rent, scheduled rent increases taken into account under GAAP
     and expense recoveries.

(3)  Calculated as weighted average full-service rental rate minus operating
     expenses.

o    For 2002, the Operating Partnership projects same-store net operating
     income for its Office Properties to increase between 0% and 4% over 2001,
     based on an average occupancy range of 90% to 93%.

RESORT/HOTEL SEGMENT

         As of December 31, 2001, the Operating Partnership owned nine
Resort/Hotel Properties.

         The following table shows weighted average occupancy, average daily
rate and revenue per available room/guest for the Resort/Hotel Properties for
the years ended December 31, 2001 and 2000.

<Table>
<Caption>
                                                                  FOR THE YEAR ENDED DECEMBER 31,
                                                          --------------------------------------------
                                                                                          PERCENTAGE/
                                                                                        POINT INCREASE
                                                             2001            2000         (DECREASE)
                                                          ----------      ----------    --------------
<S>                                                       <C>             <C>           <C>

         Weighted average occupancy(1)                            70%             76%             (6)pts
         Average daily rate(1)                            $      245      $      238               3%
         Revenue per available room/guest(1)              $      170      $      180              (6)%
</Table>

----------

(1)  Excludes the Four Seasons Hotel - Houston, which was sold on November 3,
     2000.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to subsidiaries of the Operating
Partnership, in lieu of foreclosure, COPI's lessee interests in the eight
Resort/Hotel Properties leased to subsidiaries of COPI. As a result, the
subsidiaries of the Operating Partnership became the lessees of these
Resort/Hotel Properties. The Operating Partnership will fully consolidate the
operations of the eight Resort/Hotel Properties beginning on the date of the
asset transfers. See "Note 22. Subsequent Events" included in "Item 8. Financial
Statements and Supplemental Data" for additional information regarding the
Operating Partnership's agreement with COPI.

         The following table shows the Resort/Hotel Property same-store net
operating income for the years ended December 31, 2001 and 2000, for the nine
Resort/Hotel Properties owned during both of these periods.



                                       19
<PAGE>

<Table>
<Caption>
                                                                           FOR THE YEAR
                                                                         ENDED DECEMBER 31,
                                                            ----------------------------------------
                                                                                          PERCENTAGE
                                                               2001           2000         DECREASE
                                                            ----------     ----------     ----------
<S>                                                         <C>            <C>            <C>
     (IN THOUSANDS)
     Upscale Business-Class Hotels (1)                      $   20,165     $   22,157             (9)%
     Luxury and Destination Fitness Resorts and Spas            29,451         36,837            (20)
                                                            ----------     ----------     ----------
     All Resort/Hotel Properties (1)                        $   49,616     $   58,994            (16)%
                                                            ==========     ==========     ==========
</Table>

----------

(1)  Excludes the Four Seasons Hotel - Houston, which was sold on November 3,
     2000.

o        For 2002, the Operating Partnership projects same-store net operating
         income will increase between 0% and 3% over 2001. Also, the average
         daily rate is expected to increase between 0% and 2% over 2001, and
         revenue per available room is expected to increase between 0% and 3%
         over 2001.

CR License, LLC and CRL Investments, Inc.

         As of December 31, 2001, the Operating Partnership had a 28.5% interest
in CR License, LLC, the entity which owns the right to the future use of the
"Canyon Ranch" name. The Operating Partnership also had a 95% economic interest,
representing all of the non-voting common stock, in CRL Investments, Inc., which
has an approximately 65% economic interest in the Canyon Ranch Spa Club in the
Venetian Hotel in Las Vegas, Nevada.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to subsidiaries of the Operating
Partnership, in lieu of foreclosure, COPI's 1.5% interest in CR License, LLC and
5.0% interest, representing all of the voting stock, in CRL Investments, Inc.

RESIDENTIAL DEVELOPMENT SEGMENT

         As of December 31, 2001, the Operating Partnership owned economic
interests in five Residential Development Corporations through the Residential
Development Property mortgages and the non-voting common stock of these
Residential Development Corporations. The Residential Development Corporations
in turn, through joint ventures or partnership arrangements, currently own
interests in 21 Residential Development Properties. The Residential Development
Corporations are responsible for the continued development and the day-to-day
operations of the Residential Development Properties.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to subsidiaries of the Operating
Partnership, in lieu of foreclosure, COPI's voting interests in three of the
Residential Development Corporations (The Woodlands Land Company, Inc., Desert
Mountain Development Corporation and Crescent Resort Development, Inc.). The
Operating Partnership will fully consolidate the operations of the three
Residential Development Corporations beginning on the date of the asset
transfers.

         Management plans to monetize the Operating Partnership's current
investments in the five Residential Development Corporations and reinvest
returned capital from the Residential Development Segment primarily into the
Office Segment where the Operating Partnership expects to achieve favorable
rates of return.

The Woodlands Land Development Company, L.P. and The Woodlands Commercial
Properties Company, L.P. (collectively "The Woodlands"), The Woodlands, Texas:

         The following table shows residential lot sales at an average price per
lot and commercial land sales at an average price per acre.



                                       20
<PAGE>

<Table>
<Caption>
                                             FOR THE YEAR
                                           ENDED DECEMBER 31,
                                      ---------------------------
                                         2001             2000
                                      ----------       ----------
<S>                                   <C>              <C>

Residential lot sales                      1,718            2,033
Average sales price per lot           $   72,000       $   62,000
Commercial land sales                         94 acres        124 acres
Average sales price per acre          $  337,000       $  308,000
</Table>

o    Average sales price per lot increased by $10,000, or 16%, due to a product
     mix of higher priced lots from the Carlton Woods development in the year
     ended December 31, 2001, compared to the same period in 2000.

o    Carlton Woods is The Woodlands' new upscale residential development. It is
     a gated community consisting of 491 lots located around a Jack Nicklaus
     signature golf course. As of December 31, 2001, 213 lots have been sold at
     prices ranging from $0.1 million to $1.0 million per lot, or an average
     price of $343,000 per lot. Additional phases within Carlton Woods are
     expected to be marketed to the public over the next two years.

o    Future buildout of The Woodlands is estimated at approximately 13,100
     residential lots and approximately 1,700 acres of commercial land, of which
     approximately 1,555 residential lots and 1,075 acres are currently in
     inventory.

o    The Operating Partnership projects residential lot sales at The Woodlands
     to range between 1,550 lots and 1,800 lots at an average sales price per
     lot ranging between $70,000 and $80,000 for 2002.

Desert Mountain Properties Limited Partnership ("Desert Mountain"), Scottsdale,
Arizona:

         The following table shows residential lot sales at an average price per
lot.

<Table>
<Caption>
                                              FOR THE YEAR
                                           ENDED DECEMBER 31,
                                      ---------------------------
                                        2001               2000
                                      ---------          --------
<S>                                   <C>                <C>

Residential lot sales                        86               178
Average sales price per lot(1)        $ 688,000          $619,000
</Table>

----------

(1)  Including equity golf memberships.

o    With the higher priced residential lots being completed during the latter
     phases of development at Desert Mountain, the average sales price per lot
     increased by $69,000, or 11%, for the year ended December 31, 2001, as
     compared to the same period in 2000. As a result of product mix and a
     decline in the economy combined with the events of September 11, 2001, the
     number of lot sales decreased to 86 lots for the year ended December 31,
     2001, as compared to 178 lots for the same period in 2000.

o    Approved future buildout is estimated to be approximately 300 residential
     lots, of which approximately 140 are currently in inventory.

o    As a result of product mix and a decline in the economy, the Operating
     Partnership projects residential lot sales in 2002 to range between 50 lots
     and 75 lots at an average sales price per lot ranging between $700,000 and
     $800,000.

Crescent Resort Development, Inc. ("CRD"), (formerly Crescent Development
Management Corp.), Beaver Creek, Colorado:



                                       21
<PAGE>

         The following table shows total active projects, residential lot and
residential unit sales, commercial land sales and average sales price per lot
and unit.

<Table>
<Caption>
                                                            FOR THE YEAR
                                                         ENDED DECEMBER 31,
                                                 -----------------------------------
                                                     2001                   2000
                                                 ------------           ------------
<S>                                              <C>                    <C>

Active projects                                            14                     12
Residential lot sales                                     181                    343
Residential unit sales:
   Townhome sales                                          11                     19
   Single-family home sales                                --                      5
   Equivalent timeshare unit sales                         11                     --
   Condominium sales                                      109                     26
Commercial land sales                                      -- acres                9 acres
Average sale price per residential lot           $     73,000           $    136,000
Average sale price per residential unit          $        1.0 million           $1.6 million
</Table>

o    Average sales price per lot decreased by $63,000, or 46%, and average sales
     price per unit decreased $0.6 million, or 38%, due to lower priced product
     mix sold in the year ended December 31, 2001, as compared to the same
     period in 2000.

o    For 2002, the Operating Partnership projects that residential lot sales
     will range between 325 lots and 375 lots at an average sales price per lot
     ranging between $110,000 and $130,000. In addition, the Operating
     Partnership expects between 280 and 310 residential unit sales, including
     single family homes, townhomes and condominiums to be sold at an average
     sales price per residential unit ranging between $750,000 and $850,000.

TEMPERATURE-CONTROLLED LOGISTICS SEGMENT

         As of December 31, 2001, the Operating Partnership held a 40% interest
in the Temperature-Controlled Logistics Partnership, which owns the
Temperature-Controlled Logistics Corporation, which directly or indirectly owns
the 89 Temperature-Controlled Logistics Properties. The business operations
associated with the Temperature-Controlled Logistics Properties are owned by
AmeriCold Logistics, which is owned 60% by Vornado Operating, L.P. and 40% by a
subsidiary of COPI. The Operating Partnership has no interest in AmeriCold
Logistics.

         AmeriCold Logistics, as sole lessee of the Temperature-Controlled
Logistics Properties, leases the Temperature-Controlled Logistics Properties
from the Temperature-Controlled Logistics Corporation under three triple-net
master leases, as amended on January 23, 2002. On February 22, 2001, the
Temperature-Controlled Logistics Corporation and AmeriCold Logistics agreed to
restructure certain financial terms of the leases, including the adjustment of
the rental obligation for 2001 to $146.0 million, the adjustment of the rental
obligation for 2002 to $150.0 million (plus contingent rent in certain
circumstances), the increase of the Temperature-Controlled Logistics
Corporation's share of capital expenditures for the maintenance of the
properties from $5.0 million to $9.5 million (effective January 1, 2000) and the
extension of the date on which deferred rent was required to be paid to December
31, 2003.

         In the first quarter of 2000, AmeriCold Logistics started to experience
a slowing in revenue growth from the previous year, primarily due to customers
focusing more interest on inventory management in an effort to improve operating
performance. Starting in 2000 and continuing into 2001, AmeriCold Logistics has
seen consolidation among retail and food service channels begin to significantly
limit the ability of manufacturers to pass along cost increases by raising
prices. Because of this, manufacturers are focused on supply chain cost (such as
inventory management, transportation and distribution) reduction initiatives in
an effort to improve operating performance. In the third quarter of 2000,
AmeriCold Logistics' same-store earning before interest, taxes, depreciation and
amortization, and rent ("EBITDAR") declined 2% for the nine months ended
September 30, 2000 compared to the same period in 1999. As a result of the
reductions in revenues and the second consecutive quarter decline in same-store
EBITDAR, AmeriCold Logistics was unable to fulfill its rental obligation under
the leases which resulted in deferred rent. At that time, the
Temperature-Controlled Logistics Corporation recorded a valuation allowance for
100% of the rent that had been deferred



                                       22
<PAGE>

during the three months ended September 30, 2000 and has continued to record a
valuation allowance for 100% of the deferred rent prospectively. AmeriCold
Logistics' experienced a 2% decline in same-store EBITDAR during 2000 compared
to 1999 and an 11% decline in same-store EBITDAR during 2001 compared to 2000.

         AmeriCold Logistics deferred $25.5 million of rent for the year ended
December 31, 2001, of which the Operating Partnership's share was $10.2 million.
AmeriCold Logistics also deferred $19.0 million and $5.4 million of rent for the
years ended December 31, 2000 and 1999, respectively, of which the Operating
Partnership's share was $7.5 million and $2.1 million, respectively. In December
2001, the Temperature-Controlled Logistics Corporation waived its rights to
collect $39.8 million of the total $49.9 million of deferred rent, of which the
Operating Partnership's share was $15.9 million. The Temperature-Controlled
Logistics Corporation recorded adequate valuation allowances related to the
waived deferred rental revenue during the years ended December 31, 2000 and
2001; therefore, there was no financial statement impact to the
Temperature-Controlled Logistics Corporation or to the Operating Partnership
related to the Temperature-Controlled Logistics Corporation's decision to waive
collection of the deferred rent.

<Table>
<Caption>
                                            DEFERRED RENT              VALUATION ALLOWANCE                WAIVED RENT
                                      --------------------------    -------------------------     --------------------------
(IN MILLIONS)                                         OPERATING                    OPERATING                      OPERATING
                                                     PARTNERSHIP                  PARTNERSHIP                    PARTNERSHIP
                                        TOTAL          PORTION        TOTAL         PORTION         TOTAL          PORTION
                                      ----------     -----------    ----------    -----------     ----------     -----------
<S>                                   <C>            <C>            <C>           <C>             <C>            <C>
For the year ended December 31,
1999                                  $      5.4     $      2.1     $       --     $       --     $       --     $       --
2000                                        19.0            7.5           16.3            6.5             --             --
2001                                        25.5           10.2           25.5           10.2           39.8           15.9
                                      ----------     ----------     ----------     ----------     ----------     ----------

Balance at December 31, 2001          $     49.9     $     19.8     $     41.8     $     16.7     $     39.8     $     15.9
                                      ==========     ==========     ==========     ==========     ==========     ==========
</Table>

         Management believes that EBITDAR is a useful financial performance
measure for assessing the relative stability of the financial condition of
AmeriCold Logistics prior to the payment of rent to the Operating Partnership.
Therefore, management believes EBITDAR is a reasonable indication of AmeriCold
Logistics' ability to make rent payments to the Operating Partnership. The
following table shows EBITDAR, lease payment, cash flow from operations and net
loss for AmeriCold Logistics for the years ended December 31, 2001 and 2000.

<Table>
<Caption>
                                             FOR THE YEAR ENDED
                                                DECEMBER 31,
                                           ----------------------
     (in millions)                           2001          2000
                                           --------      --------
<S>                                        <C>           <C>

     EBITDAR(1)                            $  135.8      $  162.1
     Lease Payment (2)                        146.0         160.5
     Cash Flow from Operations                  9.5           3.0
     Net Loss                                  (5.7)        (18.4)
</Table>

----------

(1)  EBITDAR does not represent net income or cash flows from operating,
     financing or investing activities as defined by GAAP.

(2)  Represents the rental obligation (excluding the effect of straight-lining
     rents and deferred rent) of AmeriCold Logistics.

         The Temperature-Controlled Logistics Corporation completed the
acquisition of one facility in the first quarter of 2001 for $10.0 million and
completed the construction of one facility in the third quarter of 2001 for
$15.8 million, representing a total of approximately 8.5 million cubic feet (0.2
million square feet.)

CHARTER BEHAVIORAL HEALTH SYSTEMS ("CBHS")

         During the year ended December 31, 1999, the Operating Partnership
received cash rental payments of approximately $35.3 million from CBHS. As of
December 31, 1999, the behavioral healthcare segment consisted of 88 behavioral
healthcare properties in 24 states, all of which were leased to CBHS and its
subsidiaries under a triple-net master lease. However, during 1999, CBHS's
business was negatively affected by many factors, including adverse industry
conditions, and CBHS failed to perform in accordance with its operating budget.
In the third quarter of 1999 CBHS was



                                       23
<PAGE>

unable to meet its rental obligation to the Operating Partnership and the
Operating Partnership began to recognize rent from CBHS on a cash basis due to
the uncertainty that CBHS would be able to fulfil its rental obligations under
the lease. In the fourth quarter of 1999, the Operating Partnership, COPI,
Magellan Health Services, Inc. ("Magellan") and CBHS completed a
recapitalization of CBHS. Pursuant to the recapitalization, Magellan transferred
its remaining hospital-based assets to CBHS, canceled its accrued franchise fees
and terminated the franchise agreements, pursuant to which Magellan had provided
services to CBHS in exchange for franchise fees.

         The following financial statement charges were made with respect to the
Operating Partnership's investment in the behavioral healthcare properties for
the year ended December 31, 1999:

o    CBHS rent was reflected on a cash basis beginning in the third quarter of
     1999;

o    The Operating Partnership wrote-off the rent that was deferred according to
     the CBHS lease agreement from the commencement of the lease in June of 1997
     through June 30, 1999. The balance written-off totaled $25.6 million;

o    The Operating Partnership wrote-down its behavioral healthcare real estate
     assets by approximately $103.8 million to a book value of $245.0 million;

o    The Operating Partnership wrote-off the book value of warrants to purchase
     common shares of Magellan of $12.5 million;

o    The Operating Partnership recorded approximately $15.0 million of
     additional expense to be used by CBHS as working capital; and

o    The Operating Partnership ceased recording depreciation expense in the
     beginning of November of 1999 on the behavioral healthcare properties that
     were classified as held for disposition.

         On February 16, 2000, CBHS and all of its subsidiaries that were
subject to the master lease with the Operating Partnership filed voluntary
Chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the
District of Delaware.

         During the year ended December 31, 2000, payment and treatment of rent
for the behavioral healthcare properties was subject to a rent stipulation
agreed to by certain of the parties involved in the CBHS bankruptcy proceeding.
The Operating Partnership received approximately $15.4 million in rent and
interest from CBHS during the year ended December 31, 2000. The Operating
Partnership also completed the sale of 60 behavioral healthcare properties
previously classified as held for disposition during the year ended December 31,
2000 (contained in Net Investment in Real Estate). The sales generated
approximately $233.7 million in net proceeds and a net gain of approximately
$58.6 million for the year ended December 31, 2000. During the year ended
December 31, 2000, the Operating Partnership recognized an impairment loss of
approximately $9.3 million on the behavioral healthcare properties held for
disposition. This amount represents the difference between the carrying values
and the estimated sales prices less the costs of the sales. At December 31,
2000, the carrying value for the 28 behavior healthcare properties classified as
held for disposition was $68.5 million (contained in Net Investment in Real
Estate). Depreciation expense has not been recognized since the dates the
behavioral healthcare properties were classified as held for sale.

         The Operating Partnership received approximately $6.0 million in
repayment of a working capital loan from CBHS during the year ended December 31,
2001. The Operating Partnership also completed the sale of 18 behavioral
healthcare properties previously classified as held for disposition during the
year ended December 31, 2001. The sales generated approximately $34.7 million in
net proceeds and a net gain of approximately $1.6 million for the year ended
December 31, 2001. During the year ended December 31, 2001, the Operating
Partnership recognized an impairment loss of approximately $8.5 million on the
behavioral healthcare properties held for disposition. This amount represents
the difference between the carrying values and the estimated sales prices less
the costs of the sales. At December 31, 2001, the carrying value for the 10
behavior healthcare properties classified as held for disposition was $27.9
million (contained in Net Investment in Real Estate). Depreciation expense has
not been recognized since the dates the behavioral healthcare properties were
classified as held for sale.



                                       24
<PAGE>

                              RESULTS OF OPERATIONS

         The following table shows the Operating Partnership's financial data as
a percentage of total revenues for the three years ended December 31, 2001, 2000
and 1999 and the variance in dollars between the years ended December 31, 2001
and 2000 and the years ended December 31, 2000 and 1999. See "Note 3. Segment
Reporting" included in "Item 8. Financial Statements and Supplementary Data" for
financial information about investment segments.

<Table>
<Caption>
                                                      FINANCIAL DATA AS A PERCENTAGE OF TOTAL    TOTAL VARIANCE IN DOLLARS BETWEEN
                                                      REVENUES FOR THE YEAR ENDED DECEMBER 31,      THE YEARS ENDED DECEMBER 31,
                                                     ------------------------------------------  ---------------------------------
                                                                                                         (IN MILLIONS)
                                                        2001            2000            1999       2001 AND 2000   2000 AND 1999
                                                     ----------      ----------      ----------    -------------   -------------
<S>                                                  <C>             <C>             <C>          <C>             <C>
REVENUES
   Office properties                                       84.1%           81.9%           82.3%     $      4.1     $     (8.5)
   Resort/Hotel properties                                  6.3             9.8             8.8           (26.4)           6.9
   Interest and other income(1)                             9.6             8.3             8.9             7.9           (5.0)
                                                     ----------      ----------      ----------      ----------     ----------
     TOTAL REVENUES                                       100.0%          100.0%          100.0%     $    (14.4)    $     (6.6)
                                                     ----------      ----------      ----------      ----------     ----------

EXPENSES
   Operating expenses                                      36.5%           33.8%           34.4%     $     13.9     $     (7.1)
   Corporate general and administrative                     3.3             3.3             2.2             0.1            7.8
   Interest expense                                        25.1            27.5            25.7           (20.8)          11.2
   Amortization of deferred financing costs                 1.3             1.3             1.4            (0.3)          (0.8)
   Depreciation and amortization                           17.4            16.7            17.6             2.4           (7.9)
   Settlement of merger dispute                              --              --             2.0              --          (15.0)
   Impairment and other charges related
     to real estate assets                                  3.5             2.4            24.0             7.5         (160.9)
   Impairment and other charges related
     to COPI                                               12.8              --              --            92.8             --
                                                     ----------      ----------      ----------      ----------     ----------
     TOTAL EXPENSES                                        99.9%           85.0%          107.3%           95.6         (172.7)
                                                     ----------      ----------      ----------      ----------     ----------
OPERATING INCOME (LOSS)                                     0.1%           15.0%           (7.3)%    $   (110.0)    $    166.1

OTHER INCOME
   Equity in net income of unconsolidated companies:
     Office properties                                      0.8             0.4             0.7             2.9           (2.1)
     Residential development properties                     5.7             7.2             5.7           (12.5)          10.6
     Temperature-controlled logistics properties            0.2             1.0             2.0            (6.3)          (7.6)
     Other                                                  0.4             1.6             0.7            (8.6)           6.5
                                                     ----------      ----------      ----------      ----------     ----------
     TOTAL EQUITY IN NET INCOME FROM
     UNCONSOLIDATED COMPANIES                               7.1%           10.2%            9.1%     $    (24.5)    $      7.4

   Gain on property sales, net                              0.6            18.6              --          (133.1)         137.5

                                                     ----------      ----------      ----------      ----------     ----------
     TOTAL OTHER INCOME AND EXPENSE                         7.7%           28.8%            9.1%     $   (157.6)    $    144.9
                                                     ----------      ----------      ----------      ----------     ----------

INCOME (LOSS) BEFORE MINORITY INTERESTS
     AND EXTRAORDINARY ITEM                                 7.8%           43.8%            1.8%     $   (267.6)    $    311.0

   Minority interests                                      (2.9)           (2.7)           (0.1)           (0.8)         (18.7)
                                                     ----------      ----------      ----------      ----------     ----------

NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                 4.9%           41.1%            1.7%     $   (268.4)    $    292.3

     Extraordinary item - extinguishment of debt           (1.7)           (0.6)             --            (7.8)          (4.4)
                                                     ----------      ----------      ----------      ----------     ----------

NET INCOME (LOSS)                                           3.2%           40.5%            1.7%     $   (276.2)    $    287.9

   6 3/4% Series A Preferred Unit distributions            (1.9)           (1.8)           (1.8)             --             --
   Share repurchase agreement return                         --            (0.4)           (0.1)            2.9           (2.3)
   Forward share purchase
        agreement return                                     --              --            (0.6)             --            4.3
                                                     ----------      ----------      ----------      ----------     ----------

NET INCOME (LOSS) AVAILABLE TO
   PARTNERS                                                 1.3%           38.3%           (0.8)%    $   (273.3)    $    289.9
                                                     ==========      ==========      ==========      ==========     ==========
</Table>

----------

(1)  Includes interest income from an intracompany loan for the years ended
     December 31, 2001 and 2000. See "Sale of Preferred Equity Interests in
     Subsidiary and Intracompany Loan" below for a description of this
     intracompany loan and its effects on certain items in the Operating
     Partnership's financial statements.


                                       25
<PAGE>

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2001 TO THE YEAR ENDED DECEMBER 31,
2000

REVENUES

         Total revenues decreased $14.4 million, or 1.9%, to $725.3 million for
the year ended December 31, 2001, as compared to $739.7 million for the year
ended December 31, 2000. The primary components of the decrease in total
revenues are discussed below.

         The increase in Office Property revenues of $4.1 million, or 0.7%, for
the year ended December 31, 2001, as compared to the year ended December 31,
2000, is attributable to:

               o    increased revenues of $31.3 million from the 74 consolidated
                    Office Properties that the Operating Partnership owned or
                    had an interest in as of December 31, 2001, primarily as a
                    result of increased full-service weighted average rental
                    rates (reflecting increases in both rental revenue and
                    operating expense recoveries), and increased occupancy;

               o    increased other income of $4.1 million, primarily due to
                    parking revenue; partially offset by

               o    decreased revenues of $27.3 million due to the disposition
                    of 11 Office Properties and four retail properties during
                    2000, compared to the disposition of five Office Properties
                    and the joint ventures of two Office Properties during 2001;
                    and

               o    decreased lease termination fees (net of the write-off of
                    deferred rent receivables) of $4.0 million, from $12.0
                    million for the year ended December 31, 2000, to $8.0
                    million for the year ended December 31, 2001.

         The decrease in Resort/Hotel Property revenues of $26.4 million, or
36.6%, for the year ended December 31, 2001, as compared to the year ended
December 31, 2000, is attributable to:

               o    decreased revenues from the upscale business-class hotels of
                    $8.1 million, due to the disposition of the Four Seasons
                    Hotel - Houston in November 2000;

               o    decreased revenues of $6.3 million due to a decrease in
                    rental income attributed to the softening of the economy and
                    the events of September 11, 2001; and

               o    decreased revenues of $12.0 million due to not recognizing
                    revenue during the fourth quarter of 2001 under the leases
                    with COPI.

         Interest and other income increased $7.9 million, or 13.0%, primarily
due to increased interest income of $8.0 million, as a result of interest earned
on a loan which originated in March 2000 from the Operating Partnership to
Crescent SH IX, Inc. ("SH IX") in connection with the repurchase of 14,468,623
common shares of the Company.

EXPENSES

         Total expenses increased $95.6 million, or 15.2%, to $724.1 million for
the year ended December 31, 2001, as compared to $628.5 million for the year
ended December 31, 2000. The primary components of the increase in total
expenses are discussed below.

         The increase in Office Property operating expenses of $13.9 million, or
0.6%, for the year ended December 31, 2001, as compared to the year ended
December 31, 2000, is attributable to:

               o    increased expenses of $24.7 million from the 74 consolidated
                    Office Properties that the Operating Partnership owned or
                    had an interest in as of December 31, 2001, primarily as a
                    result of increased operating expenses for utilities of $7.8
                    million, taxes of $3.6 million and other increased operating
                    expenses such as insurance, security, and technology
                    initiatives of $13.3 million during the year ended December
                    31, 2001, as compared to the same period in 2000; partially
                    offset by



                                       26
<PAGE>

               o    decreased expenses of $10.8 million due to the disposition
                    of 11 Office Properties and four retail properties during
                    2000, compared to the disposition of five Office Properties
                    and the joint ventures of two Office Properties during 2001.

         The decrease in interest expense of $20.8 million, or 10.2%, for the
year ended December 31, 2001, as compared to the same period in 2000, is
primarily attributable to a decrease in the weighted average interest rate of
0.61%, or $14.0 million of interest expense, combined with a decrease in the
average debt balance of $104.0 million, or $8.0 million of interest expense.

         The increase in impairment and other charges related to real estate
assets of $7.5 million is due to:

               o    the conversion of the Operating Partnership's preferred
                    member interest in Metropolitan Partners, LLC
                    ("Metropolitan") into common stock of Reckson Associates
                    Realty Corp. ("Reckson"), which resulted in an impairment
                    charge of $11.9 million; partially offset by

               o    a decrease in the impairment loss of $3.5 million, from $8.5
                    million in 2000 to $5.0 million in 2001, recognized on a
                    fund which primarily holds real estate investments and
                    marketable securities, in which the Operating Partnership
                    has an interest; and

               o    a decrease in the impairment of the behavioral healthcare
                    properties of $0.9 million.

         The increase in impairment and other charges related to COPI of $92.8
million is due to the reduction in net assets of $74.8 million, primarily
attributable to the write-down of debt and rental obligations of COPI to the
estimated underlying collateral value of assets to be received from COPI, and
estimated COPI bankruptcy costs to be funded by the Operating Partnership of
$18.0 million.

OTHER INCOME

         Other income decreased $157.6 million, or 73.9%, to $55.6 million for
the year ended December 31, 2001, as compared to $213.2 million for the year
ended December 31, 2000. This decrease is due to:

         The decrease in equity in net income of unconsolidated companies of
$24.5 million, or 32.4%, for the year ended December 31, 2001, as compared to
the same period in 2000, is primarily attributable to:

               o    a decrease in equity in net income of unconsolidated
                    Residential Development Properties of $12.5 million, or 24%,
                    primarily attributable to lower lot sales at Desert Mountain
                    during the year ended December 31, 2001, resulting in a
                    decrease of $16.3 million; partially offset by higher unit
                    sales at CRD, resulting in an increase of $4.5 million;

               o    a decrease in equity in net income of the
                    Temperature-Controlled Logistics Properties of $6.3 million,
                    or 85%, due to the lease restructuring in 2001 and an
                    increase in deferred rent of $9.2 million; and

               o    a decrease in equity in net income of other unconsolidated
                    Properties of $8.6 million, or 75.0%, primarily attributable
                    to lower earnings of $3.8 million from Metropolitan due to
                    the conversion of the Operating Partnership's preferred
                    member interest into common stock of Reckson in May 2001,
                    the $1.0 million write-off of the Operating Partnership's
                    investment in a retail distribution company and lower
                    earnings from DBL Holdings, Inc. ("DBL") of $1.7 million,
                    due to an approximate $12.2 million return of investment
                    received in March 2001; partially offset by

               o    an increase in equity in net income of the unconsolidated
                    Office Properties of $2.9 million, or 94.0%, primarily
                    attributable to lower interest expense at one unconsolidated
                    office property.

         The net decrease in gain on property sales of $133.1 million for the
year ended December 31, 2001, as compared to the same period in 2000, is
attributable to a decrease in net gains recognized primarily on Office,
Resort/Hotel and behavioral healthcare property sales for the year ended
December 31, 2001, as compared with the same period in 2000.



                                       27
<PAGE>

EXTRAORDINARY ITEMS

         The increase in extraordinary items of $7.8 million, or 177.3%, is
attributable to the write-off of deferred financing costs related to the early
extinguishment of the UBS Facility in May 2001 of $12.2 million, compared with
the write-off of deferred financing costs related to the early extinguishment of
the BankBoston Facility in February 2000 of $4.4 million.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31,
1999

REVENUES

         Total revenues decreased $6.6 million, or 0.9%, to $739.7 million for
the year ended December 31, 2000, as compared to $746.3 million for the year
ended December 31, 1999.

         The decrease in Office Property revenues of $8.5 million, or 1.4%, for
the year ended December 31, 2000, as compared to the same period in 1999, is
attributable to:

               o    decreased revenues of $38.0 million due to the disposition
                    of 11 Office Properties and four retail properties during
                    2000, which contributed revenues during the full year of
                    1999, as compared to a partial year in 2000; partially
                    offset by

               o    increased revenues of $24.4 million from the 78 Office
                    Properties owned as of December 31, 2000, primarily as a
                    result of increased weighted average full-service rental
                    rates at these Properties; and

               o    increased revenues of $5.1 million from lease termination
                    fees.

         The increase in Resort/Hotel Property revenues of $6.9 million, or
10.6%, for the year ended December 31, 2000, as compared to the same period in
1999, is attributable to:

               o    increased revenues of $3.1 million at the luxury resorts and
                    spas primarily due to an increase in percentage rents
                    resulting from increased room revenue due to the 30-room
                    expansion at the Sonoma Mission Inn & Spa that opened in
                    April 2000;

               o    increased revenues of $2.6 million at the business class
                    hotels primarily due to (i) the reclassification of the
                    Renaissance Houston Hotel from the Office segment to the
                    Resort/Hotel segment as a result of the restructuring of its
                    lease on July 1, 1999, which resulted in $2.4 million of
                    incremental revenues under the new lease and (ii) increased
                    percentage rents due to higher room and occupancy rates at
                    the Omni Austin Hotel, partially offset by (iii) decreased
                    revenues of $1.2 million due to the disposition of one
                    Resort/Hotel Property during the fourth quarter of 2000,
                    which contributed revenues during the full year of 1999, as
                    compared to a partial year in 2000; and

               o    increased revenues of $1.2 million at the destination
                    fitness resorts and spas primarily due to an increase in
                    percentage rents at the Canyon Ranch Properties as a result
                    of higher room rates.

         The decrease in interest and other income of $5.0 million, or 7.5%, for
the year ended December 31, 2000, as compared to the same period in 1999, is
primarily attributable to:

               o    the recognition of rent from Charter Behavioral Health
                    Systems, LLC ("CBHS") on a cash basis beginning in the third
                    quarter of 1999, the filing of voluntary bankruptcy
                    petitions by CBHS and its subsidiaries on February 16, 2000,
                    and a rent stipulation agreed to by certain parties to the
                    bankruptcy proceedings, which resulted in a reduction in
                    behavioral healthcare property revenues, which are included
                    in interest and other income, of $25.7 million, to $15.4
                    million for the year ended December 31, 2000 as compared to
                    $41.1 million for the same period in 1999; and

               o    decreased interest income earned on interest bearing
                    accounts due to lower cash balances as a result of debt
                    pay-downs; partially offset by

               o    an increase of $21.3 million as a result of interest earned
                    on a loan which originated in March 2000 from the Operating
                    Partnership to SH IX in connection with the repurchase of
                    14,468,623 common shares of the Company.



                                       28
<PAGE>

EXPENSES

         Total expenses decreased $172.7 million, or 21.6%, to $628.5 million
for the year ended December 31, 2000, as compared to $801.2 million for the year
ended December 31, 1999.

         The decrease in Office Property operating expenses of $7.1 million, or
2.8%, for the year ended December 31, 2000, as compared to the same period in
1999, is attributable to:

               o    decreased expenses of $17.2 million due to the disposition
                    of 11 Office Properties and four retail properties during
                    2000, which incurred expenses during the full year of 1999,
                    as compared to a partial year in 2000; partially offset by

               o    increased expenses of $10.1 million from the 78 Office
                    Properties owned as of December 31, 2000, as a result of (i)
                    increased general repair and maintenance expenses at these
                    Properties of $5.6 million and (ii) an increase in real
                    estate taxes of $4.5 million.

         The increase in corporate general and administrative expense of $7.8
million, or 47.9%, for the year ended December 31, 2000, as compared to the same
period in 1999, is primarily attributable to technology initiatives, employee
retention programs, incentive compensation, and additional personnel.

         The increase in interest expense of $11.2 million, or 5.8%, for the
year ended December 31, 2000, as compared to the same period in 1999, is
primarily attributable to an increase in the weighted-average interest rate from
7.4% in 1999 to 8.4% in 2000, partially offset by a decrease in average debt
balance outstanding from $2.6 billion in 1999 to $2.4 billion in 2000.

         The decrease in depreciation and amortization expense of $7.9 million,
or 6.0%, for the year ended December 31, 2000, as compared to the same period in
1999, is primarily attributable to the cessation of the recognition of
depreciation expense on Office Properties and behavioral healthcare properties
from the dates they were classified as held for disposition.

         An additional decrease in expenses of $175.9 million is primarily
attributable to:

               o    non-recurring costs of $15.0 million in connection with the
                    settlement of litigation relating to the merger agreement
                    entered into in January 1998 between the Company and Station
                    Casinos, Inc. in the first quarter of 1999; and

               o    a decrease of $169.5 million due to the impairment and other
                    charges related to the behavioral healthcare properties in
                    the third quarter of 1999 and the impairment charge in the
                    fourth quarter of 1999 on one of the Office Properties held
                    for disposition as compared to the year ended December 31,
                    2000; partially offset by

               o    an impairment loss of $8.5 million recognized in 2000 on a
                    fund which primarily holds real estate investments and
                    marketable securities, in which the Operating Partnership
                    has an interest.

OTHER INCOME

         Other income increased $144.9 million, or 212.2%, to $213.2 million for
the year ended December 31, 2000, as compared to $68.3 million for the year
ended December 31, 1999. The components of the increase in other income are
discussed below.

         The increase in equity in unconsolidated companies of $7.4 million, or
10.8%, for the year ended December 31, 2000, as compared to the same period in
1999 is attributable to:

               o    an increase in equity in net income of the Residential
                    Development Corporations of $10.6 million, or 24.7%,
                    attributable to (i) an increase in average sales price per
                    lot and an increase in membership conversion revenue at
                    Desert Mountain, partially offset by a decrease in lot
                    absorption, which resulted in an increase of $6.0 million in
                    equity in net income to the Operating Partnership; (ii) an
                    increase in



                                       29
<PAGE>

                    residential lot and commercial land sales and an increase in
                    average sales price per lot at The Woodlands Land
                    Development Company, L.P., partially offset by a decrease in
                    average sales price per acre from commercial land sales,
                    which resulted in an increase of $5.9 million in equity in
                    net income to the Operating Partnership; and (iii) an
                    increase in commercial acreage sales at CRD, partially
                    offset by a decrease in single-family home sales, which
                    resulted in an increase of $0.8 million in equity in net
                    income to the Operating Partnership; partially offset by
                    (iv) a decrease in commercial land sales at Houston Area
                    Development Corp., which resulted in a decrease of $2.1
                    million in equity in net income to the Operating
                    Partnership; and

               o    an increase in equity in net income of the other
                    unconsolidated companies of $6.5 million, or 127.5%,
                    primarily as a result of (i) the dividend income
                    attributable to the 7.5% per annum cash flow preference of
                    the Operating Partnership's $85.0 million preferred member
                    interest in Metropolitan, which the Operating Partnership
                    purchased in May 1999; and (ii) an increase in the equity in
                    earnings from DBL as a result of its investment in G2
                    Opportunity Fund, L.P. ("G2"), which was made in the third
                    quarter of 1999; partially offset by

               o    a decrease in equity in net income of the
                    Temperature-Controlled Logistics Partnership of $7.6
                    million, or 50.7%, resulting primarily from the recognition
                    of a rent receivable valuation allowance for the year ended
                    December 31, 2000 of $6.5 million; and

               o    a decrease in equity in net income of the unconsolidated
                    office properties of $2.1 million, or 39.6%, primarily
                    attributable to an increase in interest expense as a result
                    of additional financing obtained in July 2000 and an
                    increase in the average rate of debt at The Woodlands
                    Commercial Properties Company, L.P.

         The increase in net gain on property sales of $137.5 million for the
year ended December 31, 2000, as compared to the same period in 1999, is
attributable to net gains primarily recognized on Office, Resort/Hotel and
behavioral healthcare property sales.


                                       30
<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES



         Cash and cash equivalents were $31.6 million and $38.6 million at
December 31, 2001, and December 31, 2000, respectively. This 18.1% decrease is
attributable to $456.0 million used in financing activities, partially offset by
$210.4 million and $238.6 million provided by investing and operating
activities, respectively.


<Table>
<Caption>
                                                                         DECEMBER 31,
                                                                             2001
                                                                         ------------
                                                                         (in millions)
<S>                                                                      <C>
Cash Provided by Operating Activities                                    $      238.6
Cash Provided by Investing Activities                                           210.4
Cash Used in Financing Activities                                              (456.0)
                                                                         ------------
Decrease in Cash and Cash Equivalents                                    $       (7.0)
Cash and Cash Equivalents, Beginning of Period                                   38.6
                                                                         ------------
Cash and Cash Equivalents, End of Period                                 $       31.6
                                                                         ============
</Table>



OPERATING ACTIVITIES

         The Operating Partnership's cash provided by operating activities of
$238.6 million is attributable to:

         o        $225.2 million from Property operations; and

         o        $13.4 million representing distributions received in excess of
                  equity in earnings from unconsolidated companies.

INVESTING ACTIVITIES

         The Operating Partnership's cash provided by investing activities of
$210.4 million is attributable to:

            o   $200.4 million of net sales proceeds primarily attributable to
                the disposition of the two Washington Harbour Office Properties,
                three Woodlands Office Properties and 18 behavioral healthcare
                properties;

            o   $129.7 million of proceeds from joint venture partners,
                primarily as a result of the proceeds of $116.7 million from the
                joint ventures of two existing Office Properties, Bank One Tower
                in Austin, Texas and Four Westlake Park in Houston, Texas and
                $12.9 million from the joint venture of 5 Houston Center Office
                Property, which is currently being developed;

            o   $107.9 million of proceeds from the sale of marketable
                securities; and

            o   $32.0 million from return of investment in unconsolidated Office
                Properties, Residential Development Properties and other
                unconsolidated companies.

         The Operating Partnership's cash provided by investing activities is
partially offset by:

            o   $124.6 million of additional investment in unconsolidated
                companies, consisting of investments in (i) the upscale
                Residential Development Properties of $89.0 million, primarily
                as a result of CRD's investment in Tahoe Mountain Resorts, (ii)
                Temperature-Controlled Logistics Properties of $10.8 million,
                (iii) Office Properties of $16.4 million and (iv) other
                unconsolidated companies of $8.4 million;

            o   $51.8 million for recurring and non-recurring tenant improvement
                and leasing costs for the Office Properties;

            o   $46.4 million for capital expenditures for rental properties,
                primarily attributable to non-recoverable building improvements
                for the Office Properties and replacement of furniture, fixtures
                and equipment for the Resort/Hotel Properties;

            o   $23.7 million for the development of investment properties,
                including $12.3 million for development of the 5 Houston Center
                Office Property and expansions and renovations at the
                Resort/Hotel Properties;



                                       31
<PAGE>

            o   a $10.9 million increase in notes receivable, primarily as a
                result of approximately $10.0 million related to secured loans
                to AmeriCold Logistics; and

            o   a $2.2 million increase in restricted cash and cash equivalents,
                primarily related to the escrow of funds to purchase a parking
                garage in Denver, Colorado, which was purchased during the first
                quarter of 2002, partially offset by escrow reimbursements for
                capital expenditures at the Resort/Hotel Properties and the
                Office Properties.

FINANCING ACTIVITIES

         The Operating Partnership's use of cash for financing activities of
$456.0 million is primarily attributable to:

            o   net repayment of the UBS Facility of $553.5 million;

            o   distributions to unitholders of $352.9 million;

            o   repayment and retirement of the iStar Financial Note of $97.1
                million;

            o   repayment and retirement of the Deutsche Bank Short-term Loan of
                $75.0 million;

            o   net capital distributions to joint venture partners of $25.4
                million, primarily due to distributions to joint venture
                preferred equity partners;

            o   debt financing costs of $16.0 million; and

            o   distributions to the holder of preferred units of $13.5 million.

         The use of cash for financing activities is partially offset by:

            o   net borrowings under the Fleet Facility of $283.0 million; and

            o   proceeds from notes payable of $393.3 million, primarily
                attributable to the May 2001 debt refinancing.

COPI

         In April 1997, the Operating Partnership established a new Delaware
corporation, Crescent Operating, Inc. or COPI. All of the outstanding common
stock of COPI, valued at $0.99 per share, was distributed, effective June 12,
1997, to those persons who were limited partners of the Operating Partnership or
shareholders of the Company on May 30, 1997, in a spin-off.

         COPI was formed to become a lessee and operator of various assets to be
acquired by the Operating Partnership and to perform the intercompany agreement
between COPI and the Operating Partnership, pursuant to which each agreed to
provide the other with rights to participate in certain transactions. The
Operating Partnership was not permitted to operate or lease these assets under
the tax laws, in effect at that time, applicable to REITs. In connection with
the formation and capitalization of COPI, and the subsequent operations and
investments of COPI since 1997, the Operating Partnership made loans to COPI
under a line of credit and various term loans.

         On January 1, 2001, The REIT Modernization Act became effective. This
legislation allows the Operating Partnership, through its subsidiaries, to
operate or lease certain of its investments that had been previously operated or
leased by COPI.

         COPI and the Operating Partnership entered into an asset and stock
purchase agreement on June 28, 2001, in which the Operating Partnership agreed
to acquire the lessee interests in the eight Resort/Hotel Properties leased to
subsidiaries of COPI, the voting interests held by subsidiaries of COPI in three
of the Operating Partnership's Residential Development Corporations and other
assets in exchange for $78.4 million. In connection with that agreement, the
Operating Partnership agreed that it would not charge interest on its loans to
COPI from May 1, 2001 and that it would allow COPI to defer all principal and
interest payments due under the loans until December 31, 2001.

         Also on June 28, 2001, the Operating Partnership entered into an
agreement to make a $10.0 million investment in Crescent Machinery Company
("Crescent Machinery"), a wholly owned subsidiary of COPI. This investment,
together with capital from a third-party investment firm, was expected to put
Crescent Machinery on solid financial footing.




                                       32
<PAGE>

         Following the date of the agreements relating to the acquisition of
COPI assets and stock and the investment in Crescent Machinery, the results of
operations for the COPI hotel operations and the COPI land development interests
declined, due in part to the slowdown in the economy after September 11. In
addition, Crescent Machinery's results of operations suffered because of the
economic environment and the overall reduction in national construction levels
that has affected the equipment rental and sale business, particularly post
September 11. As a result, the Operating Partnership believes that a significant
additional investment would have been necessary to adequately capitalize
Crescent Machinery and satisfy concerns of Crescent Machinery's lenders.

         The Operating Partnership stopped recording rent from the leases of the
eight Resort/Hotel Properties leased to subsidiaries of COPI on October 1, 2001,
and recorded impairment and other adjustments related to COPI in the fourth
quarter of 2001, based on the estimated fair value of the underlying collateral.
See "Note 16. COPI" included in "Item 8. Financial Statements and Supplementary
Data" for a description of these charges.

         On January 22, 2002, the Operating Partnership terminated the purchase
agreement pursuant to which the Operating Partnership would have acquired the
lessee interests in the eight Resort/Hotel Properties leased to subsidiaries of
COPI, the voting interests held by subsidiaries of COPI in three of the
Residential Development Corporations and other assets. On February 4, 2002, the
Operating Partnership terminated the agreement relating to its planned
investment in Crescent Machinery.

         On February 6, 2002, Crescent Machinery filed for protection under the
federal bankruptcy laws.

         On February 12, 2002, the Operating Partnership delivered default
notices to COPI relating to approximately $49.0 million of unpaid rent and
approximately $76.2 million of principal and accrued interest due to the
Operating Partnership under certain secured loans.

         On February 14, 2002, the Operating Partnership executed an agreement
(the "Agreement") with COPI, pursuant to which COPI transferred to subsidiaries
of the Operating Partnership, in lieu of foreclosure, COPI's lessee interests in
the eight Resort/Hotel Properties leased to subsidiaries of COPI and COPI's
voting interests in three of the Operating Partnership's Residential Development
Corporations and other assets and the Operating Partnership agreed to assist and
provide funding to COPI for the implementation of a prepackaged bankruptcy of
COPI. In connection with the transfer, COPI's rent obligations to the Operating
Partnership were reduced by $23.6 million, and its debt obligations were reduced
by $40.1 million. These amounts include $18.3 million of value attributed to the
lessee interests transferred by COPI to the Operating Partnership, however, in
accordance with GAAP, the Operating Partnership assigned no value to these
interests for financial reporting purposes.

         The Operating Partnership holds the lessee interests in the eight
Resort/Hotel Properties and the voting interests in the three Residential
Development Corporations through three newly organized entities that are wholly
owned taxable REIT subsidiaries of the Operating Partnership. The Operating
Partnership will include these assets in its Resort/Hotel Segment and its
Residential Development Segment, and will fully consolidate the operations of
the eight Resort/Hotel Properties and the three Residential Development
Corporations, beginning on the dates of the transfers of these assets.

         Under the Agreement, the Operating Partnership will provide
approximately $14.0 million to COPI in the form of cash and common shares of the
Company to fund costs, claims and expenses relating to the bankruptcy and
related transactions, and to provide for the distribution of the Company's
common shares to the COPI stockholders. The Operating Partnership estimates that
the value of the common shares of the Company that will be issued to the COPI
stockholders will be between approximately $5.0 million and $8.0 million. The
Agreement provides that COPI and the Operating Partnership will seek to have a
plan of reorganization for COPI, reflecting the terms of the Agreement and a
draft plan of reorganization, approved by the bankruptcy court. The actual value
of the common shares of the Company issued to the COPI stockholders will not be
determined until the confirmation of COPI's bankruptcy plan and could vary
substantially from the estimated amount.

         In addition, the Operating Partnership has agreed to use commercially
reasonable efforts to assist COPI in arranging COPI's repayment of its $15.0
million obligation to Bank of America, together with any accrued interest. COPI
obtained the loan primarily to participate in investments with the Operating
Partnership. At the time COPI obtained the loan, Bank of America required, as a
condition to making the loan, that Richard E. Rainwater, the Chairman of the
Board of Trust Managers of the Company, and John C. Goff, the Vice-



                                       33
<PAGE>
Chairman of the Board of Trust Managers and Chief Executive Officer of the
Company and sole director and Chief Executive Officer of the General Partner,
enter into a support agreement with COPI and Bank of America, pursuant to which
they agreed to make additional equity investments in COPI if COPI defaulted on
payment obligations under its line of credit with Bank of America and the net
proceeds of an offering of COPI securities were insufficient to allow COPI to
pay Bank of America in full. The Operating Partnership believes, based on advice
of counsel, that the support agreement should be unenforceable in a COPI
bankruptcy. Effective December 31, 2001, the parties executed an amendment to
the line of credit providing that any defaults existing under the line of credit
on or before March 8, 2002 are temporarily cured unless and until a new default
shall occur.

         The Operating Partnership holds a first lien security interest in
COPI's entire membership interest in AmeriCold Logistics. REIT rules prohibit
the Operating Partnership from acquiring or owning the membership interest that
COPI owns in AmeriCold Logistics. Under the Agreement, the Operating Partnership
agreed to allow COPI to grant Bank of America a first priority security interest
in the membership interest and to subordinate its own security interest to Bank
of America. In addition, the Operating Partnership and the Company have agreed
to form and capitalize a separate entity to be owned by the Operating
Partnership's unitholders and the Company's shareholders, and to cause the new
entity to commit to acquire COPI's entire membership interest in the tenant, for
approximately $15.5 million. Under the Agreement, COPI has agreed that it will
use the proceeds of the sale of the membership interest to repay Bank of America
in full.

         Completion and effectiveness of the plan of reorganization for COPI is
contingent upon a number of conditions, including the vote of COPI's
stockholders, the approval of the plan by certain of COPI's creditors and the
approval of the bankruptcy court.

INVESTMENTS IN REAL ESTATE MORTGAGES AND EQUITY OF UNCONSOLIDATED COMPANIES

         Investments in which the Operating Partnership does not have a
controlling interest are accounted for under the equity method. The following is
a summary of the Operating Partnership's ownership in significant unconsolidated
companies or equity investments:

<Table>
<Caption>
                                                                                               OPERATING PARTNERSHIP'S OWNERSHIP
                     ENTITY                                  CLASSIFICATION                        AS OF DECEMBER 31, 2001
---------------------------------------------------    -----------------------------------     ---------------------------------
<S>                                                    <C>                                     <C>
Desert Mountain Development Corporation(1)             Residential Development Corporation               95.0%(2)(3)

The Woodlands Land Company, Inc.(1)                    Residential Development Corporation               95.0%(2)(4)

Crescent Resort Development, Inc.(1)                   Residential Development Corporation               90.0%(2)(5)

Mira Vista Development Corp.                           Residential Development Corporation               94.0%(2)(6)

Houston Area Development Corp.                         Residential Development Corporation               94.0%(2)(7)

Temperature-Controlled Logistics Partnership            Temperature-Controlled Logistics                 40.0%(8)

The Woodlands Commercial
    Properties Company, L.P.                                         Office                              42.5%(9)(10)

Main Street Partners, L.P.                                  Office (Bank One Center)                     50.0%(11)

Crescent 5 Houston Center, L.P.                             Office (5 Houston Center)                    25.0%(12)

Austin PT BK One Tower Office Limited Partnership            Office (Bank One Tower)                     20.0%(13)

Houston PT Four Westlake Office Limited Partnership        Office (Four Westlake Park)                   20.0%(13)

DBL Holdings, Inc.                                                    Other                              97.4%(14)

CRL Investments, Inc.(1)                                              Other                              95.0%(15)

CR License, LLC(1)                                                    Other                              28.5%(16)
</Table>


----------

(1)      On February 14, 2002, the Operating Partnership executed an agreement
         with COPI, pursuant to which COPI transferred to subsidiaries of the
         Operating Partnership, in lieu of foreclosure, COPI's interest in these
         entities. The Operating Partnership will fully consolidate the
         operations of these entities, other than CR License, LLC, beginning on
         the date of the asset transfers.

(2)      See the Residential Development Properties Table included in "Item 2.
         Properties" for the Residential Development Corporation's ownership
         interest in the Residential Development Properties.

(3)      The remaining 5.0% interest in Desert Mountain Development Corporation,
         representing 100% of the voting stock, was owned by COPI as of December
         31, 2001.

(4)      The remaining 5.0% interest in The Woodlands Land Company, Inc.,
         representing 100% of the voting stock, was owned by COPI as of December
         31, 2001.

(5)      The remaining 10.0% interest in Crescent Resort Development, Inc.,
         representing 100% of the voting stock, is owned by COPI Colorado, L.
         P., of which 60.0% was owned by COPI as of December 31, 2001, with 20%
         owned by John Goff, the Vice-Chairman of the Board of Trust Managers
         and


                                       34
<PAGE>
         Chief Executive Officer of the Company and sole director and Chief
         Executive Officer of the General Partner, and 20% owned by a third
         party.

(6)      The remaining 6.0% interest in Mira Vista Development Corp. ("MVDC"),
         representing 100% of the voting stock, is owned 4.0% by DBL and 2.0% by
         third parties.

(7)      The remaining 6.0% interest in Houston Area Development Corp. ("HADC"),
         representing 100% of the voting stock, is owned 4.0% by DBL Holdings,
         Inc. ("DBL") and 2.0% by a third party.

(8)      The remaining 60.0% interest in the Temperature-Controlled Logistics
         Partnership is owned by Vornado Realty Trust, L.P.

(9)      The remaining 57.5% interest in The Woodlands Commercial Properties
         Company, L. P. ("Woodlands CPC") is owned by Morgan Stanley Real Estate
         Fund II, L. P. ("Morgan Stanley").

(10)     Distributions are made to partners based on specified payout
         percentages. During the year ended December 31, 2001, the payout
         percentage to the Operating Partnership was 49.5%.

(11)     The remaining 50.0% interest in Main Street Partners, L.P. is owned by
         TrizecHahn Corporation.

(12)     See "5 Houston Center" below.

(13)     See "Four Westlake Park and Bank One Tower" below.

(14)     John Goff, the Vice-Chairman of the Board of Trust Managers and Chief
         Executive Officer of the Company and sole director and Chief Executive
         Officer of the General Partner, obtained the remaining 2.6% economic
         interest in DBL (including 100% of the voting interest in DBL) in
         exchange for his voting interests in MVDC and HADC, originally valued
         at approximately $0.4 million, and approximately $0.06 million in cash,
         or total consideration valued at $0.4 million. At December 31, 2001,
         Mr. Goff's interest in DBL was approximately $0.6 million.

(15)     The remaining 5.0% interest in CRL Investments, Inc. was owned by COPI
         as of December 31, 2001.

(16)     Of the remaining 71.5% interest in CR License, LLC, 70.0% is owned by a
         group of individuals unrelated to the Operating Partnership, and 1.5%
         was owned by COPI, as of December 31, 2001.

JOINT VENTURE ARRANGEMENTS

5 Houston Center

         On June 4, 2001, the Operating Partnership entered into a joint venture
arrangement with a pension fund advised by JP Morgan Investment Management, Inc.
("JPM") to construct the 5 Houston Center Office Property within the Operating
Partnership's Houston Center mixed-use Office Property complex in Houston,
Texas. The Class A Office Property will consist of 577,000 net rentable square
feet. The joint venture is structured such that the fund holds a 75% equity
interest, and the Operating Partnership holds a 25% equity interest in the
Property, which is accounted for under the equity method. The Operating
Partnership contributed approximately $8.5 million of land and $12.3 million of
development costs to the joint venture entity and received $14.8 million in net
proceeds. No gain or loss was recognized by the Operating Partnership on this
transaction. In addition, the Operating Partnership is developing, and will
manage and lease the Property on a fee basis. During the year ended December 31,
2001, the Operating Partnership recognized $2.3 million for these services.

         During the second quarter of 2001, the joint venture entity obtained an
$82.5 million construction loan guaranteed by the Operating Partnership, due May
2004, that bears interest at Prime (as defined in the loan agreement) plus 100
basis points or LIBOR plus 225 basis points, at the discretion of the borrower.
The interest rate on the loan at December 31, 2001 was 4.12%. The balance
outstanding on this construction loan at December 31, 2001 was $10.4 million.

Four Westlake Park and Bank One Tower

         On July 30, 2001, the Operating Partnership entered into joint venture
arrangements with an affiliate of General Electric Pension Fund ("GE") in which
the Operating Partnership contributed two Office Properties, Four Westlake Park
in Houston, Texas, and Bank One Tower in Austin, Texas into the joint ventures
and GE made a cash contribution. The joint ventures are structured such that GE
holds an 80% equity interest in each of Four Westlake Park, a 560,000 square
foot Class A Office Property located in the Katy Freeway submarket of Houston,
and Bank One Tower, a 390,000 square foot Class A Office Property located in
downtown Austin. The Operating Partnership continues to hold the remaining 20%
equity interests in each Property, which are accounted for under the equity
method. The joint ventures generated approximately $120.0 million in net cash
proceeds to the Operating Partnership, including distributions to the Operating
Partnership resulting from the sale of its 80% equity interest and from mortgage
financing at the joint venture level. None of the mortgage financing at the
joint venture level is guaranteed by the Operating Partnership. The Operating
Partnership has no commitment to reinvest the cash proceeds back into the joint
ventures. The joint ventures were accounted for as partial sales of these Office
Properties, resulting in a gain of approximately $7.6 million, net of a deferred
gain of approximately $1.9 million. In addition, the Operating Partnership
manages and leases the Office Properties on a fee basis. During the year ended
December 31, 2001, the Operating Partnership recognized $0.2 million for these
services.



                                       35
<PAGE>

METROPOLITAN

         On May 24, 2001, the Operating Partnership converted its $85.0 million
preferred member interest in Metropolitan and $1.9 million of deferred
acquisition costs, into approximately $75.0 million of common stock of Reckson,
resulting in an impairment charge of approximately $11.9 million. The Operating
Partnership subsequently sold the Reckson common stock on August 17, 2001, for
approximately $78.6 million, resulting in a gain of approximately $3.6 million.
The proceeds were used to pay down the Fleet Facility.

UNCONSOLIDATED PROPERTY DISPOSITIONS

         On September 27, 2001, the Woodlands CPC, owned by the Operating
Partnership and an affiliate of Morgan Stanley, sold one office/venture tech
property located within The Woodlands, Texas. The sale generated net proceeds,
after the repayment of debt, of approximately $2.7 million, of which the
Operating Partnership's portion was approximately $1.3 million. The sale
generated a net gain of approximately $3.5 million, of which the Operating
Partnership's portion was approximately $1.7 million. The net proceeds received
by the Operating Partnership were used primarily to pay down variable-rate debt.

         On November 9, 2001, The Woodlands Land Development Company, L.P.,
owned by the Woodlands Land Company, Inc. and an affiliate of Morgan Stanley,
sold two office properties and one retail property located within The Woodlands,
Texas. The sales generated net proceeds, after the repayment of debt, of
approximately $41.8 million, of which the Operating Partnership's portion was
approximately $19.7 million. The sales generated a net gain of approximately
$8.0 million, of which the Operating Partnership's portion was approximately
$3.8 million. The net proceeds received by the Operating Partnership were used
primarily to pay down variable-rate debt.

DISPOSITIONS

         During the year ended December 31, 2001, the Operating Partnership sold
five Office Properties, 18 behavioral healthcare properties and other assets.
The sales generated net proceeds of approximately $200.4 million and a net gain
of approximately $4.4 million.

Office Segment

         On July 30, 2001, the GE joint ventures were accounted for as partial
sales of two Office Properties, Four Westlake Park in Houston, Texas, and Bank
One Tower in Austin, Texas, resulting in a net gain of approximately $7.6
million, net of a deferred gain of $1.9 million.

         On September 18, 2001, the Operating Partnership completed the sale of
the two Washington Harbour Office Properties. The sale generated net proceeds of
approximately $153.0 million and a net loss of approximately $9.8 million. The
proceeds from the sale of the Washington Harbour Office Properties were used
primarily to pay down variable-rate debt and pay for the repurchase by the
Company of approximately 4.3 million of the Company's common shares. The
Washington Harbour Office Properties were the Operating Partnership's only
Office Properties in Washington, D.C.

         On September 28, 2001, The Woodlands Office Equities - '95 Limited
("WOE"), owned by the Operating Partnership and the Woodlands CPC, sold two
Office Properties located within The Woodlands. The sale generated net proceeds
of approximately $11.3 million, of which the Operating Partnership's portion was
approximately $9.9 million. The sale generated a net gain of approximately $3.4
million, of which the Operating Partnership's portion was approximately $3.0
million. The proceeds received by the Operating Partnership were used primarily
to pay down variable-rate debt.

         On December 20, 2001, WOE sold one Office Property located within The
Woodlands. The sale generated net proceeds of approximately $2.0 million, of
which the Operating Partnership's portion was approximately $1.8 million. The
sale generated a net gain of approximately $1.7 million, of which the Operating
Partnership's portion was approximately $1.5 million. The proceeds received by
the Operating Partnership were used primarily to pay down variable-rate debt.

Behavioral Healthcare Properties

         During the year ended December 31, 2001, the Operating Partnership
completed the sale of 18 behavioral healthcare properties. The sales generated
approximately $34.7 million in net proceeds and a net gain of approximately $1.6
million for the year ended December 31, 2001. The net proceeds from the sale of
the 18 behavioral healthcare properties sold during the


                                       36

<PAGE>

year ended December 31, 2001 were used primarily to pay down variable-rate debt.
As of December 31, 2001, the Operating Partnership owned 10 behavioral
healthcare properties. The Operating Partnership is actively marketing these 10
behavioral healthcare properties for sale.

         During the year ended December 31, 2001, the Operating Partnership
recognized an impairment loss of $8.5 million on seven of the behavioral
healthcare properties held for disposition. This amount represents the
difference between the carrying values and the estimated sales prices less costs
of the sales for these seven properties.

RELATED PARTY DISCLOSURES

DBL

         As of December 31, 2001, the Operating Partnership owned 97.44% of DBL
with the remaining 2.56% economic interest in DBL (including 100% of the voting
interest in DBL) held by John Goff, Vice-Chairman of the Board of Trust Managers
and Chief Executive Officer of the Company and sole director and Chief Executive
Officer of the General Partner. Originally, Mr. Goff contributed
his voting interests in MVDC and HADC originally valued at approximately $0.4
million, and approximately $0.06 million in cash, or total consideration valued
at approximately $0.4 million for his interest in DBL.

         DBL has two wholly owned subsidiaries, DBL-ABC, Inc., and DBL-CBO,
Inc., the assets of which are described in the following paragraphs, and DBL
directly holds 66% of the voting stock in MVDC and HADC. At December 31, 2001,
Mr. Goff's interest in DBL was approximately $0.6 million.

         Since June 1999, the Operating Partnership has contributed
approximately $23.8 million to DBL. The contribution was used by DBL to make an
equity contribution to DBL-ABC, Inc., which committed to purchase a limited
partnership interest representing a 12.5% interest in G2 Opportunity Fund, LP
("G2"). G2 was formed for the purpose of investing in commercial mortgage backed
securities and other commercial real estate investments and is managed and
controlled by an entity that is owned equally by Goff-Moore Strategic Partners,
LP ("GMSP") and GMAC Commercial Mortgage Corporation ("GMACCM"). The ownership
structure of GMSP consists of 50% ownership by Darla Moore, who is married to
Richard Rainwater, Chairman of the Board of Trust Managers of the Company, and
50% by Mr. Goff. Mr. Rainwater is also a limited partner of GMSP. At December
31, 2001, DBL has an approximately $14.1 million investment in G2.

         In March 1999, DBL-CBO, Inc. acquired $6.0 million aggregate principal
amount of Class C-1 Notes issued by Juniper CBO 1999-1 Ltd., a Cayman Island
limited liability company. At December 31, 2001 this investment was valued at
approximately $5.4 million.

COPI Colorado, L. P.

         As of December 31, 2001, CRD was owned 90% by the Operating Partnership
and the remaining 10%, representing 100% of the voting stock, was owned by COPI
Colorado, L.P. ("COPI Colorado"), of which 60% was owned by COPI, with 20% owned
by John Goff, Vice-Chairman of the Board of Trust Managers and Chief Executive
Officer of the Company and sole director and Chief Executive Officer of the
General Partner, and 20% owned by a third party.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to the Operating Partnership, in
lieu of foreclosure, COPI's 60% general partner interest in COPI Colorado. As a
result, the Operating Partnership indirectly owns a 96% interest in CRD, John
Goff owns a 2.0% interest in CRD and the remaining 2.0% interest is owned by a
third party. The Operating Partnership will fully consolidate the operations of
CRD beginning on the date of the asset transfer.

Loans to Employees of the Operating Partnership and Trust Managers of the
Company for Exercise of Stock Options and Unit Options

         As of December 31, 2001, the Operating Partnership had approximately
$32.9 million of loans outstanding (including approximately $3.9 million loaned
during the year ended December 31, 2001) to certain employees of the Operating
Partnership and trust managers of the Company on a recourse basis pursuant to
the Company's stock incentive


                                       37
<PAGE>
plans and the Operating Partnership's unit incentive plans pursuant to an
agreement approved by the Board of Trust Managers and the Executive Compensation
Committee of the Company. The proceeds of these loans were used by the employees
and the trust managers to acquire common shares of the Company and units of the
Operating Partnership pursuant to the exercise of vested stock and unit options.
Pursuant to the loan agreements, these loans may be repaid in full or in part at
any time without premium or penalty. John Goff, the Vice-Chairman of the Board
of Trust Managers and Chief Executive Officer of the Company and sole director
and Chief Executive Officer of the General Partner, had a loan representing
$26.3 million of the $32.9 million total outstanding loans at December 31, 2001.

         Every month, federal short-term, mid-term and long-term rates
(Applicable Federal Rates) are determined and published by the IRS based upon
average market yields of specified maturities. Effective November 1, 2001, these
loans were amended to reduce the interest rates for their remaining terms to the
Applicable Federal Rates. As a result, the interest rates on loans with
remaining terms of three years or less at November 1, 2001 were reduced to
approximately 2.7% per year and the interest rates on loans with remaining terms
greater than three years as of November 1, 2001 were reduced to approximately
4.07% per year. These amended interest rates reflect below prevailing market
interest rates; therefore, the Operating Partnership recorded $0.8 million of
compensation expense for the year ended December 31, 2001. Approximately $0.5
million of interest was outstanding related to these loans as of December 31,
2001.

SHELF REGISTRATION STATEMENT

         On October 29, 1997, the Company filed a shelf registration statement
(the "Shelf Registration Statement") with the SEC relating to the future
offering of up to an aggregate of $1.5 billion of common shares, preferred
shares and warrants exercisable for common shares. Management believes the Shelf
Registration Statement will provide the Company with more efficient and
immediate access to capital markets when considered appropriate. As of December
31, 2001, approximately $782.7 million was available under the Shelf
Registration Statement for the issuance of securities.

SALE OF PREFERRED EQUITY INTERESTS IN SUBSIDIARY AND INTRACOMPANY LOAN

Sale of Class A Units in Crescent Real Estate Funding IX, Ltd. ("Funding IX")

         During the year ended December 31, 2000, the Operating Partnership
formed Funding IX and contributed seven Office Properties and two Resort/Hotel
Properties to Funding IX. As of December 31, 2001, Funding IX held seven Office
Properties and one Resort/Hotel Property. The Operating Partnership owns 100% of
the common voting interests in Funding IX, 0.1% in the form of a general partner
interest and 99.9% in the form of a limited partner interest.

         As of December 31, 2001, GMAC Commercial Mortgage Corporation
("GMACCM") held $218.4 million of non-voting, redeemable preferred Class A Units
in Funding IX (the "Class A Units"). The Class A Units receive a preferred
variable-rate dividend currently calculated at LIBOR plus 450 basis points, or
approximately 6.6% per annum as of December 31, 2001, and increasing to LIBOR
plus 550 basis points beginning March 15, 2002. The Class A Units are redeemable
at the option of the Operating Partnership at the original purchase price.

Impact on Financial Statements of Intracompany Loan

         As of December 31, 2001, Funding IX had loaned a total of approximately
$281.1 million from the net proceeds from the sale of the Class A Units and a
portion of the net proceeds of the sale of one of the Properties held by Funding
IX to Crescent SH IX, Inc. ("SH IX"), for the purchase of common shares of the
Company. The note, which is included in Notes Receivable, Net, bears interest
based on the dividends paid on the common shares held by SH IX, a wholly-owned
subsidiary of the Company, and matures on March 15, 2003. SH IX is required to
repay the loan, plus any accrued and unpaid interest, at that time. SH IX will
receive the funds to repay the loan from the Company, pursuant to an agreement
that requires the Company to repurchase, on or before March 15, 2003, the common
shares of the Company held by SH IX. The Company will receive the funds to
repurchase the common shares from SH IX from the Operating Partnership, pursuant
to the limited partnership agreement of the Operating Partnership, which
requires the Operating Partnership to repurchase from the Company a
corresponding portion of the Company's limited partnership interest at such time
as the Company repurchases shares. The proceeds received by Funding IX for the
repayment of the principal amount of the note will be used to redeem Class A
Units.



                                       38
<PAGE>

         As of December 31, 2001, the annual interest rate on the note was
approximately 8.56%. For the year ended December 31, 2001, the Operating
Partnership recognized interest income of $29.3 million on the note. See "Note
13. Partners' Capital." The repurchased common shares will be held in SH IX
until all the Class A Units are redeemed. The Company, as a partner of the
Operating Partnership, receives quarterly distributions from the Operating
Partnership, which it then uses to make distributions to it shareholders.
Distributions on these repurchased common shares will continue to be paid by the
Company to SH IX, as a shareholder of the Company, and will be used by SH IX to
make payments of interest due to Funding IX on the loan. Funding IX in turn will
use these funds to pay dividends on the Class A Units.

         In accordance with GAAP, the operations, assets and liabilities of
Funding IX and SH IX are consolidated with those of the Company in the Company's
consolidated financial statements. In accordance with GAAP, the operations,
assets and liabilities of Funding IX (but not those of SH IX) are consolidated
with those of the Operating Partnership in the consolidated financial statements
of the Operating Partnership. As a result, the note and the payments on the note
by SH IX to Funding IX are eliminated in the Company's financial statements but
are not eliminated in the financial statements of the Operating Partnership.
These items therefore are included in Notes Receivable, Net and in Interest and
Other Income in the Operating Partnership's financial statements.

         The following table compares the current financial statements of the
Operating Partnership prepared in accordance with GAAP and the adjusted
Operating Partnership financial statements, adjusted for the elimination of the
intracompany loan and associated interest income. This table provides certain
components of the financial statements which would be affected by the
elimination of the intracompany loan and associated interest income.


<Table>
<Caption>
                                                                                     AFTER ELIMINATION OF
                                                      GAAP PRESENTATION               INTRACOMPANY LOAN

                                                    YEAR ENDED DECEMBER 31,          YEAR ENDED DECEMBER 31,
                                                     2001           2000              2001             2000
                                                     ----           ----              ----             ----
<S>                                             <C>             <C>              <C>              <C>
BALANCE SHEET DATA
(AT PERIOD END):
  Total assets                                  $   4,422,826   $   4,827,999    $   4,138,102    $   4,542,913

OPERATING DATA:
  Total revenues                                      725,326         739,697          696,054          718,405
  Operating income (loss)                               1,188         111,176          (28,084)          89,884
  Income before minority interests
    and extraordinary item                             56,844         324,344           27,572          303,052
  Net income (loss)                                    24,006         300,084           (5,266)         278,792
  Basic earnings per unit(1):
     Income (loss) before
     extraordinary item                         $        0.33   $        4.24    $       (0.11)   $        4.23
  Diluted earnings per unit(1):
     Income (loss) before
     extraordinary item                         $        0.33   $        4.21    $       (0.11)   $        4.19


</Table>

----------

(1)      The weighted average units used to calculate basic and diluted earnings
         per unit in accordance with GAAP include the common shares of the
         Company held in SH IX of 14,468, 623 (7,234,312 equivalent units) and
         8,184,578 (4,092,289 equivalent units) for the years ended December 31,
         2001 and 2000, respectively. The adjusted basic and diluted earnings
         per unit after the elimination of the intracompany loan exclude the
         common shares of the Company held in SH IX.

         The Operating Partnership's FFO for the years ended December 31, 2001
and 2000 would have been $177.1 million and $326.9 million, respectively, if the
interest income from the intracompany loan were eliminated.

EMPLOYEE STOCK PURCHASE PLAN

         On June 25, 2001, the shareholders of the Company approved a new
Employee Stock Purchase Plan (the "ESPP"), that is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
("IRC") of 1986, as amended. The ESPP is regarded as a noncompensatory plan
under APB No. 25, because it meets the qualifications


                                       39
<PAGE>

under IRC 423. Under the terms of the ESPP, eligible employees may purchase
common shares of the Company at a price that is equal to 90% of the lower of the
common shares' fair market value at the beginning or the end of a quarterly
period. The fair market value of a common share is equal to the last sale price
of the common shares on the New York Stock Exchange. Eligible employees may
purchase the common shares through payroll deductions of up to 10% of eligible
compensation. The ESPP is not subject to the provisions of ERISA. The ESPP was
effective October 1, 2001, and will terminate on May 14, 2011.

         The 1,000,000 common shares that may be issued pursuant to the purchase
of common shares under the ESPP represent less than 0.96% of the Company's
outstanding common shares at December 31, 2001.

SHARE REPURCHASE PROGRAM

         On October 15, 2001, the Company's Board of Trust Managers authorized
an increase in the amount of outstanding common shares that can be repurchased
from time to time in the open market or through privately negotiated
transactions (the "Share Repurchase Program") from $500.0 million to $800.0
million. The repurchase of common shares by the Company will decrease the
Company's limited partner interest, which will result in an increase in net
income per unit.

         The Company commenced its Share Repurchase Program in March 2000. As of
December 31, 2001, the Company had repurchased 18,756,423 common shares, 20,286
of which have been retired, at an average price of $19.09 per common share for
an aggregate of approximately $358.1 million. As of December 31, 2001, the
Company held 14,468,623 of the repurchased common shares in SH IX. The
14,468,623 common shares were repurchased with the net proceeds of the sale of
Class A Units in Funding IX and a portion of the net proceeds from the sale of
one of the Properties held by Funding IX. See "Sale of Preferred Equity
Interests in Subsidiary and Intracompany Loan" above. These common shares are
consolidated as treasury shares in accordance with GAAP in the Company's
financial statements. However, these shares are held in SH IX until all of the
Class A Units are redeemed, and are considered outstanding for the Operating
Partnership's financial statements. Distributions will continue to be paid on
these repurchased common shares and will be used to pay dividends on the Class A
Units.

         The Company expects the Share Repurchase Program to continue to be
funded through a combination of debt, equity, joint venture capital and selected
asset disposition alternatives available to the Company which, in come cases,
may be secured by the repurchased common shares. The amount of common shares
that the Company will actually purchase will be determined from time to time, in
its reasonable judgment, based on market conditions and the availability of
funds, among other factors. There can be no assurance that any number of common
shares will actually be purchased within any particular time period.

SHARE REPURCHASE AGREEMENT

         On November 19, 1999, the Company entered into an agreement (the "Share
Repurchase Agreement") with UBS to purchase a portion of its common shares from
UBS. The Company had the option to settle the Share Repurchase Agreement in cash
or common shares. During the year ended December 31, 2000, the Company purchased
the 5,809,180 common shares from UBS at an average cost of $17.62 per common
share for an aggregate of approximately $102.3 million under the Share
Repurchase Agreement with UBS.

         The Share Repurchase Agreement was accounted for under EITF 96-13 and
was considered an equity instrument similar to a preferred stock instrument with
a cumulative fixed dividend, the forward accretion component or guaranteed
return to UBS was accounted for like a preferred dividend. Additionally, the
common shares actually issued and outstanding were considered in both the basic
and diluted weighted-average shares calculations. The diluted earnings per share
calculation also included any contingently issuable common shares.

         The Company has no further obligation under the Share Repurchase
Agreement. The purchases were funded primarily through the sale of Class A Units
in Funding IX. See "Sale of Preferred Equity Interests in Subsidiary and
Intracompany Loan" above.


                                       40
<PAGE>

BROADBAND

         In 2000, the Operating Partnership made an equity investment in
Broadband Office, Inc. ("Broadband"), (a facilities-based provider of broadband
data, video and voice communication services delivered over fiber optic
networks), and related entities. In May 2001, Broadband filed for Chapter 11
bankruptcy protection, and the Operating Partnership's investment in Broadband
was approximately $7.2 million. Yipes Communications Group, Inc. ("Yipes"),
another telecom provider, has received approval from the federal bankruptcy
court to acquire certain rights formerly owned by Broadband. In addition, Yipes
has executed agreements with nine major real estate entities, including the
Operating Partnership, to assume telecom licensing agreements, in modified
formats. As part of this transaction, the Operating Partnership acquired
ownership of certain telecom assets previously owned by Broadband and located
within office properties in consideration for conveyance of its equity interest
in Broadband to Yipes. These telecom assets were independently appraised and
valued in excess of the Operating Partnerships' equity interest in Broadband. As
a result, the Operating Partnership reclassified its investment in Broadband of
approximately $7.2 million from Other Assets to Building Improvements during the
year ended December 31, 2001. Therefore, Broadband's bankruptcy did not have a
material effect on the Operating Partnership's results of operations for the
year ended December 31, 2001 or its financial position as of December 31, 2001.

STATION CASINOS, INC. ("STATION")

         As of April 14, 1999, the Company and Station entered into a settlement
agreement for the mutual settlement and release of all claims between the
Company and Station arising out of the agreement and plan of merger between the
Company and Station, which the Company terminated in August 1998. As part of the
settlement agreement, the Company paid $15.0 million to Station on April 22,
1999.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations," which provides that all business
combinations in the scope of the statement are to be accounted for under the
purchase method. This statement is effective for all business combinations
initiated after June 30, 2001, as well as all business combinations accounted
for using the purchase method for which the date of acquisition is July 1, 2001,
or later. Since the Operating Partnership currently accounts for its
acquisitions under the purchase method, management does not believe that the
adoption of this statement will have a material effect on its interim or annual
financial statements.

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which addresses financial accounting and reporting for
acquired goodwill and other intangible assets. This statement requires that
goodwill and some other intangible assets will no longer be amortized, and
provides specific guidance for testing goodwill for impairment. This statement
is effective for fiscal years beginning after December 15, 2001. The Operating
Partnership expects its impairment losses to range between $14.0 million and
$18.3 million due to the initial application of this statement. These charges
relate to unconsolidated companies in which the Operating Partnership had an
interest as of December 31, 2001. These charges will be reported as resulting
from a change in accounting principle.

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for fiscal years
beginning after June 15, 2002. The Operating Partnership has determined that
SFAS No. 143 will have no material effect on its interim and annual financial
statements.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. Management does not believe that adoption of this statement will have a
material effect on its interim or annual financial statements; however,
financial statement presentation will be modified to report the results of
operations and financial position of a component of an entity that either has
been disposed of or is classified as held for sale as discontinued operations.
The Operating Partnership will reclassify certain amounts in prior period
financial statements to conform with the new presentation requirements.


                                       41
<PAGE>

LIQUIDITY REQUIREMENTS

         As of December 31, 2001, the Operating Partnership had unfunded capital
requirements of approximately $55.9 million relating to capital investments. The
table below specifies the Operating Partnership's total capital requirements
relating to these projects, amounts funded as of December 31, 2001, amounts
remaining to be funded, and short-term and long-term capital requirements.


<Table>
<Caption>
                                                                                                   CAPITAL REQUIREMENTS
                                                                   AMOUNT                      ---------------------------
(IN MILLIONS)                                                   FUNDED AS OF       AMOUNT       SHORT-TERM      LONG-TERM
                                                    TOTAL       DECEMBER 31,     REMAINING       (NEXT 12         (12+
          PROJECT                                  COST(1)         2001           TO FUND       MONTHS)(2)     MONTHS)(2)
          -------                               ------------    ------------    ------------   ------------   ------------
<S>                                             <C>             <C>             <C>            <C>            <C>
RESIDENTIAL DEVELOPMENT SEGMENT
      Tahoe Mountain Resorts                    $      100.0    $      (71.2)   $       28.8   $       28.8   $         --
                                                ------------    ------------    ------------   ------------   ------------

OTHER
      SunTx (3)                                 $       19.0    $       (7.4)   $       11.6   $        4.0   $        7.6
      Spinco(4)                                         15.5              --            15.5           15.5             --
                                                ------------    ------------    ------------   ------------   ------------
                                                $       34.5    $       (7.4)   $       27.1   $       19.5   $        7.6

TOTAL                                           $      134.5    $      (78.6)   $       55.9   $       48.3   $        7.6
                                                ============    ============    ============   ============   ============
</Table>
----------

(1)      All amounts are approximate.

(2)      Reflects the Operating Partnership's estimate of the breakdown between
         short-term and long-term capital expenditures.

(3)      This commitment is related to the Operating Partnership's investment in
         a private equity fund.

(4)      The Operating Partnership has agreed to form and capitalize a separate
         entity to be owned by the Company's shareholders and the Operating
         Partnership's unitholders, and to cause the new entity to commit to
         acquire COPI's entire membership interest in AmeriCold Logistics.

         The Operating Partnership expects to fund its short-term capital
requirements of approximately $48.3 million through a combination of cash, net
cash flow from operations, return of capital (investment) from the Residential
Development Corporations and borrowings under the Fleet Facility. The Operating
Partnership plans to meet its maturing debt obligations during 2002 of
approximately $245.2 million, primarily through additional or replacement debt
financing or equity transactions.

         The Operating Partnership expects to meet its other short-term capital
requirements, consisting of normal recurring operating expenses, regular debt
service requirements (including debt service relating to additional and
replacement debt), additional interest expense related to the cash flow hedge
agreements, recurring capital expenditures, non-recurring capital expenditures,
such as tenant improvement and leasing costs, distributions to shareholders and
unitholders, and expenses related to the COPI bankruptcy of approximately $14.0
million, primarily through cash flow provided by operating activities. To the
extent that the Operating Partnership's cash flow from operating activities is
not sufficient to finance such short-term liquidity requirements, the Operating
Partnership expects to finance such requirements with available cash proceeds
received from joint ventures and select property sales, and borrowings under the
Fleet Facility or additional debt financing.

         The Operating Partnership expects to fund its long-term capital
requirements of approximately $7.6 million with available cash proceeds received
from joint ventures and select property sales, borrowings under the Fleet
Facility or additional debt financing and return of capital (investment) from
the Residential Development Corporations. The Operating Partnership's other
long-term liquidity requirements as of December 31, 2001, consist primarily of
maturities after December 31, 2002, under the Operating Partnership's fixed and
variable-rate debt, which totaled approximately $2.0 billion as of December 31,
2001. The Company also intends to repay the intracompany loan of approximately
$285.0 million, including accrued interest, from Funding IX to SH IX at maturity
on March 15, 2003, and to redeem approximately $218.4 million of Class A Units
in Funding IX with the proceeds received by Funding IX. The Operating
Partnership expects to meet these long-term liquidity requirements primarily
through long-term secured and unsecured borrowings and other debt and equity
financing alternatives as well as cash proceeds received from joint ventures and
select property sales.

         Debt and equity financing alternatives currently available to the
Operating Partnership to satisfy its liquidity requirements and commitments for
material capital expenditures include:

    o   Additional proceeds from the refinancing of existing secured and
        unsecured debt;




                                       42
<PAGE>

    o   Additional debt secured by existing underleveraged properties,
        investment properties, or by investment property acquisitions or
        developments;

    o   Issuance of additional unsecured debt;

    o   Equity offerings including preferred and/or convertible securities; and

    o   Proceeds from joint ventures and property sales.

        The following factors could limit the Operating Partnership's ability to
    utilize these financing alternatives:

    o   The Operating Partnership may be unable to obtain debt or equity
        financing on favorable terms, or at all, as a result of the financial
        condition of the Operating Partnership or market conditions at the time
        the Operating Partnership seeks additional financing;

    o   Restrictions on the Operating Partnership's debt instruments or
        outstanding equity may prohibit it from incurring debt or issuing equity
        at all, or on terms available under then-prevailing market conditions;
        and

    o   The Operating Partnership may be unable to service additional or
        replacement debt due to increases in interest rates or a decline in the
        Operating Partnership's operating performance.

         In addition to the Operating Partnership's liquidity requirements
stated above, as of December 31, 2001, the Operating Partnership also has
guarantees or letters of credit related to approximately $89.3 million, or 17%
of its maximum borrowings available under its unconsolidated debt. At December
31, 2001, the Operating Partnership had guarantees or letters of credit related
to approximately $17.0 million, or 4% of its total outstanding unconsolidated
debt. See "Note 4. Investments in Real Estate Mortgages and Equity of
Unconsolidated Companies" included in "Item 8. Financial Statements and
Supplementary Data" for more information about the Operating Partnership's
unconsolidated investments and the underlying debt related to these investments.

REIT QUALIFICATION

         The Company intends to maintain its qualification as a REIT under
Section 856 of the Code. As a REIT, the Company generally will not be subject to
corporate federal income taxes as long as it satisfies certain technical
requirements of the Code, including the requirement to distribute 90% of its
REIT taxable income to its shareholders.




                                       43
<PAGE>



DEBT FINANCING ARRANGEMENTS

         The significant terms of the Operating Partnership's primary debt
financing arrangements existing as of December 31, 2001, are shown below
(dollars in thousands):


<Table>
<Caption>
                                                              INTEREST                                                 BALANCE
                                                              RATE AT                              EXPECTED         OUTSTANDING AT
                                              MAXIMUM       DECEMBER 31,       MATURITY             PAYOFF           DECEMBER 31,
        DESCRIPTION                         BORROWINGS          2001             DATE                DATE                2001
        -----------                       --------------   --------------      --------            --------         --------------
<S>                                       <C>              <C>              <C>                 <C>                 <C>
SECURED FIXED RATE DEBT:
   JP Morgan Mortgage Note(1)             $      199,386             8.31%     October 2016      October 2006       $      199,386
   AEGON Partnership Note(2)                     269,930             7.53       July 2009          July 2009               269,930
   LaSalle Note I(3)                             239,000             7.83      August 2027        August 2007              239,000
   LaSalle Note II(4)                            161,000             7.79       March 2028         March 2006              161,000
   CIGNA Note (5)                                 63,500             7.47     December 2002      December 2002              63,500
   Metropolitan Life Note V(6)                    38,696             8.49     December 2005      December 2005              38,696
   Northwestern Life Note (7)                     26,000             7.66      January 2004       January 2004              26,000
   Mitchell Mortgage Note(8)                       6,244             7.00      August 2002        August 2002                6,244
   Nomura Funding VI Note (9)                      8,187            10.07       July 2020          July 2010                 8,187
   Woodmen of the World Note(10)                   8,500             8.20       April 2009         April 2009                8,500
   Rigney Promissory Note (11)                       651             8.50     November 2012        June 2012                   651
                                          --------------   --------------                                           --------------
    Subtotal/Weighted Average             $    1,021,094             7.85%                                          $    1,021,094
                                          --------------   --------------                                           --------------

UNSECURED FIXED RATE DEBT:
   Notes due 2007(12)                     $      250,000             7.50%    September 2007     September 2007     $      250,000
   Notes due 2002(12)                            150,000             7.00     September 2002     September 2002            150,000
                                          --------------   --------------                                           --------------
    Subtotal/Weighted Average             $      400,000             7.31%                                          $      400,000
                                          --------------   --------------                                           --------------

SECURED VARIABLE RATE DEBT(13):
   Fleet Fund I and II Term Loan(14)      $      275,000             5.39%       May 2005           May 2005        $      275,000
   Deutsche Bank - CMBS Loan(15)                 220,000             5.84        May 2004           May 2006               220,000
                                          --------------   --------------                                           --------------
    Subtotal/Weighted Average             $      495,000             5.59%                                          $      495,000
                                          --------------   --------------                                           --------------


UNSECURED VARIABLE RATE DEBT:
   JPMorgan Loan Sales Facility(16)       $       50,000             3.25%                       January 2002       $       10,000
   Fleet Bridge Loan(17)                          50,000             5.71      August 2002        August 2002                5,000
   Fleet Facility(14)                            400,000             3.92        May 2004           May 2005               283,000
                                          --------------   --------------                                           --------------
                                          $      500,000             3.93%                                          $      298,000
                                          --------------   --------------                                           --------------
    TOTAL/WEIGHTED AVERAGE                $    2,416,094             6.72%(18)                                      $    2,214,094
                                          ==============   ==============                                           ==============
    AVERAGE REMAINING TERM                                                      8.4 years          4.3 years
</Table>



----------

(1)  At the end of seven years (October 2006), the interest rate will adjust
     based on current interest rates at that time. It is the Operating
     Partnership's intention to repay the note in full at such time (October
     2006) by making a final payment of approximately $177.8 million.

(2)  The outstanding principal balance of this note at maturity will be
     approximately $224.1 million. This note is secured by the Greenway Plaza
     Office Properties. The note agreement requires the Operating Partnership to
     maintain compliance with a number of customary covenants, including
     maintaining the Properties that secure the note and not creating any lien
     with respect to or otherwise encumbering such Properties.

(3)  The note has a seven-year period during which only interest is payable
     (through August 2002), followed by principal amortization based on a
     25-year amortization schedule through maturity. In August 2007, the
     interest rate will increase, and the Operating Partnership is required to
     remit, in addition to the monthly debt service payment, excess property
     cash flow, as defined, to be applied first against principal until the note
     is paid in full and thereafter, against accrued excess interest, as
     defined. It is the Operating Partnership's intention to repay the note in
     full at such time (August 2007) by making a final payment of approximately
     $220.5 million. LaSalle Note I is secured by Properties owned by Crescent
     Real Estate Funding I, L.P. ("Funding I") (See "Note 1. Organization and
     Basis of Presentation" included in "Item 8. Financial Statements and
     Supplementary Data"). The note agreement restricts Funding I from engaging
     in certain activities, including incurring liens on the Properties securing
     the note, pledging the Properties securing the note, incurring certain
     other indebtedness, canceling a material claim or debt owed to it, entering
     into certain transactions, distributing funds derived from operation of the
     Properties securing the note (except as specifically permitted in the note
     agreement), or creating easements with respect to the Properties securing
     the note.

(4)  The note has a seven-year period during which only interest is payable
     (through March 2003), followed by principal amortization based on a 25-year
     amortization schedule through maturity. In March 2006, the interest rate
     will increase, and the Operating Partnership is required to remit, in
     addition to the monthly debt service payment, excess property cash flow, as
     defined, to be applied first against principal until the note is paid in
     full and thereafter, against accrued excess interest, as defined. It is the
     Operating Partnership's intention to repay the note in full at such time
     (March 2006) by making a final payment of approximately $154.1 million.
     LaSalle Note II is secured by Properties owned by Crescent Real Estate
     Funding II, L.P. ("Funding II") (See "Note 1. Organization and Basis of
     Presentation" included in "Item 8. Financial Statements and Supplementary
     Data"). The note agreement restricts Funding II from engaging in certain
     activities, including incurring liens on the Properties securing the note,
     pledging the Properties securing the note, incurring certain other
     indebtedness, canceling a material claim or debt owed to it, entering into
     certain affiliate transactions, distributing


                                       44

<PAGE>

     funds derived from operation of the Properties securing the note (except as
     specifically permitted in the note agreement), or creating easements with
     respect to the Properties securing the note.

(5)  The note requires payments of interest only during its term. The CIGNA Note
     is secured by the MCI Tower and Denver Marriott City Center Resort/Hotel
     Property. The note agreement has no negative covenants. The deed of trust
     requires the Operating Partnership to maintain the Properties that secure
     the note, and requires approval to grant liens, transfer the Properties, or
     issue new leases.

(6)  The Metropolitan Life Note V requires monthly principal and interest
     payments based on a 25-year amortization schedule through maturity, at
     which time the outstanding principal balance is due and payable. The note
     is secured by the Datran Center Office Property. The note agreement
     requires the Operating Partnership to maintain compliance with a number of
     customary covenants, including maintaining the Property that secures the
     note and not creating any lien with respect to or otherwise encumbering
     such Property.

(7)  The note requires payments of interest only during its term. The
     Northwestern Life Note is secured by the 301 Congress Avenue Office
     Property. The note agreement requires the Operating Partnership to maintain
     compliance with a number of customary covenants, including maintaining the
     Property that secures the note and not creating any lien with respect to or
     otherwise encumbering such Property.

(8)  The note requires payments of interest only during its term. The Mitchell
     Mortgage Note is secured by three of The Woodlands Office Properties. The
     note agreement has no negative covenants.

(9)  The note was assumed in connection with an acquisition and was not
     subsequently retired by the Operating Partnership because of prepayment
     penalties. Under the terms of the note, principal and interest are payable
     based on a 25-year amortization schedule. The Operating Partnership has the
     option to defease the note by purchasing Treasury obligations in an amount
     sufficient to pay the note without penalty. The Nomura Funding VI Note is
     secured by Canyon Ranch-Lenox, the Property owned by Crescent Real Estate
     Funding VI, L.P. ("Funding VI") (see "Note 1. Organization and Basis of
     Presentation" included in "Item 8. Financial Statements and Supplementary
     Data"). In July 2010, the interest rate due under the note will change to a
     10-year Treasury yield plus 500 basis points or, if the Operating
     Partnership so elects, it may repay the note without penalty at that date.
     The note agreement requires Funding VI to maintain compliance with a number
     of customary covenants, including a debt service coverage ratio for the
     Property that secures the note, a restriction on the ability to transfer or
     encumber the Property that secures the note, and covenants related to
     maintaining its single purpose nature, including restrictions on ownership
     by Funding VI of assets other than the Property that secures the note,
     restrictions on the ability to incur indebtedness and make loans, and
     restrictions on operations.

(10) The outstanding principal balance on this note at maturity will be
     approximately $8.5 million. This note is secured by the Avallon IV Office
     Property. The note agreement requires that the Operating Partnership
     maintains compliance with a number of customary covenants, including,
     maintaining the Property that secures the note and not creating any lien
     with respect to or otherwise encumbering such Property.

(11) The note requires quarterly payments of principal and interest based on a
     15-year amortization schedule through maturity, at which time the
     outstanding principal balance is due and payable. The Rigney Promissory
     Note is secured by a parcel of land owned by the Operating Partnership and
     located across from an Office Property. The note agreement has no negative
     covenants.

(12) The notes are unsecured and require payments of interest only during their
     terms. The indenture requires the Operating Partnership to maintain
     compliance with a number of customary financial and other covenants on an
     ongoing basis, including leverage ratios and debt service coverage ratios,
     limitations on the incurrence of additional indebtedness and maintaining
     the Operating Partnership's Properties. The notes were issued in an
     offering registered with the SEC.

(13) For the method of calculation of the interest rate for the Operating
     Partnership's variable-rate debt, see "Note 6. Notes Payable and Borrowings
     under the Fleet Facility" included in "Item 8. Financial Statements and
     Supplementary Data."

(14) For a description of the Fleet Fund I and II Term Loan and the Fleet
     Facility, see "Note 6. Notes Payable and Borrowings under the Fleet
     Facility" included in "Item 8. Financial Statements and Supplementary
     Data." The note requires payments of interest only during the first four
     years with a one-year extension option. The note, due May 2004, bears
     interest at LIBOR plus 325 basis points (at December 31, 2001, the interest
     rate was 5.39%). The Fleet Term Loan note is secured by eight Office
     Properties in Funding I, and 12 Office Properties in Funding II. The Term
     Loan requires the Operating Partnership maintain compliance with a number
     of customary financial and other covenants on an on going basis, including
     leverage ratios based on book value and debt service coverage ratios,
     limitations on additional secured and total indebtedness, limitations on
     distributions, and a minimum net worth requirement and with respect solely
     to Funding I and Funding II adjusted net operating income to actual debt
     service and adjusted net operating income to pro forma debt service.

(15) This note requires payment of interest only during its term. The notes, due
     May 2004, bear interest at the 30-day LIBOR rate plus a spread of 164.7
     basis points (at December 31, 2001, the interest rate was 5.15%) for the
     Deutsche Bank-CMBS and a spread of 600 basis points (at December 31, 2001,
     the interest rate was 9.50%) for the Mezzanine note. The blended rate at
     December 31, 2001, was 5.84%. The notes have three-year interest only terms
     and two one-year extension options, and are secured by the Crescent Real
     Estate Funding X, L.P. ("Funding X") Office Properties and Spectrum Center,
     L. P. (See "Note 1. Organization and Basis of Presentation" included in
     "Item 8. Financial Statements and Supplementary Data"). The notes require
     the Operating Partnership to maintain compliance with a minimum debt
     service coverage ratio.

(16) The JP Morgan Loan Sales Facility is a $50.0 million credit facility. The
     lender is not obligated to fund draws under this loan unless certain
     conditions not within the control of the Operating Partnership are
     satisfied at the time of the draw request. As a result, the Operating
     Partnership maintains sufficient availability under the Fleet Facility to
     repay the JP Morgan Loan Sales Facility at any time.

(17) The Fleet Bridge Loan is a $50.0 million unsecured credit facility.

(18) The overall weighted average interest rate does not include the effect of
     the Operating Partnership's cash flow hedge agreements. Including the
     effect of these agreements, the overall weighted average interest rate
     would have been 7.58%.


                                       45

<PAGE>



         Below are the aggregate principal payments required as of December 31,
2001 under indebtedness of the Operating Partnership by year. Scheduled
principal installments and amounts due at maturity are included.


<Table>
<Caption>
                         SECURED            UNSECURED            TOTAL
                       -----------          ---------         -----------
<S>                    <C>                  <C>               <C>
(in thousands)
2002                   $    80,157          $ 165,000         $   245,157
2003                        15,060                 --              15,060
2004                       262,857(1)         283,000(1)          545,857
2005                       329,339                 --             329,339
2006                       347,207                 --             347,207
Thereafter                 481,474            250,000             731,474
                       -----------          ---------         -----------
                       $ 1,516,094          $ 698,000         $ 2,214,094
                       ===========          =========         ===========
</Table>



----------

(1)  These amounts do not represent the effect of a one-year extension option of
     the Fleet Facility and two one-year extension options on the Deutsche
     Bank - CMBS Loan.

         The Operating Partnership has approximately $245.2 million of secured
and unsecured debt due during 2002, consisting primarily of the Cigna Note, the
Mitchell Mortgage Note and the 2002 Notes which are expected to be funded
through replacement debt financing.

         The Operating Partnership's policy with regard to the incurrence and
maintenance of debt is based on a review and analysis of:

         o        investment opportunities for which capital is required and the
                  cost of debt in relation to such investment opportunities;

         o        the type of debt available (secured or unsecured);

         o        the effect of additional debt on existing coverage ratios;

         o        the maturity of the proposed debt in relation to maturities of
                  existing debt; and

         o        exposure to variable-rate debt and alternatives such as
                  interest-rate swaps and cash flow hedges to reduce this
                  exposure.

         Debt service coverage ratios for a particular period are generally
calculated as net income plus depreciation and amortization, plus interest
expense, plus extraordinary or non-recurring losses, minus extraordinary or
non-recurring gains, divided by debt service (including principal and interest
payable during the period of calculation). The calculation of the debt service
coverage ratio for the Fleet Facility is calculated using the method described
above, including certain pro forma adjustments.

         Any uncured or unwaived events of default on the Operating
Partnership's loans can trigger an acceleration of payment on the loan in
default. In addition, a default by the Operating Partnership or any of its
subsidiaries with respect to any indebtedness in excess of $5.0 million
generally will result in a default under the Fleet Facility and the Fleet I and
II Term Loan after the notice and cure periods for the other indebtedness have
passed. As of December 31, 2001, the Operating Partnership was in compliance
with all of its debt service coverage ratios and other covenants related to its
outstanding debt. The Operating Partnership's debt facilities generally prohibit
loan pre-payment for an initial period, allow pre-payment with a penalty during
a following specified period and allow pre-payment without penalty after the
expiration of that period. During the year ended December 31, 2001, there were
no circumstances that would require pre-payment penalties or increased
collateral related to the Operating Partnership's existing debt.

DEBT REFINANCING AND FLEET FACILITY

         In May 2001, the Operating Partnership (i) repaid and retired the UBS
Facility which consisted of the UBS Line of Credit, the UBS Term Loan I and the
UBS Term Loan II; (ii) repaid and retired the iStar Financial Note; and (iii)
modified and replaced the Fleet Term Note II with proceeds from a $970.0 million
debt refinancing. In May 2001, the Operating Partnership wrote off $12.2 million
of deferred financing costs related to the early extinguishment of the UBS
Facility which is included in Extraordinary Item - Extinguishment of Debt.



                                       46
<PAGE>

New Debt Resulting from Refinancing


<Table>
<Caption>
                                              MAXIMUM                INTEREST                  MATURITY
              DESCRIPTION                    BORROWING                 RATE                      DATE
              -----------                    ---------       --------------------------        --------
     (dollars in millions)
<S>                                         <C>             <C>                              <C>
Fleet Facility                                 $ 400.0(1)   LIBOR + 187.5 basis points        2004(2)
Fleet Fund I and II Term Loan                  $ 275.0      LIBOR + 325 basis points          2005
Deutsche Bank - CMBS Loan                      $ 220.0      LIBOR + 234 basis points          2004(3)
Deutsche Bank Short-Term Loan                  $  75.0      LIBOR + 300 basis points          2001(4)
</Table>

----------
(1)  The $400.0 million Fleet Facility is an unsecured revolving line of credit.
     The weighted average interest rate from the origination of the loan in May
     2001 through December 31, 2001 is 5.38%.

(2)  One-year extension option.

(3)  Two one-year extension options.

(4)  Repaid September 19, 2001.

Debt Repaid or Modified by Refinancing


<Table>
<Caption>
                                           MAXIMUM             INTEREST              MATURITY            BALANCE
           DESCRIPTION                    BORROWING              RATE                   DATE         REPAID/MODIFIED(1)
           -----------                    ---------    --------------------------    --------        ------------------
      (dollars in millions)
<S>                                       <C>          <C>                           <C>             <C>
UBS Line of Credit                         $ 300.0     LIBOR + 250 basis points        2003                 $ 165.0
UBS Term Loan I                            $ 146.8     LIBOR + 250 basis points        2003                 $ 146.8
UBS Term Loan II                           $ 326.7     LIBOR + 275 basis points        2004                 $ 326.7
Fleet Term Note II                         $ 200.0     LIBOR + 400 basis points        2003                 $ 200.0
iStar Financial Note                       $  97.1     LIBOR + 175 basis points        2001                 $  97.1
</Table>


----------
(1)  All the amounts listed, other than the Fleet Term Note II, were repaid. In
     May 2001, the Fleet Term Note II was modified and replaced by the Fleet
     Fund I and II Term Loan.

CASH FLOW HEDGES

         The Operating Partnership uses derivative financial instruments to
convert a portion of its variable-rate debt to fixed-rate debt and to manage its
fixed to variable-rate debt ratio. As of December 31, 2001, the Operating
Partnership had entered into three cash flow hedge agreements which are
accounted for under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment of FASB
Statement No. 133".

         The following table shows information regarding the Operating
Partnership's cash flow hedge agreements as of December 31, 2001 and interest
expense for the year ended December 31, 2001 (dollars in millions):

<Table>
<Caption>
                                                                                              ADDITIONAL
                                                                                           INTEREST EXPENSE
     ISSUE             NOTIONAL      MATURITY       REFERENCE            FAIR                FOR THE YEAR
     DATE               AMOUNT         DATE           RATE          MARKET VALUE         ENDED DECEMBER 31, 2001
----------------       --------     ---------       ---------       ------------         -----------------------
<S>                     <C>         <C>             <C>             <C>                  <C>
       9/1/1999        $ 200.0       9/2/2003          6.183%        $    (10.8)               $ 3.5
       2/4/2000        $ 200.0       2/3/2003          7.11%         $    (10.8)               $ 6.0
      4/18/2000        $ 100.0      4/18/2004          6.76%         $     (7.2)               $ 2.7
</Table>


         The Operating Partnership has designated its three cash flow hedge
agreements as cash flow hedges of LIBOR-based monthly interest payments on a
designated pool of variable-rate LIBOR indexed debt that reprices closest to the
reset dates of each cash flow hedge agreement. For retrospective effectiveness
testing, the Operating Partnership uses the cumulative dollar offset approach as
described in Derivatives Implementation Group ("DIG") Issue E8. The DIG is a
task force designed to assist the FASB in answering questions that companies
have resulting from implementation of SFAS No. 133 and 138. The Operating
Partnership uses the change in variable cash flows method as described in DIG
Issue G7 for



                                       47
<PAGE>
prospective testing as well as for the actual recording of ineffectiveness, if
any. Under this method, the Operating Partnership will compare the changes in
the floating rate portion of each cash flow hedge to the floating rate of the
hedged items. The cash flow hedges have been and are expected to remain highly
effective. Changes in the fair value of these highly effective hedging
instruments are recorded in accumulated other comprehensive income. The
effective portion that has been deferred in accumulated other comprehensive
income will be reclassified to earnings as interest expense when the hedged
items impact earnings. If a cash flow hedge falls outside 80%-125% effectiveness
for a quarter, all changes in the fair value of the cash flow hedge for the
quarter will be recognized in earnings during the current period. If it is
determined based on prospective testing that it is no longer likely a hedge will
be highly effective on a prospective basis, the hedge will no longer be
designated as a cash flow hedge and no longer qualify for accounting in
accordance with SFAS Nos. 133 and 138.

         Over the next twelve months, an estimated $16.4 million to $18.4
million related to the effective portions of the cash flow hedge agreements will
be reclassified from accumulated other comprehensive income to interest expense
and charged against earnings.

INTEREST RATE CAPS

         In connection with the closing of the Deutsche Bank-CMBS Loan in May
2001, the Operating Partnership entered into a LIBOR interest rate cap struck at
7.16% for a notional amount of $220.0 million, and simultaneously sold a LIBOR
interest rate cap with the same terms. Since these instruments do not reduce the
Operating Partnership's net interest rate risk exposure, they do not qualify as
hedges and changes to their respective fair values are charged to earnings. As
the significant terms of these arrangements are substantially the same, the
effects of a revaluation of these instruments are expected to substantially
offset each other.

FUNDS FROM OPERATIONS

         FFO, based on the revised definition adopted by the Board of Governors
of the NAREIT, effective January 1, 2000, and as used in this document, means:

o        Net Income (Loss) - determined in accordance with GAAP;

         o        excluding gains (or losses) from sales of depreciable
                  operating property;

         o        excluding extraordinary items (as defined by GAAP);

         o        plus depreciation and amortization of real estate assets; and

         o        after adjustments for unconsolidated partnerships and joint
                  ventures.

         NAREIT developed FFO as a relative measure of performance and liquidity
of an equity REIT to recognize that income-producing real estate historically
has not depreciated on the basis determined under GAAP. The Operating
Partnership considers FFO an appropriate measure of performance for an operating
partnership of an equity REIT, and for its investment segments. However, FFO:

         o        does not represent cash generated from operating activities
                  determined in accordance with GAAP (which, unlike FFO,
                  generally reflects all cash effects of transactions and other
                  events that enter into the determination of net income);

         o        is not necessarily indicative of cash flow available to fund
                  cash needs; and

         o        should not be considered as an alternative to net income
                  determined in accordance with GAAP as an indication of the
                  Operating Partnership's operating performance, or to cash flow
                  from operating activities determined in accordance with GAAP
                  as a measure of either liquidity or the Operating
                  Partnership's ability to make distributions.

         The Operating Partnership has historically distributed an amount less
than FFO, primarily due to reserves required for capital expenditures, including
leasing costs. The aggregate cash distributions paid to shareholders and
unitholders for the year ended December 31, 2001, and 2000, were $275.6 and
$300.0 million, respectively. The Operating Partnership reported FFO of $206.4
million and $348.2 million for the years ended December 31, 2001 and 2000,
respectively. Excluding the impairment and other charges related to COPI of
$92.8 million, the Operating Partnership's FFO for the year ended December 31,
2001 would have been $299.2 million. Excluding the interest income from the
intracompany loan from Funding IX to SH IX, the Operating Partnership's FFO for
the years ended December 31, 2001 and 2000 would have been



                                       48
<PAGE>



$177.1 million and $326.9 million, respectively. Excluding both the interest
income from the intracompany loan and the impairment and other charges related
to COPI of $92.8 million, the Operating Partnership's FFO for the year ended
December 31, 2001 would have been $269.9 million.

         An increase or decrease in FFO does not necessarily result in an
increase or decrease in aggregate distributions because the Company's Board of
Trust Managers is not required to increase distributions on a quarterly basis
unless necessary for the Company to maintain REIT status. However, the Company
must distribute 90% of its REIT taxable income (as defined in the Code).
Therefore, a significant increase in FFO will generally require an increase in
distributions to shareholders and unitholders although not necessarily on a
proportionate basis.

         Accordingly, the Operating Partnership believes that to facilitate a
clear understanding of the consolidated historical operating results of the
Operating Partnership, FFO should be considered in conjunction with the
Operating Partnership's net income (loss) and cash flows reported in the
consolidated financial statements and notes to the financial statements.
However, the Operating Partnership's measure of FFO may not be comparable to
similarly titled measures of operating partnerships of REITs (other than the
Company) because these REITs may apply the definition of FFO in a different
manner than the Operating Partnership.

STATEMENTS OF FUNDS FROM OPERATIONS
(dollars and units in thousands)

<Table>
<Caption>
                                                                                FOR THE YEAR
                                                                              ENDED DECEMBER 31,
                                                                      --------------------------------
                                                                           2001               2000
                                                                      -------------      -------------
<S>                                                                   <C>                <C>
Net (loss) income                                                     $      24,006      $     300,084
Adjustments to reconcile net (loss) income to
  funds from operations:
    Depreciation and amortization of real estate assets                     122,033            119,999
    Gain on rental property sales, net                                       (2,835)          (136,880)
    Impairment and other charges related to
          real estate assets                                                 21,705             17,874
    Extraordinary item - extinguishment of debt                              12,174              4,378
    Adjustment for investments in real estate mortgages
      and equity of unconsolidated companies:
       Office Properties                                                      6,955              4,973
       Residential Development Properties                                    13,037             25,130
       Temperature-Controlled Logistics Properties                           22,671             26,131
       Other                                                                    144                 --
    6 3/4% Series A Preferred Share distributions                           (13,501)           (13,500)
                                                                      -------------      -------------
Funds from operations                                                 $     206,389      $     348,189

Investment Segments:
    Office Segment                                                    $     358,348      $     361,574
    Resort/Hotel Segment                                                     45,282             71,446
    Residential Development Segment                                          54,051             78,600
    Temperature-Controlled Logistics Segment                                 23,806             33,563
    Corporate and other adjustments:
       Interest expense                                                    (182,410)          (203,197)
       6 3/4% Series A Preferred Share distributions                        (13,501)           (13,500)
       Other(1)(2)                                                           37,844             43,776
       Corporate general & administrative                                   (24,249)           (24,073)
       Impairment and other charges related to COPI                         (92,782)                --
                                                                      -------------      -------------
Funds from operations                                                 $     206,389      $     348,189
                                                                      =============      =============

Basic weighted average units                                                 67,815             67,860
                                                                      =============      =============
Diluted weighted average units(3)                                            68,578             68,458
                                                                      =============      =============
</Table>



----------

(1)  Includes interest and other income, preferred return paid to GMACCM, other
     unconsolidated companies, less depreciation and amortization of non-real
     estate assets and amortization of deferred financing costs.

(2)  For purposes of this schedule, the behavioral healthcare properties'
     financial information has been included in this line item.

(3)  See calculations for the amounts presented in the reconciliation following
     this table.



                                       49
<PAGE>


         The following schedule reconciles the Operating Partnership's basic
weighted average units to the diluted weighted average units presented above:


<Table>
<Caption>
                                                                       FOR THE YEAR
                                                                    ENDED DECEMBER 31,
                                                             -----------------------------
(UNITS IN THOUSANDS)                                              2001            2000
                                                             ------------     ------------
<S>                                                          <C>              <C>
Basic weighted average units:                                      67,815           67,860
       Unit options                                                   763              598
                                                             ------------     ------------
Diluted weighted average units                                     68,578           68,458
                                                             ============     ============
</Table>


RECONCILIATION OF FUNDS FROM OPERATIONS TO NET CASH PROVIDED
 BY OPERATING ACTIVITIES
 (DOLLARS IN THOUSANDS)

<Table>
<Caption>
                                                                           FOR THE YEAR ENDED DECEMBER 31
                                                                           ------------------------------
                                                                               2001               2000
                                                                           ------------      ------------
<S>                                                                        <C>               <C>
Funds from operations                                                      $    206,389      $    348,189
Adjustments:
   Depreciation and amortization of non-real estate assets                        2,934             2,646
   Impairment and other charges related to real estate assets                    96,409                --
   Amortization of deferred financing costs                                       9,327             9,497
   Gain on undeveloped land                                                      (1,590)             (577)
   Increase in Receivables from COPI                                            (20,458)               --
   Minority interest in joint ventures profit and depreciation
    and amortization                                                             21,854            21,076
   Adjustment for investments in real estate mortgages
    and equity of unconsolidated companies                                      (42,807)          (56,234)
   Change in deferred rent receivable                                             3,744            (8,504)
   Change in current assets and liabilities                                     (64,229)          (25,736)
   Distributions received in excess of earnings from
    unconsolidated companies                                                     13,874             3,897
   Equity in earnings in excess of distributions received from
    unconsolidated companies                                                       (476)          (10,641)
   6 3/4% Series A Preferred Share distributions                                 13,501            13,500
   Non cash compensation                                                            149               114
                                                                           ------------      ------------
Net cash provided by operating activities                                  $    238,621      $    297,227
                                                                           ============      ============
</Table>


HISTORICAL RECURRING OFFICE PROPERTY CAPITAL EXPENDITURES,
TENANT IMPROVEMENT AND LEASING COSTS

         The following table sets forth annual and per square foot recurring
capital expenditures (excluding those expenditures which are recoverable from
customers) and tenant improvement and leasing costs for the years ended December
31, 2001, 2000 and 1999, attributable to signed leases, all of which have
commenced or will commence during the next 12 months (i.e., the renewal or
replacement tenant began or will begin to pay rent) for the Office Properties
consolidated in the Operating Partnership's financial statements during each of
the periods presented. Tenant improvement and leasing costs for signed leases
during a particular period do not necessarily equal the cash paid for tenant
improvement and leasing costs during such period due to timing of payments.



                                       50
<PAGE>


<Table>
<Caption>
                                                         2001              2000              1999
                                                     -------------     -------------     -------------
<S>                                                  <C>               <C>               <C>
CAPITAL EXPENDITURES:
    Capital Expenditures (in thousands)              $      15,672     $       9,199     $       6,048
    Per square foot                                  $        0.58     $        0.33     $        0.19
TENANT IMPROVEMENT AND LEASING COSTS:(1)
    Replacement Tenant Square Feet                       1,099,868         1,126,394         1,259,660
    Renewal Tenant Square Feet                             790,203         1,490,930         1,385,911
    Tenant Improvement Costs (in thousands)          $      12,154     $      16,541     $      14,339
    Per square foot leased                           $        6.43     $        6.32     $        5.42
    Tenant Leasing Costs (in thousands)              $       7,238     $      11,621     $       7,804
    Per square foot leased                           $        3.83     $        4.44     $        2.95
    Total (in thousands)                             $      19,392     $      28,162     $      22,143
       Total per square foot                         $       10.26     $       10.76     $        8.37
       Average lease term                                5.2 years         5.1 years         4.5 years
       Total per square foot per year                $        1.97     $        2.10     $        1.87
</Table>

----------

(1)  Excludes leasing activity for leases that have less than a one-year term
     (i.e., storage and temporary space).

         Capital expenditures may fluctuate in any given period subject to the
nature, extent and timing of improvements required to be made in the Operating
Partnership's Office Property portfolio. The Operating Partnership maintains an
active preventive maintenance program in order to minimize required capital
improvements. In addition, certain capital improvement costs are recoverable
from customers.

         Tenant improvement and leasing costs also may fluctuate in any given
year depending upon factors such as the property, the term of the lease, the
type of lease (renewal or replacement tenant), the involvement of external
leasing agents and overall competitive market conditions. Management believes
that future recurring tenant improvements and leasing costs for the Operating
Partnership's existing Office Properties will approximate on average for
"renewal customers", $6.00 to $10.00 per square foot, or $1.20 to $2.00 per
square foot per year based on an average five-year lease term, and, on average
for "replacement customers," $12.00 to $16.00 per square foot, or $2.40 to $3.20
per square foot per year based on an average five-year lease term.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Operating Partnership's use of financial instruments, such as debt
instruments, subject the Operating Partnership to market risk which may affect
the Operating Partnership's future earnings and cash flows as well as the fair
value of its assets. Market risk generally refers to the risk of loss from
changes in interest rates and market prices. The Operating Partnership manages
its market risk by attempting to match anticipated inflow of cash from its
operating, investment and financing activities with anticipated outflow of cash
to fund debt payments, distributions to shareholders, investments, capital
expenditures and other cash requirements. The Operating Partnership also enters
into derivative financial instruments such as interest rate swaps to mitigate
its interest rate risk on a related financial instrument or to effectively lock
the interest rate on a portion of its variable-rate debt.

         The following discussion of market risk is based solely on hypothetical
changes in interest rates related to the Operating Partnership's variable-rate
debt. This discussion does not purport to take into account all of the factors
that may affect the financial instruments discussed in this section.

INTEREST RATE RISK

         The Operating Partnership's interest rate risk is most sensitive to
fluctuations in interest rates on its short-term variable-rate debt. The
Operating Partnership had total outstanding debt of approximately $2.2 billion
at December 31, 2001, of which approximately $0.3 billion, or approximately 14%,
was unhedged variable-rate debt. The weighted average interest rate on such
variable-rate debt was 3.90% as of December 31, 2001. A 10% (39.0 basis point)
increase in the weighted average interest rate on such variable-rate debt would
result in an annual decrease in net income and cash flows of approximately $1.0
million based on the unhedged variable-rate debt outstanding as of December 31,
2001, as a result of the increased interest expense associated with the change
in rate. Conversely, a 10% (39.0 basis point) decrease in the weighted average
interest rate on such unhedged variable-rate debt would result in an annual
increase in net income and cash flows of approximately $1.0 million based on the
unhedged variable rate debt outstanding as of December 31, 2001, as a result of
the decreased interest expense associated with the change in rate.

                                       51
<PAGE>

CASH FLOW HEDGES

         The Operating Partnership uses derivative financial instruments to
convert a portion of its variable-rate debt to fixed-rate debt and to manage its
fixed to variable-rate debt ratio. As of December 31, 2001, the Operating
Partnership had entered into three cash flow hedge agreements which are
accounted for under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment of FASB
Statement No. 133."

         The following table shows information regarding the Operating
Partnership's cash flow hedge agreements as of December 31, 2001, and interest
expense for the year ended December 31, 2001 (dollars in millions):

<Table>
<Caption>
                                                                                     ADDITIONAL
                                                                                   INTEREST EXPENSE
  ISSUE          NOTIONAL      MATURITY      REFERENCE         FAIR                  FOR THE YEAR
  DATE            AMOUNT         DATE           RATE        MARKET VALUE        ENDED DECEMBER 31, 2001
---------        --------     ---------      ---------      ------------        -----------------------
<S>              <C>          <C>            <C>            <C>                 <C>
9/01/1999        $  200.0     9/02/2003          6.183%     $      (10.8)                  $        3.5
2/04/2000        $  200.0     2/03/2003           7.11%     $      (10.8)                  $        6.0
4/18/2000        $  100.0     4/18/2004           6.76%     $       (7.2)                  $        2.7
</Table>


         The Operating Partnership has designated its three cash flow hedge
agreements as cash flow hedges of LIBOR-based monthly interest payments on a
designated pool of variable-rate LIBOR indexed debt that reprices closest to the
reset dates of each cash flow hedge agreement. For retrospective effectiveness
testing, the Operating Partnership uses the cumulative dollar offset approach as
described in Derivatives Implementation Group ("DIG") Issue E8. The DIG is a
task force designed to assist the FASB in answering questions that companies
have resulting from implementation of SFAS No. 133 and 138. The Operating
Partnership uses the change in variable cash flows method as described in DIG
Issue G7 for prospective testing as well as for the actual recording of
ineffectiveness, if any. Under this method, the Operating Partnership will
compare the changes in the floating rate portion of each cash flow hedge to the
floating rate of the hedged items. The cash flow hedges have been and are
expected to remain highly effective. Changes in the fair value of these highly
effective hedging instruments are recorded in accumulated other comprehensive
income. The effective portion that has been deferred in accumulated other
comprehensive income will be reclassified to earnings as interest expense when
the hedged items impact earnings. If a cash flow hedge falls outside 80%-125%
effectiveness for a quarter, all changes in the fair value of the cash flow
hedge for the quarter will be recognized in earnings during the current period.
If it is determined based on prospective testing that it is no longer likely a
hedge will be highly effective on a prospective basis, the hedge will no longer
be designated as a cash flow hedge and no longer qualify for accounting in
accordance with SFAS Nos. 133 and 138.

         Over the next twelve months, an estimated $16.4 million to $18.4
million related to the effective portions of the cash flow hedge agreements will
be reclassified from accumulated other comprehensive income to interest expense
and charged against earnings.




                                       52
<PAGE>
Item 8. Financial Statements and Supplementary Data

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                              PAGE
                                                              -----
<S>                                                           <C>
Report of Independent Public Accountants....................    54
Consolidated Balance Sheets at December 31, 2001 and 2000...    55
Consolidated Statements of Operations for the years ended
  December 31, 2001, 2000 and 1999..........................    56
Consolidated Statements of Partners' Capital for the years
  ended December 31, 2001, 2000 and 1999....................    57
Consolidated Statements of Cash Flows for the years ended
  December 31, 2001, 2000 and 1999..........................    58
Notes to Consolidated Financial Statements..................    60
Schedule III Consolidated Real Estate Investments and
  Accumulated Depreciation..................................   112
</Table>


                                       53
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Sole Director of Crescent Real Estate Equities Ltd.:

We have audited the accompanying consolidated balance sheets of Crescent Real
Estate Equities Limited Partnership and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of operations, partners' capital
and cash flows for each of the three years in the period ended December 31,
2001. These financial statements and the schedule referred to below are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and the schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Crescent Real Estate Equities
Limited Partnership and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

                                          ARTHUR ANDERSEN LLP

Dallas, Texas,
February 21, 2002


                                       54
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
-----------------------------------------------------------------------------------------
                                                              DECEMBER 31,   DECEMBER 31,
(DOLLARS IN THOUSANDS)                                                2001           2000
-----------------------------------------------------------------------------------------
<S>                                                           <C>            <C>
ASSETS:
Investments in real estate:
   Land.....................................................   $  265,594     $  310,301
   Land held for investment or development..................      108,274        116,480
   Building and improvements................................    2,980,116      3,201,332
   Furniture, fixtures and equipment........................       74,773         62,802
   Less-- accumulated depreciation..........................     (648,834)      (564,805)
                                                              ---------------------------

            Net investment in real estate...................   $2,779,923     $3,126,110

   Cash and cash equivalents................................   $   31,644     $   38,643
   Restricted cash and cash equivalents.....................      115,531         94,568
   Accounts receivable, net.................................       28,610         42,140
   Deferred rent receivable.................................       66,362         82,775
   Investments in real estate mortgages and equity of
      unconsolidated companies..............................      838,317        845,317
   Notes receivable, net....................................      416,789        426,493
   Other assets, net........................................      145,650        171,953
                                                              ---------------------------

            Total assets....................................   $4,422,826     $4,827,999
                                                              ===========================

LIABILITIES:
   Borrowings under Credit Facility.........................   $  283,000     $  553,452
   Notes payable............................................    1,931,094      1,718,443
   Accounts payable, accrued expenses and other
      liabilities...........................................      217,405        202,591
                                                              ---------------------------

            Total liabilities...............................   $2,431,499     $2,474,486
                                                              ---------------------------

COMMITMENTS AND CONTINGENCIES:
MINORITY INTERESTS:                                            $  232,137     $  236,919
PARTNERS' CAPITAL:
   6 3/4% Series A Convertible Cumulative Preferred Units,
      liquidation preference $25.00 per unit, 8,000,000
      units issued and outstanding at December 31, 2001 and
      December 31, 2000.....................................   $  200,000     $  200,000
   Units of Partnership Interests, 66,141,632 and 67,905,150
      issued and outstanding at December 31, 2001 and
      December 31, 2000, respectively:
      General partner--outstanding 661,486 and 679,051......       16,179         19,886
      Limited partners'--outstanding 65,487,144 and
         67,226,099.........................................    1,574,495      1,903,442
   Accumulated other comprehensive income...................      (31,484)        (6,734)
                                                              ---------------------------

            Total partners' capital.........................   $1,759,190     $2,116,594
                                                              ---------------------------

            Total liabilities and partners' capital.........   $4,422,826     $4,827,999
                                                              ===========================

-----------------------------------------------------------------------------------------
</Table>

   The accompanying notes are an integral part of these financial statements.


                                       55
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
--------------------------------------------------------------------------------------------
                                                                          FOR THE YEAR ENDED
                                                                                DECEMBER 31,
                                                              ------------------------------
(DOLLARS IN THOUSANDS)                                            2001       2000       1999
--------------------------------------------------------------------------------------------
<S>                                                           <C>        <C>        <C>
REVENUES:
   Office properties........................................  $610,116   $606,040   $614,493
   Resort/Hotel properties..................................    45,748     72,114     65,237
   Interest and other income................................    69,462     61,543     66,549
                                                              ------------------------------

            Total revenues..................................  $725,326   $739,697   $746,279
                                                              ------------------------------

EXPENSES:
   Real estate taxes........................................    84,488     83,939     84,401
   Repairs and maintenance..................................    39,247     39,024     44,024
   Other rental property operating..........................   140,146    127,078    128,723
   Corporate general and administrative.....................    24,249     24,073     16,274
   Interest expense.........................................   182,410    203,197    192,033
   Amortization of deferred financing costs.................     9,327      9,497     10,283
   Depreciation and amortization............................   126,157    123,839    131,657
   Settlement of merger dispute.............................         -          -     15,000
   Impairment and other charges related to the real estate
      assets................................................    25,332     17,874    178,838
   Impairment and other charges related to
      COPI..................................................    92,782          -          -
                                                              ------------------------------

            Total expenses..................................  $724,138   $628,521   $801,233
                                                              ------------------------------

            Operating income (loss).........................     1,188    111,176    (54,954)
OTHER INCOME AND EXPENSE:
   Equity in net income of unconsolidated companies:
      Office properties.....................................     6,124      3,164      5,265
      Residential development properties....................    41,014     53,470     42,871
      Temperature-controlled logistics properties...........     1,136      7,432     15,039
      Other.................................................     2,957     11,645      5,122
                                                              ------------------------------

            Total equity in net income of unconsolidated
               companies....................................  $ 51,231   $ 75,711   $ 68,297
   Gain on property sales, net..............................     4,425    137,457          -
                                                              ------------------------------

            Total other income and expense..................  $ 55,656   $213,168   $ 68,297
                                                              ------------------------------

INCOME BEFORE MINORITY INTERESTS AND EXTRAORDINARY ITEM.....  $ 56,844   $324,344   $ 13,343
   Minority interests.......................................   (20,664)   (19,882)    (1,111)
                                                              ------------------------------

NET INCOME BEFORE EXTRAORDINARY ITEM........................    36,180    304,462     12,232
   Extraordinary item--extinguishment of debt...............   (12,174)    (4,378)         -
                                                              ------------------------------

NET INCOME..................................................  $ 24,006   $300,084   $ 12,232
Preferred unit distributions................................   (13,501)   (13,500)   (13,500)
Share repurchase agreement return...........................         -     (2,906)      (583)
Forward share purchase agreement return.....................         -          -     (4,317)
                                                              ------------------------------

NET INCOME (LOSS) AVAILABLE TO PARTNERS.....................  $ 10,505   $283,678   $ (6,168)
                                                              ==============================

BASIC EARNINGS PER UNIT DATA:
   Net income (loss) before extraordinary item..............  $   0.33   $   4.24   $  (0.09)
   Extraordinary item--extinguishment of debt...............     (0.18)     (0.06)         -
                                                              ------------------------------

   Net income (loss)........................................  $   0.15   $   4.18   $  (0.09)
                                                              ==============================

DILUTED EARNINGS PER UNIT DATA:
   Net income (loss) before extraordinary item..............  $   0.33   $   4.21   $  (0.09)
   Extraordinary item--extinguishment of debt...............     (0.18)     (0.06)         -
                                                              ------------------------------

   Net income (loss)........................................  $   0.15   $   4.15   $  (0.09)
                                                              ==============================

--------------------------------------------------------------------------------------------
</Table>

   The accompanying notes are an integral part of these financial statements.


                                       56
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

<Table>
<Caption>
----------------------------------------------------------------------------------------------
                                                                      ACCUMULATED
                               PREFERRED     GENERAL      LIMITED           OTHER        TOTAL
                               PARTNERS'   PARTNER'S    PARTNERS'   COMPREHENSIVE    PARTNERS'
(DOLLARS IN THOUSANDS)           CAPITAL     CAPITAL      CAPITAL          INCOME      CAPITAL
----------------------------------------------------------------------------------------------
<S>                            <C>         <C>         <C>          <C>             <C>
Partners' capital, December
   31, 1998..................  $200,000     $25,220    $2,331,441     $ (5,037)     $2,551,624
Contributions................         -         383        37,890            -          38,273
Settlement of Forward Share
   Purchase Agreement........         -      (1,494)     (147,890)                    (149,384)
Distributions................         -      (2,999)     (296,879)           -        (299,878)
Net Income...................         -         (13)       (1,255)           -          (1,268)
Unrealized Net Gain on
   Available-for-Sale
   Securities................         -           -             -       17,216          17,216
Unrealized Net Gain on Cash
   Flow Hedges...............         -           -             -          280             280
                               ---------------------------------------------------------------

Partners' capital, December
   31, 1999..................  $200,000     $21,097    $1,923,307     $ 12,459      $2,156,863
Contributions................         -          26         2,564            -           2,590
Preferred Equity Issuance
   Cost......................         -        (100)       (9,906)           -         (10,006)
Unit Repurchases.............         -          (4)         (351)           -            (355)
Distributions................         -      (3,999)     (295,890)           -        (299,889)
Net Income...................         -       2,866       283,718            -         286,584
Unrealized Net Loss on
   Available-for-Sale
   Securities................         -           -             -       (7,584)         (7,584)
Unrealized Net Loss on Cash
   Flow Hedges...............         -           -             -      (11,609)        (11,609)
                               ---------------------------------------------------------------

PARTNERS' CAPITAL, December
   31, 2000..................  $200,000     $19,886    $1,903,442     $ (6,734)     $2,116,594
Contributions................         -        (121)        9,888            -           9,767
Distributions................         -      (3,691)     (349,235)           -        (352,926)
Net Income...................         -         105        10,400            -          10,505
Sale of/Unrealized Loss
   Marketable Securities.....         -           -             -       (7,522)         (7,522)
Unrealized Net Loss on Cash
   Flow Hedges...............         -           -             -      (17,228)        (17,228)
                               ---------------------------------------------------------------

PARTNERS' CAPITAL, December
   31, 2001..................  $200,000     $16,179    $1,574,495     $(31,484)     $1,759,190
----------------------------------------------------------------------------------------------
</Table>

   The accompanying notes are an integral part of these financial statements.


                                       57
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
------------------------------------------------------------------------------------------------
                                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                              ----------------------------------
(DOLLARS IN THOUSANDS)                                             2001         2000        1999
------------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................  $  24,006   $  300,084   $  12,232
Adjustments to reconcile net income to net cash provided by
   operating activities:
      Depreciation and amortization.........................    135,484      133,336     141,940
      Extraordinary item--extinguishment of debt............     12,174        4,378           -
      Gain on property sales, net...........................     (4,425)    (137,457)          -
      Impairment and other charges related to real estate
         assets.............................................     25,332       17,874     120,573
      Impairment charge related to COPI.....................     92,782
      Increase in COPI hotel accounts receivable............    (20,458)           -           -
      Minority interests....................................     20,664       19,882       1,111
      Non-cash compensation.................................        149          114         118
      Distributions received in excess of earnings from
         unconsolidated companies:
            Office and retail...............................          -        1,589       3,757
            Residential development properties..............      3,392            -           -
            Temperature-controlled logistics................     10,392        2,308      25,404
            Other...........................................         90            -       1,128
      Equity in earnings net of distributions received from
         unconsolidated companies:
            Office properties...............................       (476)           -           -
            Residential development properties..............          -       (6,878)     (7,808)
            Other...........................................          -       (3,763)          -
      Decrease (increase) in accounts receivable............        829       (5,042)     (4,513)
      Decrease (increase) in deferred rent receivable.......      3,744       (8,504)       (636)
      (Increase) decrease in other assets...................    (23,086)     (19,411)     30,667
      Increase in restricted cash and cash equivalents......    (18,759)     (12,570)     (9,682)
      (Decrease) increase in accounts payable, accrued
         expenses and other liabilities.....................    (23,213)      11,287      21,538
                                                              ----------------------------------

            Net cash provided by operating activities.......    238,621      297,227     335,829
                                                              ----------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Acquisition of land held for development or sale......          -      (22,021)       (500)
      Proceeds from property sales..........................    200,389      627,775           -
      Proceeds from joint venture partners..................    129,651            -           -
      Proceeds from sale of marketable securities...........    107,940            -           -
      Development of investment properties..................    (23,723)     (41,938)    (27,781)
      Capital expenditures--rental properties...............    (46,427)     (26,559)    (20,254)
      Tenant improvement and leasing costs--rental
         properties.........................................    (51,810)     (68,461)    (58,462)
      Increase (decrease) in restricted cash and cash
         equivalents........................................     (2,204)       5,941     (31,416)
      Return of investment in unconsolidated companies:
            Office properties...............................        349       12,359           -
            Residential development properties..............     19,251       61,641      78,542
            Other...........................................     12,359        1,858           -
</Table>


                                       58
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<Table>
<Caption>
------------------------------------------------------------------------------------------------
                                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                              ----------------------------------
(DOLLARS IN THOUSANDS)                                             2001         2000        1999
------------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>          <C>
      Investment in unconsolidated companies:
            Office properties...............................    (16,360)           -        (262)
            Residential development properties..............    (89,000)     (91,377)    (52,514)
            Temperature-controlled logistics................    (10,784)     (17,100)    (40,791)
            Other...........................................     (8,418)      (3,947)   (104,805)
      (Increase) decrease in notes receivable...............    (10,857)    (293,328)     53,898
                                                              ----------------------------------

            Net cash provided by (used in) investing
               activities...................................    210,356      144,843    (204,345)
                                                              ----------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Debt financing costs..................................    (16,061)     (18,628)    (16,665)
      Settlement of Forward Share Purchase Agreement........          -            -    (149,384)
      Borrowings under Fleet Boston Credit Facility.........          -            -      51,920
      Payments under Fleet Boston Credit Facility...........          -     (510,000)   (201,920)
      Borrowings under UBS Facility.........................    105,000    1,017,819           -
      Payments under UBS Facility...........................   (658,452)    (464,367)          -
      Borrowings under Fleet Facility.......................    618,000            -           -
      Payments under Fleet Facility.........................   (335,000)           -           -
      Notes payable proceeds................................    393,336            -     929,700
      Notes payable payments................................   (180,685)    (370,486)   (498,927)
      Capital proceeds--joint venture preferred equity
         partner............................................          -      275,000           -
      Capital distribution--joint venture preferred equity
         partner............................................    (19,897)     (72,297)
      Preferred Equity Issuance Costs.......................          -      (10,006)          -
      Capital distributions--joint venture partner..........     (5,557)     (10,312)     (3,190)
      Capital contributions to the Operating Partnership....      9,767        1,492      32,634
      Unit repurchases......................................          -         (355)          -
      Treasury share repurchases............................          -            -           -
      Preferred unit distributions..........................    (13,501)     (13,500)    (13,500)
      Distributions from the Operating Partnership..........   (352,926)    (299,889)   (299,878)
                                                              ----------------------------------

            Net cash used in financing activities...........   (455,976)    (475,529)   (169,210)
                                                              ----------------------------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............     (6,999)     (33,459)    (37,726)
CASH AND CASH EQUIVALENTS,
      Beginning of period...................................     38,643       72,102     109,828
                                                              ----------------------------------

CASH AND CASH EQUIVALENTS,
      End of period.........................................  $  31,644   $   38,643   $  72,102
                                                              ==================================

------------------------------------------------------------------------------------------------
</Table>

   The accompanying notes are an integral part of these financial statements.


                                       59
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)

1. ORGANIZATION AND BASIS OF PRESENTATION:

ORGANIZATION

     Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership ("CREELP" and, together with its direct and indirect ownership
interests in limited partnerships, corporations and limited liability companies,
the "Operating Partnership"), was formed under the terms of a limited
partnership agreement dated February 9, 1994. The Operating Partnership is
controlled by Crescent Real Estate Equities Company, a Texas real estate
investment trust (the "Company"), through the Company's ownership of all of the
outstanding stock of Crescent Real Estate Equities, Ltd., a Delaware corporation
(the "General Partner"), which owns an approximately 1% general partner interest
in the Operating Partnership. In addition, the Company owns an approximately 89%
limited partner interest in the Operating Partnership, with the remaining
approximately 10% limited partner interest held by other limited partners.

     All of the limited partners of the Operating Partnership, other than the
Company, own, in addition to limited partner interests, units. Each unit
entitles the holder to exchange the unit (and the related limited partner
interest) for two common shares of the Company or, at the Company's option, an
equivalent amount of cash. For purposes of this report, the term "unit" or "unit
of partnership interest" refers to the limited partner interest and, if
applicable, related units held by a limited partner. Accordingly, the Company's
approximately 89% limited partner interest has been treated as equivalent, for
purposes of this report, to 58,892,623 units, and the remaining approximately
10% limited partner interest has been treated as equivalent, for purposes of
this report, to 6,594,521 units. In addition, the Company's 1% general partner
interest has been treated as equivalent, for purposes of this report, to 661,486
units.

     The Company owns its assets and carries on its operations and other
activities through the Operating Partnership and its other subsidiaries. The
limited partnership agreement of the Operating Partnership acknowledges that all
of the Company's operating expenses are incurred for the benefit of the
Operating Partnership and provides that the Operating Partnership will reimburse
the Company for all such expenses. Accordingly, expenses of the Company are
reimbursed by the Operating Partnership.


                                       60
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         The following table shows the subsidiaries of the Operating Partnership
that owned or had an interest in Properties (as defined below) as of December
31, 2001:

--------------------------------------------------------------------------------

<Table>
<S>                               <C>
Operating Partnership:(1)         The Avallon IV, Bank One Center, Bank One Tower, Datran
                                  Center (two Office Properties), Four Westlake Park, Houston
                                  Center (three Office Properties), The Park Shops at Houston
                                  Center, The Woodlands Office Properties (eight Office
                                  Properties) and 301 Congress Avenue
Crescent Real Estate              The Aberdeen, The Avallon I, II & III, Carter Burgess Plaza,
   Funding I, L.P.:               The Citadel, The Crescent Atrium, The Crescent Office
   ("Funding I")                  Towers, Regency Plaza One, Waterside Commons and 125 E. John
                                  Carpenter Freeway
Crescent Real Estate              Albuquerque Plaza, Barton Oaks Plaza One, Briargate Office
   Funding II, L.P.:              and Research Center, Hyatt Regency Albuquerque, Las Colinas
   ("Funding II")                 Plaza, Liberty Plaza I & II, MacArthur Center I & II, Park
                                  Hyatt Beaver Creek Resort and Spa, Ptarmigan Place, Stanford
                                  Corporate Centre, Two Renaissance Square and 12404 Park
                                  Central
Crescent Real Estate              Greenway Plaza Office Properties (ten Office Properties) and
   Funding III, IV and V, L.P.:   Renaissance Houston Hotel
   ("Funding III, IV and V")(2)
Crescent Real Estate              Canyon Ranch--Lenox
   Funding VI, L.P.:
   ("Funding VI")
Crescent Real Estate              10 behavioral healthcare properties
   Funding VII, L.P.:
   ("Funding VII")
Crescent Real Estate              The Addison, Addison Tower, Austin Centre, The Avallon V,
   Funding VIII, L.P.:            Canyon Ranch--Tucson, Cedar Springs Plaza, Frost Bank Plaza,
   ("Funding VIII")               Greenway I & IA (two Office Properties), Greenway II, Omni
                                  Austin Hotel, Palisades Central I, Palisades Central II,
                                  Sonoma Mission Inn & Spa, Stemmons Place, Three Westlake
                                  Park, Trammell Crow Center, 3333 Lee Parkway, Ventana Inn &
                                  Spa, 1800 West Loop South and 5050 Quorum
Crescent Real Estate              Chancellor Park, Denver Marriott City Center, MCI Tower,
   Funding IX, L.P.:              Miami Center, Reverchon Plaza, 44 Cook Street, 55 Madison
   ("Funding IX")(3)              and 6225 N. 24th Street
Crescent Real Estate              Fountain Place and Post Oak Central (three Office
   Funding X, L.P.                Properties)
   ("Funding X")
Crescent Spectrum                 Spectrum Center
   Center, L.P. (4):
----------------------------------------------------------------------------------------------
</Table>

(1) The Operating Partnership has a 50% interest in Bank One Center, a 20%
interest in Bank One Tower and a 20% interest in Four Westlake Park. See "Note
4. Investments in Real Estate Mortgages and Equity of Unconsolidated Companies"
for a description of the ownership structure of these Properties.

(2) Funding III owns nine of the 10 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 Coastal Tower, the remaining Office Property in the Greenway Plaza Office
portfolio.


                                       61
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) Funding IX holds its interests in Chancellor Park and Miami Center through
its 100% membership interests in the owners of the Properties, Crescent
Chancellor Park, LLC and Crescent Miami Center, LLC.

(4) Crescent Spectrum Center, L.P. holds its interest in Spectrum Center through
its ownership of the underlying land and notes and a mortgage on the Property.

         See "Note 6. Notes Payable and Borrowings under Fleet Facility" for a
list of certain other subsidiaries of the Operating Partnership, all of which
are consolidated in the Operating Partnership's financial statements and were
formed primarily for the purpose of obtaining secured debt or joint venture
financing.

         See "Note 4. Investments in Real Estate Mortgages and Equity of
Unconsolidated Companies" for a table that lists the Operating Partnership's
ownership in significant unconsolidated companies and equity investments as of
December 31, 2001, including the four Office Properties in which the Operating
Partnership owned an interest through unconsolidated companies and equity
investments and the Operating Partnership's ownership interests in the
Residential Development Segment and the Temperature-Controlled Logistics
Segment.

SEGMENTS

         As of December 31, 2001, the Operating Partnership's assets and
operations were composed of four major investment segments:

       - Office Segment;

       - Resort/Hotel Segment;

       - Residential Development Segment; and

       - Temperature-Controlled Logistics Segment.

         Within these segments, the Operating Partnership owned or had an
interest in the following real estate assets (the "Properties") as of December
31, 2001:

       - OFFICE SEGMENT consisted of 74 office properties (collectively referred
       to as the "Office Properties") located in 26 metropolitan submarkets in
       six states, with an aggregate of approximately 28.0 million net rentable
       square feet.

       - RESORT/HOTEL SEGMENT consisted of five luxury and destination fitness
       resorts and spas with a total of 1,028 rooms/guest nights and four
       upscale business-class hotel properties with a total of 1,769 rooms
       (collectively referred to as the "Resort/Hotel Properties").

       - RESIDENTIAL DEVELOPMENT SEGMENT consisted of the Operating
       Partnership's ownership of real estate mortgages and non-voting common
       stock representing interests ranging from 90% to 95% in five
       unconsolidated residential development corporations (collectively
       referred to as the "Residential Development Corporations"), which in
       turn, through joint venture or partnership arrangements, owned 21 upscale
       residential development properties (collectively referred to as the
       "Residential Development Properties").

       - TEMPERATURE-CONTROLLED LOGISTICS SEGMENT consisted of the Operating
       Partnership's 40% interest in a general partnership (the
       "Temperature-Controlled Logistics Partnership"), which owns all of the
       common stock, representing substantially all of the


                                       62
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       economic interest, of AmeriCold Corporation (the "Temperature-Controlled
       Logistics Corporation"), a REIT, which, as of December 31, 2001, directly
       or indirectly owned 89 temperature-controlled logistics properties
       (collectively referred to as the "Temperature-Controlled Logistics
       Properties") with an aggregate of approximately 445.2 million cubic feet
       (17.7 million square feet) of warehouse space.

       On February 14, 2002, the Operating Partnership executed an agreement
with Crescent Operating, Inc. ("COPI"), pursuant to which COPI transferred to
subsidiaries of the Operating Partnership, in lieu of foreclosure, COPI's lessee
interests in the eight Resort/Hotel Properties leased to subsidiaries of COPI
and COPI's voting common stock in three of the Operating Partnership's
Residential Development Corporations. See "Note 22. Subsequent Events" for
additional information regarding the Operating Partnership's agreement with
COPI.

       For purposes of investor communications, the Operating Partnership
classifies its luxury and destination fitness resorts and spas and upscale
Residential Development Properties as a single group referred to as the "Resort
and Residential Development Sector" due to their similar targeted customer
characteristics. This group does not contain the four upscale business-class
hotel properties. Additionally, for investor communications, the Operating
Partnership classifies its Temperature-Controlled Logistics Properties and its
upscale business-class hotel properties as the "Investment Sector." However, for
purposes of segment reporting as defined in Statement of Financial Accounting
Standard ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and
Related Information" and this Annual Report on Form 10-K, the Resort/Hotel
Properties, including the upscale business-class hotel properties, the
Residential Development Properties and the Temperature-Controlled Logistics
Properties are considered three separate reportable segments.

       See "Note 3. Segment Reporting" for a table showing total revenues, funds
from operations, and equity in net income of unconsolidated companies for each
of these investment segments for the years ended December 31, 2001, 2000 and
1999 and identifiable assets for each of these investment segments at December
31, 2001 and 2000.

BASIS OF PRESENTATION

       The accompanying consolidated financial statements of the Operating
Partnership include all direct and indirect subsidiary entities. The equity
interests in those direct and indirect subsidiaries the Operating Partnership
does not own are reflected as minority interests. All significant intercompany
balances and transactions have been eliminated.

       Certain amounts in prior year financial statements have been reclassified
to conform with current year presentation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NET INVESTMENTS IN REAL ESTATE

       Real estate is carried at cost, net of accumulated depreciation.
Betterments, major renovations, and certain costs directly related to the
acquisition, improvements and leasing of real estate are capitalized.
Expenditures for maintenance and repairs are charged to operations as


                                       63
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, as follows:

<Table>
<S>                                                            <C>
Buildings and Improvements                                     5 to 40 years
Tenant Improvements                                            Terms of leases
Furniture, Fixtures and Equipment                              3 to 5 years
</Table>

         An impairment loss is recognized on a property by property basis on
Properties classified as held for use, or when expected undiscounted cash flows
are less than the carrying value of the Property. In cases where the Operating
Partnership does not expect to recover its carrying costs on a Property, the
Operating Partnership reduces its carrying costs to fair value, and for
Properties held for disposition, the Operating Partnership reduces its carrying
costs to the fair value less costs to sell. See "Note 17. Dispositions" for a
description of impairment losses recognized during 2001, 2000 and 1999.

         Depreciation expense is not recognized on Properties classified as held
for disposition.

CONCENTRATION OF REAL ESTATE INVESTMENTS

         The Operating Partnership's Office Properties are located primarily in
the Dallas/Fort Worth and Houston, Texas metropolitan areas. As of December 31,
2001, the Operating Partnership's Office Properties in Dallas/Fort Worth and
Houston represented an aggregate of approximately 77% of its office portfolio
based on total net rentable square feet. The Dallas/Fort Worth Office Properties
accounted for approximately 41% of that amount and the Houston Office Properties
accounted for the remaining 36%. As a result of the geographic concentration,
the operations of the Operating Partnership could be adversely affected by a
recession or general economic downturn in the areas where these Properties are
located.

CASH AND CASH EQUIVALENTS

         The Operating Partnership considers all highly liquid investments
purchased with an original maturity of 90 days or less to be cash and cash
equivalents.

RESTRICTED CASH AND CASH EQUIVALENTS

         Restricted cash includes escrows established pursuant to certain
mortgage financing arrangements for real estate taxes, insurance, security
deposits, ground lease expenditures, capital expenditures and monthly interest
carrying costs paid in arrears and capital requirements related to cash flow
hedges.

OTHER ASSETS

         Other assets consist principally of leasing costs, deferred financing
costs and marketable securities. Leasing costs are amortized on a straight-line
basis during the terms of the respective leases, and unamortized leasing costs
are written off upon early termination of lease agreements. Deferred financing
costs are amortized on a straight-line basis (when it approximates the effective
interest method) over the terms of the respective loans. The effective interest
method is used to amortize deferred financing costs on loans where the
straight-line basis does not approximate the effective interest method, over the
terms of the


                                       64
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

respective loans. Marketable securities are considered available-for-sale and
are marked to market value on a monthly basis. The corresponding unrealized
gains and losses are included in accumulated other comprehensive income. When a
decline in the fair value of marketable securities is determined to be other
than temporary, the cost basis is written down to fair value and the amount of
the write-down is included in earnings for the applicable period. A decline in
the fair value of a marketable security is deemed nontemporary if its cost basis
has exceeded its fair value for a period of six to nine months.

DERIVATIVE FINANCIAL INSTRUMENTS

         The Operating Partnership uses derivative financial instruments to
convert a portion of its variable-rate debt to fixed-rate debt and to manage its
fixed to variable-rate debt ratio. As of December 31, 2001, the Operating
Partnership has entered into three cash flow hedge agreements which are
accounted for under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities."

         Under SFAS No. 133, the Operating Partnership's cash flow hedges are
used to mitigate the variability of cash flows. On a monthly basis, the cash
flow hedge is marked to fair value through comprehensive income and the cash
flow hedge's gain or loss is reported in earnings when the interest on the
underlying debt affects earnings. Any ineffective portion of the hedges is
reported in earnings immediately.

         In connection with the debt refinancing in May 2001, the Operating
Partnership entered into a LIBOR interest rate cap, and simultaneously sold a
LIBOR interest rate cap with the same terms. These instruments do not qualify as
hedges and changes to their respective fair values are charged to earnings
monthly.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying values of cash and cash equivalents and short-term
investments are reasonable estimates of their fair values because of the short
maturities of these instruments. The fair value of notes receivable, which
approximates carrying value, is estimated based on year-end interest rates for
receivables of comparable maturity. Notes payable and borrowings under the
Operating Partnership's prior line of credit with UBS (the "UBS Facility") and
the Operating Partnership's line of credit (the "Fleet Facility") have aggregate
carrying values which approximate their estimated fair values based upon the
current interest rates for debt with similar terms and remaining maturities,
without considering the adequacy of the underlying collateral. Disclosure about
fair value of financial instruments is based on pertinent information available
to management as of December 31, 2001 and 2000.

REVENUE RECOGNITION

         Office Properties The Operating Partnership, as a lessor, has retained
substantially all of the risks and benefits of ownership of the Office
Properties and accounts for its leases as operating leases. Income on leases,
which includes scheduled increases in rental rates during the lease term and/or
abated rent payments for various periods following the tenant's lease
commencement date, is recognized on a straight-line basis. Deferred rent
receivable represents the excess


                                       65
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of rental revenue recognized on a straight-line basis over cash received
pursuant to the applicable lease provisions.

         Resort/Hotel Properties Prior to the enactment of the REIT
Modernization Act, the Company's status as a REIT for federal income tax
purposes prohibited the Operating Partnership from operating the Resort/Hotel
Properties. As of December 31, 2001, the Operating Partnership had leased all of
the Resort/Hotel Properties, except the Omni Austin Hotel, to subsidiaries of
COPI pursuant to eight separate leases. The Omni Austin Hotel had been leased
under a separate lease to HCD Austin Corporation. During 2001 and 2000, the
leases provided for the payment by the lessee of the Resort/Hotel Property of
(i) base rent, with periodic rent increases if applicable, (ii) percentage rent
based on a percentage of gross receipts or gross room revenues, as applicable,
above a specified amount, and (iii) a percentage of gross food and beverage
revenues above a specified amount for certain Resort/Hotel Properties. Base
rental income under these leases was recognized on a straight-line basis over
the terms of the respective leases. Contingent revenue was recognized when the
thresholds upon which it is based had been met. On February 14, 2002, the
Operating Partnership executed an agreement with COPI, pursuant to which COPI
transferred to subsidiaries of the Operating Partnership, in lieu of
foreclosure, COPI's lessee interests in the eight Resort/Hotel Properties
previously leased to COPI.

         Investments in Real Estate Mortgages and Equity of Unconsolidated
Companies Investments in which the Operating Partnership does not have a
controlling interest are accounted for under the equity method. See "Note 4.
Investments in Real Estate Mortgages and Equity in Unconsolidated Companies" for
a list of the unconsolidated entities and the Operating Partnership's ownership
of each.

         Behavioral Healthcare Properties During 1999, Charter Behavioral Health
Systems, LLC's ("CBHS") business was negatively affected by many factors,
including adverse industry conditions, and CBHS failed to perform in accordance
with its operating budget. As a result, in the third quarter of 1999, the
Operating Partnership began to recognize rent from CBHS on a cash basis, due to
the uncertainty that CBHS would be able to fulfill its rental obligations under
the lease.

INCOME TAXES

         No provision has been made for federal or state income taxes, because
each partner's proportionate share of income or loss from the Operating
Partnership will be passed through on such partner's tax return.

USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.


                                       66
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS PER UNIT OF PARTNERSHIP INTEREST

         SFAS No.128 "Earnings Per Share" ("EPS") specifies the computation,
presentation and disclosure requirements for earnings per share. Basic EPS
excludes all dilution while Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common shares were
exercised or converted into common shares.

<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                              FOR THE YEAR ENDED DECEMBER 31,
                          ---------------------------------------------------------------------------------------------------
                                                     2001                              2000                              1999
                          -------------------------------   -------------------------------   -------------------------------
                            INCOME   WTD. AVG.   PER UNIT              WTD. AVG.   PER UNIT     INCOME   WTD. AVG.   PER UNIT
                            (LOSS)       UNITS     AMOUNT     INCOME       UNITS     AMOUNT     (LOSS)       UNITS     AMOUNT
-----------------------------------------------------------------------------------------------------------------------------
<S>                       <C>        <C>         <C>        <C>        <C>         <C>        <C>        <C>         <C>
BASIC EPS--
Net income before
   extraordinary item...  $ 36,180    67,815                $304,462    67,860                $ 12,232    67,977
6 3/4% Series A
   Preferred Unit
   distributions........   (13,501)                          (13,500)                          (13,500)
Share repurchase
   agreement return.....         -                            (2,906)                             (583)
Forward share purchase
   agreement return.....         -                                 -                            (4,317)
                          ---------------------------------------------------------------------------------------------------

Net income (loss)
   available to partners
   before extraordinary
   item.................  $ 22,679    67,815      $ 0.33    $288,056    67,860      $ 4.24    $ (6,168)   67,977      $(0.09)
Extraordinary item--
   extinguishment of
   debt.................   (12,174)                (0.18)     (4,378)                (0.06)          -                     -
                          ---------------------------------------------------------------------------------------------------

Net income (loss)
   available to
   partners.............  $ 10,505    67,815      $ 0.15    $283,678    67,860      $ 4.18    $ (6,168)   67,977      $(0.09)
                          ===================================================================================================

DILUTED EPS--
Net income (loss)
   available to partners
   before extraordinary
   item.................  $ 22,679    67,815                $288,056    67,860                $ (6,168)   67,977
Effect of dilutive
   securities:
   Additional common
      shares obligation
      relating to:
      Unit options......         -       763                       -       598                       -       837
      Forward share
         purchase
         agreement......         -         -                       -         -                       -       132
                          ---------------------------------------------------------------------------------------------------

Net income (loss)
   available to partners
   before extraordinary
   item.................  $ 22,679    68,578      $ 0.33    $288,056    68,458      $ 4.21    $ (6,168)   68,946      $(0.09)
Extraordinary item--
   extinguishment of
   debt.................   (12,174)                (0.18)     (4,378)                (0.06)          -                     -
                          ---------------------------------------------------------------------------------------------------

Net income (loss)
   available to
   partners.............  $ 10,505    68,578      $ 0.15    $283,678    68,458      $ 4.15    $ (6,168)   68,946      $(0.09)
                          ===================================================================================================

-----------------------------------------------------------------------------------------------------------------------------
</Table>


                                       67
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         The effect of the conversion of the 6 3/4% Series A Convertible
Cumulative Preferred Units is not included in the computation of Diluted EPS for
the years ended December 31, 2001, 2000 and 1999, since the effect of their
conversion is antidilutive.

SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS

<Table>
<Caption>
----------------------------------------------------------------------------------------------
                                                               FOR THE YEAR ENDED DECEMBER 31,
                                                             ---------------------------------
                                                                  2001        2000        1999
----------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>         <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid on debt......................................  $174,584    $202,478    $188,475
Additional interest paid in conjunction with cash flow
   hedges..................................................    11,036       1,042         344
                                                             ---------------------------------

Total Interest Paid........................................  $185,620    $203,520    $188,819
                                                             =================================

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
  ACTIVITIES:
Issuance of Operating Partnership units in conjunction with
   settlement of an obligation.............................  $      -    $  2,125    $  1,786
Acquisition of partnership interests.......................         -           -       3,774
Sale of marketable securities..............................    (8,118)          -           -
Unrealized gain (loss) on available-for-sale securities....       596      (7,584)     17,216
Forward Share Purchase Agreement Return....................         -           -       4,317
Share Repurchase Agreement Return..........................         -       2,906         583
Impairment and other charges related to real estate
   assets..................................................    25,332      17,874     178,838
Adjustment of cash flow hedge to fair value................   (17,228)    (11,609)        280
Equity investment in a tenant in exchange for office
   space/other investment ventures.........................         -       4,485           -
Acquisition of ownership of certain assets previously owned
   by Broadband Office, Inc................................     7,200           -           -
Impairment and other charges related to COPI...............    92,782           -           -
Additional compensation expense related to employee notes
   receivable..............................................       750           -           -
----------------------------------------------------------------------------------------------
</Table>

NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations," which provides that all business
combinations in the scope of the statement are to be accounted for under the
purchase method. This statement is effective for all business combinations
initiated after June 30, 2001, as well as all business combinations accounted
for using the purchase method for which the date of acquisition is July 1, 2001,
or later. Since the Operating Partnership currently accounts for its
acquisitions under the purchase method, management does not believe that the
adoption of this statement will have a material effect on its interim or annual
financial statements.


                                       68
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which addresses financial accounting and reporting for
acquired goodwill and other intangible assets. This statement requires that
goodwill and some other intangible assets will no longer be amortized, and
provides specific guidance for testing goodwill for impairment. This statement
is effective for fiscal years beginning after December 15, 2001. The Operating
Partnership expects its impairment losses to range between $14,000 and $18,300
due to the initial application of this statement. These charges relate to
unconsolidated companies in which the Operating Partnership had an interest as
of December 31, 2001. These charges will be reported as resulting from a change
in accounting principle.

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for fiscal years
beginning after June 15, 2002. The Operating Partnership has determined that
SFAS No. 143 will have no material effect on its interim and annual financial
statements.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. Management does not believe that adoption of this statement will have a
material effect on its interim or annual financial statements; however,
financial statement presentation will be modified to report the results of
operations and financial position of a component of an entity that either has
been disposed of or is classified as held for sale as discontinued operations.
As a result, the Operating Partnership will reclassify certain amounts in prior
period financial statements to conform with the new presentation requirements.

3. SEGMENT REPORTING:

         The Operating Partnership currently has four major investment segments:
the Office Segment; the Resort/Hotel Segment; the Residential Development
Segment; and the Temperature-Controlled Logistics Segment. Management organizes
the segments within the Operating Partnership based on property type for making
operating decisions and assessing performance. Investment segments for SFAS No.
131 are determined on the same basis.

         The Operating Partnership uses funds from operations ("FFO") as the
measure of segment profit or loss. FFO, based on the revised definition adopted
by the Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT"), effective January 1, 2000, and as used in this document,
means:

       - 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 (as defined by GAAP);

       - plus depreciation and amortization of real estate assets; and


                                       69
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       - after adjustments for unconsolidated partnerships and joint ventures.

NAREIT developed FFO as a relative measure of performance and liquidity of an
equity REIT to recognize that income-producing real estate historically has not
depreciated on the basis determined under GAAP. The Operating Partnership
considers FFO an appropriate measure of performance for an operating partnership
of an equity REIT, and for its investment segments. However, the Operating
Partnership's measure of FFO may not be comparable to similarly titled measures
of operating partnerships of REITs (other than the Company) because these REITs
may apply the definition of FFO in a different manner than the Operating
Partnership.


                                       70
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         Selected financial information related to each segment for the years
ended December 31, 2001, 2000 and 1999 is presented below.

<Table>
<Caption>
--------------------------------------------------------------------------------------------------
                                                                    2001         2000         1999
--------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>
REVENUES:
   Office Segment(1)........................................  $  610,116   $  606,040   $  614,493
   Resort/Hotel Segment.....................................      45,748       72,114       65,237
   Residential Development Segment..........................           -            -            -
   Temperature-Controlled Logistics Segment.................           -            -            -
   Corporate and Other(2)...................................      69,462       61,543       66,549
                                                              ------------------------------------

TOTAL REVENUE...............................................  $  725,326   $  739,697   $  746,279
                                                              ====================================

FUNDS FROM OPERATIONS:
   Office Segment...........................................  $  358,348   $  361,574   $  367,830
   Resort/Hotel Segment.....................................      45,282       71,446       64,079
   Residential Development Segment..........................      54,051       78,600       74,597
   Temperature-Controlled Logistics Segment.................      23,806       33,563       37,439
   Corporate and other adjustments:
      Interest expense......................................    (182,410)    (203,197)    (192,033)
      6 3/4% Series A Preferred Unit distributions..........     (13,501)     (13,500)     (13,500)
      Other(3)..............................................      37,844       43,776       33,639
      Corporate general & administrative....................     (24,249)     (24,073)     (16,274)
      Impairment and other charges related to COPI..........     (92,782)           -            -
      Settlement of merger dispute..........................           -            -      (15,000)
                                                              ------------------------------------

   TOTAL FUNDS FROM OPERATIONS..............................  $  206,389   $  348,189   $  340,777
ADJUSTMENTS TO RECONCILE FUNDS FROM OPERATIONS TO NET
   INCOME:
   Depreciation and amortization of real estate assets......    (122,033)    (119,999)    (128,403)
   Gain on rental property sales, net.......................       2,835      136,880      (16,361)
   Impairment and other charges related to real estate
      assets................................................     (21,705)     (17,874)    (136,435)
   Extraordinary item--extinguishment of debt...............     (12,174)      (4,378)           -
   Adjustment for investments in real estate mortgages and
      equity of unconsolidated companies:
         Office Properties..................................      (6,955)      (4,973)      (6,110)
         Residential Development Properties.................     (13,037)     (25,130)     (31,725)
         Temperature-Controlled Logistics Properties........     (22,671)     (26,131)     (22,400)
         Other..............................................        (144)           -         (611)
   6 3/4% Series A Preferred Unit distributions.............      13,501       13,500       13,500
                                                              ------------------------------------

NET INCOME..................................................  $   24,006   $  300,084   $   12,232
                                                              ====================================

EQUITY IN NET INCOME OF UNCONSOLIDATED COMPANIES:
      Office Properties.....................................  $    6,124   $    3,164   $    5,265
      Resort/Hotel Properties...............................           -            -            -
      Residential Development Properties....................      41,014       53,470       42,871
      Temperature-Controlled Logistics Properties...........       1,136        7,432       15,039
      Other(2)..............................................       2,957       11,645        5,122
                                                              ------------------------------------

TOTAL EQUITY IN NET INCOME OF UNCONSOLIDATED COMPANIES......  $   51,231   $   75,711   $   68,297
                                                              ====================================

<Caption>
-------------------------------------------------------------------------------------
                                                              BALANCE AT DECEMBER 31,
                                                              -----------------------
                                                                    2001         2000
-------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>
IDENTIFIABLE ASSETS:
   Office Segment...........................................  $2,727,939   $3,088,653
   Resort/Hotel Segment.....................................     442,724      468,286
   Residential Development Segment..........................     371,535      305,187
   Temperature-Controlled Logistics Segment.................     308,427      308,035
   Other(2).................................................     572,201      657,838
                                                              -----------------------
TOTAL IDENTIFIABLE ASSETS...................................  $4,422,826   $4,827,999
                                                              =======================
--------------------------------------------------------------------------------------------------
</Table>


                                       71
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(1) Excludes financial information for the four office properties included in
"Equity of Net Income of Unconsolidated Companies."

(2) For purposes of this Note, the behavioral healthcare properties' financial
information has been included in this line item.

(3) Includes interest and other income, behavioral healthcare property income,
preferred return paid to GMAC Commercial Mortgage Corporation ("GMACCM"), other
unconsolidated companies, less depreciation and amortization of non-real estate
assets and amortization of deferred financing costs.

         At December 31, 2001, COPI was the Operating Partnership's largest
lessee in terms of total revenues. COPI was the lessee of eight of the
Resort/Hotel Properties for the year ended December 31, 2001. Total revenues
recognized from COPI for the year ended December 31, 2001 were approximately 6%
of the Operating Partnership's total revenues. On February 14, 2002, the
Operating Partnership executed an agreement with COPI, pursuant to which COPI
transferred to subsidiaries of the Operating Partnership, in lieu of
foreclosure, COPI's lessee interests in the eight Resort/Hotel Properties
previously leased to COPI.

         See "Note 4. Investments in Real Estate Mortgages and Equity of
Unconsolidated Companies--Temperature-Controlled Logistics Properties" for a
description of the sole lessee of the Temperature-Controlled Logistics
Properties.


                                       72
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS IN REAL ESTATE MORTGAGES AND EQUITY OF UNCONSOLIDATED COMPANIES:

         Investments in which the Operating Partnership does not have a
controlling interest are accounted for under the equity method. The following is
a summary of the Operating Partnership's ownership in significant unconsolidated
companies or equity investments:

<Table>
<Caption>
-----------------------------------------------------------------------------------------------
                                                                                      OPERATING
                                                                                  PARTNERSHIP'S
                                                                                OWNERSHIP AS OF
ENTITY                                                   CLASSIFICATION       DECEMBER 31, 2001
-----------------------------------------------------------------------------------------------
<S>                                 <C>                                 <C>
Desert Mountain Development         Residential Development Corporation             95.0%(2)(3)
   Corporation(1)
The Woodlands Land Company,         Residential Development Corporation             95.0%(2)(4)
   Inc. (1)
Crescent Resort Development,        Residential Development Corporation             90.0%(2)(5)
   Inc.(1)
Mira Vista Development Corp.        Residential Development Corporation             94.0%(2)(6)
Houston Area Development Corp.      Residential Development Corporation             94.0%(2)(7)
Temperature-Controlled Logistics     Temperature-Controlled Logistics                40.0%(8)
   Partnership
The Woodlands Commercial                          Office                           42.5%(9)(10)
   Properties Company, L.P.
Main Street Partners, L.P.               Office (Bank One Center)                    50.0%(11)
Crescent 5 Houston Center, L.P.          Office (5 Houston Center)                   25.0%(12)
Austin PT BK One Tower Office             Office (Bank One Tower)                    20.0%(13)
   Limited Partnership
Houston PT Four Westlake Office         Office (Four Westlake Park)                  20.0%(13)
   Limited Partnership
DBL Holdings, Inc.                                 Other                             97.4%(14)
CRL Investments, Inc.(1)                           Other                             95.0%(15)
CR License, LLC(1)                                 Other                             28.5%(16)
-----------------------------------------------------------------------------------------------
</Table>

(1) On February 14, 2002, the Operating Partnership executed an agreement with
COPI, pursuant to which COPI transferred to subsidiaries of the Operating
Partnership, in lieu of foreclosure, COPI's interest in these entities. The
Operating Partnership will fully consolidate the operations of these entities,
other than CR License, LLC, beginning on the date of the asset transfers.

(2) See the Residential Development Properties Table included in "Item 2.
Properties" for the Residential Development Corporation's ownership interest in
the Residential Development Properties.

(3) The remaining 5.0% interest in Desert Mountain Development Corporation,
which represents 100% of the voting stock, was owned by COPI as of December 31,
2001.

(4) The remaining 5.0% interest in The Woodlands Land Company, Inc., which
represents 100% of the voting stock, was owned by COPI as of December 31, 2001.

(5) The remaining 10.0% interest in Crescent Resort Development, Inc., which
represents 100% of the voting stock, was owned by COPI Colorado, L. P., of which
60.0% was owned by COPI as of December 31, 2001, with 20% owned by John Goff,
Vice-Chairman of the Board of Trust Managers and Chief Executive Officer of the
Company and sole director and Chief Executive Officer of the General Partner
and 20% owned by a third party.

(6) The remaining 6.0% interest in Mira Vista Development, Inc. ("MVDC"), which
represents 100% of the voting stock, is owned 4.0% by DBL Holdings, Inc. ("DBL")
and 2.0% by third parties.


                                       73
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7) The remaining 6.0% interest in Houston Area Development Corp. ("HADC"),
which represents 100% of the voting stock, is owned 4.0% by DBL Holdings, Inc.
("DBL") and 2.0% by a third party.

(8) The remaining 60.0% interest in the Temperature-Controlled Logistics
Partnership is owned by Vornado Realty Trust, L.P.

(9) The remaining 57.5% interest in The Woodlands Commercial Properties Company,
L. P. ("Woodlands CPC") is owned by Morgan Stanley Real Estate Fund II, L. P.
("Morgan Stanley").

(10) Distributions are made to partners based on specified payout percentages.
During the year ended December 31, 2001, the payout percentage to the Operating
Partnership was 49.5%.

(11) The remaining 50.0% interest in Main Street Partners, L.P. is owned by
TrizecHahn Corporation.

(12) See "5 Houston Center" below.

(13) See "Four Westlake Park and Bank One Tower" below.

(14) John Goff, Vice-Chairman of the Board of Trust Managers and Chief Executive
Officer of the Company and sole director and Chief Executive Officer of the
General Partner, obtained the remaining 2.6% economic interest in DBL (including
100% of the voting interest in DBL) in exchange for his voting interests in MVDC
and HADC, originally valued at approximately $380, and approximately $63 in
cash, or total consideration valued at approximately $443. At December 31, 2001,
Mr. Goff's interest in DBL was approximately $554.

(15) The remaining 5.0% interest in CRL Investments, Inc., which represents 100%
of the voting stock, was owned by COPI as of December 31, 2001.

(16) Of the remaining 71.5% interest in CR License, LLC, 70.0% is owned by a
group of individuals unrelated to the Operating Partnership, and 1.5% was owned
by COPI, as of December 31, 2001.

JOINT VENTURE ARRANGEMENTS

5 HOUSTON CENTER

         On June 4, 2001, the Operating Partnership entered into a joint venture
arrangement with a pension fund advised by JP Morgan Investment Management, Inc.
("JPM") to construct the 5 Houston Center Office Property within the Operating
Partnership's Houston Center mixed-use Office Property complex in Houston,
Texas. The Class A Office Property will consist of 577,000 net rentable square
feet. The joint venture is structured such that the fund holds a 75% equity
interest, and the Operating Partnership holds a 25% equity interest in the
Property, which is accounted for under the equity method. The Operating
Partnership contributed approximately $8,500 of land and $12,300 of development
costs to the joint venture entity and received a distribution of $14,800 of net
proceeds. No gain or loss was recognized by the Operating Partnership on this
transaction. In addition, the Operating Partnership is developing, and will
manage and lease the Property on a fee basis. During the year ended December 31,
2001, the Operating Partnership recognized $2,300 for these services.

         During the second quarter of 2001, the joint venture entity obtained an
$82,500 construction loan guaranteed by the Operating Partnership, due May 2004,
that bears interest at Prime (as defined in the loan agreement) plus 100 basis
points or LIBOR plus 225 basis points, at the discretion of the borrower. The
interest rate on the loan at December 31, 2001 was 4.12%. The balance
outstanding on this construction loan at December 31, 2001 was $10,429.

FOUR WESTLAKE PARK AND BANK ONE TOWER

         On July 30, 2001, the Operating Partnership entered into joint venture
arrangements with an affiliate of General Electric Pension Fund ("GE") in which
the Operating Partnership contributed two Office Properties, Four Westlake Park
in Houston, Texas, and Bank One Tower in Austin, Texas into the joint ventures
and GE made a cash contribution. The joint ventures are structured such that GE
holds an 80% equity interest in each of Four Westlake Park, a


                                       74
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

560,000 square foot Class A Office Property located in the Katy Freeway
submarket of Houston, and Bank One Tower, a 390,000 square foot Class A Office
Property located in downtown Austin. The Operating Partnership continues to hold
the remaining 20% equity interests in each Property, which are accounted for
under the equity method. The joint ventures generated approximately $120,000 in
net cash proceeds to the Operating Partnership, including distributions to the
Operating Partnership resulting from the sale of its 80% equity interest and
from mortgage financing at the joint venture level. None of the mortgage
financing at the joint venture level is guaranteed by the Operating Partnership.
The Operating Partnership has no commitment to reinvest the cash proceeds back
into the joint ventures. The joint ventures were accounted for as partial sales
of these Office Properties, resulting in a gain of approximately $7,577, net of
a deferred gain of approximately $1,894. In addition, the Operating Partnership
manages and leases the Office Properties on a fee basis. During the year ended
December 31, 2001, the Operating Partnership recognized $227 for these services.

METROPOLITAN

         On May 24, 2001, the Operating Partnership converted its $85,000
preferred member interest in Metropolitan Partners, LLC ("Metropolitan") and
$1,900 of deferred acquisition costs, into approximately $75,000 of common stock
of Reckson Associates Realty Corp. ("Reckson"), resulting in an impairment
charge of approximately $11,900. The Operating Partnership subsequently sold the
Reckson common stock on August 17, 2001 for approximately $78,600, resulting in
a gain of approximately $3,600. The proceeds were used to pay down the Fleet
Facility.

DISPOSITIONS

         On September 27, 2001, the Woodlands CPC, owned by the Operating
Partnership and an affiliate of Morgan Stanley, sold one office/venture tech
property located within The Woodlands, Texas. The sale generated net proceeds,
after the repayment of debt, of approximately $2,700, of which the Operating
Partnership's portion was approximately $1,300. The sale generated a net gain of
approximately $3,500, of which the Operating Partnership's portion was
approximately $1,700. The net proceeds received by the Operating Partnership
were used primarily to pay down variable-rate debt.

         On November 9, 2001, The Woodlands Land Development Company, L.P.,
owned by The Woodlands Land Company, Inc. and an affiliate of Morgan Stanley,
sold two office properties and one retail property located within The Woodlands,
Texas. The sales generated net proceeds, after the repayment of debt, of
approximately $41,800, of which the Operating Partnership's portion was
approximately $19,700. The sale generated a net gain of approximately $8,000, of
which the Operating Partnership's portion was approximately $3,800. The net
proceeds received by the Operating Partnership were used primarily to pay down
variable-rate debt.

         During the year ended December 31, 2000, the Woodlands CPC also sold
four office/venture tech properties located within The Woodlands, Texas. The
sale generated net proceeds of approximately $51,800, of which the Operating
Partnership's portion was approximately $22,000. The sale generated a net gain
of approximately $11,800, of which the Operating


                                       75
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Partnership's portion was approximately $5,000. The proceeds received by the
Operating Partnership were used primarily for working capital purposes.

TEMPERATURE-CONTROLLED LOGISTICS PROPERTIES

         Effective March 12, 1999, the Operating Partnership, Vornado Realty
Trust, COPI, the Temperature-Controlled Logistics Partnership and the
Temperature-Controlled Logistics Corporation (including all affiliated entities
that owned any portion of the business operations of the Temperature-Controlled
Logistics Properties at that time) sold all of the non-real estate assets,
encompassing the business operations, for approximately $48.7 million to a newly
formed partnership ("AmeriCold Logistics") owned 60% by Vornado Operating L.P.
and 40% by a newly formed subsidiary of COPI. The Operating Partnership has no
interest in AmeriCold Logistics.

         As of December 31, 2001, the Operating Partnership held a 40% interest
in the Temperature-Controlled Logistics Partnership, which owns the
Temperature-Controlled Logistics Corporation, which directly or indirectly owns
the 89 Temperature-Controlled Logistics Properties, with an aggregate of
approximately 445.2 million cubic feet (17.7 million square feet) of warehouse
space.

         AmeriCold Logistics, as sole lessee of the Temperature-Controlled
Logistics Properties, leases the Temperature-Controlled Logistics Properties
from the Temperature-Controlled Logistics Corporation under three triple-net
master leases, as amended on January 23, 2002. On February 22, 2001, the
Temperature-Controlled Logistics Corporation and AmeriCold Logistics agreed to
restructure certain financial terms of the leases, including the adjustment of
the rental obligation for 2001 to $146,000, the adjustment of the rental
obligation for 2002 to $150,000 (plus contingent rent in certain circumstances),
the increase of the Temperature-Controlled Logistics Corporation's share of
capital expenditures for the maintenance of the properties from $5,000 to $9,500
(effective January 1, 2000) and the extension of the date on which deferred rent
was required to be paid to December 31, 2003.

         In the first quarter of 2000, AmeriCold Logistics started to experience
a slowing in revenue growth from the previous year, primarily due to customers
focusing more interest on inventory management in an effort to improve operating
performance. Starting in 2000 and continuing into 2001, AmeriCold Logistics has
seen consolidation among retail and food service channels begin to significantly
limit the ability of manufacturers to pass along cost increases by raising
prices. Because of this, manufacturers are focused on supply chain cost (such as
inventory management, transportation and distribution) reduction initiatives in
an effort to improve operating performance. In the third quarter of 2000,
AmeriCold Logistics' same-store earnings before interest, taxes, depreciation
and amortization, and rent ("EBITDAR") declined 2% for the nine months ended
September 30, 2000 compared to the same period in 1999. As a result of the
reductions in revenues and the second consecutive quarter decline in same-store
EBITDAR, AmeriCold Logistics was unable to fulfill its rental obligation under
the leases which resulted in deferred rent. At that time, the
Temperature-Controlled Logistics Corporation recorded a valuation allowance for
100% of the rent that had been deferred during the three months ended September
30, 2000 and has continued to record a valuation allowance for 100% of the
deferred rent prospectively. AmeriCold Logistics' experienced a 2% decline in


                                       76
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

same-store EBITDAR during 2000 compared to 1999 and an 11% decline in same-store
EBITDAR during 2001 compared to 2000.

     AmeriCold Logistics deferred $25,500 of rent for the year ended December
31, 2001, of which the Operating Partnership's share was $10,200. AmeriCold
Logistics also deferred $19,000 and $5,400 of rent for the years ended December
31, 2000 and 1999, respectively, of which the Operating Partnership's share was
$7,500 and $2,100, respectively. In December 2001, the Temperature-Controlled
Logistics Corporation waived its rights to collect $39,800 of the total $49,900
of deferred rent, of which the Operating Partnership's share was $15,900. The
Temperature-Controlled Logistics Corporation recorded adequate valuation
allowances related to the waived deferred rental revenue during the years ended
December 31, 2000 and 2001; therefore, there was no financial statement impact
to the Temperature-Controlled Logistics Corporation or to the Operating
Partnership related to the Temperature-Controlled Logistics Corporation's
decision to waive collection of deferred rent.

<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------
                                              DEFERRED RENT        VALUATION ALLOWANCE               WAIVED RENT
                                     ----------------------      ---------------------    ----------------------
                                                  OPERATING                  OPERATING                 OPERATING
                                              PARTNERSHIP'S              PARTNERSHIP'S             PARTNERSHIP'S
                                     TOTAL          PORTION     TOTAL          PORTION    TOTAL          PORTION
----------------------------------------------------------------------------------------------------------------
<S>                                  <C>      <C>               <C>       <C>             <C>         <C>
For the year ended December 31,
1999...............................  $ 5,400  $       2,100     $     -   $         -     $     -      $       -
2000...............................   19,000          7,500      16,300         6,500           -              -
2001...............................   25,500         10,200      25,500        10,200      39,800         15,900
                                     ---------------------------------------------------------------------------
Balance at December 31, 2001.......  $49,900  $      19,800     $41,800   $    16,700     $39,800      $  15,900
                                     ===========================================================================

----------------------------------------------------------------------------------------------------------------
</Table>

OTHER

     During the year ended December 31, 2001, the Operating Partnership
recognized an impairment loss of $5,000, which is included in Impairment and
Other Charges Related to Real Estate Assets, on a fund which primarily holds
real estate investments and marketable securities, in which the Operating
Partnership has an interest.

     During the year ended December 31, 2000, the Operating Partnership
recognized an impairment loss of $8,525, which is included in Impairment and
Other Charges Related to Real Estate Assets, on a fund which primarily holds
real estate investments and marketable securities, in which the Operating
Partnership has an interest.

     The Operating Partnership reports its share of income and losses based on
its ownership interest in its respective equity investments, adjusted for any
preference payments. The following summarized information for all unconsolidated
companies is presented below, with significant subsidiaries identified under the
captions "Desert Mountain Development Corporation", "Crescent Resort
Development, Inc." and "The Woodland's Land Company, Inc." and all other
unconsolidated companies presented on an aggregate basis and classified under
the captions "Other Residential Development Corporations,"
"Temperature-Controlled Logistics," "Office" and "Other," as applicable, as of
December 31, 2001, 2000 and 1999.


                                       77
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

BALANCE SHEETS:

<Table>
<Caption>
------------------------------------------------------------------------------------------------------------------------------------
                                                                               BALANCE AT DECEMBER 31, 2001
                                                     -------------------------------------------------------------------------------
                                                         CRESCENT             THE          OTHER
                                                           RESORT       WOODLANDS    RESIDENTIAL   TEMPERATURE-
                                                      DEVELOPMENT            LAND    DEVELOPMENT     CONTROLLED
                                                             INC.    COMPANY, INC   CORPORATIONS      LOGISTICS    OFFICE     OTHER
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                                           <C>            <C>        <C>
Real estate, net.................................... $   393,784   $      365,636     $  173,991   $  1,272,784   $553,147
Cash................................................      17,570            2,688          7,973         23,412     28,224
Other assets........................................      31,749           32,244         94,392         82,967     31,654
                                                     -------------------------------------------------------------------------------

      Total assets.................................. $   443,103   $      400,568     $  276,356   $  1,379,163   $613,025
                                                     ===============================================================================

Notes payable....................................... $        --   $      225,263     $       --   $    558,949   $324,718
Notes payable to the Operating Partnership..........     180,827               --         60,000          4,833         --
Other liabilities...................................     232,767           74,271        168,671         46,395     29,394
Equity..............................................      29,509          101,034         47,685        768,986    258,913
                                                     -------------------------------------------------------------------------------

         Total liabilities and equity............... $   443,103   $      400,568     $  276,356   $  1,379,163   $613,025
                                                     ===============================================================================

Operating Partnership's share of unconsolidated
   debt(1).......................................... $        --   $       90,949     $       --   $    223,580   $126,580
                                                     ===============================================================================

Operating Partnership's investments in real estate
   mortgages and equity of unconsolidated
   companies........................................ $   222,082   $       29,046     $  120,407   $    308,427   $121,423   $36,932
                                                     ===============================================================================

------------------------------------------------------------------------------------------------------------------------------------
</Table>

SUMMARY STATEMENTS OF OPERATIONS:

<Table>
<Caption>

------------------------------------------------------------------------------------------------------------------------------------
                                                                               BALANCE AT DECEMBER 31, 2001
                                                     -------------------------------------------------------------------------------
                                                         CRESCENT             THE          OTHER
                                                           RESORT       WOODLANDS    RESIDENTIAL  TEMPERATURE-
                                                      DEVELOPMENT            LAND    DEVELOPMENT    CONTROLLED
                                                             INC.    COMPANY, INC   CORPORATIONS     LOGISTICS    OFFICE(2)   OTHER
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                                         <C>             <C>         <C>
Total revenues....................................... $  195,163     $    188,178     $   93,462   $  120,531     $ 88,835
Expenses:
   Operating expense.................................    175,424          104,486         83,074       13,349(3)    37,128
   Interest expense..................................      1,373            4,967          1,641       44,988       19,184
   Depreciation and amortization.....................      2,726            5,599          6,185           --           --
   Taxes.............................................        641           14,676         (4,222)      58,855       19,387
                                                     -------------------------------------------------------------------------------

Total expenses.......................................    180,164          129,728         86,678      117,192       75,699
                                                     -------------------------------------------------------------------------------

Net income........................................... $   14,999     $     58,450     $    6,784  $     3,339(3)  $ 13,136
                                                      ==============================================================================

Operating Partnership's equity in net income of
   unconsolidated companies.......................... $   14,944     $     20,943     $    5,127  $     1,136     $  6,124    $2,957
                                                      ==============================================================================

------------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) The Operating Partnership has guarantees or letters of credit related to
approximately $89,300, or 17% of its maximum borrowings available under its
unconsolidated debt. At December 31, 2001, the Operating Partnership had
guarantees or letters of credit related to approximately $17,000, or 4% of its
total outstanding unconsolidated debt.


                                       78
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) This column includes information for Four Westlake Park and Bank One Tower.
These Office Properties were contributed by the Operating Partnership to joint
ventures on July 30, 2001. Therefore, net income for 2001 includes only the
months of August through December for these Properties.

(3) Inclusive of the preferred return paid to Vornado Realty Trust (1% per annum
of the Total Combined Assets).

BALANCE SHEETS:

<Table>
<Caption>
-------------------------------------------------------------------------------------------------------------
                                                                  BALANCE AT DECEMBER 31, 2000
                                                   ----------------------------------------------------------
                                                                                         THE
                                                         DESERT       CRESCENT     WOODLANDS           OTHER
                                                       MOUNTAIN         RESORT          LAND     RESIDENTIAL
                                                    DEVELOPMENT    DEVELOPMENT      COMPANY,     DEVELOPMENT
                                                    CORPORATION           INC.          INC.    CORPORATIONS
-------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>          <C>              <C>
Real estate, net.................................. $   147,484     $   227,429  $    406,660     $  16,739
Cash..............................................       5,733          36,717        10,739         6,450
Other assets......................................      70,503          83,452        37,930         4,662
                                                   ----------------------------------------------------------

      Total assets................................ $   223,720     $   347,598  $    455,329     $  27,851
                                                   ==========================================================

Notes payable..................................... $               $         -  $    255,356     $       -
Notes payable to the Operating Partnership........      59,000         130,932             -             -
Other liabilities.................................     130,834         158,839        96,533         2,774
Equity............................................      33,886          57,827       103,440        25,077
                                                   ----------------------------------------------------------

      Total liabilities and equity................ $   223,720     $   347,598  $    455,329     $  27,851
                                                   ==========================================================

Operating Partnership's share of unconsolidated
   debt........................................... $         -     $         -  $    103,100     $       -
                                                   ==========================================================

Operating Partnership's investments in real estate
   mortgages and equity of unconsolidated
   companies...................................... $   109,092     $   150,118  $     24,525     $  21,452
                                                   ==========================================================

-------------------------------------------------------------------------------------------------------------



<Caption>
-----------------------------------------------------------------------------------------
                                                             BALANCE AT DECEMBER 31, 2000
                                                   --------------------------------------


                                                      TEMPERATURE-
                                                        CONTROLLED
                                                         LOGISTICS     OFFICE     OTHER
-----------------------------------------------------------------------------------------
<S>                                                   <C>             <C>        <C>
Real estate, net..................................    $  1,303,810    $394,724
Cash..............................................          19,606      34,599
Other assets......................................          82,883      34,897
                                                   --------------------------------------

      Total assets................................    $  1,406,299    $464,220
                                                   ======================================

Notes payable.....................................    $    561,321    $251,785
Notes payable to the Operating Partnership........          11,333           -
Other liabilities.................................          78,042      46,054
Equity............................................         755,603     166,381
                                                   --------------------------------------

      Total liabilities and equity................    $  1,406,299    $464,220
                                                   ======================================

Operating Partnership's share of unconsolidated
   debt...........................................    $    224,528    $118,485
                                                   ======================================

Operating Partnership's investments in real estate
   mortgages and equity of unconsolidated
   companies......................................    $    308,035    $ 98,308   $133,787
                                                   ======================================

-----------------------------------------------------------------------------------------
</Table>

                                       79
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUMMARY STATEMENTS OF OPERATIONS:

<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------------------------
                                                                         FOR THE YEAR ENDED DECEMBER 31, 2000
                                                ----------------------------------------------------------------------------------
                                                                                  THE
                                                     DESERT      CRESCENT   WOODLANDS         OTHER
                                                   MOUNTAIN        RESORT        LAND   RESIDENTIAL  TEMPERATURE-
                                                DEVELOPMENT  DEVELOPMENT,    COMPANY,   DEVELOPMENT    CONTROLLED
                                                CORPORATION          INC.        INC.  CORPORATIONS     LOGISTICS  OFFICE    OTHER
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>           <C>          <C>           <C>           <C>      <C>
Total revenues................................  $   153,680  $    180,038  $  180,670   $    30,404   $  154,341    $89,841
Expenses:
   Operating expense..........................      127,589       158,860     105,231        10,897       21,982(1)  34,261
   Interest expense...........................          916         3,157       2,986           164       46,637     25,359
   Depreciation and amortization..............        4,966         6,430       4,479           436       57,848     20,673
   Taxes......................................        3,812           979      27,188         1,235        7,311          -
   Other (income) expense.....................            -             -           -             -       (2,886)         -
                                                ------------------------------------------------------------------------------------

Total expenses................................  $   137,283  $    169,426  $  139,884   $    12,732   $  130,892    $80,293
                                                ------------------------------------------------------------------------------------

Net income....................................  $    16,397  $     10,612  $   40,786   $    17,672   $   23,449(1) $ 9,548
                                                ------------------------------------------------------------------------------------

Operating Partnership's equity in net income of
   unconsolidated companies...................  $    16,109  $     10,407  $   16,466   $    10,488   $    7,432    $ 3,164  $11,645
                                                ====================================================================================

------------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) Inclusive of the preferred return paid to Vornado Realty Trust (1% per annum
of the Total Combined Assets).

SUMMARY STATEMENTS OF OPERATIONS:

<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------
                                                                       FOR THE YEAR ENDED DECEMBER 31, 1999
                                                     ------------------------------------------------------
                                                          DESERT      CRESCENT            THE         OTHER
                                                        MOUNTAIN        RESORT      WOODLANDS   RESIDENTIAL
                                                     DEVELOPMENT  DEVELOPMENT,           LAND   DEVELOPMENT
                                                     CORPORATION          INC.  COMPANY, INC.  CORPORATIONS
-----------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>            <C>            <C>
Total revenues...................................... $   192,094  $    134,411    $   134,781   $    41,297
Expenses:
      Operating expense.............................     175,762       116,717         80,357        22,022
      Interest expense..............................           -         2,709          2,174            37
      Depreciation and amortization.................       6,435         3,131          4,386           343
      Taxes.........................................           -         1,963         19,146         1,440
                                                     ------------------------------------------------------

Total expenses...................................... $   182,197  $    124,520    $   106,063   $    23,842
                                                     ------------------------------------------------------

Net income.......................................... $     9,897  $      9,891    $    28,718   $    17,455
                                                     ======================================================

Operating Partnership's equity in net income of
   unconsolidated companies......................... $    10,097  $      9,561    $    15,548   $     7,665
                                                     ======================================================



<Caption>
-----------------------------------------------------------------------------------------
                                                     FOR THE YEAR ENDED DECEMBER 31, 1999
                                                     ------------------------------------

                                                     TEMPERATURE-
                                                       CONTROLLED
                                                        LOGISTICS   OFFICE    OTHER
-----------------------------------------------------------------------------------------
<S>                                                  <C>            <C>       <C>
Total revenues......................................  $  264,266    $78,534
Expenses:
      Operating expense.............................     127,516(1)  27,008
      Interest expense..............................      47,273     19,321
      Depreciation and amortization.................      54,574     19,273
      Taxes.........................................      (6,084)         -
                                                     ------------------------------------

Total expenses......................................  $  223,279    $65,602
                                                     ------------------------------------

Net income..........................................  $   40,987(1) $12,932
                                                     ====================================

Operating Partnership's equity in net income of
   unconsolidated companies.........................  $   15,039    $  5,265  $ 5,122
                                                     ====================================

-----------------------------------------------------------------------------------------
</Table>

(1) Inclusive of the preferred return paid to Vornado Realty Trust (1% per annum
of the Total Combined Assets).


                                       80
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. OTHER ASSETS, NET:

<Table>
<Caption>
--------------------------------------------------------------------------------
                                                                      BALANCE AT
                                                                    DECEMBER 31,
                                                             -------------------
                                                                 2001       2000
--------------------------------------------------------------------------------
<S>                                                          <C>        <C>
Leasing costs............................................... $142,440   $123,036
Deferred financing costs....................................   46,305     48,645
Prepaid expenses............................................    9,444      3,690
Marketable securities.......................................   10,832     50,321
Other.......................................................   33,910     23,905
                                                             -------------------

                                                             $242,931   $249,597
Less--Accumulated amortization..............................  (97,281)   (77,644)
                                                             -------------------

                                                             $145,650   $171,953
                                                             ===================

--------------------------------------------------------------------------------
</Table>


                                       81
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. NOTES PAYABLE AND BORROWINGS UNDER FLEET FACILITY:

         The following is a summary of the Operating Partnership's debt
financing at December 31, 2001 and 2000:

<Table>
<Caption>
-------------------------------------------------------------------------------------
                                                              BALANCE AT DECEMBER 31,
                                                              -----------------------
SECURED DEBT                                                        2001         2000
-------------------------------------------------------------------------------------
<S>                                                           <C>          <C>
UBS Term Loan II,(1) secured by the Funding VIII Properties
   and the Washington Harbour Office Properties.............  $        -   $  326,677
Fleet Fund I and II Term Loan(2)(5) due May 2005, bears
   interest at LIBOR plus 325 basis points (at December 31,
   2001, the interest rate was 5.39%), with a four-year
   interest-only term, secured by equity interests in
   Funding I and II with a combined book value of $275,000
   at December 31, 2001.....................................     275,000      200,000
AEGON Note(3) due July 2009, bears interest at 7.53% with
   monthly principal and interest payments based on a
   25-year amortization schedule, secured by the Funding
   III, IV and V Properties with a combined book value of
   $263,456 at December 31, 2001............................     269,930      274,320
LaSalle Note I(4) bears interest at 7.83% with an initial
   seven-year interest-only term (through August 2002),
   followed by principal amortization based on a 25-year
   amortization schedule through maturity in August 2027,
   secured by the Funding I Properties with a combined book
   value of $262,672 at December 31, 2001...................     239,000      239,000
Deutsche Bank-CMBS Loan due May 2004, bears interest at the
   30-day LIBOR rate plus 234 basis points (at December 31,
   2001, the interest rate was 5.84%), with a three-year
   interest-only term and two one-year extension options,
   secured by the Funding X Properties and Spectrum Center
   with a combined book value of $304,699...................     220,000            -
JP Morgan Mortgage Note(6) due October 2016, bears interest
   at a fixed rate of 8.31% with a two-year interest-only
   term (through October 2001), followed by principal
   amortization based on a 15-year amortization schedule
   through maturity in October 2016, secured by the Houston
   Center mixed-use Office Property complex with a combined
   book value of $268,978 at December 31, 2001..............     199,386      200,000
LaSalle Note (II(7) bears interest at 7.79% with an initial
   seven-year interest-only term (through March 2003),
   followed by principal amortization based on a 25-year
   amortization schedule through maturity in March 2028,
   secured by the Funding II Properties with a combined book
   value of $308,145 at December 31, 2001...................     161,000      161,000
UBS Term Loan I,(1) secured by the Funding VIII Properties
   and the Washington Harbour Office Properties.............           -      146,775
iStar Financial Note due September 2001, bears interest at
   30-day LIBOR plus 175 (at December 31, 2000, the rate
   was 8.57%) with
</Table>


                                       82
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
-------------------------------------------------------------------------------------
                                                              BALANCE AT DECEMBER 31,
                                                              -----------------------
SECURED DEBT                                                        2001         2000
-------------------------------------------------------------------------------------
<S>                                                           <C>          <C>
   an interest-only term, secured by the Fountain Place
   Office Property with a book value of $112,332 at December
   31, 2000.................................................  $        -   $   97,123
UBS Line of Credit,(1) secured by the Funding VIII
   Properties and the Washington Harbour Properties.........           -       80,000
CIGNA Note due December 2002, bears interest at 7.47% with an
   interest-only term, secured by the MCI Tower Office
   Property and Denver Marriott City Center Resort/Hotel
   Property with a combined book value of $103,773 at
   December 31, 2001........................................      63,500       63,500
Metropolitan Life Note V due December 2005, bears interest
   at 8.49% with monthly principal and interest payments
   based on a 25-year amortization schedule, secured by the
   Datran Center Office Properties with a combined book
   value of $68,653 at December 31, 2001....................      38,696       39,219
Northwestern Life Note due January 2004, bears interest at
   7.66% with an interest-only term, secured by the 301
   Congress Avenue Office Property with a book value of
   $36,234 at December 31, 2001.............................      26,000       26,000
Metropolitan Life Note I due September 2001, bears interest
   at 8.88% with monthly principal and interest payments
   based on a 20-year amortization schedule, secured by five
   of The Woodlands Office Properties with a combined book
   value of $12,464 at December 31, 2000....................           -        9,263
Nomura Funding VI Note(8) bears interest at 10.07% with
   monthly principal and interest payments based on a
   25-year amortization schedule through maturity in July
   2020, secured by the Funding VI Property with a book
   value of $35,043 at December 31, 2001....................       8,187        8,330
Woodmen of the World Note(9) due April 2009, bears interest
   at 8.20% with an initial five-year interest-only term
   (through April 2006), followed by principal amortization
   based on a 25-year amortization schedule, secured by the
   Avallon IV Office Property with a book value of
   $12,858..................................................       8,500            -
Mitchell Mortgage Note due August 2002, bears interest at
   7.00% with an interest-only term, secured by three of The
   Woodlands Office Properties with a combined book value of
   $9,167...................................................       6,244            -
Rigney Promissory Note due November 2012, bears interest at
   8.50% with quarterly principal and interest payments based
   on a 15-year amortization schedule, secured by a parcel
   of land with a book value of $17,123 at December 31,
   2001.....................................................         651          688

UNSECURED DEBT

Fleet Facility(2) due May 2004, bears interest at LIBOR plus
   187.5 basis points (at December 31, 2001, the interest
   rate was 3.92%), with a three-year interest-only term and
   a one year extension option..............................     283,000            -
</Table>


                                       83
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
-------------------------------------------------------------------------------------
                                                              BALANCE AT DECEMBER 31,
                                                              -----------------------
SECURED DEBT                                                        2001         2000
-------------------------------------------------------------------------------------
<S>                                                           <C>          <C>
2007 Notes(10) bear interest at a fixed rate of 7.50% with a
   ten-year interest-only term, due September 2007..........  $  250,000   $  250,000
2002 Notes(10) bear interest at a fixed rate of 7.00% with a
   five-year interest-only term, due September 2002.........     150,000      150,000

SHORT-TERM BORROWINGS
Short-term borrowings(11); variable interest rates ranging
   from the Fed Funds rate plus 150 points to LIBOR plus 375
   basis points, with maturities up to August 2002..........      15,000            -
                                                              -----------------------

            Total Notes Payable.............................  $2,214,094   $2,271,895
                                                              =======================

-------------------------------------------------------------------------------------
</Table>

(1) The UBS Facility was entered into effective January 31, 2000 and amended on
May 10, 2000 and May 18, 2000. As amended, the UBS Facility consisted of three
tranches: the UBS Line of Credit, the UBS Term Loan I and the UBS Term Loan II.
In May 2001, the Operating Partnership repaid and retired the UBS Facility with
proceeds from a $970,000 debt refinancing. The interest rate on the UBS Line of
Credit and the UBS Term Loan I was equal to LIBOR plus 250 basis points. The
interest rate on the UBS Term Loan II was equal to LIBOR plus 275 basis points.
As of December 31, 2000, the interest rate on the UBS Line of Credit and UBS
Term Loan I was 9.20%, and the interest rate on the UBS Term Loan II was 9.46%.
The weighted average interest rate on the UBS Line of Credit for the year ended
December 31, 2000 was 8.91%. As of December 31, 2000, the UBS Facility was
secured by 25 Office Properties and four Resort/Hotel Properties with a combined
book value of $1,042,207.

(2) For a description of the Fleet Fund I and II Term Loan and the Fleet
Facility, see "Debt Refinancing and Fleet Facility" section below.

(3) The outstanding principal balance of this note at maturity will be
approximately $224,100.

(4) In August 2007, the interest rate will increase, and the Operating
Partnership is required to remit, in addition to the monthly debt service
payment, excess property cash flow, as defined, to be applied first against
principal until the note is paid in full and thereafter, against accrued excess
interest, as defined. It is the Operating Partnership's intention to repay the
note in full at such time (August 2007) by making a final payment of
approximately $220,500.

(5) The Fleet Fund I and II Term Loan, entered into in May 2001, modified and
replaced the previously outstanding Fleet Term Note II. Prior to the
modification and replacement, the Fleet Term Note II was due August 31, 2003,
bore interest at the 30-Day LIBOR rate plus 234 basis points (at December 31,
2000, the interest rate was 10.63%) with a four-year interest-only term, and was
secured by equity interests in Funding I and II with a combined value of
$200,000 at December 31, 2000.

(6) At the end of seven years (October 2006), the interest rate will adjust
based on current interest rates at that time. It is the Operating Partnership's
intention to repay the note in full at such time (October 2006) by making a
final payment of approximately $177,800.

(7) In March 2006, the interest rate will increase, and the Operating
Partnership is required to remit, in addition to the monthly debt service
payment, excess property cash flow, as defined, to be applied first against
principal until the note is paid in full, and thereafter, against accrued excess
interest, as defined. It is the Operating Partnership's intention to repay the
note in full at such time (March 2006) by making a final payment of
approximately $154,100.

(8) In July 2010, the interest rate due under the note will change to a 10-year
Treasury yield plus 500 basis points or, if the Operating Partnership so elects,
it may repay the note without penalty at that date.

(9) The outstanding principal balance of this loan at maturity will be
approximately $8,200.

(10) The notes were issued in an offering registered with the SEC.

(11) Short-term borrowings include the unsecured JP Morgan Loan Sales Facility,
a $50,000 credit facility, and the $50,000 unsecured Fleet Bridge Loan. The
lender under the JP Morgan Loan is not required to fund draws under the loan
unless certain conditions not within the control of the Operating Partnership
are met. As a result, the Operating Partnership maintains sufficient
availability under the Fleet Facility to repay the JP Morgan Loan Sales Facility
at any time. At December 31, 2001, $10,000 was outstanding on the JP Morgan Loan
Sales Facility and $5,000 was outstanding on the Fleet Bridge Loan.


                                       84
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         Below are the aggregate principal payments required as of December 31,
2001 under indebtedness of the Operating Partnership by year. Scheduled
principal installments and amounts due at maturity are included.

<Table>
<Caption>
--------------------------------------------------------------------------------------------
                                                            SECURED   UNSECURED        TOTAL
--------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>         <C>
2002...................................................  $   80,157    $165,000    $  245,157
2003...................................................      15,060           -        15,060
2004...................................................     262,857(1)  283,000(1)    545,857
2005...................................................     329,339           -       329,339
2006...................................................     347,207           -       347,207
Thereafter.............................................     481,474     250,000       731,474
                                                          -----------------------------------

                                                         $1,516,094    $698,000    $2,214,094
                                                          ===================================

--------------------------------------------------------------------------------------------
</Table>

(1) These amounts do not represent the effect of a one-year extension option on
the Fleet Facility and two one-year extension options on the Deutsche Bank--CMBS
Loan.

         The Operating Partnership has approximately $245,157 of secured and
unsecured debt due during 2002, consisting primarily of the Cigna Note, the
Mitchell Mortgage Note, and the 2002 Notes, which are expected to be funded
through replacement debt financing.

         Any uncured or unwaived events of default on the Operating Partnership
loans can trigger an acceleration of payment on the loan in default. In
addition, a default by the Operating Partnership or any of its subsidiaries with
respect to any indebtedness in excess of $5,000 generally will result in a
default under the Fleet Facility and the Fleet I and II Term Loan after the
notice and cure periods for the other indebtedness have passed. As of December
31, 2001, the Operating Partnership was in compliance with all of its debt
service coverage ratios and other covenants related to its outstanding debt. The
Operating Partnership's debt facilities generally prohibit loan pre-payment for
an initial period, allow pre-payment with a penalty during a following specified
period and allow pre-payment without penalty after the expiration of that
period. During the year ended December 31, 2001, there were no circumstances
that would require pre-payment penalties or increased collateral related to the
Operating Partnership's existing debt.

         In addition to the subsidiaries listed in "Note 1. Organization and
Basis of Presentation," certain other subsidiaries of the Operating Partnership
were formed primarily for the purpose of obtaining secured and unsecured debt or
joint venture financings. The following lists these entities, all of which are
consolidated and are grouped based on the Properties to which they relate:
Funding I and Funding II Properties (CREM Holdings, LLC, Crescent Capital
Funding, LLC, Crescent Funding Interest, LLC, CRE Management I Corp., CRE
Management II Corp.); Funding III Properties (CRE Management III Corp.); Funding
IV Properties (CRE Management IV Corp.); Funding V Properties (CRE Management V
Corp.); Funding VI Properties (CRE Management VI Corp.); Funding VIII Properties
(CRE Management VIII, LLC); Funding IX Properties (CRE Management IX, LLC);
Funding X Properties (CREF X Holdings Management, LLC, CREF X Holdings, L. P.,
CRE Management X, LLC); Spectrum Center Partners, L.P., Spectrum Mortgage
Associates, L. P., CSC Holdings Management, LLC, Crescent SC Holdings, L. P.,
CSC Management,


                                       85
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LLC); and 5 Houston Center (Development Property) (C5HC Management, LLC,
Crescent 5 Houston Center, L. P.).

DEBT REFINANCING AND FLEET FACILITY

         In May 2001, the Operating Partnership (i) repaid and retired the UBS
Facility which consisted of the UBS Line of Credit, the UBS Term Loan I and the
UBS Term Loan II; (ii) repaid and retired the iStar Financial Note; and (iii)
modified and replaced the Fleet Term Note II with proceeds from a $970,000 debt
refinancing. In May 2001, the Operating Partnership wrote off $12,200 of
deferred financing costs related to the early extinguishment of the UBS Facility
which is included in Extraordinary Item--Extinguishment of Debt.

NEW DEBT RESULTING FROM REFINANCING

<Table>
<Caption>
----------------------------------------------------------------------------------------------
                                               MAXIMUM                                MATURITY
DESCRIPTION                                  BORROWING                INTEREST RATE       DATE
----------------------------------------------------------------------------------------------
<S>                                          <C>         <C>                          <C>
Fleet Facility.............................  $400,000(1) LIBOR + 187.5 basis points     2004(2)
Fleet Fund I and II Term Loan..............  $275,000      LIBOR + 325 basis points     2005
Deutsche Bank--CMBS Loan...................  $220,000      LIBOR + 234 basis points     2004(3)
Deutsche Bank Short-Term Loan..............  $ 75,000      LIBOR + 300 basis points     2001(4)
----------------------------------------------------------------------------------------------
</Table>

(1) The $400,000 Fleet Facility is an unsecured revolving line of credit. The
weighted average interest rate from the origination of the note in May 2001
through December 31, 2001 is 5.38%.

(2) One-year extension option.

(3) Two one-year extension options.

(4) Repaid September 19, 2001.

DEBT REPAID OR MODIFIED AND REPLACED BY REFINANCING

<Table>
<Caption>
-----------------------------------------------------------------------------------------------
                             MAXIMUM                              MATURITY              BALANCE
DESCRIPTION                BORROWING              INTEREST RATE       DATE   REPAID/MODIFIED(1)
-----------------------------------------------------------------------------------------------
<S>                        <C>         <C>                        <C>        <C>
UBS Line of Credit.......  $300,000    LIBOR + 250 basis points     2003          $165,000
UBS Term Loan I..........  $146,775    LIBOR + 250 basis points     2003          $146,775
UBS Term Loan II.........  $326,677    LIBOR + 275 basis points     2004          $326,677
Fleet Term Note II.......  $200,000    LIBOR + 400 basis points     2003          $200,000
iStar Financial Note.....  $ 97,123    LIBOR + 175 basis points     2001          $ 97,123
-----------------------------------------------------------------------------------------------
</Table>

(1) All the amounts listed, other than the Fleet Term Note II, were repaid. In
May 2001, the Fleet Term Note II was modified and replaced by the Fleet Fund I
and II Term Loan.

7. INTEREST RATE CAPS:

         In connection with the closing of the Deutsche Bank--CMBS Loan in May
2001, the Operating Partnership entered into a LIBOR interest rate cap struck at
7.16% for a notional amount of $220,000, and simultaneously sold a LIBOR
interest rate cap with the same terms. Since these instruments do not reduce the
Operating Partnership's net interest rate risk exposure, they do not qualify as
hedges and changes to their respective fair values are charged to earnings. As


                                       86
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the significant terms of these arrangements are substantially the same, the
effects of a revaluation of these instruments are expected to substantially
offset each other.

8.   CASH FLOW HEDGES:

         The Operating Partnership uses derivative financial instruments to
convert a portion of its variable-rate debt to fixed-rate debt and to manage its
fixed to variable-rate debt ratio. As of December 31, 2001, the Operating
Partnership had entered into three cash flow hedge agreements which are
accounted for under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an Amendment of FASB
Statement No. 133."

         The following table shows information regarding the Operating
Partnership's cash flow hedge agreements as of December 31, 2001, and interest
expense for the year ended December 31, 2001:

<Table>
<Caption>
-------------------------------------------------------------------------------------------------
                                                                                       ADDITIONAL
                                                                         INTEREST EXPENSE FOR THE
ISSUE                  NOTIONAL    MATURITY   REFERENCE    FAIR MARKET    YEAR ENDED DECEMBER 31,
DATE                     AMOUNT        DATE        RATE          VALUE                       2001
-------------------------------------------------------------------------------------------------
<S>                    <C>        <C>         <C>         <C>            <C>
9/01/1999............  $200,000   9/02/2003     6.183%      $(10,800)             $3,500
2/04/2000............  $200,000   2/03/2003      7.11%      $(10,800)             $6,000
4/18/2000............  $100,000   4/18/2004      6.76%      $ (7,200)             $2,700
-------------------------------------------------------------------------------------------------
</Table>

         The Operating Partnership has designated its three cash flow hedge
agreements as cash flow hedges of LIBOR-based monthly interest payments on a
designated pool of variable-rate LIBOR indexed debt that reprices closest to the
reset dates of each cash flow hedge agreement. For retrospective effectiveness
testing, the Operating Partnership uses the cumulative dollar offset approach as
described in Derivatives Implementation Group ("DIG") Issue E8. The DIG is a
task force designed to assist the FASB in answering questions that companies
have resulting from implementation of SFAS No. 133 and 138. The Operating
Partnership uses the change in variable cash flows method as described in DIG
Issue G7 for prospective testing as well as for the actual recording of
ineffectiveness, if any. Under this method, the Operating Partnership will
compare the changes in the floating rate portion of each cash flow hedge to the
floating rate of the hedged items. The cash flow hedges have been and are
expected to remain highly effective. Changes in the fair value of these highly
effective hedging instruments are recorded in accumulated other comprehensive
income. The effective portion that has been deferred in accumulated other
comprehensive income will be reclassified to earnings as interest expense when
the hedged items impact earnings. If a cash flow hedge falls outside 80%-125%
effectiveness for a quarter, all changes in the fair value of the cash flow
hedge for the quarter will be recognized in earnings during the current period.
If it is determined based on prospective testing that it is no longer likely a
hedge will be highly effective on a prospective basis, the hedge will no longer
be designated as a cash flow hedge and no longer qualify for accounting in
accordance with SFAS Nos. 133 and 138.


                                       87
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         Over the next twelve months, an estimated $16,400 to $18,400 related to
the effective portions of the cash flow hedge agreements will be reclassified
from accumulated other comprehensive income to interest expense and charged
against earnings.

9.   RENTALS UNDER OPERATING LEASES:

         During 2001, the Operating Partnership received rental income from the
lessees of Office Property and Resort/Hotel Property space under operating
leases. On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which subsidiaries of the Operating Partnership acquired,
in lieu of foreclosure, COPI's lessee interests in the eight Resort/Hotel
Properties previously leased to COPI. Therefore, no future rental income from
the operating lessee will be recognized for these Resort/Hotel Properties. The
Operating Partnership recognized percentage rental income from the Resort/Hotel
Properties of approximately $14,665, $24,622 and $19,648 for the years ended
December 31, 2001, 2000 and 1999, respectively.

For noncancelable operating leases for consolidated Office Properties owned as
of December 31, 2001, future minimum rentals (base rents) during the next five
years and thereafter (excluding tenant reimbursements of operating expenses for
Office Properties) are as follows:

<Table>
<Caption>
------------------------------------------------------------------------
                                                                  OFFICE
                                                              PROPERTIES
------------------------------------------------------------------------
<S>                                                           <C>
2002........................................................  $  410,459
2003........................................................     350,022
2004........................................................     268,891
2005........................................................     213,334
2006........................................................     165,175
Thereafter..................................................     482,383
                                                              ----------

                                                              $1,890,264
                                                              ==========

------------------------------------------------------------------------
</Table>

         Generally, the Office Property leases also require that each customer
reimburse the Operating Partnership for increases in operating expenses above
operating expenses during the base year of the customer's lease. These amounts
totaled $98,816, $91,735 and $92,865, for the years ended December 31, 2001,
2000 and 1999, respectively. These increases are generally payable in equal
installments throughout the year, based on estimated increases, with any
differences adjusted at year end based upon actual expenses.

         See "Note 2. Summary of Significant Accounting Policies," for further
discussion of revenue recognition, and "Note 3. Segment Reporting," for further
discussion of significant customers.

10.   COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

         The Operating Partnership has 12 Properties located on land that is
subject to long-term ground leases, which expire between 2015 and 2080. The
Operating Partnership also leases


                                       88
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

parking spaces in a parking garage adjacent to one of its Properties pursuant to
a lease expiring in 2021. Lease expense associated with these leases during each
of the three years ended December 31, 2001, 2000, and 1999 was $2,766, $2,869
and $2,642, respectively. Future minimum lease payments due under such leases as
of December 31, 2001, are as follows:

<Table>
<Caption>
------------------------------------------------------------------------
                                                                  LEASES
                                                             COMMITMENTS
------------------------------------------------------------------------
<S>                                                          <C>
2002........................................................  $  2,121
2003........................................................     2,129
2004........................................................     2,136
2005........................................................     2,143
2006........................................................     2,155
Thereafter..................................................   107,219
                                                             -----------

                                                              $117,903
                                                             ===========

------------------------------------------------------------------------
</Table>

COPI COMMITMENTS

         See "Note 22. Subsequent Events," for a description of the Operating
Partnership's commitments related to the agreement with COPI, executed on
February 14, 2002.

CONTINGENCIES

ENVIRONMENTAL MATTERS

         All of the Properties have been subjected to Phase I environmental
assessments, and some Properties have been subjected to Phase II soil and ground
water sampling as part of the Phase I assessments. Such assessments have not
revealed, nor is management aware of, any environmental liabilities that
management believes would have a material adverse effect on the financial
position or results of operations of the Operating Partnership.

11.   STOCK AND UNIT BASED COMPENSATION:

STOCK OPTION PLANS

         The Company has two stock incentive plans, the 1995 Stock Incentive
Plan (the "1995 Plan") and the 1994 Stock Incentive Plan (the "1994 Plan"). Due
to the approval of the 1995 Plan, additional options and restricted shares will
no longer be granted under the 1994 Plan. Under the 1994 Plan, the Company had
granted, net of forfeitures, 2,509,800 options and no restricted shares. The
maximum number of options and/or restricted shares that the Company was able to
initially grant at inception under the 1995 Plan was 2,850,000 shares. The
maximum aggregate number of shares available for grant under the 1995 Plan
increases automatically on January 1 of each year by an amount equal to 8.5% of
the increase in the number of common shares and units outstanding since January
1 of the preceding year, subject to certain adjustment provisions. As of January
1, 2001, the number of shares the Company may grant under the 1995 Plan is
9,677,794. Under the 1995 Plan, the Company had granted,


                                       89
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

net of forfeitures, options and restricted shares of 8,546,700 and 23,715
respectively, through December 31, 2001. Under both Plans, options are granted
at a price not less than the market value of the shares on the date of grant and
expire ten years from the date of grant. The options that have been granted
under the 1995 Plan vest over five years, with the exception of 500,000 options
that vest over two years, 250,000 options that vest over three and a half years
and 60,000 options that vest six months from the initial date of grant. The
options that have been granted under the 1994 Plan vest over periods ranging
from one to five years.

                              STOCK OPTIONS PLANS

         A summary of the status of the Company's 1994 and 1995 Plans as of
December 31, 2001, 2000 and 1999 and changes during the years then ended is
presented in the table below:

<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------
                                                2001                          2000                          1999
                         ---------------------------   ---------------------------   ---------------------------
                         OPTIONS TO        WTD. AVG.   OPTIONS TO        WTD. AVG.   OPTIONS TO        WTD. AVG.
                            ACQUIRE   EXERCISE PRICE      ACQUIRE   EXERCISE PRICE      ACQUIRE   EXERCISE PRICE
                             SHARES        PER SHARE       SHARES        PER SHARE       SHARES        PER SHARE
----------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>              <C>          <C>              <C>          <C>
Outstanding as of
   January 1,..........       7,966   $           21        6,661   $           21        6,967   $           21
Granted................         559               22        1,665               20        3,489               16
Exercised..............        (747)              17         (209)              15       (2,900)              13
Forfeited..............        (803)              20         (151)              20         (895)              30
Expired................           -                -            -                -            -                -
                         ---------------------------------------------------------------------------------------

Outstanding/Wtd. Avg.
   as of December 31,..       6,975   $           21        7,966   $           21        6,661   $           21
                         ---------------------------------------------------------------------------------------

Exercisable/Wtd. Avg.
   as of December 31,..       3,127   $           24        2,630   $           23        1,721   $           24
----------------------------------------------------------------------------------------------------------------
</Table>

The following table summarizes information about the options outstanding and
exercisable at December 31, 2001:

<Table>
<Caption>
--------------------------------------------------------------------------------------------------------
                                     OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                          ------------------------------                    ----------------------------
                               NUMBER    WTD. AVG. YEARS                         NUMBER
                          OUTSTANDING   REMAINING BEFORE        WTD. AVG.   EXERCISABLE        WTD. AVG.
RANGE OF EXERCISE PRICES  AT 12/31/01         EXPIRATION   EXERCISE PRICE   AT 12/31/01   EXERCISE PRICE
--------------------------------------------------------------------------------------------------------
<S>                       <C>           <C>                <C>              <C>           <C>
$11 to 19...............        3,258          7.4 years   $           16         1,252   $           16
$19 to 27...............        2,221                8.3               22           599               22
$27 to 39...............        1,496                6.1               32         1,276               32
                          ------------------------------------------------------------------------------

$11 to 39...............        6,975          7.4 years   $           21         3,127   $           24
                          ==============================================================================

--------------------------------------------------------------------------------------------------------
</Table>


                                       90
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

UNIT PLANS

         The Operating Partnership has two unit incentive plans, the 1995 Unit
Incentive Plan (the "1995 Unit Plan") and the 1996 Unit Incentive Plan (the
"1996 Unit Plan"). The 1995 Unit Plan is designed to reward persons who are not
trust managers, officers or 10% shareholders of the Company. An aggregate of
100,000 common shares are reserved for issuance upon the exchange of 50,000
units available for issuance to employees and advisors under the 1995 Unit Plan.
As of December 31, 2001, an aggregate of 7,012 units had been distributed under
the 1995 Unit Plan. The 1995 Unit Plan does not provide for the grant of
options. There was no activity in the 1995 Unit Plan in 2001, 2000 or 1999. The
1996 Unit Plan provides for the grant of options to acquire up to 2,000,000
units. Through December 31, 2001, the Operating Partnership had granted, net of
forfeitures, options to acquire 1,778,571 units. Forfeited options are available
for grant. The unit options granted under the 1996 Unit Plan were priced at fair
market value on the date of grant, generally vest over seven years, and expire
ten years from the date of grant. Pursuant to the terms of the unit options
granted under the 1996 Unit Plan, because the fair market value of the Company's
common shares equaled or exceeded $25 for each of ten consecutive trading days,
the vesting of an aggregate of 500,000 units was accelerated and such units
became immediately exercisable in 1996. In addition, 100,000 unit options vest
50% after three years and 50% after five years. Under the 1996 Unit Plan, each
unit that may be purchased is exchangeable, as a result of shareholder approval
in June 1997, for two common shares or, at the option of the Company, an
equivalent amount of cash.

         A summary of the status of the Operating Partnership's 1996 Unit Plan
as of December 31, 2001, 2000 and 1999, and changes during the years then ended
is presented in the table below (assumes each unit is exchanged for two common
shares):

                        1996 UNIT INCENTIVE OPTION PLAN

<Table>
<Caption>
-------------------------------------------------------------------------------------------------------------------
                                               2001                            2000                            1999
                      -----------------------------   -----------------------------   -----------------------------
                            SHARES        WTD. AVG.         SHARES        WTD. AVG.         SHARES        WTD. AVG.
                        UNDERLYING   EXERCISE PRICE     UNDERLYING   EXERCISE PRICE     UNDERLYING   EXERCISE PRICE
                      UNIT OPTIONS        PER SHARE   UNIT OPTIONS        PER SHARE   UNIT OPTIONS        PER SHARE
-------------------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>              <C>            <C>              <C>            <C>
Outstanding as of
   January 1,........        2,414   $           17          2,414   $           17          4,000   $           18
Granted..............            -                -              -                -            200               16
Exercised............          (20)              18              -                -         (1,143)              18
Forfeited............            -                -              -                -           (643)              18
Expired..............            -                -              -                -              -                -
                      ---------------------------------------------------------------------------------------------

Outstanding/Wtd. Avg.
   as of December
   31,...............        2,394   $           17          2,414   $           17          2,414   $           17
                      ---------------------------------------------------------------------------------------------

Exercisable/Wtd. Avg.
   as of December
   31,...............        1,766   $           18          1,571   $           18          1,143   $           18
-------------------------------------------------------------------------------------------------------------------
</Table>


                                       91
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective March 5, 2001, the Operating Partnership granted options to acquire
150,000 units (each Unit is exchangeable for two common shares) to Dennis H.
Alberts, in connection with his employment as the Chief Operating Officer of the
General Partner and the Company. The 300,000 common share equivalents were
priced at $21.84 per share which equals the fair market value of the Company's
common shares at the date of grant.

STOCK OPTION AND UNIT PLANS

         The Company and the Operating Partnership apply APB No. 25 in
accounting for options granted pursuant to the 1995 Plan, the 1994 Plan and the
1996 Unit Plan (collectively, the "Plans"). Accordingly, no compensation cost
has been recognized for the Plans. Had compensation cost for the Plans been
determined based on the fair value at the grant dates for awards under the
Plans, consistent with SFAS No. 123, the Operating Partnership's net income and
earnings per unit would have been reduced to the following pro forma amounts:

<Table>
<Caption>
--------------------------------------------------------------------------------------------
                                                             FOR THE YEAR ENDED DECEMBER 31,
                               -------------------------------------------------------------
                                            2001                  2000                  1999
                               -----------------   -------------------   -------------------
                                     AS      PRO         AS        PRO         AS        PRO
                               REPORTED    FORMA   REPORTED      FORMA   REPORTED      FORMA
--------------------------------------------------------------------------------------------
<S>                            <C>        <C>      <C>        <C>        <C>        <C>
Basic EPS:
   Net Income (Loss)
      available to
      partners...............  $ 10,505   $5,364   $283,678   $278,074   $ (6,168)  $(11,725)
Diluted EPS:
   Net Income (Loss)
      available to
      partners...............    10,505    5,364    283,678    278,074     (6,168)   (11,725)
Basic Earnings (Loss) per
   Unit......................      0.15     0.08       4.18       4.10      (0.09)     (0.17)
Diluted Earnings (Loss) per
   Unit......................      0.15     0.08       4.15       4.06      (0.09)     (0.17)
--------------------------------------------------------------------------------------------
</Table>

         At December 31, 2001, 2000 and 1999, the weighted average fair value of
options granted (assumes each unit option was two common share options) was
$2.73, $2.46 and $2.80, respectively. The fair value of each option is estimated
at the date of grant using the Black-Scholes option-pricing model using the
following expected weighted average assumptions in the calculation.

<Table>
<Caption>
-----------------------------------------------------------------------------------------------
                                                                FOR THE YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                   2001        2000        1999
-----------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>         <C>
Life of options.............................................  10 years    10 years    10 years
Risk-free interest rates....................................       4.4%        8.0%        8.0%
Dividend yields.............................................       8.3%       10.0%       12.0%
Stock price volatility......................................      25.7%       26.0%       27.0%
-----------------------------------------------------------------------------------------------
</Table>


                                       92
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. SALE OF PREFERRED EQUITY INTERESTS IN SUBSIDIARY AND INTRACOMPANY LOAN:

SALE OF CLASS A UNITS IN FUNDING IX

         During the year ended December 31, 2000, the Operating Partnership
formed Funding IX and contributed seven Office Properties and two Resort/Hotel
Properties to Funding IX. As of December 31, 2001, Funding IX held seven Office
Properties and one Resort/Hotel Property. The Operating Partnership owns 100% of
the common voting interests in Funding IX, 0.1% in the form of a general partner
interest and 99.9% in the form of a limited partner interest.

         As of December 31, 2001, GMAC Commercial Mortgage Corporation
("GMACCM") held $218,400 of non-voting, redeemable preferred Class A Units in
Funding IX (the "Class A Units"). The Class A Units receive a preferred
variable-rate dividend currently calculated at LIBOR plus 450 basis points, or
approximately 6.6% per annum as of December 31, 2001, and increasing to LIBOR
plus 550 basis points beginning March 15, 2002. The Class A Units are redeemable
at the option of the Operating Partnership at the original purchase price.

IMPACT ON FINANCIAL STATEMENTS OF INTRACOMPANY LOAN

         As of December 31, 2001, Funding IX had loaned a total of approximately
$281,107 from the net proceeds from the sale of the Class A Units and a portion
of the net proceeds of the sale of one of the Properties held by Funding IX to
Crescent SH IX, Inc. ("SH IX"), for the purchase of common shares of the
Company. The note, which is included in Notes Receivable, Net, bears interest
based on the dividends paid on the common shares held by SH IX, a wholly-owned
subsidiary of the Company, and matures on March 15, 2003. SH IX is required to
repay the loan, plus any accrued and unpaid interest, at that time. SH IX will
receive the funds to repay the loan from the Company, pursuant to an agreement
that requires the Company to repurchase, on or before March 15, 2003, the common
shares of the Company held by SH IX. The Company will receive the funds to
repurchase the common shares from SH IX from the Operating Partnership, pursuant
to the limited partnership agreement of the Operating Partnership, which
requires the Operating Partnership to repurchase from the Company a
corresponding portion of the Company's limited partnership interest at such time
as the Company repurchases shares. The proceeds received by Funding IX for the
repayment of the principal amount of the note will be used to redeem Class A
Units.

         As of December 31, 2001, the annual interest rate on the note was
approximately 8.56%. For the year ended December 31, 2001, the Operating
Partnership recognized interest income of $29,272 on the note. See "Note 13.
Partners' Capital." The repurchased common shares will be held in SH IX until
all the Class A Units are redeemed. The Company, as a partner of the Operating
Partnership, receives quarterly distributions from the Operating Partnership,
which it then uses to make distributions to it shareholders. Distributions on
these repurchased common shares will continue to be paid by the Company to SH
IX, as a shareholder of the Company, and will be used by SH IX to make payments
of interest due to Funding IX on the loan. Funding IX in turn will use these
funds to pay dividends on the Class A Units.

         In accordance with GAAP, the operations, assets and liabilities of
Funding IX and SH IX are consolidated with those of the Company in the Company's
consolidated financial statements. In accordance with GAAP, the operations,
assets and liabilities of Funding IX (but not those of SH


                                       93
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

IX) are consolidated with those of the Operating Partnership in the consolidated
financial statements of the Operating Partnership. As a result, the note and the
payments on the note by SH IX to Funding IX are eliminated in the Company's
financial statements but are not eliminated in the financial statements of the
Operating Partnership. These items therefore are included in Notes Receivable,
Net and in Interest and Other Income in the Operating Partnership's financial
statements.

The following table compares the current financial statements of the Operating
Partnership prepared in accordance with GAAP and the adjusted Operating
Partnership financial statements, adjusted for the elimination of the
intracompany loan and associated interest income. This table provides certain
components of the financial statements which would be affected by the
elimination of the intracompany loan and associated interest income.

<Table>
<Caption>
--------------------------------------------------------------------------------------------
                                                                        AFTER ELIMINATION OF
                                                 GAAP PRESENTATION         INTRACOMPANY LOAN
                                           -------------------------------------------------
                                           YEAR ENDED DECEMBER 31,   YEAR ENDED DECEMBER 31,
                                           -------------------------------------------------
                                                 2001         2000         2001         2000
--------------------------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>
BALANCE SHEET DATA (AT PERIOD END):
   Total assets..........................  $4,422,826   $4,827,999   $4,138,102   $4,542,913
OPERATING DATA:
   Total revenues........................     725,326      739,697      696,054      718,405
   Operating income (loss)...............       1,188      111,176      (28,084)      89,884
   Income before minority interests and
      extraordinary item.................      56,844      324,344       27,572      303,052
   Net income (loss).....................      24,006      300,084       (5,266)     278,792
   Basic earnings per unit(1):
         Income (loss) before
            extraordinary item...........  $     0.33   $     4.24   $    (0.11)  $     4.23
   Diluted earnings per unit(1):
         Income (loss) before
            extraordinary item...........  $     0.33   $     4.21   $    (0.11)  $     4.19
--------------------------------------------------------------------------------------------
</Table>

(1) The weighted average units used to calculate basic and diluted earnings per
unit in accordance with GAAP include the common shares of the Company held in SH
IX of 14,468,623 (7,234,312 equivalent units) and 8,184,578 (4,092,289
equivalent units) for the years ended December 31, 2001 and 2000, respectively.
The adjusted basic and diluted earnings per unit after the elimination of the
intracompany loan exclude the common shares of the Company held in SH IX.

13. PARTNERS' CAPITAL:

         Each unit may be exchanged for either two common shares or, at the
election of the Company, cash equal to the fair market value of two common
shares at the time of the exchange. When a unitholder exchanges a unit, the
Company's percentage interest in the Operating Partnership increases. During the
year ended December 31, 2001, there were 401,302 units exchanged for 802,604
common shares of the Company.


                                       94
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EMPLOYEE STOCK PURCHASE PLAN

         On June 25, 2001, the shareholders of the Company approved a new
Employee Stock Purchase Plan (the "ESPP") that is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
("IRC") of 1986, as amended. The ESPP is regarded as a noncompensatory plan
under APB No. 25, because it meets the qualifications under IRC 423. Under the
terms of the ESPP, eligible employees may purchase common shares of the Company
at a price that is equal to 90% of the lower of the common shares' fair market
value at the beginning or the end of a quarterly period. The fair market value
of a common share is equal to the last sale price of the common shares on the
New York Stock Exchange. Eligible employees may purchase the common shares
through payroll deductions of up to 10% of eligible compensation. The ESPP is
not subject to the provisions of ERISA. The ESPP was effective October 1, 2001,
and will terminate on May 14, 2011.

         The 1,000,000 common shares of the Company that may be issued pursuant
to the purchase of common shares of the Company under the ESPP represent less
than 0.96% of the Company's outstanding common shares at December 31, 2001.

FORWARD SHARE PURCHASE AGREEMENT

         On August 12, 1997, the Company entered into two transactions with
affiliates of the predecessor of UBS AG ("UBS"). In one transaction, the Company
sold 4,700,000 common shares to UBS for approximately $148,000 and received
approximately $145,000 in net proceeds. In the other transaction, the Company
entered into a forward share purchase agreement (the "Forward Share Purchase
Agreement") with UBS. The Company had the right to settle the Forward Share
Purchase Agreement in cash or common shares. On August 11, 1998, the Company
paid a fee of approximately $3,000 to UBS in connection with the exercise by the
Company and UBS of the right to extend the term of the Forward Share Purchase
Agreement until August 12, 1999.

         The Forward Share Purchase Agreement was accounted for under the
Emerging Issues Task Force (the "EITF") Issue No. 96-13. The Forward Share
Purchase Agreement and the related common stock was accounted for together as an
equity instrument, similar to a preferred stock instrument with a cumulative
fixed dividend, the forward accretion component or the guaranteed return to UBS
was accounted for like a preferred dividend. Additionally, the common shares
actually issued and outstanding were considered in both the basic and diluted
weighted-average shares calculations. The diluted EPS calculation also included
any contingently issuable common shares.

         On June 30, 1999, the Company settled the Forward Share Purchase with
affiliates of the predecessor of UBS. At settlement of the Forward Share
Purchase Agreement, the Company made a cash payment of approximately $149,000
(the "Settlement Price") to UBS in exchange for the return by UBS to the Company
of 7,299,760 common shares.

         The number of common shares returned to the Company is equal to the
4,700,000 common shares originally issued to UBS plus 2,599,760 common shares
subsequently issued by the Company, because of a decline in its stock price. In
connection with the issuance of additional common shares, the Company received
an additional limited partner interest, which resulted in


                                       95
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a reduction of the Operating Partnership's net income per unit and net book
value per unit. The additional shares were issued as collateral for the
Company's obligation to purchase 4,700,000 common shares from UBS by August 12,
1999. The Settlement Price was calculated based on the gross proceeds the
Company received from the original issuance of 4,700,000 common shares to UBS,
plus a forward accretion component equal to 90-day LIBOR plus 75 basis points,
minus an adjustment for the Company's distributions paid to UBS. The forward
accretion component represented a guaranteed rate of return to UBS. The return
of common shares to the Company in settlement of the Forward Share Purchase
Agreement resulted in a decrease in the Company's limited partner interest,
which resulted in an increase of net income per unit and net book value per
unit.

SHARE REPURCHASE PROGRAM

         On October 15, 2001, the Company's Board of Trust Managers authorized
an increase in the amount of outstanding common shares that can be repurchased
from time to time in the open market or through privately negotiated
transactions (the "Share Repurchase Program") from $500,000 to $800,000. The
repurchase of common shares by the Company will decrease the Company's limited
partner interest, which will result in an increase in net income per unit.

         The Company commenced its Share Repurchase Program in March 2000. As of
December 31, 2001, the Company had repurchased 18,756,423 common shares, 20,286
of which have been retired, at an average price of $19.09 per common share for
an aggregate of approximately $358,115. As of December 31, 2001, the Company
held 14,468,623 of the repurchased common shares in SH IX. The 14,468,623 common
shares were repurchased with the net proceeds of the sale of Class A Units in
Funding IX and a portion of the net proceeds from the sale of one of the
Properties held by Funding IX. See "Note 12. Sale of Preferred Equity Interests
in Subsidiary and Intracompany Loan." These common shares are consolidated as
treasury shares in accordance with GAAP in the Company's financial statements.
However, these shares are held in SH IX until all of the Class A Units are
redeemed, an are considered outstanding for the Operating Partnership's
financial statements. Distributions will continue to be paid on these
repurchased common shares and will be used to pay dividends on the Class A
Units.

         The Company expects the Share Repurchase Program to continue to be
funded through a combination of debt, equity, joint venture capital and selected
asset disposition alternatives available to the Company, which, in some cases,
may be secured by the repurchased common shares. The amount of common shares
that the Company will actually purchase will be determined from time to time, in
its reasonable judgment, based on market conditions and the availability of
funds, among other factors. There can be no assurance that any number of common
shares will actually be purchased within any particular time period.

SHARE REPURCHASE AGREEMENT

         On November 19, 1999, the Company entered into an agreement (the "Share
Repurchase Agreement") with UBS to purchase a portion of its common shares from
UBS. The Company had the option to settle the Share Repurchase Agreement in cash
or common shares. During the year ended December 31, 2000, the Company purchased
the 5,809,180 common shares


                                       96
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

from UBS at an average cost of $17.62 per common share for an aggregate of
approximately $102,333 under the Share Repurchase Agreement with UBS.

         The Share Repurchase Agreement was accounted for under EITF 96-13 and
was considered an equity instrument similar to a preferred stock instrument with
a cumulative fixed dividend, the forward accretion component or guaranteed
return to UBS was accounted for like a preferred dividend. Additionally, the
common shares actually issued and outstanding were considered in both the basic
and diluted weighted-average shares calculations. The diluted EPS calculation
also included any contingently issuable common shares.

         The Company has no further obligation under the Share Repurchase
Agreement. The purchases were funded primarily through the sale of Class A Units
in Funding IX. See "Note 12. Sale of Preferred Equity Interests in Subsidiary
and Intracompany Loan."

DISTRIBUTIONS

         Beginning with the third quarter of 2001, the Operating Partnership,
due to its revised cash flow expectations in the uncertain economic environment
and measuring its payout ratios to those of the Operating Partnership's peer
group, reduced its quarterly distribution from $1.10 per unit, or an annualized
distribution of $4.40 per unit, to $0.75 per unit, or an annualized distribution
of $3.00 per unit.

The following table summarizes the distributions paid or declared by the
Operating Partnership to unitholders during the year ended December 31, 2001.

<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------
                                                                                                     ANNUAL
                                                   DIVIDEND/     TOTAL     RECORD    PAYMENT      DIVIDEND/
SECURITY                                        DISTRIBUTION    AMOUNT       DATE       DATE   DISTRIBUTION
-----------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>       <C>        <C>        <C>
Units..........................................  $    1.100    $74,697(2)  1/31/01   2/15/01    $     4.40
Units..........................................  $    1.100    $74,789(2)  4/30/01   5/15/01    $     4.40
Units..........................................  $    1.100    $74,986(2)  7/31/01   8/15/01    $     4.40
Units..........................................  $    0.750(1) $49,937(2) 10/31/01  11/15/01    $     3.00(1)
Units..........................................  $    0.750(1) $49,706(2)  1/31/02   2/15/02    $     3.00(1)
6 3/4% Series A Preferred Units................  $    0.422    $ 3,375    1/31/01    2/15/01    $     1.69
6 3/4% Series A Preferred Units................  $    0.422    $ 3,375    4/30/01    5/15/01    $     1.69
6 3/4% Series A Preferred Units................  $    0.422    $ 3,375    7/31/01    8/15/01    $     1.69
6 3/4% Series A Preferred Units................  $    0.422    $ 3,375   10/31/01   11/15/01    $     1.69
6 3/4% Series A Preferred Units................  $    0.422    $ 3,375    1/31/02    2/15/02    $     1.69
-----------------------------------------------------------------------------------------------------------
</Table>

(1) Beginning with the third quarter of 2001, the Operating Partnership reduced
its quarterly distribution from $1.10 per unit, or an annualized distribution of
4.40 per unit, to $0.75 per unit, or an annualized distribution of $3.00 per
unit.

(2) These distribution amounts include $7,958 for each of the distributions paid
on February 15, 2001, May 15, 2001 and August 15, 2001, and $5,426 for each of
the distributions paid on November 15, 2001 and February 15, 2002, which relate
to distributions paid on common shares of the Company held in SH IX.

         The distributions paid to unitholders during the year ended December
31, 2000, were $299,889. As of December 31, 2000, SH IX was holding 14,468,623
common shares of the Company. The distribution amount of $299,889 includes
$17,313 for the year ended December 31, 2000, related to these common shares.


                                       97
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         The distributions paid to preferred unitholders during the year ended
December 31, 2000, were $13,500, or $1.6875 per preferred unit.

UNITS

Following is the income tax status of distributions paid by the Operating
Partnership on units during the years ended December 31, 2001, and 2000 to
unitholders:

<Table>
<Caption>
--------------------------------------------------------------------------
                                                              2001    2000
--------------------------------------------------------------------------
<S>                                                           <C>     <C>
Ordinary dividend/distribution..............................  50.3%   51.5%
Capital gain................................................    -      6.4%
Return of capital...........................................  49.7%   35.9%
Unrecaptured Section 1250 gain..............................    -      6.2%
--------------------------------------------------------------------------
</Table>

PREFERRED UNITS

         Following is the income tax status of dividends paid by the Company and
distributions paid by the Operating Partnership during the years ended December
31, 2001 and 2000 to preferred unitholders:

<Table>
<Caption>
---------------------------------------------------------------------------
                                                               2001    2000
---------------------------------------------------------------------------
<S>                                                           <C>      <C>
Ordinary dividend/distribution..............................  100.0%   83.7%
Capital gain................................................      -     8.2%
Unrecaptured Section 1250 gain..............................      -     8.1%
---------------------------------------------------------------------------
</Table>

14. MINORITY INTEREST:

         Minority interest represents joint venture and preferred equity
interests held by third parties in other consolidated subsidiaries.

15. RELATED PARTY DISCLOSURES:

DBL HOLDINGS, INC. ("DBL")

         As of December 31, 2001, the Operating Partnership owned 97.44% of DBL
with the remaining 2.56% economic interest in DBL (including 100% of the voting
interest in DBL) held by John Goff, Vice-Chairman of the Board of Trust Managers
and Chief Executive Officer of the Company and sole director and Chief Executive
Officer of the General Partner. Originally, Mr. Goff contributed his voting
interests in MVDC and HADC, originally valued at approximately $380, and
approximately $63 in cash, or total consideration valued at approximately $443
for his interest in DBL.

         DBL has two wholly owned subsidiaries, DBL-ABC, Inc. and DBL-CBO, Inc.,
the assets of which are described in the following paragraphs, and DBL directly
holds 66% of the voting stock in MVDC and HADC. At December 31, 2001, Mr. Goff's
interest in DBL was approximately $554.


                                       98
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         Since June 1999, the Operating Partnership has contributed
approximately $23,800 to DBL. The contribution was used by DBL to make an equity
contribution to DBL-ABC, Inc., which committed to purchase a limited partnership
interest representing a 12.5% interest in G2 Opportunity Fund, LP ("G2"). G2 was
formed for the purpose of investing in commercial mortgage backed securities and
other commercial real estate investments and is managed and controlled by an
entity that is owned equally by Goff-Moore Strategic Partners, LP ("GMSP") and
GMACCM. The ownership structure of GMSP consists of 50% ownership by Darla
Moore, who is married to Richard Rainwater, Chairman of the Board of Trust
Managers of the Company, and 50% by Mr. Goff. Mr. Rainwater is also a limited
partner of GMSP. At December 31, 2001, DBL has an approximately $14,100
investment in G2.

         In March 1999, DBL-CBO, Inc. acquired $6,000 aggregate principal amount
of Class C-1 Notes issued by Juniper CBO 1999-1 Ltd., a Cayman Island limited
liability company. At December 31, 2001 this investment was valued at
approximately $5,400.

COPI COLORADO, L. P.

         As of December 31, 2001, CRD was owned 90% by the Operating Partnership
and the remaining 10%, representing 100% of the voting stock, was owned by COPI
Colorado, L.P. ("COPI Colorado"), of which 60% was owned by COPI, with 20% owned
by John Goff, Vice-Chairman of the Board of Trust Managers and Chief Executive
Officer of the Company and sole director and Chief Executive Officer of the
General Partner and 20% owned by a third party.

         On February 14, 2002, the Operating Partnership executed an agreement
with COPI, pursuant to which COPI transferred to the Operating Partnership, in
lieu of foreclosure, COPI's 60% general partner interest in COPI Colorado. As a
result, the Operating Partnership indirectly owns a 96% interest in CRD, Mr.
Goff owns a 2.0% interest in CRD and the remaining 2.0% interest is owned by a
third party. The Operating Partnership will fully consolidate the operations of
CRD beginning on the date of the asset transfer.

LOANS TO EMPLOYEES OF THE OPERATING PARTNERSHIP AND TRUST MANAGERS OF THE
COMPANY FOR EXERCISE OF STOCK OPTIONS AND UNIT OPTIONS

         As of December 31, 2001, the Operating Partnership had approximately
$32,900 of loans outstanding (including approximately $3,855 loaned during the
year ended December 31, 2001) to certain employees of the Operating Partnership
and trust managers of the Company on a recourse basis pursuant to the Company's
stock incentive plans and the Operating Partnership's unit incentive plans
pursuant to an agreement approved by the Board of Trust Managers and the
Executive Compensation Committee of the Company. The proceeds of these loans
were used by the employees and the trust managers to acquire common shares of
the Company and units of the Operating Partnership pursuant to the exercise of
vested stock and unit options. Pursuant to the loan agreements, these loans may
be repaid in full or in part at any time without premium or penalty. John Goff,
Vice-Chairman of the Board of Trust Managers and Chief Executive Officer of the
Company and sole director and Chief Executive Officer of the General Partner,
had a loan representing $26,300 of the $32,900 total outstanding loans at
December 31, 2001.


                                       99
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         Every month, federal short-term, mid-term and long-term rates
(Applicable Federal Rates) are determined and published by the IRS based upon
average market yields of specified maturities. Effective November 1, 2001, these
loans were amended to reduce the interest rates for their remaining terms to the
Applicable Federal Rates. As a result, the interest rates on loans with
remaining terms of three years or less at November 1, 2001 were reduced to
approximately 2.7% per year and the interest rates on loans with remaining terms
greater than three years as of November 1, 2001 were reduced to approximately
4.07% per year. These amended interest rates reflect below prevailing market
interest rates; therefore, the Operating Partnership recorded $750 of
compensation expense for the year ended December 31, 2001. Approximately $466 of
interest was outstanding related to these loans as of December 31, 2001.

16. COPI:

         In April 1997, the Operating Partnership established a new Delaware
corporation, COPI. All of the outstanding common stock of COPI, valued at $0.99
per share, was distributed, effective June 12, 1997, to those persons who were
limited partners of the Operating Partnership or shareholders of the Company on
May 30, 1997, in a spin-off.

         COPI was formed to become a lessee and operator of various assets to be
acquired by the Operating Partnership and to perform the intercompany agreement
between COPI and the Operating Partnership, pursuant to which each agreed to
provide the other with rights to participate in certain transactions. In
connection with the formation and capitalization of COPI, and the subsequent
operations and investments of COPI since 1997, the Operating Partnership made
loans to COPI under a line of credit and various term loans.

         On January 1, 2001, The REIT Modernization Act became effective. This
legislation allows the Operating Partnership, through its subsidiaries, to
operate or lease certain of its investments that had been previously operated or
leased by COPI.

         COPI and the Operating Partnership entered into an asset and stock
purchase agreement on June 28, 2001, in which the Operating Partnership agreed
to acquire the lessee interests in the eight Resort/Hotel Properties leased to
subsidiaries of COPI, the voting interests held by subsidiaries of COPI in three
of the Operating Partnership's Residential Development Corporations and other
assets in exchange for $78,400. In connection with that agreement, the Operating
Partnership agreed that it would not charge interest on its loans to COPI from
May 1, 2001 and that it would allow COPI to defer all principal and interest
payments due under the loans until December 31, 2001.

         Also on June 28, 2001, the Operating Partnership entered into an
agreement to make a $10,000 investment in Crescent Machinery Company ("Crescent
Machinery"), a wholly owned subsidiary of COPI. This investment, together with
capital from a third-party investment firm, was expected to put Crescent
Machinery on solid financial footing.

         Following the date of the agreements relating to the acquisition of
COPI assets and stock and the investment in Crescent Machinery, the results of
operations for the COPI hotel operations and the COPI land development interests
declined, due in part to the slowdown in the economy after September 11. In
addition, Crescent Machinery's results of operations suffered because of the
economic environment and the overall reduction in national construction levels


                                      100
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

that has affected the equipment rental and sale business, particularly post
September 11. As a result, the Operating Partnership believes that a significant
additional investment would have been necessary to adequately capitalize
Crescent Machinery and satisfy concerns of Crescent Machinery's lenders.

         The Operating Partnership stopped recording rent from the leases of the
eight Resort/Hotel Properties leased to subsidiaries of COPI on October 1, 2001,
and recorded the following impairment and other adjustments related to COPI in
the fourth quarter of 2001, based on the estimated fair value of the underlying
collateral.

IMPAIRMENT AND OTHER ADJUSTMENTS RELATED TO COPI

<Table>
<S>                                                            <C>
Resort/Hotel Accounts Receivable, net of allowance..........   $ 33,200
Resort/Hotel Deferred Rent Receivable.......................     12,700
Notes Receivable and Accrued Interest.......................     71,500
Asset transaction costs.....................................      2,800
                                                               --------

                                                               $120,200
Less estimated collateral value to be received from COPI:
Estimated Fair Value of Resort/Hotel FF&E...................   $  6,900
Estimated Fair Value of Voting Stock of Residential
   Development Corporations.................................     38,500
                                                               --------

                                                               $ 45,400
                                                               --------

Impairment of assets........................................   $ 74,800
Plus Estimated Costs Related to COPI Bankruptcy.............     18,000
                                                               --------

Impairment and other charges related to COPI................   $ 92,800
-----------------------------------------------------------------------
</Table>

         For a description of the COPI assets transferred to subsidiaries of the
Operating Partnership, in lieu of foreclosure, of certain COPI assets, see "Note
22. Subsequent Events."

17.   DISPOSITIONS:

OFFICE SEGMENT

         On September 18, 2001, the Operating Partnership completed the sale of
the two Washington Harbour Office Properties. The sale generated net proceeds of
approximately $153,000 and a net loss of approximately $9,800. The proceeds from
the sale of the Washington Harbour Office Properties were used primarily to pay
down variable-rate debt and pay for the repurchase by the Company of
approximately 4.3 million of the Company's common shares. The Washington Harbour
Office Properties were the Operating Partnership's only Office Properties in
Washington, D.C.

         On September 28, 2001, the Woodlands Office Equities--'95 Limited
("WOE"), owned by the Operating Partnership and the Woodlands CPC, sold two
Office Properties located within The Woodlands, Texas. The sale generated net
proceeds of approximately $11,281, of which the Operating Partnership's portion
was approximately $9,857. The sale generated a net gain of approximately $3,418,
of which the Operating Partnership's portion was approximately $2,987.


                                      101
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         The proceeds received by the Operating Partnership were used primarily
to pay down variable-rate debt.

         On December 20, 2001, WOE sold one Office Property located within The
Woodlands, Texas. The sale generated net proceeds of approximately $2,016, of
which the Operating Partnership's portion was approximately $1,761. The sale
generated a net gain of approximately $1,688, of which the Operating
Partnership's portion was approximately $1,475. The proceeds received by the
Operating Partnership were used primarily to pay down variable-rate debt.

         The following table summarizes the condensed results of operations for
the years ended December 31, 2001, 2000 and 1999 for the five Office Properties
sold during 2001.

<Table>
<Caption>
----------------------------------------------------------------------------------------------
                                                               FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                  2001        2000        1999
----------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>         <C>
Revenue.....................................................  $16,673     $22,751     $20,683
Operating Expenses..........................................    5,998       7,460       6,588
                                                              --------------------------------

Net Operating Income........................................  $10,675(1)  $15,291     $14,095
----------------------------------------------------------------------------------------------
</Table>

(1) Net operating income for 2001 only includes the period for which the
disposition Properties were held during the year.

         During the year ended December 31, 2000, the Operating Partnership
completed the sale of 11 wholly-owned Office Properties. The sale of the 11
Office Properties generated approximately $268,233 of net proceeds. The proceeds
were used primarily to pay down variable-rate debt. The Operating Partnership
recognized a net gain, which is included in Gain on Property Sales, net, of
approximately $35,841 related to the sale of the 11 Office Properties during the
year ended December 31, 2000. During the year ended December 31, 1999, the
Operating Partnership recognized an impairment loss of approximately $16,800 on
one of the 11 Office Properties sold during the year ended December 31, 2000.
The Operating Partnership also recognized a loss of approximately $5,000, which
is included in Gain on Property Sales, net, during the year ended December 31,
2000 on one of the 11 Office Properties sold. The losses represented the
differences between the carrying values of the Office Properties and the sales
prices less costs of the sales.

         During the year ended December 31, 2000, the Woodlands Retail
Equities--'96 Limited, owned by the Operating Partnership and Woodlands CPC,
completed the sale of its retail portfolio, consisting of the Operating
Partnership's four retail properties located in The Woodlands, Texas. The sale
generated approximately $42,700 of net proceeds, of which the Operating
Partnership's portion was approximately $32,000. The sale generated a net gain
of approximately $6,500, of which the Operating Partnership's portion was
approximately $4,900. The proceeds received by the Operating Partnership were
used primarily to pay down variable-rate debt. The net operating income for the
years ended December 31, 2000 and 1999 for the four retail properties was $15
and $3,792, respectively. Net operating income for the year ended 2000 only
includes the periods for which these properties were held during the year.


                                      102
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RESORT/HOTEL SEGMENT

         On November 3, 2000, the Operating Partnership completed the sale of
the Four Seasons Hotel--Houston for a sales price of approximately $105,000. The
Operating Partnership used approximately $19,700 of the proceeds to buy out the
Property lease with COPI and the asset management contract, and for other
transaction costs. The sale generated net proceeds of approximately $85,300. The
Operating Partnership also used approximately $56,600 of the net proceeds to
redeem Class A Units in Funding IX, through which the Operating Partnership
owned the Property, from GMACCM. See "Note 12. Sale of Preferred Equity
Interests in Subsidiary and Intracompany Loan" for a description of the
ownership structure of Funding IX. The sale generated a net gain, which is
included in Gain on Property Sales, net, of approximately $28,715. The Operating
Partnership's net operating income for the years ended December 31, 2000 and
1999 for the Four Seasons Hotel--Houston was $7,591 and $9,237, respectively.
The operating results of this property are included in operating income for 2000
only for the periods for which this Property was held during the year.

18.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

<Table>
<Caption>
---------------------------------------------------------------------------------------------
                                                                2001
                                          ---------------------------------------------------
                                          MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
---------------------------------------------------------------------------------------------
<S>                                       <C>         <C>        <C>             <C>
Revenues...............................   $ 185,791   $198,175   $     183,932   $    157,428
Income before minority interests and
   extraordinary item..................      48,945     42,060          38,458        (72,619)
Minority interests.....................      (5,683)    (5,215)         (5,337)        (4,429)
Extraordinary Item.....................           -    (12,174)              -              -
Net income available to partners
   - basic.............................      39,887     21,296          29,746        (80,424)
   - diluted...........................      39,887     21,296          29,746        (80,425)
Per share data:
   Basic Earnings Per Unit
      - Income before extraordinary
         item..........................        0.59       0.49            0.44          (1.20)
      - Net income.....................        0.59       0.31            0.44          (1.20)
   Diluted Earnings Per Unit
      - Income before extraordinary
         item..........................        0.58       0.48            0.43          (1.20)
      - Net income.....................        0.58       0.30            0.43          (1.20)
---------------------------------------------------------------------------------------------
</Table>


                                      103
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
---------------------------------------------------------------------------------------------
                                                                2000
                                          ---------------------------------------------------
                                          MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
---------------------------------------------------------------------------------------------
<S>                                       <C>         <C>        <C>             <C>
Revenues...............................   $ 175,788   $175,229   $     190,677   $    198,003
Income before minority interests and
   extraordinary item..................      62,082     44,737         114,407        103,118
Minority interests.....................        (650)    (3,964)         (7,643)        (7,625)
Extraordinary Item.....................      (4,378)         -               -              -
Net income available to partners
   - basic.............................      51,603     36,680         101,742         93,653
   - diluted...........................      51,603     36,680         101,742         93,653
Per share data:
   Basic Earnings Per Unit
      - Income before extraordinary
         item..........................        0.83       0.57            1.50           1.54
      - Net income.....................        0.83       0.57            1.50           1.54
   Diluted Earnings Per Unit
      - Income before extraordinary
         item..........................        0.82       0.56            1.48           1.52
      - Net income.....................        0.82       0.56            1.48           1.52
---------------------------------------------------------------------------------------------
</Table>

19.   BEHAVIORAL HEALTHCARE PROPERTIES:

         During the year ended December 31, 1999, the Operating Partnership
received cash rental payments of approximately $35,300 from CBHS, which is
included in Interest and Other Income. As of December 31, 1999, the behavioral
healthcare segment consisted of 88 behavioral healthcare properties in 24
states, all of which were leased to CBHS and its subsidiaries under a triple-net
master lease. However, during 1999, CBHS's business was negatively affected by
many factors, including adverse industry conditions, and CBHS failed to perform
in accordance with its operating budget. In the third quarter of 1999 CBHS was
unable to meet its rental obligation to the Operating Partnership and the
Operating Partnership began to recognize rent from CBHS on a cash basis due to
the uncertainty that CBHS would be able to fulfill its rental obligations under
the lease. In the fourth quarter of 1999, the Operating Partnership, COPI,
Magellan Health Services, Inc. ("Magellan") and CBHS completed a
recapitalization of CBHS. Pursuant to the recapitalization, Magellan transferred
its remaining hospital-based assets to CBHS, canceled its accrued franchise fees
and terminated the franchise agreements, pursuant to which Magellan had provided
certain services to CBHS in exchange for certain franchise fees.

         The following financial statement charges were made with respect to the
Operating Partnership's investment in the behavioral healthcare properties for
the year ended December 31, 1999:

       - CBHS rent was reflected on a cash basis beginning in the third quarter
       of 1999;

       - The Operating Partnership wrote-off the rent that was deferred
       according to the CBHS lease agreement from the commencement of the lease
       in June of 1997 through June 30, 1999. The balance written-off totaled
       $25,600;


                                      104
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       - The Operating Partnership wrote-down its behavioral healthcare real
       estate assets by approximately $103,800 to a book value of $245,000;

       - The Operating Partnership wrote-off Magellan warrants of $12,500;

       - The Operating Partnership recorded approximately $15,000 of additional
       expense to be used by CBHS as working capital; and

       - The Operating Partnership ceased recording depreciation expense in the
       beginning of November of 1999 on the behavioral healthcare properties
       that were classified as held for disposition.

         On February 16, 2000, CBHS and all of its subsidiaries that are subject
to the master lease with the Operating Partnership filed voluntary Chapter 11
bankruptcy petitions in the United States Bankruptcy Court for the District of
Delaware.

         During the year ended December 31, 2000, payment and treatment of rent
for the behavioral healthcare properties was subject to a rent stipulation
agreed to by certain of the parties involved in the CBHS bankruptcy proceeding.
The Operating Partnership received approximately $15,400 in rent and interest
from CBHS during the year ended December 31, 2000, which is included in Interest
and Other Income. The Operating Partnership also completed the sale of 60
behavioral healthcare properties previously classified as held for disposition
during the year ended December 31, 2000 (contained in Net Investment in Real
Estate). The sales generated approximately $233,700 in net proceeds and a net
gain of approximately $58,600 for the year ended December 31, 2000. The net
proceeds from the sale of the 60 behavioral healthcare properties sold during
the year ended December 31, 2000 were used primarily to pay down variable-rate
debt. During the year ended December 31, 2000, the Operating Partnership
recognized an impairment loss of approximately $9,300 on the behavioral
healthcare properties held for disposition, which is included in Impairment and
Other Charges Related to Real Estate Assets. This amount represents the
difference between the carrying values and the estimated sales prices less the
costs of the sales. At December 31, 2000, the carrying value of the 28
behavioral healthcare properties classified as held for disposition was
approximately $68,500 (contained in Net Investment in Real Estate). Depreciation
expense has not been recognized since the dates the behavioral healthcare
properties were classified as held for sale.

         The Operating Partnership received approximately $6,000 in repayments
of a working capital loan from CBHS during the year ended December 31, 2001,
which is included in Interest and Other Income. The Operating Partnership also
completed the sale of 18 behavioral healthcare properties previously classified
as held for disposition during the year ended December 31, 2001 (contained in
Net Investment in Real Estate). The sales generated approximately $34,700 in net
proceeds and a net gain of approximately $1,600 for the year ended December 31,
2001. The net proceeds from the sale of the 18 behavioral healthcare properties
sold during the year ended December 31, 2001 were used primarily to pay down
variable-rate debt.

         During the year ended December 31, 2001, the Operating Partnership
recognized an impairment loss of approximately $8,500 on the behavioral
healthcare properties held for disposition, which is included in Impairment and
Other Charges Related to Real Estate Assets.


                                       105
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

This amount represents the difference between the carrying values and the
estimated sales prices less the costs of the sales. At December 31, 2001, the
carrying value of the 10 behavioral healthcare properties classified as held for
disposition was approximately $27,900 (contained in Net Investment in Real
Estate). Depreciation expense has not been recognized since the dates the
behavioral healthcare properties were classified as held for sale.

20. BROADBAND:

         In 2000, the Operating Partnership made an equity investment in
Broadband Office, Inc. ("Broadband"), (a facilities-based provider of broadband
data, video and voice communication services delivered over fiber optic
networks), and related entities. In May 2001, Broadband filed for Chapter 11
bankruptcy protection, and the Operating Partnership's investment in Broadband
was approximately $7,200. Yipes Communications Group, Inc. ("Yipes"), another
telecom provider, has received approval from the federal bankruptcy court to
acquire certain rights formerly owned by Broadband. In addition, Yipes has
executed agreements with nine major real estate entities, including the
Operating Partnership, to assume telecom licensing agreements, in modified
formats. As part of this transaction, the Operating Partnership acquired
ownership of certain telecom assets previously owned by Broadband and located
within office properties in consideration for conveyance of its equity interest
in Broadband to Yipes. These telecom assets were independently appraised and
valued in excess of the Operating Partnerships' equity interest in Broadband. As
a result, the Operating Partnership reclassified its investment in Broadband of
approximately $7,200 from Other Assets to Building Improvements during the year
ended December 31, 2001. Therefore, Broadband's bankruptcy did not have a
material effect on the Operating Partnership's results of operations for the
year ended December 31, 2001 or its financial position as of December 31, 2001.

21. SETTLEMENT OF MERGER DISPUTE:

STATION CASINOS, INC. ("STATION")

         As of April 14, 1999, the Company and Station entered into a settlement
agreement for the mutual settlement and release of all claims between the
Company and Station arising out of the agreement and plan of merger between the
Company and Station, which the Company terminated in August 1998. As part of the
settlement agreement, the Company paid $15,000 to Station on April 22, 1999.

22. SUBSEQUENT EVENTS:

OFFICE SEGMENT

         On January 18, 2002, the Operating Partnership completed the sale of
the Cedar Springs Office Property located in Dallas, Texas. The sale generated
net proceeds of approximately $12,000 and a net gain of approximately $4,500.
The proceeds from the sale of Cedar Springs were used primarily to pay down
variable-rate debt.


                                      106
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COPI

         On January 22, 2002, the Operating Partnership terminated the purchase
agreement pursuant to which the Operating Partnership would have acquired the
lessee interests in the eight Resort/Hotel Properties leased to subsidiaries of
COPI, the voting interests held by subsidiaries of COPI in three of the
Residential Development Corporations and other assets. On February 4, 2002, the
Operating Partnership terminated the agreement relating to its planned
investment in Crescent Machinery.

         On February 6, 2002, Crescent Machinery filed for protection under the
federal bankruptcy laws.

         On February 12, 2002, the Operating Partnership delivered default
notices to COPI relating to approximately $49,000 of unpaid rent and
approximately $76,200 of principal and accrued interest due to the Operating
Partnership under certain secured loans.

         On February 14, 2002, the Operating Partnership executed an agreement
(the "Agreement") with COPI, pursuant to which COPI transferred to subsidiaries
of the Operating Partnership, in lieu of foreclosure, COPI's lessee interests in
the eight Resort/Hotel Properties leased to subsidiaries of COPI, COPI's voting
interests in three of the Operating Partnership's Residential Development
Corporations and other assets and the Operating Partnership agreed to assist and
provide funding to COPI for the implementation of a prepackaged bankruptcy of
COPI. In connection with the transfer, COPI's rent obligations to the Operating
Partnership were reduced by $23,600, and its debt obligations were reduced by
$40,100. These amounts include $18,300 of value attributed to the lessee
interests transferred by COPI to the Operating Partnership, however, in
accordance with GAAP, the Operating Partnership assigned no value to these
interests for financial reporting purposes.

         The Operating Partnership holds the lessee interests in the eight
Resort/Hotel Properties and the voting interests in the three Residential
Development Corporations through three newly organized entities that are wholly
owned taxable REIT subsidiaries of the Operating Partnership. The Operating
Partnership will include these assets in its Resort/Hotel Segment and its
Residential Development Segment, and will fully consolidate the operations of
the eight Resort/Hotel Properties and the three Residential Development
Corporations, beginning on the dates of the transfers of these assets.

         Under the Agreement, the Operating Partnership has agreed to provide
approximately $14,000 to COPI in the form of cash and common shares of the
Company to fund costs, claims and expenses relating to the bankruptcy and
related transactions, and to provide for the distribution of the Company's
common shares to the COPI stockholders. The Operating Partnership estimates that
the value of the common shares of the Company that will be issued to the COPI
stockholders will be approximately $5,000 to $8,000. The Agreement provides that
COPI and the Operating Partnership will seek to have a plan of reorganization
for COPI, reflecting the terms of the Agreement and a draft plan of
reorganization, approved by the bankruptcy court. The actual value of the common
shares of the Company issued to the COPI stockholders will not be determined
until the confirmation of COPI's bankruptcy plan and could vary substantially
from the estimated amount.


                                      107
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         In addition, the Operating Partnership has agreed to use commercially
reasonable efforts to assist COPI in arranging COPI's repayment of its $15,000
obligation to Bank of America, together with any accrued interest. COPI obtained
the loan primarily to participate in investments with the Operating Partnership.
At the time COPI obtained the loan, Bank of America required, as a condition to
making the loan, that Richard E. Rainwater, the Chairman of the Board of Trust
Managers of the Company, and John C. Goff, the Vice-Chairman of the Board of
Trust Managers and Chief Executive Officer of the Company and sole director and
Chief Executive Officer of the General Partner, enter into a support agreement
with COPI and Bank of America, pursuant to which they agreed to make additional
equity investments in COPI if COPI defaulted on payment obligations under its
line of credit with Bank of America and the net proceeds of an offering of COPI
securities were insufficient to allow COPI to pay Bank of America in full. The
Operating Partnership believes, based on advice of counsel, that the support
agreement should be unenforceable in a COPI bankruptcy. Effective December 31,
2001, the parties executed an amendment to the line of credit providing that any
defaults existing under the line of credit on or before March 8, 2002 are
temporarily cured unless and until a new default shall occur.

         The Operating Partnership holds a first lien security interest in
COPI's entire membership interest in AmeriCold Logistics. REIT rules prohibit
the Operating Partnership from acquiring or owning the membership interest that
COPI owns in AmeriCold Logistics. Under the Agreement, the Operating Partnership
agreed to allow COPI to grant Bank of America a first priority security interest
in the membership interest and to subordinate its own security interest to Bank
of America. In addition, the Operating Partnership and the Company have agreed
to form and capitalize a separate entity to be owned by the Operating
Partnership's unitholders and the Company's shareholders, and to cause the new
entity to commit to acquire COPI's entire membership interest in the tenant for
approximately $15,500. Under the Agreement, COPI has agreed that it will use the
proceeds of the sale of the membership interest to repay Bank of America in
full.

         Completion and effectiveness of the plan of reorganization for COPI is
contingent upon a number of conditions, including the vote of COPI's
stockholders, the approval of the plan by certain of COPI's creditors and the
approval of the bankruptcy court.

         The following Unaudited Condensed Consolidated Pro Forma Financial
Statements are based upon the historical financial statements of the Operating
Partnership and of the assets being transferred to the Operating Partnership
from COPI under the Agreement. The Unaudited Condensed Consolidated Pro Forma
Balance Sheet as of December 31, 2001 is presented as if the principal
transactions contemplated by the Agreement had been completed on December 31,
2001. The Unaudited Condensed Consolidated Pro Forma Statements of Operations
for the years ended December 31, 2001 and 2000 are presented as if these
transactions had occurred as of the beginning of the respective periods.

         The Unaudited Condensed Consolidated Pro Forma Financial Statements
have been prepared based on a number of assumptions, estimates and uncertainties
including, but not limited to, estimates of the fair values of assets received
and liabilities assumed and estimated transaction costs. As a result of these
assumptions, estimates and uncertainties, the accompanying Unaudited Condensed
Consolidated Pro Forma Financial Statements do not purport to predict


                                      108
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the actual financial condition as of December 31, 2001 or results of operations
that would have been achieved had the principal transactions contemplated by the
Agreement been completed as of January 1, 2001 or 2000.

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET

<Table>
<Caption>
---------------------------------------------------------------------------------
                                                               AS OF DECEMBER 31,
                                                                             2001
---------------------------------------------------------------------------------
<S>                                                            <C>
Real estate, net............................................   $        3,362,342
Cash........................................................              186,487
Other assets................................................            1,297,059
                                                               ------------------

   Total assets.............................................   $        4,845,888
                                                               ==================

Notes payable...............................................   $        2,396,290
Other liabilities...........................................              439,804
Minority interests..........................................              283,102
Total partners' capital.....................................            1,726,692
                                                               ------------------

      Total liabilities and partners' capital...............   $        4,845,888
                                                               ==================

---------------------------------------------------------------------------------
</Table>


                                      109
<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS

<Table>
<Caption>
-------------------------------------------------------------------------------------
                                                                   FOR THE YEAR ENDED
                                                                         DECEMBER 31,
                                                              -----------------------
                                                                    2001         2000
-------------------------------------------------------------------------------------
<S>                                                           <C>          <C>
Total revenues..............................................  $1,178,100   $1,231,173
Total expenses..............................................   1,162,390    1,092,726
                                                              -----------------------

Operating Income............................................      15,710      138,447
                                                              -----------------------

Total other income and expense..............................      53,161      203,874
Income before minority interests, income taxes and
   extraordinary item.......................................      68,871      342,321
Income before extraordinary item and cumulative effect of
   change in accounting principle...........................  $   32,184   $  302,283
                                                              =======================

Basic Earnings per unit(1)..................................  $     0.47   $     4.45
Diluted Earnings per unit(1)................................  $     0.47   $     4.41
-------------------------------------------------------------------------------------
</Table>

(1) Represents earnings per unit for income before extraordinary item and
cumulative effect of change in accounting principle.

         The Unaudited Condensed Consolidated Pro Forma Balance Sheet combines
the Operating Partnership's consolidated historical balance sheet for the year
ended December 31, 2001 with the following adjustments:

       - Reflects the inclusion of the assets and liabilities of the eight
       Hotel/Resort Properties as of December 31, 2001;

       - Eliminates the eight Resort/Hotel Properties' initial working capital
       receivable on the Operating Partnership's balance sheet with the
       offsetting net working capital payable;

       - Adjusts the historical balance sheet to consolidate the balance sheets
       of Desert Mountain Development Corporation ("DMDC"), The Woodlands Land
       Company ("TWLC"),other entities, and COPI Colorado (which, as the owner
       of 100% of the voting stock of CRD, consolidates the balance sheet of
       CRD) as a result of the Operating Partnership's retention of voting stock
       in DMDC, TWLC and other entities, and the Operating Partnership's
       retention of the 60% general partnership interest in COPI Colorado;

       - Eliminates the Operating Partnership's equity investment in the
       historical December 31, 2001 balance sheet for DMDC, TWLC, CRD and other
       entities;

       - Eliminates the intercompany loans and associated accrued interest and
       capitalized interest between the Operating Partnership and DMDC, CRD and
       other entities;

       - Reflects the Operating Partnership's capitalization of a new entity to
       be owned by the Company's shareholders that will be committed to acquire
       COPI's membership interest in AmeriCold Logistics; and

       - Reflects the issuance of $5,000 of the Company's shares to COPI
       stockholders.


                                      110

<PAGE>

               CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         The Unaudited Condensed Consolidated Pro Forma Statements of Operations
combine the Operating Partnership's consolidated historical statements of
operations for the years ended December 31, 2001 and 2000 with the following
adjustments:

       - Includes the operating results for the eight Hotel/Resort Properties
       after deducting the amount of the lessee rent payments due under the
       respective leases;

       - Eliminates hotel lessees' rent expense to the Operating Partnership and
       the Operating Partnership's rental revenue from the hotel leases;

       - Reflects the consolidation of the operations of DMDC, TWLC, other
       entities and COPI Colorado with the Operating Partnership's historical
       Statement of Operations, as a result of the Operating Partnership's
       retention of voting stock in DMDC, TWLC and other entities, and the
       Operating Partnership's retention of the 60% general partnership interest
       in COPI Colorado;

       - Eliminates the Operating Partnership's historical equity in net income
       for DMDC, TWLC, CRD and other entities;

       - Eliminates intercompany interest expense on the loans from the
       Operating Partnership to DMDC and CRD;

       - Reflects income tax benefit for the hotel business, calculated as 40%
       of the net loss for the hotel lessees;

       - Reflects the additional shares issued to COPI shareholders, valued at
       $5,000, using the Company's current share price of $17.91; and

       - The December 31, 2001, Unaudited Condensed Consolidated Pro Forma
       Statement of Operations includes the impairment and other charges related
       to the COPI assets of $92,782 contained in the Operating Partnership's
       2001 Consolidated Statement of Operations.


                                      111
<PAGE>

                                                                    SCHEDULE III

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------------------------
                                                                    COSTS
                                                              CAPITALIZED
                                                            SUBSEQUENT TO    IMPAIRMENT TO
                                                             ACQUISITIONS   CARRYING VALUE
                                                         ----------------   --------------
                                                         LAND, BUILDINGS,       BUILDINGS,                 BUILDINGS,
                                         INITIAL COSTS      IMPROVEMENTS,    IMPROVEMENTS,              IMPROVEMENTS,
                              ------------------------         FURNITURE,       FURNITURE,                 FURNITURE,
                                         BUILDINGS AND       FIXTURES AND     FIXTURES AND               FIXTURES AND
DESCRIPTION                       LAND    IMPROVEMENTS          EQUIPMENT        EQUIPMENT       LAND       EQUIPMENT        TOTAL
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>             <C>                <C>              <C>        <C>             <C>
The Citadel, Denver, CO.....  $  1,803   $      17,259   $          4,782   $           -    $  1,803   $      22,041   $   23,844
Las Colinas Plaza, Irving,
   TX.......................     2,576           7,125              1,965               -       2,581           9,085       11,666
Carter Burgess Plaza, Fort
   Worth, TX................     1,375          66,649             39,131               -       1,375         105,780      107,155
The Crescent Office Towers,
   Dallas, TX...............     6,723         153,383             83,870               -       6,723         237,253      243,976
MacArthur Center I & II,
   Irving, TX...............       704          17,247              5,007               -         880          22,078       22,958
125. E. John Carpenter
   Freeway, Irving, TX......     2,200          48,744              2,903               -       2,200          51,647       53,847
Regency Plaza One, Denver,
   CO.......................       950          31,797              2,664               -         950          34,461       35,411
The Avallon, Austin, TX.....       475          11,207                723               -         475          11,930       12,405
Waterside Commons, Irving,
   TX.......................     3,650          20,135              7,445               -       3,650          27,580       31,230
Two Renaissance Square,
   Phoenix, AZ..............         -          54,412             10,290               -           -          64,702       64,702
Liberty Plaza I & II,
   Dallas, TX...............     1,650          15,956                538               -       1,650          16,494       18,144
6225 North 24th Street,
   Phoenix, AZ..............       719           6,566              3,433               -         719           9,999       10,718
Denver Marriott City Center,
   Denver, CO...............         -          50,364              6,981               -           -          57,345       57,345
MCI Tower, Denver, CO.......         -          56,593              3,267               -           -          59,860       59,860
Spectrum Center, Dallas,
   TX.......................     2,000          41,096              8,009               -       2,000          49,105       51,105
Ptarmigan Place, Denver,
   CO.......................     3,145          28,815              5,437               -       3,145          34,252       37,397
Stanford Corporate Centre,
   Dallas, TX...............         -          16,493              6,507               -           -          23,000       23,000
Barton Oaks Plaza One,
   Austin, TX...............       900           8,207              2,032               -         900          10,239       11,139
The Aberdeen, Dallas, TX....       850          25,895                409               -         850          26,304       27,154
12404 Park Central, Dallas,
   TX.......................     1,604          14,504              4,933               -       1,604          19,437       21,041

<Caption>
----------------------------  -----------------------------------------------------------

                                                                            LIFE ON WHICH
                                                                          DEPRECIATION IN
                                                                            LATEST INCOME
                               ACCUMULATED        DATE OF   ACQUISITION      STATEMENT IS
DESCRIPTION                   DEPRECIATION   CONSTRUCTION          DATE          COMPUTED
----------------------------  -----------------------------------------------------------
<S>                           <C>            <C>            <C>           <C>
The Citadel, Denver, CO.....   $ (15,092)           1987           1987                (1)
Las Colinas Plaza, Irving,
   TX.......................      (4,739)           1989           1989                (1)
Carter Burgess Plaza, Fort
   Worth, TX................     (47,594)           1982           1990                (1)
The Crescent Office Towers,
   Dallas, TX...............    (159,434)           1985           1993                (1)
MacArthur Center I & II,
   Irving, TX...............      (8,354)      1982/1986           1993                (1)
125. E. John Carpenter
   Freeway, Irving, TX......     (10,614)           1982           1994                (1)
Regency Plaza One, Denver,
   CO.......................      (7,139)           1985           1994                (1)
The Avallon, Austin, TX.....      (2,125)           1986           1994                (1)
Waterside Commons, Irving,
   TX.......................      (5,193)           1986           1994                (1)
Two Renaissance Square,
   Phoenix, AZ..............     (14,627)           1990           1994                (1)
Liberty Plaza I & II,
   Dallas, TX...............      (3,173)      1981/1986           1994                (1)
6225 North 24th Street,
   Phoenix, AZ..............      (2,891)           1981           1995                (1)
Denver Marriott City Center,
   Denver, CO...............     (13,117)           1982           1995                (1)
MCI Tower, Denver, CO.......      (9,457)           1982           1995                (1)
Spectrum Center, Dallas,
   TX.......................     (11,103)           1983           1995                (1)
Ptarmigan Place, Denver,
   CO.......................      (8,294)           1984           1995                (1)
Stanford Corporate Centre,
   Dallas, TX...............      (4,807)           1985           1995                (1)
Barton Oaks Plaza One,
   Austin, TX...............      (2,343)           1986           1995                (1)
The Aberdeen, Dallas, TX....      (6,357)           1986           1995                (1)
12404 Park Central, Dallas,
   TX.......................      (4,043)           1987           1995              ()(1)
</Table>

                                      112
<PAGE>
<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------------------------
                                                                    COSTS
                                                              CAPITALIZED
                                                            SUBSEQUENT TO    IMPAIRMENT TO
                                                             ACQUISITIONS   CARRYING VALUE
                                                         ----------------   --------------
                                                         LAND, BUILDINGS,       BUILDINGS,                 BUILDINGS,
                                         INITIAL COSTS      IMPROVEMENTS,    IMPROVEMENTS,              IMPROVEMENTS,
                              ------------------------         FURNITURE,       FURNITURE,                 FURNITURE,
                                         BUILDINGS AND       FIXTURES AND     FIXTURES AND               FIXTURES AND
DESCRIPTION                       LAND    IMPROVEMENTS          EQUIPMENT        EQUIPMENT       LAND       EQUIPMENT        TOTAL
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>             <C>                <C>              <C>        <C>             <C>
Briargate Office and
   Research Center, Colorado
   Springs, CO..............     2,000          18,044              1,603               -       2,000          19,647       21,647
Hyatt Regency Beaver Creek,
   Avon, CO.................    10,882          40,789             19,698               -      10,882          60,487       71,369
Albuquerque Plaza,
   Albuquerque, NM..........         -          36,667              2,689               -         101          39,255       39,356
Hyatt Regency Albuquerque,
   Albuquerque, NM..........         -          32,241              4,840               -           -          37,081       37,081
The Woodlands Office
   Properties, Houston,
   TX(2)....................    12,007          35,865            (12,417)              -       8,735          26,720       35,455
Sonoma Mission Inn & Spa,
   Sonoma, CA...............  $ 10,000   $      44,922   $         36,444   $           -    $ 10,000   $      81,366   $   91,366
Bank One Tower, Austin,
   TX(3)....................     3,879          35,431            (39,310)              -           -               -            -
Canyon Ranch, Tucson, AZ....    14,500          43,038              5,842               -      17,846          45,534       63,380
3333 Lee Parkway, Dallas,
   TX.......................     1,450          13,177              3,881               -       1,468          17,040       18,508
Greenway I & IA, Richardson,
   TX.......................     1,701          15,312                523               -       1,701          15,835       17,536
Three Westlake Park,
   Houston, TX..............     2,920          26,512              3,114               -       2,920          29,626       32,546
Frost Bank Plaza, Austin,
   TX.......................         -          36,019              5,427               -           -          41,446       41,446
301 Congress Avenue, Austin,
   TX.......................     2,000          41,735              7,716               -       2,000          49,451       51,451
Chancellor Park, San Diego,
   CA.......................     8,028          23,430             (5,202)              -       2,328          23,928       26,256
Canyon Ranch, Lenox, MA.....     4,200          25,218             12,941               -       4,200          38,159       42,359
Greenway Plaza Office
   Portfolio, Houston, TX...    27,204         184,765            105,498               -      27,204         290,263      317,467
The Woodlands Office
   Properties, Houston,
   TX.......................     2,393           8,523                  -               -       2,393           8,523       10,916
1800 West Loop South,
   Houston, TX..............     4,165          40,857              2,945               -       4,165          43,802       47,967
55 Madison, Denver, CO......     1,451          13,253              1,325               -       1,451          14,578       16,029
Miami Center, Miami, FL.....    13,145         118,763              7,726               -      13,145         126,489      139,634
44 Cook, Denver, CO.........     1,451          13,253              2,516               -       1,451          15,769       17,220
Trammell Crow Center,
   Dallas, TX...............    25,029         137,320             13,596               -      25,029         150,916      175,945
Greenway II, Richardson,
   TX.......................     1,823          16,421              1,105               -       1,823          17,526       19,349
Fountain Place, Dallas,
   TX.......................    10,364         103,212              8,825               -      10,364         112,037      122,401

<Caption>
----------------------------  -----------------------------------------------------------

                                                                            LIFE ON WHICH
                                                                          DEPRECIATION IN
                                                                            LATEST INCOME
                               ACCUMULATED        DATE OF   ACQUISITION      STATEMENT IS
DESCRIPTION                   DEPRECIATION   CONSTRUCTION          DATE          COMPUTED
----------------------------  -----------------------------------------------------------
<S>                           <C>            <C>            <C>           <C>
Briargate Office and
   Research Center, Colorado
   Springs, CO..............      (3,655)           1988           1995                (1)
Hyatt Regency Beaver Creek,
   Avon, CO.................     (10,104)           1989           1995                (1)
Albuquerque Plaza,
   Albuquerque, NM..........      (6,271)           1990           1995                (1)
Hyatt Regency Albuquerque,
   Albuquerque, NM..........      (8,041)           1990           1995                (1)
The Woodlands Office
   Properties, Houston,
   TX(2)....................      (8,813)      1980-1993           1995                (1)
Sonoma Mission Inn & Spa,
   Sonoma, CA...............   $ (10,734)           1927           1996                (1)
Bank One Tower, Austin,
   TX(3)....................           -            1974           1996                (1)
Canyon Ranch, Tucson, AZ....      (6,626)           1980           1996                (1)
3333 Lee Parkway, Dallas,
   TX.......................      (3,330)           1983           1996                (1)
Greenway I & IA, Richardson,
   TX.......................      (2,045)           1983           1996                (1)
Three Westlake Park,
   Houston, TX..............      (3,765)           1983           1996                (1)
Frost Bank Plaza, Austin,
   TX.......................      (6,590)           1984           1996                (1)
301 Congress Avenue, Austin,
   TX.......................      (8,701)           1986           1996                (1)
Chancellor Park, San Diego,
   CA.......................      (3,542)           1988           1996                (1)
Canyon Ranch, Lenox, MA.....      (7,317)           1989           1996                (1)
Greenway Plaza Office
   Portfolio, Houston, TX...     (52,175)      1969-1982           1996                (1)
The Woodlands Office
   Properties, Houston,
   TX.......................      (1,805)      1995-1996           1996                (1)
1800 West Loop South,
   Houston, TX..............      (4,966)           1982           1997                (1)
55 Madison, Denver, CO......      (2,229)           1982           1997                (1)
Miami Center, Miami, FL.....     (13,615)           1983           1997                (1)
44 Cook, Denver, CO.........      (2,723)           1984           1997                (1)
Trammell Crow Center,
   Dallas, TX...............     (20,323)           1984           1997                (1)
Greenway II, Richardson,
   TX.......................      (2,074)           1985           1997                (1)
Fountain Place, Dallas,
   TX.......................     (12,580)           1986           1997                (1)
</Table>

                                      113
<PAGE>
<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------------------------
                                                                    COSTS
                                                              CAPITALIZED
                                                            SUBSEQUENT TO    IMPAIRMENT TO
                                                             ACQUISITIONS   CARRYING VALUE
                                                         ----------------   --------------
                                                         LAND, BUILDINGS,       BUILDINGS,                 BUILDINGS,
                                         INITIAL COSTS      IMPROVEMENTS,    IMPROVEMENTS,              IMPROVEMENTS,
                              ------------------------         FURNITURE,       FURNITURE,                 FURNITURE,
                                         BUILDINGS AND       FIXTURES AND     FIXTURES AND               FIXTURES AND
DESCRIPTION                       LAND    IMPROVEMENTS          EQUIPMENT        EQUIPMENT       LAND       EQUIPMENT        TOTAL
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>             <C>                <C>              <C>        <C>             <C>
Behavioral Healthcare
   Facilities(4)............    89,000         301,269           (235,137)       (122,202)     12,785          20,145       32,930
Houston Center, Houston,
   TX.......................    52,504         224,041             15,366               -      47,406         244,505      291,911
Ventana Country Inn, Big
   Sur, CA..................     2,782          26,744              3,941               -       2,782          30,685       33,467
5050 Quorum, Dallas, TX.....       898           8,243                846               -         898           9,089        9,987
Addison Tower, Dallas, TX...       830           7,701                663               -         830           8,364        9,194
Cedar Springs Plaza, Dallas,
   TX.......................       700           6,549              1,281               -         700           7,830        8,530
Palisades Central I, Dallas,
   TX.......................     1,300          11,797              1,513               -       1,300          13,310       14,610
Palisades Central II,
   Dallas, TX...............     2,100          19,176              5,803               -       2,100          24,979       27,079
Reverchon Plaza, Dallas,
   TX.......................     2,850          26,302              2,198               -       2,850          28,500       31,350
Stemmons Place, Dallas,
   TX.......................         -          37,537              3,686               -           -          41,223       41,223
The Addison, Dallas, TX.....     1,990          17,998                790               -       1,990          18,788       20,778
Sonoma Golf Course, Sonoma,
   CA.......................    14,956               -              2,139               -      11,795           5,300       17,095
Austin Centre, Austin, TX...     1,494          36,475              2,675               -       1,494          39,150       40,644
Omni Austin Hotel, Austin,
   TX.......................     2,409          56,670              3,280               -       2,409          59,950       62,359
Washington Harbour,
   Washington, D.C.(5)......  $ 16,100   $     146,438   $       (162,538)  $           -    $      -   $           -   $        -
Four Westlake Park, Houston,
   TX(3)....................     3,910          79,190            (79,190)              -       3,910               -        3,910
Post Oak Central, Houston,
   TX.......................    15,525         139,777              8,492               -      15,525         148,269      163,794
Datran Center, Miami, FL....         -          71,091              3,528               -           -          74,619       74,619
Avallon Phase II, Austin,
   TX.......................     1,102               -             23,365               -       1,236          23,231       24,467
Plaza Park Garage...........     2,032          14,125                570               -       2,032          14,695       16,727
Washington Harbour Phase II,
   Washington, D.C. ........    15,279             411                283               -      15,322             651       15,973
5 Houston Center, Houston,
   TX.......................     7,598               -             (7,598)              -           -               -            -
Houston Center Land,
   Houston, TX..............    14,642               -                 22               -      14,515             149       14,664
Crescent Real Estate
   Equities L.P.............         -               -             29,648               -           -          29,648       29,648
Other.......................    23,270           2,874             17,059               -      29,608          13,595       43,203

<Caption>
----------------------------  -----------------------------------------------------------

                                                                            LIFE ON WHICH
                                                                          DEPRECIATION IN
                                                                            LATEST INCOME
                               ACCUMULATED        DATE OF   ACQUISITION      STATEMENT IS
DESCRIPTION                   DEPRECIATION   CONSTRUCTION          DATE          COMPUTED
----------------------------  -----------------------------------------------------------
<S>                           <C>            <C>            <C>           <C>
Behavioral Healthcare
   Facilities(4)............      (4,995)      1850-1992           1997                (1)
Houston Center, Houston,
   TX.......................     (28,034)      1974-1983           1997                (1)
Ventana Country Inn, Big
   Sur, CA..................      (4,270)      1975-1988           1997                (1)
5050 Quorum, Dallas, TX.....      (1,202)      1980/1986           1997                (1)
Addison Tower, Dallas, TX...      (1,184)      1980/1986           1997                (1)
Cedar Springs Plaza, Dallas,
   TX.......................      (1,309)      1980/1986           1997                (1)
Palisades Central I, Dallas,
   TX.......................      (1,916)      1980/1986           1997                (1)
Palisades Central II,
   Dallas, TX...............      (3,532)      1980/1986           1997                (1)
Reverchon Plaza, Dallas,
   TX.......................      (3,760)      1980/1986           1997                (1)
Stemmons Place, Dallas,
   TX.......................      (5,486)      1980/1986           1997                (1)
The Addison, Dallas, TX.....      (2,215)      1980/1986           1997                (1)
Sonoma Golf Course, Sonoma,
   CA.......................      (1,063)           1929           1998                (1)
Austin Centre, Austin, TX...      (4,195)           1986           1998                (1)
Omni Austin Hotel, Austin,
   TX.......................      (8,618)           1986           1998                (1)
Washington Harbour,
   Washington, D.C.(5)......   $       -            1986           1998                (1)
Four Westlake Park, Houston,
   TX(3)....................           -            1992           1998                (1)
Post Oak Central, Houston,
   TX.......................     (14,478)      1974-1981           1998                (1)
Datran Center, Miami, FL....      (6,940)      1986-1992           1998                (1)
Avallon Phase II, Austin,
   TX.......................      (2,055)           1997              -                (1)
Plaza Park Garage...........      (1,020)           1998              -                (1)
Washington Harbour Phase II,
   Washington, D.C. ........           -            1998              -                (1)
5 Houston Center, Houston,
   TX.......................           -               -              -                (1)
Houston Center Land,
   Houston, TX..............         (18)              -              -                (1)
Crescent Real Estate
   Equities L.P.............      (9,202)              -              -                (1)
Other.......................        (822)              -              -                (1)
</Table>

                                      114
<PAGE>
<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------------------------
                                                                    COSTS
                                                              CAPITALIZED
                                                            SUBSEQUENT TO    IMPAIRMENT TO
                                                             ACQUISITIONS   CARRYING VALUE
                                                         ----------------   --------------
                                                         LAND, BUILDINGS,       BUILDINGS,                 BUILDINGS,
                                         INITIAL COSTS      IMPROVEMENTS,    IMPROVEMENTS,              IMPROVEMENTS,
                              ------------------------         FURNITURE,       FURNITURE,                 FURNITURE,
                                         BUILDINGS AND       FIXTURES AND     FIXTURES AND               FIXTURES AND
DESCRIPTION                       LAND    IMPROVEMENTS          EQUIPMENT        EQUIPMENT       LAND       EQUIPMENT        TOTAL
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>             <C>                <C>              <C>        <C>             <C>
Land held for development or
   sale, Dallas, TX.........    27,288               -             (7,474)              -      19,670             144       19,814
                              ----------------------------------------------------------------------------------------------------
Total.......................  $492,475   $   3,031,622   $         26,862   $    (122,202)   $373,868   $   3,054,889   $3,428,757
                              ====================================================================================================
----------------------------------------------------------------------------------------------------------------------------------

<Caption>
----------------------------  -----------------------------------------------------------

                                                                            LIFE ON WHICH
                                                                          DEPRECIATION IN
                                                                            LATEST INCOME
                               ACCUMULATED        DATE OF   ACQUISITION      STATEMENT IS
DESCRIPTION                   DEPRECIATION   CONSTRUCTION          DATE          COMPUTED
----------------------------  -----------------------------------------------------------
<S>                           <C>            <C>            <C>           <C>
Land held for development or
   sale, Dallas, TX.........           -               -              -                 -
                              ------------
Total.......................   $(648,834)
                              ============
----------------------------
</Table>

(1) Depreciation of the real estate assets is calculated over the following
estimated useful lives using the straight-line method:

<Table>
<S>                                                           <C>
Building and improvements...................................  5 to 40 years
Tenant improvements.........................................  Terms of leases
Furniture, fixtures, and equipment..........................  3 to 5 years
</Table>

(2) During the year ended December 31, 2001, The Woodlands Office Equities--'95
Limited, owned by the Operating Partnership and the Woodlands Commercial
Properties Company, L.P., sold three of The Woodlands Office Properties.

(3) On July 30, 2001, the Company entered into joint venture arrangements with
GE for these Office Properties. The gross amount at which land is carried for
Four Westlake Park includes $3,910 of land, which was not joint ventured.

(4) Depreciation on behavioral healthcare properties held for sale ceased from
11/11/99 through 12/31/01 (the period over which these properties were held for
sale).

(5) These Office Properties were sold on September 18, 2001.


                                      115
<PAGE>

A summary of combined real estate investments and accumulated depreciation is as
follows:

<Table>
<Caption>
--------------------------------------------------------------------------------------------------
                                                                 2001         2000         1999
--------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>
Real estate investments:
   Balance, beginning of year...............................  $3,690,915   $4,095,574   $4,129,372
      Acquisitions..........................................           -       22,170            -
      Improvements..........................................      98,946      108,950       95,210
      Dispositions..........................................    (352,646)    (526,430)      (8,435)
      Impairments...........................................      (8,458)      (9,349)    (120,573)
                                                              ------------------------------------

   Balance, end of year.....................................  $3,428,757   $3,690,915   $4,095,574
                                                              ====================================

Accumulated Depreciation:
   Balance, beginning of year...............................  $  564,805   $  507,520   $  387,457
      Depreciation..........................................     111,086      123,839      120,745
      Dispositions..........................................     (27,057)     (66,554)        (682)
                                                              ------------------------------------

   Balance, end of year.....................................  $  648,834   $  564,805   $  507,520
--------------------------------------------------------------------------------------------------
</Table>


                                      116
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 1st day of
April, 2002.

                              CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
                                               (Registrant)

                              By:  CRESCENT REAL ESTATE EQUITIES, LTD.
                                      its General Partner

                              By   /s/   John C. Goff
                                   -----------------------------
                                         John C. Goff
                                         Chief Executive Officer



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